APPEAL 00-1118
SALES & WITHHOLDING
TAX
SIGNED 1/17/01
BEFORE THE UTAH STATE TAX
COMMISSION
____________________________________
PETITIONER, )
) ORDER
Petitioner, )
) Appeal No. 00-1118
v. )
) Account No. #####
TAXPAYER SERVICES
DIVISION )
OF THE UTAH STATE TAX ) Tax Type:
Sales & Withholding Tax
COMMISSION, )
)
Respondent. ) Judge: Davis
_____________________________________
Presiding:
G. Blaine Davis,
Administrative Law Judge
Appearances:
For Petitioner: PETITIONER
Representative for
Petitioner
For Respondent: Ms. Laurie Allred, from the Taxpayer
Services Division
Ms. Jan Sanchez, from
the Taxpayer Services Division
STATEMENT OF
THE CASE
This matter came before the Commission for an
Initial Hearing on January 8, 2001, pursuant to the provisions of Utah Code
Ann. '59-1-502.5.
Petitioner has operated the business of
Petitioner for approximately 25 years.
Approximately two years ago, Petitioner had a
stroke, and then later had problems with his heart which restricted his ability
to manage and operate the business. Out
of necessity, he left his secretary and office manager in charge of most of the
operations. She had been an employee
for a period of 14 years, and based upon his past experience, he had confidence
and trust in her. Filing the sales tax
returns and withholding tax returns, and making payment thereon was one of the
responsibilities which he gave to her in his absence.
In September of 1999, someone from the Utah
State Tax Commission called him at his home and told him that Petitioner was
late paying its sales tax again, and asked why he had paid late several times
in the past. Petitioner said he did not
know there was any problem, and was not aware that prior sales tax returns had
been paid late.
Following the contact from the Tax Commission,
he contacted his office manager and asked her why the taxes had been paid
late. She responded that the State must
be mistaken, and she would take care of it.
She further represented that the taxes were being automatically
withdrawn from the bank account, and they had never been late or incurred any
penalties or interest. Over the next
several days, she again represented that the State had just made a mistake, and
she had taken care of it with the Tax Commission.
Notwithstanding the representations of the
office manager, Petitioner became suspicious and called the Tax Commission
later in September of 1999 and was informed there was no mistake, and the
business tax returns had been late several times during the past year. Petitioner then confronted the office
manager about the lateness of the tax returns, penalties and interest, and she
again told him the State had made a mistake and there were no penalties or
interest. PETITIONER then told her he
had talked to the State Tax Commission personally, and asked why she had lied to
him. She said she was sorry and had no
explanation.
Petitioner next called his accountant and asked
for an audit of the books, which determined that numerous things had not been
handled correctly and that many thousands of dollars in penalties and interest
had been paid, not only to the State Tax Commission, but to other government
agencies and creditors.
Petitioner made further investigations, and
determined that the office manager was drug dependent and had an alcohol
problem, and had apparently embezzled further funds from the business. Based upon the facts he discovered, he
terminated the office manager as an employee.
Petitiioner then had his accountant contact the
State Tax Commission to obtain a breakdown of penalties for some of the previous
periods, and based upon filing an application for refund and waiver of the
penalties, he did obtain a refund of approximately $$$$$, but Ms. Jan Sanchez,
from the State Tax Commission, asked why he didn't request a refund for all of
the periods for the past three years.
Petitioner indicated he did not know there were any other periods, so he
came to the Tax Commission and discussed the prior history with NAME and
determined the total penalties paid were nearly $$$$$. The office manager had paid those items by
preparing checks which merely indicated they were for taxes, and did not break
down the payment between taxes, penalties and interest. There was no documentation readily available
to determine such a breakdown.
Upon determining the problem, Petitioner had his
accountant prepare prior returns for some of the periods, and get them filed,
and then later he prepared the returns for the remaining periods and filed them. Petitioner is now seeking a waiver of the
penalties based upon the actions and embezzlement of the office manager.
Although there have been numerous late filings
of both sales tax and withholding tax returns following the health problems of
Petitioner, prior to that time Petitioner had a very good filing and payment
record. It is clear the problems did
not occur until Petitioner had health problems and left the business to be
managed by the office manager, who apparently, knowingly and intentionally, did
not comply with the filing and payment requirements to help hide and cover up
other problems, including embezzlement, of the funds of the business.
Petitioner has paid the penalties for which he
is requesting a waiver, so waiver of the penalties will require a refund of the
amounts paid.
APPLICABLE
LAW
The Tax Commission is granted the authority to
waive, reduce, or compromise penalties and interest upon a showing of
reasonable cause. Utah Code Ann. '59-1-401(10).
DECISION
AND ORDER
Based upon the foregoing, the Commission finds
that sufficient cause has been shown to justify a waiver of the penalties for
the sales and withholding tax returns for 1997, 1998 and 1999. Such penalties, to the extent not previously
refunded, shall be refunded to Petitioner.
It is so ordered.
This decision does not limit a party's right to
a Formal Hearing. However, this
Decision and Order will become the Final Decision and Order of the Commission
unless any party to this case files a written request within thirty (30) days
of the date of this decision to proceed to a Formal Hearing. Such a request shall be mailed to the
address listed below and must include the Petitioner's name, address, and
appeal number:
Utah State
Tax Commission
Appeals
Division
210
North 1950 West
Salt Lake
City, Utah 84134
Failure to request a Formal Hearing will preclude
any further appeal rights in this matter.
DATED this 17th day of January , 2001.
____________________________________
G. Blaine Davis
Administrative Law Judge
BY ORDER OF THE UTAH
STATE TAX COMMISSION:
The Commission
has reviewed this case and the undersigned concur in this decision.
DATED this 17th day of January
, 2001.
Pam Hendrickson R.
Bruce Johnson
Commission Chair Commissioner
Palmer DePaulis Marc
B. Johnson
Commissioner Commissioner