Sales Tax

Signed 12/30/02







Petitioner, )

) Appeal No. 01-1603

v. ) Account No. #####




COMMISSION, ) Judge: Phan


Respondent. )




Jane Phan, Administrative Law Judge


For Petitioner: PETITIONER

For Respondent: Clark Snelson, Assistant Attorney General





This matter came before the Utah State Tax Commission for an Initial Hearing pursuant to the provisions of Utah Code Ann. '59-1-502.5, on November 5, 2002.

Petitioner is appealing an audit deficiency of additional sales tax in the amount of $$$$$ along with the interest accrued thereon. The audit period at issue is May 1, 1997, through April 30, 2001.

Petitioner manufactures orthodontic equipment which it then sells to a number of dentists. The major portion of the audit deficiency is sales tax which Petitioner should have collected from the dentists and remitted to the Tax Commission upon the sale of these items. A small portion of the audit deficiency results from unreported taxable purchases. These were materials Petitioner purchased for the manufacture of orthodontic products that were not exempt under Utah Code Ann. Sec. 59-12-104.

Petitioner's representative explained that it was their understanding that, "the person or company who had the manufactured item last was responsible for the sales tax." (See Petitioner's Petition for Redetermination.) Petitioner's representative indicated that this was a small business and did not utilize the assistance of a tax professional. She stated that Petitioner did not know he was supposed to collect the sales tax from the dentists upon the sale of the manufactured items, so he did not collect that tax. Since it was not collected from the customers, it was Petitioner's representatives statement that Petitioner was unable financially to pay the large deficiency.

Respondent's assessment is based on longstanding statute and is supported by case law. [1] Respondent is correct that the dentists are required to pay the sales tax on the items at issue[2] and Petitioner, as the vendor, is required by law to collect the sales tax from them and remit the sales tax to the State of Utah. Petitioner is a Avendor@ pursuant to Utah Code Ann. Sec. 59-12-102(38) as a Aperson receiving any payment or consideration upon a sale of tangible personal property. . .@ Utah Code Ann. Sec. 59-12-107(2)(a) requires that the vendor collect the sales tax from the purchaser.

Clearly Respondent has followed the law in this matter and Petitioner=s arguments that he did not know to collect the tax, and now can not pay the amount, are not sufficient grounds for abating the audit. Ignorance of the law is not justification for abatement of a tax. The Commission recognizes that it would be difficult for Petitioner to pay this amount out of pocket, however, financial hardship it not grounds for abatement of the audit[3].

At the hearing Petitioner=s representative indicated that a number of the dentists to whom they had sold the orthodontic products had indicated that they had paid the sales tax on the items after being contacted by the Auditing Division. The Auditing Division has recently sent out a self assessment audit to all the dentists it could locate in the state, and based on the self assessment audit some of the dentists who purchased the product from Petitioner may have paid some of the sales tax at issue. Respondent indicated that if Petitioner can provide sufficient verification as to which amounts have already been paid by its customers, Respondent would give Petitioner a credit for those amounts.

The Commission notes that the self audit assessment program was designed to collect from dentists sales or use tax which they had not paid upon purchases of items such as are at issue in this appeal. The likely result is that some portion of the sales tax at issue will be collected from the dentists who were Petitioner's customers. The Commission does not want to collect the tax at issue twice, and is concerned that Petitioner will not be able to supply verification to the satisfaction of Respondent as to which of its customers have already paid the tax. Petitioner does not have access to the self audit assessment information filed by the dentists. Respondent, on the other hand, has the names of the dentists who purchased items from Petitioner, as well as the self audit information filed by the dentists who have responded. Respondent has the ability to review the self audit assessments from these dentists for double taxation.


(1) A tax is imposed on the purchaser as provided in this part for amounts paid or charged for the following transactions: (a) retail sales of tangible personal property made within the state; . . . (Utah Code Ann. Sec. 59-12-103(1)(a).)

(39) (a) AVendor@ means any person receiving any payment or consideration upon a sale of tangible personal property or any other taxable transaction under Subsection 59-12-103(1), or to whom the payment or consideration is payable. (Utah Code Ann. 59-12-102 (39) (2002).)

Each vendor shall pay or collect and remit the sales and use taxes imposed b this chapter if within this state the vendor: (i) has or utilizes:

(A) an office; (B) a distribution house; (C) a sales house; (D) a warehouse; (E) a service enterprise; or (F) a place of business similar to Subsection (1)(a)(I)(A) through (E); from the purchaser.

(ii) maintains a stock of goods;

(iii) regularly solicits orders, regardless of whether or not the orders are accepted in the state, . . .(Utah Code Ann. Sec. 59-12-107(1)(a).)


Based on the forgoing, Petitioner should have collected sales tax from its customers and remitted the tax to the State of Utah. The sales of the items Petitioner sold are subject to sales tax and Petitioner is the party responsible for collecting the tax and remitting it to the Tax Commission. However, the Tax Commission finds that Respondent should not collect the same sales tax twice; first from Petitioner and then from the dentists. The self assessment audits sent to all dentists are likely to accomplish a double collection of tax to some extent. Respondent is ordered to review within the next three months, whether Petitioner's dentist customers have turned in a self audit assessments, and, if so, review the self audit assessment and the amount of the tax paid by that particular dentist. If it reasonably appears that the sales tax has already been paid, Respondent is ordered to credit the amount towards the audit deficiency. This appeal is to remain open for the next three months for Respondent to accomplish this review and determine the amount of credit to be given towards the deficiency consistent with this order.

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 30th day of December , 2002.



Jane Phan

Administrative Law Judge




The Commissioners have reviewed this decision and concur in the result. Petitioner should have collected and remitted the sales tax. However, the tax should not be collected twice and Respondent is in the better position to determine whether or not this has occurred. The Commission orders Respondent to review within the next three months Petitioner's customer list from the audit and the self assessment audits. Whenever Respondent finds a dentist, who was a customer of Petitioner during the audit period, that has completed the self assessment audit, Respondent is to review the self assessment audit. If the self assessment audit includes an amount for sales and use tax, the amount is at least equal to the amount indicated in Petitioner's audit for sales to that dentists, and the dentist has paid the tax indicated, Respondent is to accept this as sufficient evidence that the tax on items sold by Petitioner to that particular dentist has been paid in full and is hereby

ordered to allow a credit for that amount against the audit deficiency. It is so ordered. Either party has the right to request a Formal Hearing as listed above.

DATED this 30th day of December , 2002.


Pam Hendrickson R. Bruce Johnson

Commission Chair Commissioner





Palmer DePaulis Marc B. Johnson

Commissioner Commissioner


[1]See Hardy v. State Tax Comm=n, 561 P.2d 1064 (Utah 1977).

[2]See Utah Code Ann. Secs. 59-12-103(1)(a) and 59-12-106(2).

[3]However, Financial hardship is basis for the Offer in Compromise program. Once the appeal is closed in this matter, regardless of the appeal decision, Petitioner may make an Offer in Compromise, or Petitioner can arrange a monthly payment plan. To do either an Offer in Compromise or set up a payment plan, Petitioner must contact the Taxpayer Services Division directly at 297-6300.