02-0087 and 02-0088
Special Fuel and
Environmental Assurance
Signed 3/18/03
BEFORE THE UTAH STATE TAX
COMMISSION
____________________________________
)
ORDER
PETITIONER, )
) Appeal Nos. 02-0087; 02-0088
Petitioner, )
) Account Nos. #####
v. ) #####
)
AUDITING DIVISION OF ) Tax Types:
Special Fuel and
THE UTAH STATE TAX ) Environmental
Assurance
COMMISSION, )
) Audit Period: 7/1/98 –
6/30/01
Respondent. )
) Judge: Chapman
_____________________________________
Presiding:
Kerry R. Chapman,
Administrative Law Judge
Appearances:
For Petitioner: PETITIONER 1
PETITIONER 2
For Respondent: Mr. Clark Snelson, Assistant Attorney
General
Mr. Andy Coffman, from the Auditing
Division
Mr. Doug Smith, from the
Auditing Division
STATEMENT
OF THE CASE
These matters came
before the Utah State Tax Commission for an Initial Hearing pursuant to the
provisions of Utah Code Ann. '59-1-502.5 on January 22, 2003.
Appeal No. 02-0087 concerns
Auditing Division’s assessment of additional special fuel tax, penalty, and
interest to the Petitioner. Appeal No.
02-0088 concerns Auditing Division’s assessment of additional environmental
assurance fee, penalty, and interest to the Petitioner. The Petitioner is a special fuel supplier
that did not pay or accrue the special fuel tax and the environmental assurance
fee on certain transactions involving special fuel. Both parties have agreed to the amount of special fuel taxes and
environmental assurance fees owed by the Petitioner, so the portions of the
assessments relating to additional taxes and fees are not at issue. At issue, however, is the 10% negligence
penalty imposed by Auditing Division on both assessments.
Auditing Division asks
the Commission to sustain the penalties.
It assessed a penalty on the Petitioner’s failure to pay the special
fuel tax because of the serious revenue consequences of a supplier not paying
the tax. Because the special fuel tax
is $$$$$ cents per gallon of fuel, not paying the tax can result in a
significant loss of tax revenue.
Auditing Division asserts that the imposition of the penalty is to
ensure that the supplier pays or accrues the tax.
Auditing Division also
explains that it assessed a penalty on the Petitioner’s failure to pay the
environmental assurance fee because the fee “piggybacks” on the payment or
accrual of the special fuel tax.
Because it determined that a 10% negligence penalty was warranted on the
Petitioner’s non-payment of special fuel tax, it assessed a similar penalty on
the non-payment of the environmental assurance fee.
The Petitioner asks the Commission to waive
the penalty imposed in both appeals because one of the Petitioner’s
distributors changed it billing method as it related to the Petitioner. Prior to January 17, 2000, this distributor
charged the Petitioner the special fuel tax.
On January 22, 2000, and afterwards, this distributor did not include
the taxes on its invoices. Petitioner
asserts the nonpayment of the special fuel tax and environmental assurance fee
was due to a change in another company’s billing procedures, not its own
negligence. Accordingly, it asks the
Commission to waive the penalties associated with these appeals.
We should also note that
the Petitioner has previously filed for bankruptcy protection and is currently
within the realm of the bankruptcy court.
Nevertheless, the Petitioner waived whatever rights it may have under
bankruptcy law so that the Commission can determine the amount of its liability
for penalties associated with these appeals.
However, the Petitioner did not waive any protection from payment that
is afforded by its having filed for bankruptcy.
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).
When
totaled, the special fuel tax and the environmental assurance fee imposed on a
gallon of special fuel is nearly $$$$$ cents.
When the tax and fuel are not paid, the loss of revenue is significant
in relation to the total amount of the transaction. Unless a supplier itself ensures that these taxes and fees are
properly paid or accrued, the Commission rarely learns of the nonpayment,
except during an audit. The Commission
believes that a supplier should have sufficient business practices in place to
ensure that errors resulting in nonpayment are caught and corrected. Petitioner blames its nonpayment of the tax
and fee at issue on the actions of another party, but offers no explanation why
it should not be responsible for discovering and correcting such errors on its
accounts. Petitioner has not provided
us any information to convince us that its not discovering and correcting a
distributor’s billing mistake for over a year was reasonable or unavoidable,
especially when the Petitioner is the party responsible for accruing the
tax. For these reasons, we approve
Auditing Division’s imposition of the 10% negligence penalty on each of the
assessments at issue and do not find the existence of any reasonable cause to
warrant a waiver of the penalty in either instance.
DECISION
AND ORDER
Based upon the
foregoing, the Commission denies the Petitioner’s request to waive the 10%
negligence penalties imposed by Auditing Division in Appeal Nos. 02-0087 and
02-0088. 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 18th day of March
, 2003.
________________________________
Kerry R. Chapman
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 18th day of March , 2003.
Pam Hendrickson R.
Bruce Johnson
Commission Chair Commissioner
Palmer DePaulis Marc
B. Johnson
Commissioner Commissioner