02-0202
Personal Penalty
Assessment
Signed 12/23/02
BEFORE THE UTAH STATE
TAX COMMISSION
____________________________________
PETITIONER, ) FINDINGS OF FACT,
) CONCLUSIONS OF LAW,
Petitioner, ) AND FINAL DECISION
)
v. ) Appeal No. 02-0202
)
TAXPAYER SERVICES
DIVISION OF )
THE UTAH STATE TAX ) Tax Type:
Personal Penalty Assessment
COMMISSION, )
) Judge: Phan
Respondent. )
_____________________________________
Presiding:
Jane Phan,
Administrative Law Judge
Appearances:
For Petitioner: PETITIONER
For Respondent: Gale Francis, Assistant Attorney General
STATEMENT
OF THE CASE
This matter came before the Utah State Tax
Commission for a Formal Hearing on October 9, 2002. Based upon the evidence and testimony presented at the hearing,
the Tax Commission hereby makes its:
FINDINGS
OF FACT
1. The assessment in question is a personal
penalty assessment, made against Petitioner for the unpaid sales and
withholding tax of COMPANY A.
2. The
period in question for the unpaid sales tax was the first quarter of 2000 and
the amount of the unpaid sales tax was $$$$$.
The period at issue for the withholding tax was the fourth quarter of
1999 and the amount of the withholding tax in question was $$$$$.
3. Petitioner started working for COMPANY
A late in 1998. COMPANY A was a
mortgage company. Petitioner was a
director, vice president and secretary of the corporation and ran the
production underwriting and sales area.
Petitioner also signed on the business checking account.
4. Petitioner worked out of COMPANY A's
office in CITY, STATE. Late in 1999
through early 2000 COMPANY A opened and operated a branch office in Utah. The corporate office remained in CITY and
during this period the CITY office was paying the bills of the Utah
branch. The sales and withholding tax
at issue are from the Utah branch.
5. Petitioner traveled to Utah on two
occasions to work with the Utah production staff. As of January 2002, Petitioner was still registered with the Utah
Department of Commerce as a director, secretary and vice president of COMPANY A
6. Petitioner had no ownership interest in
COMPANY A. Petitioner maintains that
she did not control the financing aspect of the business and did not make the
decisions as to which creditors were paid.
It was her testimony that these decisions were made by NAME and NAME.
7. Petitioner was one of two signors on a
check dated January 24, 2000, written on COMPANY A’s account in the amount of
$$$$$ to the Utah Tax Commission to pay the withholding tax for the fourth
quarter of 1999. This check did not
clear COMPANY A's account due to insufficient funds and the withholding tax was
never remitted to the Tax Commission.
This amount is the basis for most of the personal penalty at issue. It was Petitioner's testimony that as of May
2000, when she resigned from COMPANY A, she did not know that this check had
not cleared. It was her understanding
that the tax had been paid. She
testified that prior to the time she resigned she knew of no risks, that would
result in the failure of COMPANY A to pay over the tax. She also indicated that the first notice she
had received that the taxes of COMPANY A had not been paid in full were from
the Utah Tax Commission in January 2002.
She indicates after she left the company she had no ability to
investigate or correct mismanagement.
Respondent presented no evidence to refute Petitioner's claim that she
did not know the check had failed to clear.
There was no indication that numerous checks were being returned unpaid
for insufficient funds during this time frame, or that Tax Commission notices
of the deficiency were sent directly to Petitioner.
8. COMPANY A filed Chapter 7 Bankruptcy in
December 2000. Respondent was unable to
collect the underlying sales and withholding tax deficiencies from COMPANY A
and, as of the date of the hearing, been unable to collect the amount of the
tax from another principal who had been assessed a personal penalty.
APPLICABLE LAW
Utah Law provides for a
personal penalty assessment for a company's unpaid withholding tax
liabilities. It is listed in Utah Code
Ann. '59-1-302(1994) and
provides in pertinent part:
(1) The provision of this
section apply to the following taxes in this title: . . .(g) withholding tax .
. .
(2) Any person required
to collect, truthfully account for, and pay over any tax listed in Subsection
(1) who willfully fails to collect the tax, fails to truthfully account for and
pay over the tax, or attempts in any manner to evade or defeat any tax or the
payment of the tax, shall be liable for a penalty equal to the total amount of
the tax evaded, not collected, not accounted for or not paid over. This penalty is in addition to other
penalties provided by law . . .
(7)(a) in any hearing
before the Commission and in any judicial review of the hearing, the commission
and the court shall consider any inference and evidence that a person has
willfully failed to collect, truthfully account for, or pay over any tax listed
in Subsection (1).
(b) It is prima facie
evidence that a person has willfully failed to collect, truthfully account for,
or pay over any of the taxes listed in Subsection (1) if the commission or a
court finds that the person charged with the responsibility of collecting,
accounting for or paying over the taxes:
(i) made a voluntary,
conscious, and intentional decision to prefer other creditors over the state
government or utilize the tax money for personal purposes;
(ii) recklessly disregarded obvious or know
risks, which resulted in the failure to collect, account for, or pay over the
tax; or
(iii) failed to
investigate or to correct mismanagement, having notice that the tax was not or
is not being collected, accounted for, or paid over as provided by law.
CONCLUSIONS
OF LAW
Petitioner signed on the
bank account of COMPANY A and in fact, signed the check written to pay the
withholding tax that comprises almost entirely the deficiency at issue. She was also a corporate officer and held a
position of responsibility in the company.
Petitioner was a person responsible for paying over the tax at issue. However, the evidence indicates that
Petitioner thought she had paid the tax.
Although, Petitioner has a duty to make sure a check which she signed
has cleared the account, the Commission finds the negligence on the part of
Petitioner to do so, without some other evidence that she knew, or should have
reason to know that it did not clear, is insufficient to meet the willfulness
standard set out in the statute at Utah Code Ann. '59-1-302.
DECISION
AND ORDER
Based upon the
foregoing, the Tax Commission abates the personal penalty assessment against Petitioner
for the fourth quarter of 1999 and first quarter of 2000. It is so ordered.
DATED this 23rd day of December
, 2002.
_____________________
Jane Phan
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 23rd day of December
, 2002.
Pam Hendrickson R.
Bruce Johnson
Commission Chair Commissioner
Palmer DePaulis Marc
B. Johnson
Commissioner Commissioner