Personal Penalty Assessment
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
) Judge: Phan
Jane Phan, Administrative Law Judge
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.
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.
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