02-0662
Withholding Tax
Signed 9/10/02
BEFORE THE UTAH STATE TAX
COMMISSION
____________________________________
PETITIONER, ) ORDER
)
) Appeal No. 02-0662
Petitioner, )
) Account No. #####
v. )
) Tax Type: Withholding Tax
TAXPAYER SERVICES
DIVISION )
OF THE UTAH STATE TAX ) Tax Years: 01/00-03/00,
04/00-06/00
COMMISSION, ) & 07/00-09/00
)
Respondent. ) Judge: Davis
_____________________________________
Presiding:
G. Blaine Davis, Administrative Law
Judge
Appearances:
For Petitioner: PETITIONER
For Respondent: Mr. Gale Francis, Assistant Attorney
General
Ms. Donna Smith, from the Taxpayer
Services Division
STATEMENT
OF THE CASE
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 August
21, 2002.
This matter is a
personal penalty assessment imposed upon Petitioner by Respondent for the
payroll withholding taxes unpaid by COMPANY for the first, second, and third
quarters of 2000.
During all of the times
at issue, Petitioner was the sales representative for COMPANY. However, until July or August 2000, he was
not an officer or director in the company and did not have any authority to
sign checks or to otherwise be responsible.
In either July or August
2000, following the termination of services of two of the other officers, the President
of the company approached PETITIONER and indicated they did not have sufficient
people on the Board to take the minutes and act as an officer. Petitioner was therefore asked to be the
Secretary of the company, and to attend and take minutes. At that time, Petitioner was also given
authority to sign checks on the bank account, and he did sign a number of
checks from then until the company terminated business. Petitioner did sign some of the payroll
checks from which withholding tax had been withheld which are at issue in this
proceeding. Petitioner was also aware
that there were taxes due to the State of Utah, but represented that the
decision as to which bills were to be paid was not made by him, but was made by
the President of the company.
COMPANY ceased its
business operations in October 2000.
When the company ceased operations, Petitioner was not responsible for
the dissolution of the company or for the distribution of any assets.
APPLICABLE
LAW
Utah Code Ann. §59-1-302
provides in relevant part:
(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 known 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.
(c ) The commission or court need not find a bad
motive or specific intent to defraud the government or deprive it of revenue to
establish willfulness under this section.
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).
DISCUSSION
In this matter,
Petitioner was clearly not a person required to collect, truthfully account
for, and pay over the tax for the first and second quarters of the year
2000. He did not have any authority or
responsibility to collect or pay over the taxes to the Utah State Tax
Commission.
However, for some or all
of the third quarter of 2000, Petitioner was the Secretary of the company,
participated in meetings in which he became aware that the taxes were not being
paid, had check-signing authority and, in fact, signed some of the payroll
checks from which withholding taxes were withheld. He represented that decisions regarding who should be paid were
made by another individual. However,
when an individual is in a position of authority to see that payment of taxes
is made, such a person becomes a responsible person under the law if he does
not take whatever steps are legally possible to pay such taxes to the Tax
Commission. In addition, Petitioner
signed checks for the payment of other bills and obligations during that time
period, and therefore he made a voluntary and conscious decision to prefer
other creditors over the state government.
However, there is no testimony that he utilized any of the tax money for
personal purposes other than the receipt of his regular paycheck, which was
also signed by other individuals in the company.
DECISION
AND ORDER
Based upon the
foregoing, the Commission hereby determines that Petitioner was a person
required to collect, truthfully account for, and pay over the withholding tax,
and that he willfully failed to do so by preferring other creditors over the
state government. Accordingly, the
determination of the division that Petitioner is liable for the penalty
assessed by Utah Code Ann. §59-1-302 is hereby upheld for the third quarter of
2000. The determination to impose such
penalty on Petitioner for the first and second quarters of 2000 is not
sustained. The penalty sustained hereby
for the third quarter of 2000 is in the amount of $$$$$. 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 10th day of September , 2002.
____________________________________
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 10th day of September , 2002.
Pam Hendrickson R.
Bruce Johnson
Commission Chair Commissioner
Palmer DePaulis Marc
B. Johnson
Commissioner Commissioner
02-0662
Withholding Tax/Personal
Penalty
Signed 3/17/03
BEFORE THE UTAH STATE TAX
COMMISSION
____________________________________
PETITIONER, ) FINDINGS
OF FACT,
) CONCLUSIONS
OF LAW,
) AND FINAL DECISION
Petitioner, )
)
v. ) Appeal No. 02-0662
) Account No. #####
TAXPAYER SERVICES DIVISION
)
OF THE UTAH STATE TAX ) Tax Type:
Withholding Tax / Personal
Penalty
COMMISSION, ) Tax Year:
)
Respondent. ) Judge: Davis
_____________________________________
Presiding:
G. Blaine Davis, Administrative Law Judge
Appearances:
For Petitioner: PETITIONER
PETITIONER REP
For Respondent: Mr. Gale Francis, Assistant Attorney
General
Ms. Donna Smith, from the
Taxpayer Services Division
STATEMENT OF
THE CASE
This matter came before the Utah State Tax
Commission for a Formal Hearing on February 24, 2003. Based upon the evidence and testimony presented at the hearing,
the Tax Commission hereby makes its:
FINDINGS
OF FACT
1. The
tax in question is a personal penalty assessment of withholding tax.
2. The periods
in question are the third quarter of 2000.
3.
Petitioner was a sales representative for COMPANY. However, until approximately July 2000, he
was not an officer or director in the company and did not have authority to
sign checks or to otherwise be responsible for the actions of the company.
4. In
approximately July 2000, following the termination of services of two of the
other officers of the company, the President of the company, XXXXX, approached
Petitioner and indicated they did not have sufficient people to take Minutes at
their Board Meeting, so he requested that Petitioner come and take the Minutes
at the meeting. Petitioner was pleased
that they had sufficient confidence in him to have him take that action. He was thereafter deemed to be the Secretary
of the company and was later given authority to sign checks on the bank
account. The primary purpose for him
signing checks was so he could sign the check of the President, and the
President would always sign his check so there would be no question about the
authority for either of them to receive their paychecks. He indicated he may have signed a few other
checks when they were presented to him, but he did not make out any checks and
did not calculate the payroll for any of the employees, although he may have
signed a few of the payroll checks. He
also did not know the amount of the withholding taxes from the paychecks of any
other employees, and did not have access to the payroll records to determine
any amounts due to the State Tax Commission.
5.
Petitioner was aware there was a tax obligation to the Internal Revenue
Service because he saw a Notice of Intent to Levy, which arrived from the
Internal Revenue Service. However, he
testified he did not know about any obligation to the Utah State Tax Commission
and he was never asked to prepare any returns or make out any checks to the Tax
Commission. Petitioner represented that
he never attended any formal management meetings and was not involved in the
decision making process of who received payments and who did not receive
payments. He did state that the company
was undergoing substantial cash-flow problems, but he testified that XXXXX and
a XXXXX were the individuals who determined who would be paid.
6. He
did sign one document, an agreement to guarantee obligations, which was signed
by XXXXX, and he was asked to sign it as the Secretary of the Corporation, but
that document does not involve tax obligations to the State of Utah.
7. Petitioner
was listed as the Secretary of the Corporation, but he was not a Director of
the Corporation at the time that it went out of business.
8. The
company was out of business by November or December of 2000, so Petitioner
served as the Secretary for approximately three to four months. He was not a stockholder or owner of the
company.
APPLICABLE
LAW
Utah Code Ann. §59-1-302
provides in relevant part:
(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 known 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.
(c ) The commission or court need not find a bad
motive or specific intent to defraud the government or deprive it of revenue to
establish willfulness under this section.
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).
DISCUSSION
In this matter, there is no evidence that
Petitioner was a person charged with the responsibility of collecting,
accounting for, or paying over the withholding taxes to the Utah State Tax
Commission. There is no testimony or
evidence that he made a voluntary, conscious, or intentional decision to prefer
other creditors over the state government, or to utilize the tax money for
personal purposes. There is also no
testimony or evidence that he recklessly disregarded obvious or known risks,
which resulted in the failure to collect, account for, or pay over the tax, nor
is there any evidence that he had notice that the tax was not being collected,
accounted for, or paid over as required by law.
Based upon the evidence presented, there is not
sufficient evidence in this matter to find that Petitioner willfully failed to
collect, truthfully account for, or pay over the withholding taxes at issue in
this case.
DECISION
AND ORDER
Based upon the foregoing, the Tax Commission
hereby determines that Petitioner was not liable for the penalty assessed by
Utah Code Ann. §59-1-302. The
determination to impose the penalty is therefore not sustained and Petitioner
is relieved of that liability. It is so
ordered.
DATED this 17th day of March , 2003.
____________________________________
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 March , 2003.
Pam Hendrickson R.
Bruce Johnson
Commission Chair Commissioner
Palmer DePaulis Marc
B. Johnson
Commissioner Commissioner