Signed 6/26/85



                                                    BEFORE THE UTAH STATE TAX COMMISSION



XXXXX,                                                                     )


                        Appellant,                                             )           DECISION FROM

                                                                                    :           INFORMAL HEARING

v.                                                                                 )


AUDIT DIVISION OF THE                                       )

UTAH STATE TAX COMMISSION,                        :           Appeal No. 85‑51‑0011

STATE OF UTAH,                                                      )

                        Respondent.                                         :



                        This is a decision from an Informal Hearing in the matter of XXXXX & XXXXX (hereinafter referred to as ("Appellant").  The Audit Division of the Utah State Tax Commission (hereinafter referred to as "Respondent") had determined a deficiency in Appellant's Sales and use Taxes, whereupon Appellant submitted a Petition for Redetermination to the Utah State Tax Commission (hereinafter referred to as "Commission").

                        The Informal Hearing was held on XXXXX in the offices of the Utah State Tax Commission.  XXXXX, Hearing Officer, heard the matter as and for the Commission.  XXXXX appeared on behalf of and representing the Appellant.  XXXXX, Assistant Attorney General, appeared on behalf of and representing the Respondent.

                        Based on the evidence and the written documentation, the Commission makes the following determinations:

                        1. The tax periods in question are XXXXX through XXXXX.

                        2. Appellant and Respondent stipulated that sales and use taxes and interest assessed on Contracts XXXXX and XXXXX for the audit period ending XXXXX were payable by Appellant.  The taxes and interest amounted to $$$$$ and $$$$$ respectively.  These amounts have been paid.

                        3. The only remaining issue is whether a penalty of $$$$$ is properly included in the assessment.

                        4. Contracts XXXXX and XXXXX were executed in XXXXX.  The other party to the contracts was the XXXXX.  At this time the issue of taxes was not addressed because of an understanding that the contracts were for exempt sales.

                        5. In XXXXX, Appellant was advised by the XXXXX that material portions of the contract were subject to the Utah use tax and that XXXXX would pay the use taxes.  In XXXXX responsibility to pay the taxes was placed on Appellant.  However, Appellant did not pay the taxes until XXXXX.

                        6. Between XXXXX and XXXXX, Appellant and XXXXX held numerous meetings to resolve the issues of proper application and responsibility for the taxes.  In XXXXX, XXXXX executed a change order providing for compensation to Appellant for use taxes paid.

                        7. The period of delay between the time of realization of the liability (XXXXX) and the time of actual payment (XXXXX) was unreasonable.  If Appellant believed that there was an honest dispute as to sales and use tax liability, Appellant should have filed a return, paid the tax and then sued for a refund.  XXXXX. v. State Board of Equalization, 334 P.2d 236,240 (Cal. 1959); XXXXX v. State Board of Equalization, App., 99 Cal Rptr. 802,809 (1972).  Appellant was negligent in failing to remit the taxes due on contracts XXXXX and XXXXX every quarter.

                        8. A 10 percent penalty is properly assessed against a taxpayer who negligently fails to remit the correct amount of tax.  Utah Code Ann. '59‑15‑8 (1953).



                        1. That a penalty of $$$$$ was properly assessed against Appellant.

                        2. That Appellant may petition within thirty days of the date of this decision for a Formal Hearing, but only as to the issue of penalty.  The tax and interest have been stipulated to and may not be appealed.

                        DATED this 26th day of July, 1985.



Mark K. Buchi Gary C. Cornia

Chairman                                                                      Commissioner


R. H. Hansen    Roger O. Tew

Commissioner   Commissioner