BEFORE THE STATE TAX COMMISSION OF UTAH
Petitioner, : FINDINGS OF FACT,
: CONCLUSIONS OF LAW,
v. : AND FINAL DECISION.
COLLECTION DIVISION OF THE : Appeal No. 85 1535
STATE TAX COMMISSION OF UTAH, ) Acct. No. XXXXX
STATEMENT OF CASE
A Formal Hearing was held on XXXXX. XXXXX, XXXXX, represented Petitioner. XXXXX, Hearing Officer, heard the matter for the Utah State Tax Commission. Petitioner appeals from an Informal Decision dated XXXXX favoring Respondent.
Petitioner's appeal is two-pronged. First, XXXXX argued that it was always his understanding and expectation that after the amount of tax determined in the audit deficiency was paid the Commission would waive the penalty that was assessed. Second, it was his understanding that the interest would be recomputed in some manner to a flat 12% rate. After the amended audit report of XXXXX, and after Petitioner had paid the amount of tax assessed from the amended audit report of $$$$$, Petitioner requested a waiver of penalty and interest assessed against the audit deficiency. Petitioner's waiver request was denied; Petitioner appealed to the Tax Commission for an Informal Hearing; and the decision to deny the penalty and interest waiver request was affirmed.
On XXXXX, Respondent notified Petitioner that subject to an audit for the period XXXXX, through XXXXX, there was an additional tax due of $$$$$, a penalty of $$$$$, and interest amounting to $$$$$.
Petitioner disputed this amount, arguing that some items included in the deficiency assessment were not subject to sales or use tax. Over the course of the next year (most of XXXXX) Respondent and Petitioner had a great deal of communication which resulted in an agreement that a tax of $$$$$$ was due and owing. On XXXXX, Respondent prepared an amended audit report for the same period which showed an additional tax owing of $$$$$, a penalty of $$$$$ (a 10% penalty), and interest totaling $$$$$. Petitioner and Respondent apparently agreed to Petitioner's paying the tax on an installment basis. Petitioner subsequently paid the tax in $$$$$ increments with a final balloon payment; the first payment being made in XXXXX, and the last payment being made in XXXXX. Petitioner had been told it could not petition for a waiver of penalty and interest until the entire tax had been paid; consequently, Petitioner requested a waiver of the penalty and interest on XXXXX. Moreover, in the XXXXX legislative session, the Legislature of the State of Utah passed H.B. 103 enacting Utah Code Ann. 59-16-4(m) (Supp. 1986) which provides for an exemption from sales or use tax "all sales or leases of machinery and equipment purchased or leased by a manufacturer for use in new or expanding operations . . . and any manufacturing facility in Utah." Petitioner argues that this provision provides support for waiving the penalty applied against the deficiency assessment. In other words, the Legislature recognized that sales and use tax on sales or leases of machinery or equipment for use in new or expanding manufacturing facilities causes an extreme hardship on the taxpaying manufacturing company. Likewise, the penalty and interest assessment against Petitioner has added to Petitioner's financial hardship.
XXXXX repeated throughout the Formal Hearing that although he knew and understood that people he dealt with at the Tax Commission did not have the authority to waive the penalty and interest assessment, it had been Petitioner's expectation and understanding that if Petitioner worked with Respondent on the audit deficiency and payment plan that the penalty would be waived. XXXXX said that he was surprised when the request for waiver was denied, but he did understand that the Tax Commission had that authority. XXXXX said that he understood that the Tax Commission had the discretion to deny a waiver request but he had not expected that to happen.
FINDINGS OF FACT
1. Utah Code Ann. 59-15-8 and 59-16-9 provide for 10% negligence penalties on deficiencies in the amounts of tax owing on the return date. Therefore, the penalty was properly assessed from the beginning.
2. Petitioner knew from the beginning that the penalty and interest might not be waived despite its expectations to the contrary.
3. Petitioner knew that its Tax Commission contact did not have the authority to promise a waiver of penalty and interest.
CONCLUSIONS OF LAW
1. The penalty was properly assessed and the Commission has twice before chosen not to exercise its discretion to reduce the penalty.
2. Therefore, the Informal Decision in this case is affirmed.
Based on the foregoing, it is the Decision and Order of the Utah State Tax Commission to deny Petitioner's request for waiver of penalty and to deny Petitioner's request for recomputation of interest and to affirm the Informal Decision in this hearing.
DATED this 5 day of August, 1987.
BY ORDER OF THE STATE TAX COMMISSION OF UTAH.
R. H. Hansen Roger O. Tew
G. Blaine Davis Joe B. Pacheco