BEFORE THE STATE TAX
COMMISSION OF UTAH
_____________________________________
XXXXX
:
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
Respondent. :
_____________________________________
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.
FINAL DECISION
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
Chairman Commissioner
G. Blaine
Davis Joe
B. Pacheco
Commissioner Commissioner