86-0164 - Sales and Use





Petitioner, )





STATE TAX COMMISSION : Appeal No. 86 0164

OF UTAH, ) Acct. No. XXXXX


Respondent. )



An Informal Hearing was held on June 24, XXXXX. James E. Harward, Hearing Officer, heard the matter for the Tax Commission. The Petitioner represented himself.

The Petitioner testified that he purchased two motorcycles from XXXXX in XXXXX, Utah. During the negotiation for their purchase, XXXXX told him that if he owned any property, he would be eligible for a tax deferment. The Petitioner said that he owned ten acres of land, and the sales person gave him a Certificate of Exemption, which he signed. After the Petitioner purchased the motorcycles, the Auditing Division of the Utah State Tax Commission assessed a 100 percent penalty because the Petitioner is not a farmer, nor does he farm the 10 acres he said he owned. The Petitioner paid the $$$$$ tax in XXXXX, and requested a waiver of penalty and interest.

Petitioner received a form letter dated XXXXX, from the Collection Division of the Utah State Tax Commission responding to his request for waiver of penalty and interest. The item marked as applicable to the Petitioner stated:

4. Your request for waiver of penalties and or interest has been reviewed by the Commission. The waiver has been disapproved. Charges assessed have been paid. There is no balance due. (Emphasis added).

However, in XXXXX, Petitioner was notified that he owed $$$$$. Petitioner filed a "Claim for Reduction or Waiver of Penalty and Interest" on XXXXX. Prior to the Informal Hearing being scheduled, the Collection Division sent Petitioner a Notice of Warrant dated XXXXX, indicating that a warrant had been issued against his real and personal property. Subsequently, an Informal Hearing was scheduled.


1. Utah Code Ann. 59-10-22(3) (1953) provides that any person required to pay Utah sales, use, or withholding taxes who willfully fails to collect the taxes, fails to truthfully account for or pay the taxes, or willfully attempts to evade or defeat the taxes will be liable for a penalty.

2. Utah Code Ann. 59-10-22(5) (1953) provides that the Tax Commission shall assess a penalty when it determines that a person is liable for a penalty in accordance with Subsection (3).

3. Utah Code Ann. 59-10-22(7) (1953) allows a person against whom a penalty has been assessed to petition the State Tax Commission for a hearing. Subsection (9) provides that in any hearing, the Tax Commission "shall consider any inference and evidence that a person has willfully failed to collect, truthfully account for or pay over any sales, use, or withholding tax imposed by Utah law."

4. The Utah Sales Tax Act, Utah Code Ann. 59-15-8 (Supp. 1986) provides:

If any part of the [sales tax] deficiency is due to negligence or intentional disregard of authorized rules and regulations with knowledge thereof, but without intent to defraud, there shall be added the greater of $50 or 10 per cent of the total amount of the deficiency and interest at the rate prescribed in Section 59-11-16 to the amount of deficiency from the time the return was due.

5. The Commission finds that the Petitioner relied on XXXXX's representation that if the Petitioner owned property, he would be eligible for a tax deferment. Although Petitioner's reliance was not justified, the Commission finds that the Petitioner did not willfully fail to pay the Sales Tax nor did he willfully attempt to defraud the State. Because Petitioner's reliance on XXXXX's sales pitch was foolish, a penalty is appropriate; however, a 100 percent penalty is exorbitant absent an affirmative showing of fraud by the Collection Division.

6. The Commission finds that Petitioner relied on the representation in the XXXXX, letter from the Tax Commission that there was no balance due; otherwise, Petitioner would have promptly and vigorously protested the penalty as he had before and after he received the letter. Therefore, interest on the principal tax liability should be assessed only through XXXXX.


Based on the facts, the written documentation provided, and the evidence presented at the hearing, it is the Decision of the Utah State Tax Commission that:

1. The penalty be reduced to $$$$$, and the interest associated with the penalty be reduced accordingly.

2. The interest on the principal tax liability be assessed only through XXXXX, the date of the letter the Utah State Tax Commission sent to Petitioner indicating that there was no balance due and owing.

DATED this 7 day of August, 1986.


R. H. Hansen Roger O. Tew

Chairman Commissioner

Joe B. Pacheco