86-0172 - Sales and Use





            Petitioner,                                                         )


v.                                                                                 )           INFORMAL DECISION



AUDITING DIVISION OF THE                                :           Appeal No. 86 0172

STATE TAX COMMISSION OF UTAH,                  )           Acct. No. XXXXX


            Respondent.                                                     )



            An Informal Hearing was held on XXXXX.  James E. Harward, Hearing Officer, heard the matter for the Utah State Tax Commission.  XXXXX and XXXXX, Deputy XXXXX County Attorneys, represented the Petitioner.  XXXXX, Assistant Attorney General.  XXXXX and XXXXX represented Respondent.

            Petitioner is an organization contracted by XXXXX County to operate XXXXX County's solid waste disposal facility.  The facility is operated as a service to county residents and no profit is realized from its operation. Respondent assessed a sales and use tax on equipment purchased from XXXXX to XXXXX.  Petitioner argued that it did not purchase the equipment, and that XXXXX County purchased equipment for government proprietary functions; therefore, the purchases should be exempt from sales tax.  Since the time Petitioner's Petition for Redetermination was filed, Petitioner and Respondent have settled the matter with Petitioner paying the sales tax.  The only issue left to be determined is whether Petitioner should be required to pay penalty and interest.

            At the hearing Petitioner argued that the waste disposal facility was operated by Petitioner and that equipment used in running the operation was bought by XXXXX County or by Petitioner.  The understanding between Petitioner and XXXXX County, however, was that all of the equipment was owned by the county.  Petitioners and XXXXX County's agreement required XXXXX County to pay any tax bills.  If the transactions had been handled properly, no tax would ever had been assessed because XXXXX County's purchase of equipment would have been sales tax exempt.  Petitioner argued that the penalty and interest should be waived because XXXXX County and Petitioner had a government-agency relationship. In other words, when Petitioner purchased equipment for the solid waste disposal facility, it did so as XXXXX County's agent.

            Respondent also recommended waiver of the penalty and interest, arguing that XXXXX County (the party in the contractual agreement between XXXXX County and Petitioner that was required to pay any tax bills) did not have use of the money that was ultimately paid to Respondent.


            Based on the foregoing, it is the Decision and Order of the Utah State Tax Commission to grant Petitioner's request for waiver of penalty and interest. By this decision the Tax Commission recognizes that Petitioner and XXXXX County acted not with negligence nor intentional disregard of the law, but operated under the belief that if Petitioner purchased equipment whose ownership would be in XXXXX County, the purchase would be sales tax exempt because it would be the same as a purchase of equipment by XXXXX County.

            Respondent is therefore ordered to adjust its records to reflect the decision of the Commission to waive all penalties and interest in this matter.

            DATED this 1 day of September, 1987.


R. H. Hansen                                                                Roger O. Tew

Chairman                                                                      Commissioner


Joe B. Pacheco                                                            G. Blaine Davis

Commissioner   Commissioner