86-0617 & 86 0351 - Motor Fuel

BEFORE THE STATE TAX COMMISSION OF UTAH

_____________________________________

XXXXX,                                                                                 )

                                                                                    :

            Petitioner,                                                         )

                                                                                    :

v.                                                                                 )           INFORMAL DECISION

                                                                                    :

                                                                                    )

COLLECTION DIVISION OF THE                          :           Appeal No. 86 0617

STATE TAX COMMISSION OF UTAH,                  )           and 86 0351

                                                                                    :           Acct. No. XXXXX

                                                                                    )           and XXXXX

            Respondent.                                                     :

_____________________________________

STATEMENT OF CASE

            This is an appeal to the Utah State Tax Commission from a decision of the Collection Division of the Utah State Tax Commission (Respondent) to assess penalty and interest on oil and gas occupation tax account No. XXXXX for the XXXXX annual occupation tax return and for the XXXXX first and second quarter occupation tax returns.  This is also an appeal from a decision of Respondent to assess penalty and interest on withholding royalties oil and gas tax account No. XXXXX.  The circumstances giving rise to the late payment of both types of taxes are the same so both appeals will be addressed in one decision.

            An Informal Hearing was held on XXXXX, in the offices of the Utah State Tax Commission.  David J. Angerhofer, Hearing Officer, heard the matter for the Commission.  XXXXX and XXXXX represented the Petitioner.  XXXXX and XXXXX represented the Respondent.

            XXXXX purchased 55% of XXXXX in XXXXX.  In XXXXX, XXXXX assumed operation of both the XXXXX and XXXXX fields which XXXXX had previously operated.  Petitioner stated that revenues were not paid to XXXXX until XXXXX. Petitioner assumed that since revenues were being sent to XXXXX prior to XXXXX, that XXXXX was handling the taxes.  During this time XXXXX was moving its office to Canada and communications between XXXXX and XXXXX were less than ideal.

            Petitioner stated that it received the first notice of delinquent taxes ten months after it assumed operation of the XXXXX and XXXXX fields. Petitioner immediately took steps to remedy the problem and has been very cooperative.

FINDINGS

            Petitioner is liable for the taxes since Petitioner assumed operation of both the XXXXX and XXXXX fields in XXXXX.  Petitioner was negligent in assuming that because XXXXX continued to receive revenues, XXXXX would still pay the taxes.  Although there may have been confusion and delays in the transfer of information from XXXXX to XXXXX  this is not an unforeseeable event when one company takes over operation from another.  Petitioner should have made arrangements with XXXXX concerning the responsibility for payment of taxes in order to avoid the mix-up that occurred.

DECISION AND ORDER

            It is the Decision and Order of the Utah State Tax Commission that Petitioner's request for waiver of penalty on oil and gas occupation tax account No. XXXXX and withholding royalties oil and gas tax account No. XXXXX be denied.

            The assessment of penalty and interest by the Collection Division of the Utah State Tax Commission is hereby affirmed.

            DATED this 12 day of November, 1986.

BY ORDER OF THE STATE TAX COMMISSION OF UTAH.

R. H. Hansen                                                                Roger O. Tew

Chairman                                                                      Commissioner

Joe B. Pacheco                                                            G. Blaine Davis

Commissioner   Commissioner