BEFORE THE STATE TAX COMMISSION OF UTAH
: FINDINGS OF FACT,
v. : CONCLUSIONS OF LAW
: AND FINAL DECISION
COLLECTION DIVISION OF THE : Appeal No. 86 0956
STATE TAX COMMISSION OF UTAH, ) Acct. No. XXXXX
STATEMENT OF CASE
This is an appeal to a Formal Hearing from an Informal Decision of the Utah State Tax Commission to affirm the assessment of penalty and interest on sales and use tax account No. XXXXX. A Formal 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 represented the Petitioner. XXXXX and XXXXX represented the Respondent.
FINDINGS OF FACT
On XXXXX, Petitioner purchased a used XXXXX S/N XXXXX from XXXXX for $$$$$. No sales tax was charged or paid. See, Exhibit 2, Invoice No. XXXXX. Page 2 of Exhibit 2 includes a statement of use signed by XXXXX:
XXXXX will use XXXXX S/N XXXXX specifically for commercial crop production and farm use only.
On XXXXX, Respondent sent Petitioner a notice of deficiency which indicated the amount of tax, penalty and interest which was due. Respondent assessed a tax of $$$$$ on the purchase of $$$$$ (a tax rate of 5 3/4%). Respondent further assessed a 100% civil fraud penalty $$$$$ and interest at 12% per annum from XXXXX to XXXXX of $$$$$ for a total due of $$$$$ as of XXXXX.
On XXXXX, Petitioner purchased a XXXXX S/N XXXXX from XXXXX for $$$$$. No sales tax was assessed or paid. Exhibit 1, Invoice No. XXXXX, states on the face that the "machine is to be used specifically for commercial crop and produce production only."
On XXXXX, Respondent sent Petitioner a notice of deficiency which assessed a sales tax of $$$$$ on the purchase price of $$$$$ (tax rate of 5 3/4%). Respondent assessed a 100% civil fraud penalty of $$$$$ and interest at 12% per annum from XXXXX to XXXXX of $$$$$ for a total due of $$$$$.
The primary use of the equipment was for construction purposes. Petitioner used equipment on a farm approximately 10% of the time during the period in question.
CONCLUSIONS OF LAW
The agricultural exemption from the Utah Sales Tax is set forth in Utah Code Ann. § 59-15-6(3) (1953):
The gross receipts
from sales of tangible personal property to be used or consumed primarily
and directly in farming operations are exempted from the taxes imposed by
Utah sales tax regulation A12-02-S49(d) elaborates on the agricultural exemption:
Farm machinery, equipment, and supplies used directly and primarily in farming operations are exempt from sales tax subject to the following provisions . . . . (2) The exemption applies only to sales of tangible personal property used or consumed primarily and directly in commercial farming operations as evidenced by the finding of a federal Farm Income and Expenses Statement (Schedule F) or similar evidence that the farm is operated as a commercial venture.
Id. (Emphasis added.)
Petitioner did not use the equipment primarily and directly in farming operations. Any use of the equipment on the farm was a de minimus use only.
Respondent had the burden of proof to establish fraud in this matter. Fraud may not be presumed or imputed: however, since direct evidence of fraud is seldom available, the taxing authority may meet its burden of proof through circumstantial evidence. Stone v. Commissioner, 56 T.C. 213,224 (1971). (Intent may be inferred from circumstantial evidence. Powell v. Grandquist, 252 F.2d 56 (9th Cir. 1958)). Respondent has met this burden of proof.
It is the Decision and Order of the Utah State Tax Commission that Petitioner's request for waiver of the fraud penalty be denied.
The assessment of penalty and interest by the Collection Division of the Utah State Tax Commission is hereby affirmed.
DATED this 24 day of June, 1987.
BY ORDER OF THE STATE TAX COMMISSION OF UTAH.
R. H. Hansen Roger O. Tew
Joe B. Pacheco G. Blaine Davis