BEFORE THE STATE TAX COMMISSION OF UTAH
v. ) INFORMAL DECISION
COLLECTION DIVISION OF THE ) Appeal No. 87-0224
STATE TAX COMMISSION OF UTAH, ) Account No. XXXXX
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 a penalty against Petitioner pursuant to Utah Code Ann. §59-10-22(3) (1953) for taxes owed by XXXXX. 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 represented the Petitioner. XXXXX represented the Respondent. On XXXXX, the Tax Commission issued an Informal Decision in the matter of XXXXX. This informal decision affirmed an audit report prepared by the Auditing Division of the Utah State Tax Commission after withdrawing a duplicated item on the audit report. XXXXX, was formed to develop and market a three dimensional viewer, but became inactive after selling one complete viewer, selling the XXXXX from a second viewer, selling a third XXXXX, and holding a fourth XXXXX for sale. The issue in XXXXX was whether those activities constituted research and development or manufacture. The Tax Commission held that the activities did not rise to the level of manufacture.
XXXXX has been inactive since XXXXX and its license was suspended on XXXXX, for failure to file. Petitioner was the secretary/treasurer of XXXXX. Respondent assessed a penalty against Petitioner in the amount of the total of the sales tax and the withholding tax assessed against XXXXX.
A person that is assessed pursuant to Utah Code Ann. §59-10-22(3) (1953) must be (1) a "responsible" person and (2) must have willfully attempted to evade the tax or the payment thereof. The Tax Commission finds that the Petitioner was a responsible person for the purpose of §59-10-22(3). Petitioner was the secretary/treasurer of XXXXX, and did accounting for the corporation.
The Tax Commission finds that Petitioner did not willfully attempt to evade the taxes or the payment thereof. At the time that XXXXX was developing the 3-D Viewer, selling one completed viewer and selling two other XXXXX, the corporation negligently assumed that the activities constituted manufacturing and would not be taxable. This was not a situation in which the corporation and its officers knew that the tax had to be paid, but attempted to evade or defeat the tax. The willful intent to evade or defeat the tax is the intent when the taxes are due.
The Tax Commission finds that Petitioner is not liable for the assessment in the amount of the outstanding sales taxes and withholding taxes assessment assessed against XXXXX, and, therefore, does not reach the issue of the amount of tax to be assessed.
DECISION AND ORDER
It is the Decision and Order of the Utah State Tax Commission that Petitioner is not personally liable for a penalty in the amount of the sales taxes and withholding taxes assessed against XXXXX. The Collection Division of the Utah State Tax Commission is hereby ordered to adjust its records in accordance with this decision.
DATED this 26 day of October, 1987.
BY ORDER OF THE STATE TAX COMMISSION OF UTAH.
R. H. Hansen Roger O. Tew
Joe B. Pacheco G. Blaine Davis