87-0873 - Sales





            Petitioner                                                          :

v.                                                                                 :           INFORMAL DECISION

AUDITING DIVISION OF THE                                :           Appeal No. 87-0873

STATE TAX COMMISSION OF UTAH,                  )

            Respondent.                                                     :



            This is an appeal to the Utah State Tax Commission from a decision of the Auditing Division of the Utah State Tax Commission (Respondent) to assess penalty and interest on sales and use tax account No. XXXXX for the period XXXXX.  A telephone conference 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.  Petitioner stated during the course of the hearing that it was in agreement with the interest assessed but that it requested a waiver of penalty on the basis that it was not negligent and that it did not intentionally disregard rules and regulations.  Petitioner experienced tremendous growth during the audit period in question and did not have a system in place to analyze the taxability of transactions involving the movement of equipment and supplies from its various warehouses to hundreds of locations across the country and to accrue and pay use tax in a timely manner to the various taxing jurisdictions.  Petitioner has subsequently installed an automated system which will analyze payments, purchases, and taxability.  Petitioner stated that it has made every effort to comply with the law and that it is not negligent.  Petitioner noted that 20-25% of purchases in a Nebraska audit included items where tax had already been paid. Petitioner has not prepared a study in Utah to determine how much of the audit includes items where tax has already been paid but suggested a parallel to the XXXXX audit.  Petitioner did not object to the tax per se but presented this argument as support for its contention that the penalty should be reduced.  Respondent noted that Petitioner had been audited previously in Utah and that it was informed then of its tax responsibilities.  Petitioner knew of the upcoming merger and was told of the tax consequences.  Respondent asserted that Petitioner had knowledge of the rules and regulations, and that growth was not excuse for ignoring taxes.


            Petitioner had the burden of proof to establish that Respondent assessed penalty and interest in error.  Petitioner failed to meet this burden of proof.  The Tax Commission finds no basis on which to reduce the amount of tax, penalty, or interest as determined by Respondent.  Lack of an effective system to keep track of taxes, and rapid growth in the company is not sufficient justification for waiver of penalty.


            It is the Decision and Order of the Utah State Tax Commission that Petitioner's request for waiver of penalty on sales and use tax account No. XXXXX for the audit period from XXXXX be denied.  The assessment of tax penalty and interest by the Auditing Division of the Utah State Tax Commission is hereby affirmed.

            DATED this 15 day of October, 1987.


R. H. Hansen                                                                Roger O. Tew

Chairman                                                                      Commissioner

Joe B. Pacheco                                                            G. Blaine Davis

Commissioner   Commissioner