BEFORE THE STATE TAX
COMMISSION OF UTAH
___________________________
XXXXX
Petitioner, :
v. : INFORMAL DECISION
:
COLLECTION
DIVISION OF THE : Appeal No. 87-1119 & 1120
STATE TAX
COMMISSION OF UTAH, ) Account Nos. 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 a penalty
against Petitioner as an individual in the amount of the total of the sales
taxes and withholding taxes assessed against XXXXX for the last 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, Attorney at Law,
represented the Petitioner. XXXXX,
Special Assistant Attorney General, represented the Respondent.
Petitioner
stated that XXXXX was formed in XXXXX and filed Chapter 11 bankruptcy in
XXXXX. The plan was confirmed in
XXXXX. Part of the plan was that XXXXX
would merge with XXXXX. Pursuant to the
plan the Tax Commission accepted promissory notes representing tax arrears for
all periods in question except the XXXXX.
These promissory notes are in the amount of $$$$$ for 60 payments at 10
percent per annum, the first payment to commence on XXXXX. Petitioner was President of XXXXX, until
XXXXX, at which time he resigned.
Petitioner
stated that the Tax Commission may not assess a penalty against the principal
of a corporation as an individual. The
Utah Code does not include the principal of a Corporation in the definition of
a "person" as contrasted with the IRS Code which does include a
principal of a corporation in the definition of "person."
Respondent
stated that Utah Code Ann. §59-2-1321(3) (1953) faithfully follows §6672 of the
IRS Code. Respondent asserted that Petitioner
demonstrated a reckless disregard when Petitioner resigned from the
corporation. Petitioner should have partially paid over the money prior to his
resignation.
FINDINGS
The
Tax Commission finds that Utah Code Ann.59-2-1321(3) (1953) applies to the principal
of a corporation in his individual capacity.
A personal penalty may properly be assessed against Petitioner provided
that the elements of Section 59-2-1321 have been met: Petitioner must have been
a "responsible person" for the periods in question and he must have
willfully failed to collect, truthfully account for and pay over the tax before
the personal penalty may be assessed.
The
Tax Commission finds that Petitioner is not liable for a penalty in the amount
of the sales tax due and owing for the XXXXX or for a penalty in the amount of
the withholding tax due and owing for the XXXXX. Petitioner resigned prior to the due date of these returns and
was not a "responsible person" for the purpose of Section
59-2-1321. Petitioner resigned on or about
XXXXX, and was responsible to collect and truthfully account for the funds
since his resignation occurred after the end of the quarter. Testimony indicates that he had collected
and accounted for the funds. Petitioner
would have been responsible to pay over the tax since his resignation occurred
in the time frame between the end of the quarter and the statutory due date
except for the fact that Petitioner was forced out of the company. He did not voluntarily resign just before
the due date with the intent of escaping liability for the first quarter taxes.
The
Tax Commission also finds the Petitioner not liable for a penalty in the amount
of the sales tax due and owing for the last three quarters of XXXXX and the
XXXXX. These periods were covered by the
promissory notes the promissory notes were accepted by the Tax Commission
pursuant to the plan of reorganization.
Since the first payment was not due until after Petitioner resigned and
since this resignation was not voluntary, Petitioner was not in a position to
insure that payment would be made. He
cannot be held liable.
DECISION AND ORDER
Based
on the foregoing, it is the Decision and Order of the Utah State Tax Commission
that the penalty in the amount of the sales taxes for XXXXX be abated. The penalty in the amount of the withholding
tax for the XXXXX is also abated.
The
Collection Division of the Utah State Tax Commission is hereby ordered to
adjust its records in accordance with this Decision.
DATED
this 1 day of October, 1988.
BY ORDER OF THE STATE TAX COMMISSION OF UTAH.
ABSENT
R. H. Hansen Roger
O. Tew
Chairman Commissioner
Joe B.
Pacheco G.
Blaine Davis
Commissioner Commissioner