BEFORE THE STATE TAX
COMMISSION OF UTAH
_____________________________________
XXXXX
Petitioner, : INFORMAL DECISION
v. :
COLLECTION
DIVISION OF THE : Appeal No. 87-1298
STATE TAX
COMMISSION OF UTAH, )
Respondent. :
_____________________________________
STATEMENT OF CASE
This
matter came before the Utah State Tax Commission for an Informal Hearing on
XXXXX. James E. Harward, Hearing
Officer, heard the matter for the Tax Commission. XXXXX was present. XXXXX
appeared representing the Respondent.
The Petitioner began work for a company called XXXXX, in XXXXX. At that time the accounting system was
already in place and approximately $$$$$ was due in federal payroll taxes and
some unknown sum was due to the Utah State Tax Commission for withholding tax
and sales tax. Through XXXXX, the
Petitioner caught up the taxes, and through XXXXX remained current and timely. In the fall of XXXXX, the president of XXXXX
began a project for the construction of an insulation plant which project
caused a severe cash flow problem in the company. During XXXXX, it became apparent that the company would suffer
financial collapse if an infusion of money were not made. Numerous attempts and applications were made
for loans by the president of XXXXX.
During this time the Petitioner was responsible for the collection and
payment to tax and also the payment creditors as it related to the ongoing
operation of XXXXX and the construction of the insulation plant. It was clear that during this period of
time, the president of the company as well as Petitioner, were aware of the
outstanding obligations including outstanding taxes. Discussions were held weekly regarding the costs of the projects,
the expenses, and the inability to meet those costs and expenses. In addition, several financial statements
were prepared which bear the signature of the president of XXXXX which show
outstanding tax liabilities. The
Petitioner signed checks for the company and was responsible for the payment of
debts and obligations of the corporation.
In XXXXX, the Petitioner left the corporation and was no longer
responsible for the collection, assessment, and payment of taxes. After the Petitioner left the corporation,
the corporation was liquidated and the assets have apparently been transferred
to another company. XXXXX was owned
solely by XXXXX, the President, his wife and his children. The Petitioner made the decision to pay
certain creditors and not pay others.
As a result it was his decision not to pay the Tax Commission. That decision was based on the inability to
pay all of the creditors. At the
hearing, the Petitioner admitted that the creditor who was making the most
noise got paid.
DECISION AND ORDER
Utah
Code Ann. 59-1-1321(3) requires that "any person required to collect,
truthfully account for, and pay over the sales, use, or withholding tax imposed
by law who willfully (a) collect the tax (b) fails to truthfully account for,
or (c) attempts in any manner to evade or defeat any tax or the payment of the
tax shall in addition to other penalties provided by law be liable to a penalty
equal to the total amount of tax evaded, not collected, not accounted for or
paid over." The statute sets up
two criteria required to subject a person to this penalty. Those criteria are (1) a person who is
required to collect and truthfully account for and pay over the tax, and (2)
the failure to do any of the above has to be willful. Subsection (8) of 1321
provides some clue as to what conduct would constitute willful. That section states "the following
shall be non exclusive prima facie evidence that a person has willfully failed
to collect, truthfully account for and pay over sales use or withholding tax
imposed by law (a) finding that the person charged with the responsibility of
collecting, accounting for and paying over the sales, use, withholding or
corporate franchise tax and made a voluntary conscious and intentional decision
to: (i). Prefer other creditors over
state government or to (ii). Utilize
the tax money for personal purposes."
The Tax Commission, after reviewing the evidence and the recommendation
of the hearing officer, are convinced that Petitioner falls within the strict
interpretation of the statute. The Petitioner candidly admitted that he was
responsible for the collection and payment of tax and consciously chose to pay
other creditors, who made the most noise, over the Tax Commission. The Tax Commission is further convinced after
reviewing the documentation and evidence submitted by the Petitioner that the
President of the corporation, XXXXX, is equally responsible. He consciously chose a project and its
obligations over the payment of tax. Therefore, the Tax Commission shall affirm
the assessment against the Petitioner in part, i.e., that the assessment up to
and including the fourth quarter of XXXXX shall be affirmed. However, this affirmation shall be held in
abeyance until a jeopardy assessment can be made against XXXXX, and all
remedies, hearings, and administrative appeals and collections be exhausted
against XXXXX before collection can be made against XXXXX.
DATED
this 19 day of January, 1988.
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