BEFORE THE STATE TAX
COMMISSION OF UTAH
_____________________________________
XXXXX ) ORDER ON MOTION
Petitioner : TO INTERVENE AND
v. : REQUEST TO REVIEW
AUDITING
DIVISION OF THE : CERTAIN DOCUMENTS & RECORDS
STATE TAX
COMMISSION OF UTAH, ) Appeal No. 87-3276 &
Respondent. : 87-3277
_____________________________________
STATEMENT OF CASE
The
above entitled case came on for a hearing before the Utah State Tax Commission on
the Motion to Intervene filed by Salt Lake City and the Motion to Intervene
filed by XXXXX County, together with the request by XXXXX County to review the
sales tax audit of the Petitioner; to review the Petitioner's Petition for
Redetermination, and to also review all correspondence between the Petitioner
and Respondent. XXXXX appeared for and
in behalf of the Petitioner, XXXXX appeared for and in behalf of the
Respondent, XXXXX appeared for and in behalf of XXXXX County, and XXXXX
appeared for and in behalf of XXXXX.
Chairman R. H. Hansen and Commissioners Roger O. Tew, Joe B. Pacheco and
G. Blaine Davis heard the matter for the Tax Commission.
The
legal positions of the City and the County were nearly identical in that they
argued they have a legal interest in the outcome of the current sales tax audit
being conducted by the Auditing Division on XXXXX. It was also the position of the City and County that the Tax
Commission may not compromise the local portion of any sales or use tax, and
that the City and County have standing pursuant to a contract entered into
between the Tax Commission and the City and County respectively.
The
position of the Petitioner, XXXXX, is that Utah Code Ann. §59-12-204 gives the
right to administer the local portion of the sales tax exclusively to the Tax
Commission, and the City and County are not entitled to be a party to the
proceeding. The Petitioner also takes
the position that it would be administratively impossible to give notice to
approximately 250 taxing agencies every time a sales tax audit is performed to
permit them to participate in every sales tax audit which is performed by the
Tax Commission.
Article
XIII, Section 11, of the Constitution of Utah, provides in part:
"The
State Tax Commission shall administer and supervise the tax laws of the
State."
The
law is clear that cities and counties have only such powers as are specifically
granted to them by the legislature.
American Fork City v. Robinson, 77 Utah 168, 292 Pac. 249 (1930); Stevenson
v. Salt Lake City Corp., 7 U.2d 28, 317 P.2d 597 (1957); and Salt Lake City v.
Revene, 101 Utah 504, 124 P. 2d 537 (1942).
The only legislative authorization dealing with the administration of
the local option sales tax is Utah Code Ann. §59-12-204, 1953, as amended, and
specifically paragraph (5) thereof, which provides:
"Such tax
ordinance shall include a provision that the county shall contract, prior to
the effective date of the ordinance, with the Commission to perform all
functions incident to the administration or operation of the ordinance."
(Emphasis added.)
After
reviewing the arguments of each of the parties, and the relevant documents and
statutes related thereto, it is the opinion of the Commission as follows:
1.
The present status of the case is that the Auditing Division of the Tax
Commission is in the process of ascertaining the amount of sales and use tax
which is due from the Petitioner, XXXXX.
A portion of any tax determined to be due will be distributed to local
governments throughout the State of Utah pursuant to the statutory distribution
formula.
2.
The determination of the amount of tax due is not just a routine auditing
function. The telephone industry has
been rapidly changing, and some of the issues in this case are matters of first
impression, both in this state and the nation.
The administrative function of determining the amount
of tax due will not be completed until the
Auditing Division has completed its process and any necessary administrative
quasi judicial hearings have been completed.
3.
The statute, Utah Code Ann. §59-12-204, gives to the Commission the
responsibility of administering the local portion of the sales tax, and the
City and County are not appropriate parties and are not legally entitled to participate
in the proceeding.
4.
The confidentiality of sales tax returns is governed by Utah Code Ann.
§59-1-403, 1953, as amended, which makes sales tax returns confidential and
places restrictions on the right of anyone outside of the Tax Commission to see
those returns.
5.
The contractual provisions which permit the City and County to have access to
Tax Commission and taxpayer records must be harmonized with Section 59-1-403,
Supra, and it is our opinion that those contractual provisions were intended to
permit the cities and counties to review the records of the Commission and
taxpayers to determine that sales tax revenues have been appropriately
allocated and distributed to the respective cities and counties. Those
contractual provisions were not intended to permit cities and counties to have
access to confidential taxpayer information nor to permit them to participate
in the internal operations of the Tax Commission or Auditing Division,
specifically as it relates to the determination of amount of taxes due.
6.
There is no reason to believe that the Auditing Division, together with its
legal counsel from the Utah Attorney General's office, will not adequately
pursue taxpayers and protect the revenues of cities and counties, because the
State of Utah receives a larger portion of all such revenues, and the cities
and counties receive their required portion of all the sales tax revenues
received by the Tax Commission.
Therefore, in protecting the revenues of the State of Utah, equal
protection will be given to the revenues of cities, counties, and other taxing
districts.
7.
Utah Code Ann. §59-12-205, (1953), as amended, provides for the distribution of
local sales tax revenues based on both the point of sale and the
population. Since part of every local sales
tax dollar is distributed based on population, every taxing district imposing
local option sales tax is as entitled to participate in any proceedings as are
XXXXX and XXXXX County. There are
approximately 250 such taxing districts.
8.
If the City and County had a legal right to participate in this hearing, then
notice would have to be given to every taxing district in the state every time
a sales tax audit was being reviewed by the Tax Commission, and this would
require notifying approximately 250 separate taxing entities and giving them a
right to be heard before any sales tax audit could be closed. Such a process would create an
administrative nightmare, would greatly increase the cost of administering the system,
would clog the entire system including the appeal and hearing system, would
unduly complicate all sales tax proceedings, and would substantially delay the
receipt of the revenues to be derived by the City, County and State through
that system.
Therefore,
the Commission hereby denies the Motion to Intervene filed by XXXXX and the
Motion to Intervene filed by XXXXX County, and further denies the request to
review the above stated documents filed by XXXXX County.
DATED
this 26 day of May, 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 Commission
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