88-2840 - Withholding

 

BEFORE THE UTAH STATE TAX COMMISSION

_____________________________________

XXXXX

Petitioner, : FINDINGS OF FACT,

v. : CONCLUSIONS OF LAW

: AND FINAL DECISION

AUDITING DIVISION OF THE :

STATE TAX COMMISSION OF UTAH, : Appeal No. 88-2840

Respondent :

_____________________________________

STATEMENT OF CASE

This matter came before the Utah State Tax Commission for a Formal Hearing on XXXXX. Paul F Iwasaki, Presiding Officer, heard the matter for and in behalf of the Tax Commission. Present by telephone and representing the Petitioner were XXXXX and XXXXX. Present and representing the Respondent were XXXXX, Assistant Attorney General and XXXXX of the Auditing Division.

The Petitioner appealed the determination of an audit conducted by the Auditing Division which found the Petitioner liable for a tax deficiency arising out of the Petitioner's failure to withhold Utah taxes on employees by the Petitioner who were temporarily in Utah on a job.

Based upon the evidence and testimony presented at the hearing, the Tax Commission hereby makes its:

FINDINGS OF FACT

1. The tax in question is withholding tax.

2. The audit period is XXXXX through XXXXX.

3. The amount of deficiency as assessed by the Auditing Division was $$$$$ plus penalty of $$$$$ and interest.

4. The Petitioner is a XXXXX company which specializes in the application of XXXXX and XXXXX.

5. Pursuant to a contract with the XXXXX, the Petitioner sent XXXXX of its employees to Utah to apply XXXXX to the streets and highways of XXXXX counties.

6. The XXXXX workers from XXXXX spent approximately XXXXX days while working in Utah. They began work during the week of XXXXX and completed work on XXXXX. During that time they returned to XXXXX for XXXXX days and then returned to Utah.

7. No Utah income taxes were withheld from the workers wages XXXXX income taxes however, were withheld from their wages.

8. The Petitioner is prequalified to do business in XXXXX states. In several of those states, XXXXX has a reciprocal agreement whereby workers from another state who are temporarily in XXXXX to do a job do not have XXXXX income taxes withheld and XXXXX workers in those states who are there temporarily do not have those state income taxes withheld. The Petitioner assumed that Utah was one of those states.

9. Utah does not have a reciprocity agreement with XXXXX regarding such matters.

10. The Petitioner withheld and remitted XXXXX income tax on the approximately $$$$$ in wages paid to the XXXXX employees while they were in Utah.

11. None of the XXXXX workers filed nonresident Utah income tax returns for the period in question.

12. By way of an audit report dated XXXXX, the Auditing Division found the Petitioner liable for $$$$$ in withholding taxes and assessed a penalty of $$$$$ plus interest.

13. Petitioner filed a Petition for Redetermination on XXXXX. No further action was taken by the Commission until the matter was set for a Formal Hearing on XXXXX.

CONCLUSIONS OF LAW

Each employer making payment of wages shall deduct and withhold from wages an amount which will, as closely as possible, pay the income tax imposed by this chapter (Utah Code Ann 59-10-402(1)).

"Any employer who is to do business within the state of Utah for a period not to exceed 60 days in the aggregate during any calendar year may be relieved from the requirement provided for under this part for such period by furnishing to the Commission in advance a certificate so certifying. (Utah Code Ann. 59-10-402(2))."

DECISION AND ORDER

Had the Petitioner applied for a waiver certificate as provided for by 59-10-402(2), he would have been relieved of the requirements of 59-10-402(1). Unfortunately, that provision of the statute requires application in advance of the time such work is to commence which the Petitioner failed to do.

Under usual circumstances the Petitioner's failure to comply with the waiver certificate procedure would result in the imposition of the withholding requirements. This case, however, is complicated by the fact that for reasons unknown, no action on the Petitioner's appeal was taken by the Commission for approximately two years. If the Commission had responded in a timely manner, sufficient time would have remained in which the Petitioner's employees could have filed amended income tax returns and eliminate the need for the Petitioner to pay additional withholding taxes.

Because the delay by the Commission, in effect, denied the Petitioner the opportunity to remedy the situation, the Tax Commission finds that imposition of the withholding tax penalties and interest would be unjust.

Based upon the foregoing, the Tax Commission grants the Petitioner's request to rescind the audit deficiency, penalty and interest for the audit period XXXXX through XXXXX.

It is so ordered.

DATED this 14 day of March, 1989.

BY ORDER OF THE UTAH STATE TAX COMMISSION.

R. H. Hansen Roger O. Tew

Chairman Commissioner

Joe B. Pacheco G. Blaine Davis

Commissioner Commissioner