BEFORE THE UTAH STATE TAX COMMISSION
Petitioner : FINDINGS OF FACT,
: CONCLUSIONS OF LAW,
v. : AND FINAL DECISION
: Appeal No. 89-2703
COLLECTION DIVISION OF THE :
STATE TAX COMMISSION OF UTAH )
: Acct No. XXXXX
STATEMENT OF CASE
This matter came before the Utah State Tax Commission pursuant to the Utah Administrative Procedures Act for a formal hearing on XXXXX, before Joseph G. Linford, Presiding Officer. Petitioner was represented by XXXXX. No one representing the Respondent appeared.
Based upon the evidence and arguments of the parties in the record, and the recommendation of the Presiding Officer, the Tax Commission hereby makes its:
FINDINGS OF FACT
1. The tax in question is sales and use tax.
2. The periods in question are XXXXX through XXXXX, and XXXXX through XXXXX.
3. During the periods in question, Petitioner purchased materials and equipment in order to lease such to another corporation owned by the same principals who own Petitioner, XXXXX. At the time of the purchase of these materials and equipment, Petitioner paid the sales tax.
4. Petitioner was notified in XXXXX by the Tax Commission that Petitioner should have collected sales tax at the lease of the equipment, rather than at the time of purchase. Under subsequent instructions from the Tax Commission, Petitioner sent several hundred letters to the entities from which Petitioner purchased the materials and equipment at issue. Petitioner states that more than two thousand hours were spent searching Petitioner's records and sending the letters.
5. As the audit proceeded, Petitioner was then instructed by the Tax Commission that the previous instructions had been in error, and that the Petitioner acted correctly in paying the tax at the time of purchase and should not have collected at the time of lease. Petitioner was also told that it should not have mailed the letters requesting sales tax refunds. Petitioner asserts that this error on the part of the Tax Commission cost Petitioner more than $$$$$ in labor and time. Petitioner states that it later discovered that as far as actual tax amounts are concerned, the state would realize less money on sales taxes on the lease of the materials and equipment at issue than it did on the sales tax paid at the time of purchase. Petitioner states that it paid tax on the purchase of the equipment and materials on the advice of Petitioner's accountants.
6. Based on these facts, Petitioner requests a waiver of penalty and interest assessed in this case.
7. Research into Tax Commission files shows that the Auditing Division did give credit to Petitioner for any reimbursements collected by Petitioner from vendors to whom Petitioner sent its letters requesting reimbursement of sales tax collected at the time of purchase. Also, Tax Commission records indicate that Petitioner did not pay sales tax on all of the purchases of the materials and equipment at issue, and did not collect sales tax on that equipment and material when it was leased. This is according to the best determination of Tax Commission personnel based upon a review by those personnel during the audit of Petitioner's records. Petitioner's records were in disarray and Petitioner had been using the sales tax number of another corporation, XXXXX, owned by the principals of the Petitioner, to which Petitioner was also making leases of equipment sales. Petitioner had not yet obtained its sales tax number.
CONCLUSIONS OF LAW
1. Utah Code Ann. §59-1-401 and59-1-402 provide that penalties and interest shall be assessed for the late payment and filing of taxes, including the prepayment of sales and use taxes.
2. Utah Code Ann. §59-1-401(8) provides that upon reasonable cause shown, the Tax Commission may waive or reduce penalties and interest assessed under the above statutes.
3. Such reasonable cause has not been shown in this case. Petitioner alleges that this is a case of double taxation; however, based upon the facts as outlined above, it clearly is not. Tax Commission records reveal that sales tax was not collected on some of the equipment when it was purchased, nor on that equipment when it was leased. These amounts are what the penalty and interest is based upon. Failure to collect or remit the tax by Petitioner for these purchases was due to Petitioner's own negligence, and not to the error of the Tax Commission.
DECISION AND ORDER
Based upon the foregoing, it is the Decision and Order of the Utah State Tax Commission that Petitioners' request for waiver of penalty and interest is denied.
DATED this 20th day of August, 1990.
BY ORDER OF THE UTAH STATE TAX COMMISSION.
R. H. Hansen Roger O. Tew
Joe B. Pacheco G. Blaine Davis