BEFORE THE UTAH STATE TAX
COMMISSION
_____________________________________
XXXXX
:
Petitioner, :
: FINDINGS
OF FACT,
v. : CONCLUSIONS OF LAW
: AND FINAL
DECISION
AUDITING
DIVISION OF THE :
UTAH STATE TAX COMMISSION : Appeal
Nos. 89-3226
: to 89-3264
Respondent. : See Attachment
_____________________________________
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 and representing the Petitioner was
XXXXX, Attorney at Law. Present and
representing the respondent were XXXXX.
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 period in question in XXXXX through XXXXX.
3.
XXXXX is a XXXXX corporation. In XXXXX
and XXXXX the corporation obtained some oil properties in Utah and began
operations there.
4.
When the Utah operations were started up, XXXXX requested information from the
Tax Commission as to how the necessary withholding taxes were to be handled.
5.
XXXXX received a booklet from the Tax Commission entitled "Utah Mineral
Production Tax Guidelines" to aid them in the handling of withholding tax.
6.
The constant referral to "royalties" within that booklet as well as
the reference to "royalties" on the return filed by XXXXX led XXXXX
to believe that withholding taxes need only be paid on royalties.
7.
Based upon the belief that withholding need only be made on royalty payments,
XXXXX did not withhold taxes on payments made to working interest owners. The Petitioners were not aware of the requirement
to withhold such taxes until XXXXX and thereafter began to withhold the
necessary taxes.
8.
An audit conducted by the Auditing Division for the period XXXXX through XXXXX
established a deficiency for the failure to withhold the taxes in question as
well as established a penalty for the failure to do so.
9.
Negotiations between XXXXX and the Auditing Division led to an agreement
whereby further proceedings on the matter were stayed until XXXXX had an
opportunity to contact those persons to whom non-mineral production payments
had been made and no withholding taken out.
Once contacted those individuals were allowed time to file amended
income tax returns to state such income.
10.
All but three of the individuals so affected filed the amended return or had
already included the income in their income tax returns.
11.
The entire tax deficiency had been paid by the individual taxpayers. The individual taxpayers who had not
included the income in their original returns were assessed a penalty.
CONCLUSIONS OF LAW
The
Tax Commission is granted the authority to waive, reduce or compromise
penalties and interest upon a reasonable showing of reasonable cause. (Utah
Code Ann. §59-1-401(8).)
DECISION AND ORDER
Although
the necessary withholding taxes for non-mineral production payments had not
been deducted by XXXXX, the Petitioner nevertheless had an obligation to
include such sums in its Utah income tax return. The error of XXXXX does not relieve Petitioner of that
obligation.
Based
upon the foregoing, the Tax Commission finds that sufficient cause has not been
shown which would justify a waiver or a reduction of the penalties and interest
associated with the audit period XXXXX through XXXXX. Therefore, the Petitioner's request to waive the penalties and
interest associated with those years is denied. It is so ordered.
DATED
this 19th day of a April, 1990.
BY ORDER OF THE UTAH STATE TAX COMMISSION.
R. H. Hansen Roger
O. Tew
Chairman Commissioner
Joe B.
Pacheco G.
Blaine Davis
Commissioner Commissioner