BEFORE THE UTAH STATE TAX
COMMISSION
____________________________________
In Re: ) FINDINGS OF FACT,
: CONCLUSIONS
OF LAW,
XXXXX ) AND FINAL DECISION
:
: Appeal No.
90-1613
: Account
No. XXXXX
_____________________________________
STATEMENT OF CASE
This
matter came before the Utah State Tax Commission for a formal hearing on
XXXXX. Alan Hennebold, Presiding
Officer, heard the matter for and on behalf of the Commission. XXXXX, Petitioner's Director of Taxes, participated
by telephone. XXXXX, Assistant Utah
Attorney General, represented the Auditing Division.
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 use tax.
2. The period in question is XXXXX to XXXXX.
3. Petitioner provides XXXXX services to
various client companies. Its facility
in XXXXX collates and mails XXXXX to households in Utah, XXXXX and XXXXX.
4. In some cases, Petitioner's clients supply their
own XXXXX. In other cases, Petitioner
purchases the advertising materials, then incorporates the cost of such
materials in its service fee.
5. Petitioner did not report or pay use tax on
most of its purchases of advertising materials. In several instances, it issued sales tax exemption certificates
to in-state vendors.
6. Following an audit of Petitioner's
compliance with Utah's use tax law for the period in question, the Auditing
Division assessed Petitioner with additional tax liability of $$$$$, a
negligence penalty of XXXXX of the additional tax, plus associated
interest. Subsequent corrections to the
audit reduced Petitioner's tax liability to $$$$$, with corresponding
reductions in penalty and interest.
7. Petitioner does not contest the additional
tax assessed against it by the audit.
8. On XXXXX, after Petitioner had filed its
appeal in this matter, an additional XXXXX penalty was erroneously imposed
against Petitioner. This second penalty
has now been removed from Petitioner's account.
9. The tax found due by the audit in this
matter represents XXXXX of Petitioner's total sales and use tax liability for
the period in question.
CONCLUSIONS OF LAW
Utah
law authorizes imposition of a 10% penalty for negligent underpayment of
tax. (Utah Code Ann. §59-1-401(3).)
The
Tax Commission is granted the authority to waive, reduce, or compromise
penalties and interest upon a showing of reasonable cause. (Utah Code Ann. §59-1-401(8).)
DECISION AND ORDER
The
Petitioner admits its failure to properly report and pay use tax on purchases
of printed advertising material. It has
now paid such tax and associated interest.
Petitioner's
responsibility for its failure to report and pay the use tax in question is aggravated
by the magnitude of the underpayment of tax when compared to the amount of tax
which was originally reported by Petitioner, and by its issuance of exemption
certificates to its vendors. To
Petitioner's credit, it appears that the underpayments and issuance of
exemption certificates arose from an ill-advised but honest misunderstanding of
the taxability of the transactions in question.
Based
on the foregoing, the Commission concludes that the negligence penalty of XXXXX
imposed against Petitioner by the Auditing Division is appropriate. The Commission notes that a second XXXXX
penalty erroneously imposed against Petitioner has been withdrawn by the
Auditing Division.
In
summary, the Commission finds reasonable cause has not been shown to justify reduction
of the penalty associated with the Petitioner's use tax liability for the
period in question. The Commission
therefore affirms the audit determination, including its imposition of the
XXXXX penalty and interest. It is so ordered.
DATED
this 3rd day of December, 1991.
BY ORDER OF THE UTAH STATE TAX COMMISSION.
ABSENT
R. H. Hansen Roger
O. Tew
Chairman Commissioner
Joe B.
Pacheco S.
Blaine Willes
Commissioner Commissioner