91-0482 - Sales

 

BEFORE THE UTAH STATE TAX COMMISSION

________________________________

In Re: ) FINDINGS OF FACT,

: CONCLUSIONS OF LAW,

XXXXX ) AND FINAL DECISION

:

: Appeal No. 91-0482

: Account No. XXXXX

_____________________________

STATEMENT OF CASE

This matter came before the Utah State Tax Commission for a formal hearing on XXXXX. Joseph G. Linford, Presiding Officer, heard the matter for and on behalf of the Commission. Present and representing the Petitioner were XXXXX, CPA and 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 sales tax.

2. The period in question is the audit period XXXXX through XXXXX.

3. The penalty and interest in this case was assessed upon Petitioner's tax liability which resulted from a sales tax audit performed by the Tax Commission on Petitioner's records. This audit revealed that Petitioner's records and accounting system was not sufficient because proper controls were not in place to ensure the proper collection and accrual of sales taxes. Customers were purchasing merchandise tax free without Petitioner acquiring proper information to verify the exempt nature of these sales. A reconciliation of Petitioner's general ledger to the sales tax returns resulted in large differences which could not be explained or supported by Petitioner's records.

4. Petitioner states that the penalty in this case should be waived, because the total tax deficiency discovered pursuant to the audit was only $$$$$, which, in Petitioner's words, "represents a margin of error of less than 3%."

Petitioner is of the opinion that this 3% margin of error reflects a common misunderstanding in the linen supply industry of the nuances of sales tax laws.

5. Petitioner had been previously audited by the Tax Commission, but, according to Petitioner, the previous audits had not been as thorough as that which has given rise to this case. These audits did not reveal the deficiencies noted in the audit for this case.

6. The audit also revealed that Petitioner was collecting tax where tax was not due, as well as not collecting tax that was due. Petitioner feels that some consideration should be given for the fact that, in some of these transactions, tax was collected and remitted when it should not have been, which resulted in an overpayment to the state. These overpayments have now been corrected.

CONCLUSIONS OF LAW

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

Prior to this audit, Petitioner had a reasonable basis to believe that its tax accounting methods were proper, because Petitioner had previously been audited by the Tax Commission and the deficiencies discovered in this audit were not discovered in the prior audits.

Based upon the foregoing, the Tax Commission finds that sufficient cause has been shown which would justify a waiver of the penalty associated with Petitioner's sales taxes for the audit period XXXXX through XXXXX. Interest shall be adjusted to account for the waiver of the penalty. It is so ordered.

DATED this 28th day of June, 1991.

BY ORDER OF THE UTAH STATE TAX COMMISSION.

ABSENT

R. H. Hansen Roger O. Tew

Chairman Commissioner

Joe B. Pacheco G. Blaine Davis

Commissioner Commissioner