BEFORE THE UTAH STATE TAX COMMISSION
In Re: ) FINDINGS OF FACT,
: CONCLUSIONS OF LAW,
XXXXX ) AND FINAL DECISION
: Appeal No. 91-0485
: 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 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 periods in question are the second and fourth quarters of XXXXX.
3. XXXXX was ill with an aneurysm throughout the years XXXXX and XXXXX, which finally culminated in surgery for the problem in XXXXX. Mr. and Mrs. XXXXX did not have medical insurance, and they began to suffer significant financial stress. Petitioner's business began to "go down hill," both as a result of XXXXX illness and the fact that Petitioner's supplier/sponsor began to cause problems for Petitioner during these years, and Petitioner states that it had difficulty paying the taxes in question.
4. The XXXXX attempted to pay their debts for four years, but could not meet their creditors' demands and, therefore, filed Chapter 13 bankruptcy in XXXXX.
5. On XXXXX, Petitioner's supplier/sponsor notified Petitioner that the sponsor would no longer supply Petitioner. This had a drastic effect on Petitioner's business, to the point where, according to the XXXXX, they make no profit on the business and are subsisting on social security. As a result of this, Petitioner could not meet its Chapter 13 bankruptcy obligations, and had to file for Chapter 7 bankruptcy, which was discharged in XXXXX.
6. Petitioner paid off the tax amount due for the second quarter of XXXXX, on XXXXX. Petitioner paid off the tax amount due for the fourth quarter of XXXXX on XXXXX.
CONCLUSIONS OF LAW
1. 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).)
2. The law relative to Chapter 7 bankruptcies provides that taxes which are accrued more than three years before the date of bankruptcy filing are not discharged by the bankruptcy. Interest also is not discharged which has accrued up until the date of the filing. Penalty amounts on taxes owing, however, are usually discharged.
DECISION AND ORDER
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 second and fourth quarters of XXXXX. Interest accruing after the date of Petitioner's filing for Chapter 7 bankruptcy is also waived. Interest which accrued up until the date of Petitioner's filing for bankruptcy is not waived because the state was deprived of the use of the tax funds in question for a period of time, through no fault of its own, and should be compensated for that loss of use. Interest shall, however, be further adjusted to account for the waiver of the penalty, and to account for the waiver of the interest which accrued after the date of filing for Chapter 7 bankruptcy. It is so ordered.
DATED this 27th day of June, 1991.
BY ORDER OF THE UTAH STATE TAX COMMISSION.
R. H. Hansen Roger O. Tew
Joe B. Pacheco G. Blaine Davis