BEFORE THE UTAH STATE TAX
COMMISSION
___________________________
In Re: )
: FINDINGS
OF FACT,
XXXXX : CONCLUSIONS OF LAW,
: AND FINAL
DECISION
: Appeal No.
91-0918
: 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. Present and representing the Petitioner was
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 use tax.
2. The period in question is XXXXX through
XXXXX.
3. Auditing Division staff conducted an audit
of the Petitioner's compliance with Utah sales and use tax law for the period
in question. As a result of that audit,
additional use tax in the amount of $$$$$, was assessed against Petitioner.
A
10% negligence penalty in the amount of $$$$$, was also assessed against
Petitioner, as was interest on the additional tax due.
4. The additional tax assessed under the audit
was derived from three categories: first, non-inventory purchases made where
tax was neither paid nor accrued; second, additional taxable amount of goods
consumed by XXXXX out of inventory; and, third, assets purchased from
out-of-state vendors.
5. The Petitioner does not contest the audit's
additional tax audit except for two items.
First, the Petitioner has identified a transaction dated XXXXX in which
it purchased material for $$$$$ from XXXXX.
The invoice establishes that tax on the transaction was paid at that
time, but the audit does not credit the Petitioner with the amount of tax paid.
The second item involves transactions in the amount $$$$$, made during the
audit period. Tax on those transactions
was accrued and paid during XXXXX and XXXXX, shortly after the audit
period. The audit did not allow credit
for the tax subsequently accrued and paid.
6. Approximately half of the total audit
deficiency is attributable to two large purchases made during the audit
period. The Petitioner contends that
the tax resulting from those two items resulted in an audit deficiency which is
larger than would typically occur.
7. The Petitioner was previously audited for
the period of XXXXX through XXXXX. As a
result of that audit, additional sales and use tax of $$$$$, and penalty of
$$$$$, was assessed against Petitioner. The Commission has previously waived
the penalty from that earlier audit.
CONCLUSIONS OF LAW
Utah
Code Ann. §59-1-402(3)(a) provides a penalty of 10% of the under payment of any
tax, if that under payment is due to negligence.
Utah Code Ann. §59-1-402(8) provides that
penalties or interest may be waived, reduced or compromised by the Commission
for reasonable cause shown.
DECISION AND ORDER
The
Petitioner requests waiver of penalty on the grounds it substantially improved
its compliance with Utah's sales and use tax law since the XXXXX audit. During the earlier audit, tax of
approximately $$$$$ was imposed, while tax of only $$$$$ was imposed by the
current audit. The Petitioner points
out that its performance would have been even better except for two large items
which distort the picture of the Petitioner's improved compliance with Sales
and Use Tax Law.
Although
Petitioner's tax compliance has improved, the fact remains that a significant
underpayment of use tax continued during the current audit period. The Petitioner has identified no reasonable
cause for the underpayment other than mis-communication between Petitioner's
various divisions and locations. Under
such circumstances a 10% negligence penalty is appropriately imposed against
Petitioner.
While
the Commission affirms the imposition of the negligence penalty in this matter,
the two matters identified by the Petitioner require further attention. First, the existing audit determination for
the period in question fails to credit the Petitioner with tax paid to XXXXX on
a purchase of $$$$$ on XXXXX. The audit
should be amended to reflect Petitioners' payment of tax on that
transaction. Second, the Petitioner
contends that the audit fails to give credit for tax paid after the audit period
on taxable purchases of $$$$$ during the audit period. The Commission concludes that those
transactions are properly included in the audit. However, if the Petitioner can document that it also paid the tax
on such transactions during a later period, it may apply for an appropriate
credit.
In
summary, the Tax Commission affirms the imposition of penalty in the amount 10%
of the additional tax assessed by the audit for the period in question. However, the Commission remands this matter
to the audit division for correction of the error regarding the XXXXX matter.
After
that correction is made, the auditing division is instructed to advise the
Petitioner of the recomputed tax, penalty and interest due. It is so ordered.
DATED
this 12th day of November, 1991.
BY ORDER OF THE STATE TAX COMMISSION.
R. H. Hansen Roger
O. Tew
Chairman Commissioner
Joe B.
Pacheco S.
Blaine Willes
Commissioner Commissioner