BEFORE THE UTAH STATE TAX COMMISSION
XXXXX : FINDINGS OF FACT,
Petitioner, : CONCLUSIONS OF LAW,
: AND FINAL DECISION
AUDITING DIVISION OF THE : Appeal No. 91-1663
UTAH STATE TAX COMMISSION, :
: Account No. XXXXX
STATEMENT OF CASE
This matter came before the Utah State Tax Commission for a formal telephone hearing on XXXXX. Alan Hennebold, Presiding Officer, heard the matter for and on behalf of the Commission. XXXXX, attorney at law, represented Petitioner. XXXXX, Assistant Utah Attorney General, represented Respondent.
Based upon the evidence presented at the hearing, the Commission hereby makes its:
FINDINGS OF FACT
1. The tax in question is sales and use tax.
2. The period in question is XXXXX through XXXXX.
3. Respondent used a projection method in auditing Petitioner's compliance with Utah's sales and use tax for the period in question. As a result of the audit, Respondent assessed Petitioner with additional tax in the amount of $$$$$, plus interest. No penalty was assessed.
4. Petitioner is a XXXXX located in XXXXX Utah. It has been in business for approximately eight years, installing XXXXX in XXXXX projects as well as retail sales. Prior to XXXXX, Petitioner purchased its XXXXX and other materials tax free, then charged sales tax to its customers.
5. On approximately XXXXX, Petitioner's accountant suggested that Petitioner could pay sales tax on its purchases of glass supplies, and not charge tax on subsequent sales to its customers. Petitioner's C.P.A. called an unidentified member of Respondent's staff, advised the staff member that approximately 90% of Petitioner's sales involved installation of XXXXX on real property, and asked whether Petitioner could pay tax on its purchase of materials, instead of on its sales. According to the C.P.A., he was told such a method of sales tax payment was acceptable.
6. Following the C.P.A.'s advice, Petitioner instructed suppliers to charge it with sales tax on all purchases. At that same time, Petitioner surrendered its sales tax license.
7. Thereafter, Petitioner generally paid tax on its purchase of materials, however, vendors did not always charge sales tax on those purchases. Also, Petitioner failed to report and pay use tax on materials purchased from out-of-state vendors. In still other instances, Petitioner made sales on a retail basis, such as XXXXX, but did not collect tax on such sales. Finally, the audit disclosed that in a few cases, Petitioner had charged tax on retail sales, then failed to remit such tax to the Commission. All of the foregoing items are set forth in detail in Respondent's audit and supporting schedules. Overall, approximately 60% of Petitioner's sales were made on a retail basis during the audit period.
CONCLUSIONS OF LAW
1. The Petitioner has the burden of proof to establish that its petition should be granted. (Utah Administrative Rule R861-1A-7(G).)
2. Sales or use tax is levied on the purchaser for the amount paid or charged for, among other things, retail sales of tangible personal property made within Utah. (Utah Code Ann. §59-12-103(1)(a).)
3. Charges for labor to install personal property in connection with other personal property are taxable. (Utah Administrative RuleR865-19S-51(C).)
4. Sales of materials and supplies to contractors and subcontractors are taxable transactions as sales to final consumers. (Utah Administrative RuleR865-19S-58(A).)
5. Contractors must accrue and report tax on all merchandise bought tax-free and used in performing contracts to improve or repair real property. (Utah Administrative RuleR865-19S-58.B.2.)
6. For reasonable cause shown, the Commission may waive, reduce or compromise any penalties or interest. (Utah Code Ann. §59-1-401(8).)
DECISION AND ORDER
Petitioner does not challenge Respondent's interpretation of the Sales and Use Tax Act in this matter. Instead, Petitioner argues it was entitled to rely upon advice received from one of Respondent's employees during XXXXX, to the effect that it could pay sales tax on all its purchases and thereby escape the requirement that it collect tax on sales. Petitioner also contends that even if the tax is affirmed, the Commission should waive interest charges.
Regarding the argument that one of Respondent's staff members approved Petitioner's plan for paying sales tax on its purchases, the details of such advice are vague. It is not certain what facts were provided to Respondent, nor is it clear that such information was accurate regarding Petitioner's retail sales volume. In the light most favorable to Petitioner, the evidence suggests that Petitioner's business was different during the period in question than it was at the time Petitioner sought advice from Respondent. Based on the foregoing, the Commission finds no basis to conclude that Petitioner was given incorrect advice by Respondent.
Petitioner also asks the Commission to waive interest in this matter. While Utah Code Ann. §59-1-401(8) authorizes the Commission to waive assessments of interest for reasonable cause, interest is a reasonable charge for Petitioner's use of sales tax funds during the time such funds should have been paid to the Commission. This is particularly true here, where no penalty has been assessed. The Commission therefore declines to waive interest in this matter.
In summary, the Commission affirms Respondent's audit determination, including its assessment of additional sales tax and interest. It is so ordered.
DATED this 1 day of September, 1991.
BY ORDER OF THE UTAH STATE TAX COMMISSION.
R. H. Hansen Roger O. Tew
Joe B. Pacheco S. Blaine Willes