BEFORE THE UTAH STATE TAX
COMMISSION
___________________________________
XXXXX :
Petitioner, : FINDINGS OF FACT,
: CONCLUSIONS
OF LAW,
v. : AND FINAL DECISION
:
AUDITING
DIVISION OF THE : Appeal No. 91-1686
UTAH STATE TAX COMMISSION, :
: Tax
Type: Special Fuels
Respondent. :
_____________________________________
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 on behalf of the Commission. XXXXX, one of Petitioner's owners, and
XXXXX, office manager, represented Petitioner.
XXXXX, Assistant Utah Attorney General, with XXXXX and XXXXX of the
Audit Division, represented Respondent.
Based
upon the evidence presented at the hearing, the Tax Commission hereby makes
its:
FINDINGS OF FACT
1. The tax in question is special fuels tax.
2. The period in question is XXXXX through
XXXXX.
3. Petitioner operates two service stations and
a bulk plant in XXXXX. Among other
things, Petitioner sells XXXXX.
4. On XXXXX, Respondent issued its audit,
assessing Petitioner with additional special fuels tax of $$$$$, a XXXXX
negligence penalty in the amount of $$$$$, and
interest at the statutory rate of %%%%% per annum.
5. Petitioner filed a timely appeal of the
foregoing assessment.
6. Respondent's audit is divided into five
schedules. Petitioner does not contest
schedules one, three, four or five.
Petitioner does contest schedule two, which accounts for $$$$$ of the
additional tax assessed by the audit.
7. Schedule two identifies, by a projection
method, the amount of XXXXX which was sold by Petitioner during the audit
period for which special fuels tax was not collected. In most cases, the transactions involved relatively small
purchases of diesel fuel. Schedule two
does not include transactions of less than five gallons. Respondent excluded such transactions because
purchases of such small quantities were, in all likelihood, for exempt purposes. In such instances, the invoice would
typically carry a notation such as "cash", "offroad" or
"farm". Petitioner interprets
the last two notations as indicating the use to which the fuel was to be put.
8. Petitioner had not previously been audited
for compliance with the special fuels tax.
Apart from the matter involved in this appeal, Petitioner has a good
record of compliance with tax requirements.
Petitioner has also been audited for federal motor fuel tax purposes and
found to have properly reported and paid such tax.
CONCLUSIONS OF LAW
Utah
imposes a tax of 19 cents per gallon on the sale or use of special fuel. The tax is not imposed upon special fuel
"sold or used for any purpose other than to operate or propel a motor
vehicle upon public highways of the state." The foregoing exemption applies only where the purchasers or the
users of special fuel establish that the special fuel was used for exempt
purposes. (Utah Code Ann. §59-13-301.)
The
Commission's RuleR865-4D-6 provides in material part as follows:
A. Every user-dealer or retail dealer of
special fuel who sells special fuel exempt from tax must at the time of each
sale and delivery issue an invoice to the purchaser.
1. If requested, an invoice must also be issued
to the purchaser of special fuel that pays the tax at the time of
purchase. This invoice shall serve as
evidence that the special fuel tax has been paid.
B. Invoices must be numbered consecutively,
made in duplicate, and contain the following information:
1. name and address of seller,
2. place of sale,
3. date of sale,
4. name and address of purchaser,
5. fuel type,
6. number of gallons,
7. unit
number or other
vehicle identification if delivered into a motor vehicle,
8. type of container delivered into if not a
motor vehicle,
9. invoice number,
10. amount and type of state tax charged, if
any.
C. The user-dealer must retain a copy of each
tax exempt invoice and be able to account for each tax exempt delivery made.
D. The burden of proving that a sale of special
fuel is exempt shall be upon the person who makes the sale. In any case, if during an audit or at other
times upon request of any member or agent of the Tax Commission the user-dealer
fails to produce an acceptable invoice or other acceptable evidence in support
of the user-dealer's claim that a sale is exempt, the sale is considered
taxable and the tax shall be payable by the user-dealer.
Utah
Code Ann. §59-1-401(3) establishes a penalty of 10% if underpayment of any tax
is due to negligence.
Utah
Code Ann. §59-1-401(8) permits the Commission, upon reasonable cause shown, to
waive, reduce, or compromise any penalties or interest imposed.
DECISION AND ORDER
As
a general rule, Utah law requires that tax be collected on all sales of special
fuels. While sales for offroad or farm
use are exceptions to this general rule, the statutes and rules cited above
make it clear that dealers must either collect the tax or be prepared to
document that the sale was exempt. Such
documentation must, by rule, include the name and address of the purchaser and
the type of container into which the special fuel was delivered.
In
this case, Petitioner concedes that it failed to obtain all the information
necessary to establish that certain sales of diesel fuel were for exempt
use. While it may be true, as argued by
Petitioner, that some sales were for exempt purposes, the lack of documentation prevents the exemption from being
granted. Consequently, the Commission
concludes that the audit's assessment of additional tax under schedule two is
correct.
A
10% negligence penalty has also been assessed against Petitioner. Petitioner's errors in this matter are a
small percentage of its overall fuel sales.
Petitioner has not previously been audited, and so had not had the
benefit of the education an audit provides at the time it made the mistakes
which led to the present audit deficiency.
Finally, Petitioner has cooperated with Respondent in the performance of
the audit, and in compliance with other tax requirements. For these reasons, the Commission finds
reasonable cause to waive the assessment of penalty.
With
respect to interest, the Commission views such a charge as representing the
time value of tax funds while such funds were in Petitioner's possession. Interest is therefore not waived.
In
summary, the Commission affirms the assessment of special fuels tax as set
forth in Respondent's audit. The
Commission waives assessment of penalty, but does not waive interest. It is so ordered.
DATED
this 10 day of June, 1993.
BY ORDER OF THE UTAH STATE TAX COMMISSION.
R. H. Hansen Roger
O. Tew
Chairman Commissioner
Joe B.
Pacheco S.
Blaine Willes
Commissioner Commissioner