BEFORE THE UTAH STATE TAX
COMMISSION
__________________________________
XXXXX, )
:
Petitioner, ) FINDINGS OF FACT,
: CONCLUSIONS
OF LAW,
v. ) AND FINAL DECISION
:
AUDITING
DIVISION OF THE ) Appeal No. 92-0327
UTAH STATE TAX
COMMISSION, :
) Account
No. XXXXX
:
Respondent. )
______________________________
STATEMENT OF CASE
This
matter came before the Utah State Tax Commission for a formal hearing on XXXXX,
XXXXX. Alan Hennebold, Presiding
Officer, heard the matter for and on behalf of the Commission. Present and representing the Petitioner were
XXXXX and XXXXX. Present and
representing the Respondent were XXXXX, Assistant Utah Attorney General and
XXXXX of the Auditing Division.
FINDINGS OF FACT
1. The tax in question is sales tax.
2. The period in question is XXXXX XXXXX
through XXXXX XXXXX.
3. Petitioner is in the business of selling
fastening devices on both a retail and wholesale basis.
4. By its Amended Assessment dated XXXXX,
XXXXX, Respondent assessed Petitioner with additional sales tax of ($$$$), a
10% negligence penalty of ($$$$), and interest accrued at the statutory rate of
12% through XXXXX, XXXXX in the amount of ($$$$).
5. By another Amended Assessment dated XXXXX,
XXXXX, Respondent reduced its assessment of tax to ($$$$), penalty to ($$$$),
and recomputed interest accordingly. In
making the foregoing reductions to its assessment, Respondent corrected certain
items identified by Petitioner in its Petition For Redetermination. In particular, Respondent withdrew its
assessment of sales and use tax on certain items sold in interstate commerce,
other items sold pursuant to valid exemption certificates, and items sold to
consumers who had themselves paid use tax on the items.
6. Of
the remaining tax assessed by Respondent, ($$$$) arises from Petitioner's sale
of fasteners without either charging sales tax or obtaining an exemption
certificate from the purchaser.
Petitioner contends that at least some of the transactions in this
category were for resale and therefore not subject to sales tax.
7. Of the remaining tax, ($$$$) arises from
transactions where Petitioner actually billed sales tax to the purchaser, but
the purchaser paid only the purchase price and failed to remit the tax amount.
8. Finally, the remaining ($$$$) of additional
tax assessment was imposed to adjust Petitioner from a "cash" to an
"accrual" basis for reporting its sales tax liability.
9. Respondent assessed a 10% negligence penalty
against Petitioner on the basis that Petitioner had previously demonstrated an
understanding of the necessity of exemption certificates by collecting them in
some cases, but was negligent in not obtaining the certificates on a consistent
basis, or alternatively, collecting the applicable sales tax. Petitioner has not previously been audited
for sales tax compliance.
CONCLUSIONS OF LAW
Sales
or use tax is levied on the purchaser for the amount paid or charged for retail
sales of tangible personal property made within Utah. (Utah Code Ann. §59-12-103(a).)
Every
vendor is responsible for the collection of the sales or use tax imposed by
Utah's Sales and Use Tax Act. (Utah
Code Ann. §59-12-107.)
1. RuleR865-19S-20(B.), Utah Administrative
Code 1992-1993, provides in material part as follows:
Justified adjustments may be made and credit allowed for cash discounts,
returned goods, bad debts, and repossessions which result from sales upon which
the tax has been reported and paid in full by the retailers to the Tax Commission.
2. In no case shall the credit
be greater than the sales tax on that portion of the purchase price remaining
unpaid at the time the goods are returned, the account is charged off, or the
repossession occurs.
4. Sales tax credits for bad
debts are allowable only on accounts determined to be worthless and actually
charged off for income tax purposes.
Parties
seeking exemptions from taxation bear the burden of proving that they qualify
and are legally entitled to the exemption.
(Parson Asphalt Products v. Utah State Tax Commission, 617 P.2d 397
(1980).)
DECISION AND ORDER
Petitioner's
primary argument in this matter is that provisions of Utah's Sales and Use Tax
Act which require Petitioner to collect sales tax from its customers and remit
such tax to the state are unconstitutional.
Petitioner has failed to submit any precedent that supports its
contention, and the Commission is unaware of any such precedent. Furthermore, the Commission is without
authority to pass upon the constitutionality of legislative enactments. The Commission therefore concludes that the
collection requirements of the Sales and Use Tax Act are constitutional.
Petitioner
argues that some of its sales were for resale, and therefore exempt from
tax. The Sales and Use Tax Act requires
vendors to obtain exemption certificates in such cases. Petitioner failed to do so, despite a
demonstrated familiarity with such exemption certificates.
Petitioner
further argues that it cannot be compelled to remit tax in those instances
where it has properly billed its customers for both the property sold and the
applicable tax, but the customer has paid only the property's price and left
the sales tax unpaid. The Commission
has adopted rules, cited above, which provide for credit for sales tax on bad
debts. Petitioner has not established
that it is entitled to any such credits as provided by the rule.
With
respect to imposition of negligence penalty against Petitioner, the Commission
finds that the assessment of tax in this matter arises from Petitioner's
haphazard compliance with the requirements of the Sales and Use Tax Act. This is not a case where the taxpayer was
unaware of its obligations, but rather, is a case where the taxpayer did not
make the minimal efforts necessary to comply with the requirements. The Commission therefore concludes that the
imposition of a 10% negligence penalty is warranted.
In
view of the foregoing, the Commission affirms Respondent's audit determination
and assessment of XXXXX, XXXXX, including its imposition of tax in the amount
of ($$$$), a 10% negligence penalty in the amount of ($$$$), and interest at
the statutory rate. It is so ordered.
DATED
this 5th day of March, 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