BEFORE THE UTAH STATE TAX
COMMISSION
____________________________________
XXXXX, )
:
Petitioner, ) FINDINGS OF FACT,
: CONCLUSIONS
OF LAW,
v. ) AND FINAL DECISION
:
OPERATIONS
DIVISION OF THE ) Appeal No. 92-1243
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
January 14, 1993. XXXXX, Presiding
Officer, heard the matter for and on behalf of the Commission. Present and representing the Petitioner was
XXXXX. Present and representing the Respondent
was XXXXX, Assistant Utah Attorney General.
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 corporate franchise
tax.
2. The period in question is XXXX.
3. The Petitioner is a cooperative association
which is organized and operated on a cooperative basis. As such the Petitioner is exempt from
corporate franchise tax.
4. The Petitioner is also exempt from the
filing of a federal income tax return except to the extent that taxes have been
imposed on unrelated business income and certain other activities pursuant to
relevant provisions of the Internal Revenue Code.
5. In approximately XXXXX of XXXXX, the
Internal Revenue Service released a Technical Advice Memorandum (TAM) which
changed the ways revenues for cooperative associations are classified which
would, in turn, change the taxability of the cooperatives.
6. A draft copy of the TAM was received by the
Petitioner in approximately XXXXX of XXXXX.
7. Based upon the changes, the accountant for
the Petitioner believed that the Petitioner would no longer meet the tax exempt
status requirements. The accountant
erroneously thought that access revenues would be subject to income tax. The effect of such a situation was to
overestimate income which, in turn, would lead to an overpayment of taxes.
8. Based upon the erroneous interpretation of
the changes, the Petitioner paid $$$$$ in state taxes. That amount was remitted when the Petitioner
filed its request for extension of its corporate franchise tax return on XXXXX.
9. The Petitioner asserted that by way of a
letter dated XXXXX, an independent auditor for the Petitioner requested a
refund of the $$$$$ paid to the Commission in error.
10. The XXXXX Division denies receiving the
letter of XXXXX.
11. By way of a subsequent letter dated XXXXX
written by a tax representative of the Petitioner, the request for refund was
renewed. That letter also requested
that interest calculated at 12 percent per annum be returned to the Petitioner.
12. By way of a check dated XXXXX, the
Petitioner was refunded the sum of $$$$$.
The request for interest on that amount was denied. The Petitioner was made aware of that denial
by way of a statutory notice dated XXXXX.
13. Had the Petitioner been liable for the
payment of corporate franchise tax, and had the return and payment of such
taxes not been timely made, penalties would have been assessed upon those
amounts as provided for by Section 59-1-401 Utah Code Annotated.
CONCLUSIONS OF LAW
Interest
shall be allowed and paid upon any overpayment in respect of any tax imposed by
this chapter at the rate prescribed in Section 59-1-402 as follows: . . . (2) in
the case of a refund, from the date of the overpayment to a date preceding the
date of the refund check by not more than thirty (30) days, such date to be
determined by the Commission. (Utah
Code Ann. §59-7-154.)
The
rate of interest applicable to a tax provision administered directly by the
Commission is 12 percent annually.
(Utah Code Ann. §59-1-402.)
If
an extension of time is necessary for filing a return, . . . payment must be
made in amount equal to: (i) 90 percent of the total amount of tax due with the
return when filed; (ii) 100 percent of the minimum tax due under Section
59-7-102, which ever is greater; or (iii) 100 percent of the tax paid for the
previous year. (Utah Code Ann.
§59-7-126(1)(b).)
DECISION AND ORDER
In
the present case, the issue to be determined by the Commission is whether there
was an overpayment of taxes for which interest must be allowed.
The
Respondent claims that here, there was no overpayment of tax. It is the Respondent's argument that since there
was never any tax due, there could not have been an overpayment of such a
tax. Respondent further argued that to
qualify, the overpayment must have resulted from either an over-assessment by
the government, or a self assessment by the taxpayer based upon a processable
return. The Respondent claimed that in
the present case there was no processable return filed by the taxpayer but
rather, the Petitioner made a "casual deposit" of the sum in
question.
The
Tax Commission rejects the Respondent's characterization of the Petitioner's
actions as having made a "casual deposit". The Tax Commission finds that under the circumstances, the
Petitioner reasonably believed that it would no longer qualify for its tax
exempt status. Based upon that
reasonable belief, the Petitioner, in good faith, filed its request for
extension and included in that request, the required sum of money.
It
is important to note that had the Petitioner not acted as it did, and had it
been found to be liable for the taxes it believed were due, the Petitioner
would have been subjected to a substantial penalty for non filing and non
payment of the taxes and would have been subject to interest at the rate of 12
percent per annum.
Based
upon the foregoing, the Tax Commission finds that under the facts of the
present case, the Petitioner is entitled to interest on the amount paid in
error as overpayment of corporate franchise tax. The amount of interest due shall be calculated from the date on
which the check and extension request were received to XXXXX, which is the date
on the which the refund check was issued.
It is so ordered.
DATED
this 13th day of May, 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