BEFORE THE UTAH STATE TAX
COMMISSION
________________________________
In Re: )
:
XXXXX ) FINDINGS OF FACT,
: CONCLUSIONS
OF LAW,
: AND FINAL
DECISION
:
: Appeal No.
92-1399
: Account
No. XXXXX
_______________________________________
STATEMENT OF CASE
This
matter came before the Utah State Tax Commission for a formal hearing on
XXXXX. Lisa L. Olpin, Presiding
Officer, heard the matter for and on behalf of the Commission. Present and representing the Petitioner was
XXXXX, an attorney. Present and
representing the Respondent was XXXXX, Assistant Utah Attorney General.
After
the formal hearing in this matter, the parties submitted a revised Exhibit A
with a change in computation. This
revised exhibit is admitted into evidence at this time.
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 mineral production
withholding tax.
2. The audit period in question spans
XXXXX-XXXXX.
3. As a result of a Tax Commission audit of Petitioner's
mineral production withholding tax records for the years in question, the
Commission determined Petitioner owed a delinquency of approximately $$$$$ in
additional mineral production withholding taxes. Penalties in excess of $$$$$ were assessed plus $$$$$ in
interest.
4. At Petitioner's request, the Commission
later reviewed the penalty and interest amounts and ordered the penalty amount
waived.
5. Petitioner is now seeking a reduction/waiver
of the interest assessment.
6. During the period in question, Petitioner
was the first purchaser of minerals produced or extracted from deposits in
Utah.
7. Petitioner sent mineral production
distribution payments to royalty interest owners and working interest owners
during the audit period without first deducting any withholding tax as required
by Utah statute.
8. Corporations comprised 87.7% of the total
recipients of these payments. These
corporations, in turn, reported and paid the tax quarterly on these mineral
production distributions.
9.
In fact, although the Auditing Division
determined that Petitioner failed to remit approximately $$$$$ in mineral
production withholding tax, the Auditing Division found that the recipient
corporations had remitted to the state over $$$$$. After credits were applied,
Petitioner ended up owing the difference of approximately $$$$$ in taxes.
10. Petitioner contends that the interest amount
(which was calculated on the initial approximate $$$$$ in withholding taxes) is
unjust given that these recipient corporations remitted the withholding taxes
pursuant to their own filing obligations 15 days earlier on a quarterly basis
than Petitioner was required to do so.
In other words, because the recipient corporations were remitting the
tax amount that Petitioner should have deducted in the first instance on an
earlier time schedule, the state actually benefitted in that it received the
tax money earlier than if Petitioner had remitted it on its own. (Corporations
file by the 15th of each quarter's end; first purchasers of mineral production
file by the 30th of each quarter's end.)
11. Petitioner also claims that the Auditing
Division should not assess interest on distributions it paid out to the XXXXX
because it believes that XXXXX is essentially a marketing agent of the
XXXXX. Petitioner feels that XXXXX
relationship with the XXXXX relieves Petitioner of any obligation to withhold
tax on mineral production payments in the first place. (Utah Code Ann. §59-6-102(2)(c).)
12. The Auditing Division cited Utah Administrative
Rule R865-14l-W(H), provided below, in support of its interest assessment.
If
the producer, operator, or first purchaser fails to withhold the tax required
under Section 59-6-102, and thereafter, the income subject to withholding is
reported, and the resulting tax is paid by the recipient, any tax required to
be withheld shall not be collected from the producer, operator, or first
purchaser. However, the producer,
operator, or first purchaser shall remain subject to penalties and interest on
the total amount of taxes that should have been withheld.
CONCLUSIONS OF LAW
The
Tax Commission is granted the authority to waive, reduce, or compromise
penalties and interest upon a showing of reasonable cause. (Utah Code Ann.
§59-1-401(8).)
DECISION AND ORDER
Based
upon the foregoing, the Tax Commission finds that sufficient cause has been
shown which would justify a reduction of the interest associated with the
mineral production withholding tax by 87.7%, leaving a balance of $$$$$. It is so ordered.
DATED
this 3rd day of December, 1993.
BY ORDER OF THE UTAH STATE TAX COMMISSION.
W. Val
Oveson Roger
O. Tew
Chairman Commissioner
Joe B.
Pacheco Alice
Shearer
Commissioner Commissioner