92-1545 - Sales

BEFORE THE UTAH STATE TAX COMMISSION

_________________________________

In Re: ) FINDINGS OF FACT,

: CONCLUSIONS OF LAW,

XXXXX, ) AND FINAL DECISION

:

) Appeal No. 92-1545

: 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. Attorneys XXXXX and XXXXX represented Petitioner by telephone. XXXXX, Assistant Utah Attorney General, also represented the Auditing Division by telephone.

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 sales and use tax.

2. The audit in question spans XXXXX through XXXXX.

3. Petitioner was assessed $$$$$ in sales and use tax as a result of the audit in question. A ten percent penalty plus interest was also assessed.

4. According to the audit, Petitioner had failed to collect sales and use tax on sales it made to certain customers. The majority of the uncollected tax was a result of sales to two customers, namely XXXXX Company and XXXXX Company.

5. Petitioner claims it had oral agreements with both customers whereby each customer would self-accrue sales tax and remit it on its own accord.

6. These two customers never provided tax exemption certificates to XXXXX.

7. In a letter from XXXXX, senior staff counsel for XXXXX, she explains that during the audit period XXXXX had mistakenly remitted sales tax on XXXXX purchases to XXXXX.

8. XXXXX claims it learned of this error when XXXXX contacted it as a result of the audit in question. XXXXX claims it then sent $$$$$ in sales and use taxes to Utah (presumably to XXXXX).

9. In an affidavit by XXXXX, disbursements supervisor of XXXXX Company, XXXXX stated that XXXXX had been self-accruing and remitting sales and use taxes on XXXXX purchases to XXXXX when XXXXX contacted it as a result of the audit in question.

10. The Tax Commission had audited Petitioner the preceding period. Petitioner was assessed an additional $$$$$ for failing to remit sales and use taxes on certain purchases.

11. It was apparent from testimony that XXXXX had allowed some customers during the previous audit period to self-accrue sales and use taxes with the understanding that they would remit the taxes to the proper entity. The customers, in turn, did not remit all of the taxes.

12. In this previous audit, however, XXXXX purchases were not included in the audit as these purchases were deemed out of state purchases (interstate commerce) and not subject to Utah tax.

13. In the present audit, XXXXX purchases from XXXXX account for approximately $$$$$ of the $$$$$ tax assessment.

14. At the hearing, there was no evidence provided that would indicate that the nature of the sales transactions between XXXXX and XXXXX had changed from the previous audit period to the audit period in question.

15. During the first audit, Tax Commission auditors apparently did not fully investigate the type of sales Petitioner made to XXXXX.

16. It was not until the second audit that the auditors specifically examined all of the sales to XXXXX and determined that the sales were, in fact, not a part of interstate commerce, but were taxable to Utah.

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 waiver of the penalty assessed for the audit period in question. It is conceivable there was confusion on the part of Petitioner as to how to tax the XXXXX and XXXXX purchases in light of the previous audit. Interest is not waived. It is so ordered.

DATED this 7th day of December, 1992.

BY ORDER OF THE UTAH STATE TAX COMMISSION.

ABSENT

R. H. Hansen Roger O. Tew

Chairman Commissioner

Joe B. Pacheco S. Blaine Willes

Commissioner Commissioner