BEFORE THE UTAH STATE TAX
COMMISSION
_______________________________
In Re: )
:
XXXXX, ) FINDINGS OF FACT,
: CONCLUSIONS
OF LAW,
) AND FINAL
DECISION
: Appeal No.
92-1680
) 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 Petitioner was XXXXX, an attorney. Present and representing 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 sales and use tax.
2. The audit period in question spans July
XXXXX - June XXXXX.
3. The Auditing Division determined as a result
of the audit in question that Petitioner owed an additional $$$$$ in sales and
use taxes.
4. This tax deficiency was assessed for 1) disallowed debits to the sales tax
accrual account, 2) disallowed exempt
unit sales, 3) disallowed exempt sales
in work order, parts and rental sales,
4) additional taxable purchases for items used or consumed and 5) miscellaneous additional taxable
purchases.
5. Additionally, the Auditing Division assessed
Petitioner a ten percent negligence penalty because the Auditing Division found
the same errors in the same areas in the prior audit which spanned April XXXXX
- March XXXXX and felt that Petitioner should have corrected its accounting
system by the time this second audit occurred.
Also, the amount of the tax deficiency in the current audit was 3.63
times the dollar amount of the same deficiency in the first audit.
6. Petitioner is requesting a waiver of this
negligence penalty.
7. During the first audit period, Petitioner
had a total sales volume of $$$$$ million.
In comparing total sales to the sales and use tax deficiency as
determined by the Auditing Division of $$$$$, there is a .05% tax reporting
error rate.
8. During this second audit period now in
question, Petitioner had a total sales volume of $$$$$ million. In comparing total sales to the sales and
use tax deficiency of $$$$$ (excluding penalty and interest), there is a .1%
tax reporting error rate.
9. Petitioner contends that this error rate is
nominal and not indicative of negligence in the accounting structure of the business. Petitioner proposes that this minor error
rate is even commendable given the fact that Petitioner acquired two businesses
in XXXXX and another in XXXXX during the audit period and increased sales $$$$$
million.
10. During this expansion period, Petitioner was
also struggling with incompatible computer systems gained from the new business
acquisitions which may have accounted for some of the tax reporting errors.
11. Additionally, Petitioner had a new
controller at the start of this second audit period who had to deal with these
changes.
12. During the audit period in question
Petitioner paid over $$$$$ million in sales and use taxes to the state. When comparing the total sales and use taxes
paid to the tax deficiency of $$$$$, there is a 2.9% tax reporting error rate.
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
In
this case, the Tax Commission relies upon the information provided that
indicates Petitioner's tax reporting error rate for the audit period in
question is .1% in determining that Petitioner has shown a lack of negligence
in its accounting procedures.
Although
the tax deficiency is 3.6 times greater than the deficiency found in the prior
audit, the increase in sales volume minimizes the significance of this figure.
Based
upon the foregoing, the Tax Commission finds that sufficient cause been shown
which would justify a waiver of the penalty associated with the sales and use
tax audit spanning the months July XXXXX through June XXXXX. It is so ordered.
DATED
this 4th day of August, 1993.
BY ORDER OF THE UTAH STATE TAX COMMISSION.
W. Val
Oveson* Roger
O. Tew
Chairman Commissioner
Joe B.
Pacheco Alice
Shearer*
Commissioner Commissioner