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
Joe B. Pacheco Alice Shearer*