BEFORE THE UTAH STATE TAX
COMMISSION
__________________________________
XXXXX. )
:
Petitioner, )
: FINDINGS
OF FACT,
v. ) CONCLUSIONS OF LAW
: AND FINAL
DECISION
AUDITING
DIVISION OF THE )
UTAH STATE TAX
COMMISSION, : Appeal No. 92-1833
)
: Account No.
XXXXX
Respondent. )
__________________________________
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 were
XXXXX, Petitioner's certified public accountant, and XXXXX, company
secretary/treasurer. Present and
Representing Respondent was XXXXX.
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 withholding tax.
2. The period in question is the year XXXXX.
3. As a result of an audit by the Tax
Commission, Petitioner was penalized ten percent plus interest for
underreporting withholding taxes due for the year in question.
4. Petitioner is requesting a waiver of the
penalty and interest assessments.
5. Petitioner's secretary/treasurer, XXXXX,
testified that he prepared all of Petitioner's withholding tax filings until he
had open heart surgery in XXXXX. Just a
month before XXXXX's surgery, Petitioner hired a new controller, XXXXX, to take
over the filings, among other duties.
6. Six weeks after his surgery, XXXXX returned
to work, but this time he left for the east coast to help out the corporate
restructuring. Mr. XXXXX, a certified
public account, continued to handle the withholding tax filings.
7. According to XXXXX, these filings should not
have been difficult as an outside payroll service, XXXXX, computed the withholding
amounts due monthly.
8. At the time, Petitioner owed withholding
taxes in five states and was required to file in all of them.
9. On XXXXX, XXXXX returned to Utah and stopped
in at Petitioner's office to check on how the new controller was handling the
taxes then due. XXXXX helped XXXXX
prepare the year-end reconciliation reports.
He noticed that XXXXX did not seem to have a grasp of how to do the task
nor realize its importance.
10. XXXXX admitted that he did not have time to
double-check XXXXX's XXXXX reconciliation report prior to its filing, largely
because XXXXX had not begun preparing it until the last minute.
11. Petitioner fired XXXXX soon thereafter and
hired XXXXX as controller.
12. In her internal audit report, XXXXX
determined that XXXXX had somehow erred in preparing Petitioner's XXXXX
withholding tax filings. Petitioner had underpaid Utah and overpaid West
Virginia; there were similar problems in other states.
13. Petitioner was aware of the XXXXX filing
error in XXXXX.
14. In XXXXX, the Tax Commission also discovered
a withholding deficiency for XXXXX and notified Petitioner.
15. Petitioner remitted the deficiency
immediately.
16. Petitioner is requesting a waiver of the
penalty and interest amounts, contending that the XXXXX filing mistake was
unintentional. Apparently, the controller at the time was incompetent and
should have discovered the error when he prepared the year-end reconciliation
report.
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, Petitioner admits that its own employee was negligent in the
preparation of the year-end reconciliation report which would have revealed the
error. An employer is responsible for
the mistakes of its employees.
Additionally
Petitioner exacerbated the problem when it discovered the underreported taxes
and then did not apprise the Tax Commission of the situation.
Based
upon the foregoing, the Tax Commission finds that sufficient cause has not been
shown which would justify a wavier of the penalty and interest assessments associated
with the withholding tax due on the year XXXXX. It is so ordered.
DATED
this 12th day of March, 1993.
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