92-1893 - Motor Fuel






Petitioner, : ORDER


v. : Appeal No. 92-1893





Respondent. : Tax Type: Motor Fuel



This matter came before the Utah State Tax Commission for a Status Conference on XXXXX at XXXXX in the hearing room of the Utah State Tax Commission in Salt Lake City. Joe B. Pacheco, Commissioner, conducted the proceedings, W. Val Oveson, Commission Chairman also heard the matter for the Commission. XXXXX, Owner and XXXXX, Accountant represented the Petitioner. XXXXX and XXXXX represented the Auditing Division, XXXXX and XXXXX represented the Collection Division.

The issues in this matter were identified by the Petitioner and generally agreed to by the Respondents. The Respondents were relying on information in their files and had only prepared sufficient data to satisfy a Status Conference.

Commissioner Pacheco on his own Motion converted the Status Conference to an Initial Hearing because he felt that it was in the best interest of the parties and that such a proceeding would not unjustly prejudice the rights of any party.

Respondents objected to such conversion noting that they were not prepared for an Initial Hearing and that their Legal Counsel, who was just recently assigned to the case, was not present. Commissioner Pacheco acknowledged the objection and also acknowledges that the Petitioner had traveled a long distance and was prepared to proceed. The conversion from a Status Conference to an Initial Hearing is extraordinary, however, Commissioner Pacheco felt that the facts were fairly specific and that Respondents had sufficient documentation on hand to address the

issues identified.


The issues in this matter are identified as follows:

1.) On XXXXX a check in the amount of $$$$$ was given to the Tax Commission by the Petitioner for payment of its motor fuel account with a restrictive endorsement that if accepted the account was paid in full. The Tax Commission subsequently cashed this check on XXXXX. Petitioner said that he had received assistance from Tax Commission Personnel in the XXXXX Office in the structure of a document and an accounting of the amount due for proposed payment and final settlement of the account.

2.) An Audit Summary dated XXXXX for the Motor Fuel Account showed a refund due the Petitioner of $$$$$. The Audit covered the period XXXXX to XXXXX.

3.) Letters dated XXXXX addressed to Commissioner Pacheco from XXXXX and Associates and a Response dated XXXXX from Commissioner Pacheco to XXXXX are pertinent to the Appeal. The Letters address the Field Audit Report covering the period XXXXX to XXXXX and three (3) additional Office Audits of the motor fuel account covering Individual Audit Assessments for the months of XXXXX, XXXXX, and XXXXX.

4.) Petitioners said that they understood that the Auditing Division did a Comprehensive three (3) year Motor Fuel Audit which included a review of all invoices and receipts for the entire Audit Period and the results were further confirmed by XXXXX, an Audit Supervisor. After receiving the audit with the above understanding in mind, Petitioner signed the Audit Report as to the findings, and waited, as reported in the audit, for the $$$$$ to be refunded to him.

5.) The Field Audit work was performed in XXXXX and completed in XXXXX. The individual Audits of XXXXX, XXXXX and XXXXX XXXXX were performed during XXXXX and XXXXX. No Appeal of the aforementioned assessments for the three months was received by the Tax Commission.

6.) On or about XXXXX, Petitioner approached the XXXXX office of the Utah State Tax Commission seeking help from the Collection Division as to how much was due to the State of Utah. Petitioner received information from Tax Commission personnel as to the outstanding amount due and assistance on how to structure a document to present to the Tax Commission proposing a full payment and final settlement of the account. Petitioner relied in good faith that the payment of $$$$$ was accepted in full payment of the account. The check for payment was cashed by the Utah State Tax Commission on XXXXX.

7.) Petitioner acknowledges that during XXXXX and XXXXX, three assessments for the months of XXXXX, XXXXX, and XXXXX were received. Petitioner stated that they believed these assessments were also included in the comprehensive Audit for the period XXXXX toXXXXX. Irrespective of the separate billings received for the above three months, the Petitioner said in its XXXXX letter that “By definition an Audit is a reconciliation or comparison of amounts reported and paid to an agency by an individual or corporation.” The Petitioner believes that the three months were included in the comprehensive audit. “It was a comprehensive audit so these three month’s invoices were reviewed and compared to previous returns, assessments and payments. There were no adjustment indicated. The Auditor agreed with this finding in his preliminary Notice on XXXXX.”

8.) In the XXXXX response to XXXXX, Commissioner Pacheco stated;

“The field audit takes all prior assessments into consideration. The field audit is a reconciliation or comparison of the taxpayer’s records to amounts reported on returns or billed in prior office audits. The field audit allows credit for all prior assessments. This procedure avoids the problem of duplicate assessments. If the assessments for returns or office audits are not paid, they are in addition to the field audit and all outstanding liabilities on the account are billed by the system. The above procedures are long standing procedures of the Auditing Division.”

9.) Respondent, Collection Division, agreed that the XXXXX Office assisted the Petitioner in XXXXX. However the assistance given was for a previous audit period, (XXXXX). Collection Division said that all representations made by the taxpayer were generally correct but payments made at that time would have only paid off the motor fuel account in full as of XXXXX. Respondent pointed out that the payment transaction took place prior to the three office audits occurring in XXXXX, therefore, there could be no confusing the payment of a prior audit with current transactions. Respondent also said the documents had been presented as an offer in compromise, which had been denied in XXXXX.

10.) Respondent, Auditing Division, said that none of the assessments, (the three desk audit assessments and the current audit) ever had a Petition For Redetermination filed so they were unaware until this date that an Appeal had been filed. Auditing Division says this is a collections issue, as all of the liabilities for the three months assessments were still outstanding.

11.) The Pacheco letter of XXXXX indicated that the refund amount from the field audit was being applied to theXXXXX outstanding balance.

12.) Auditing Division responded to questions as to their long standing procedures of keeping desk audit assessments outside of on-going field audits. Auditing has always followed this procedure to avoid duplicate assessments and does not look to the credit side of an account balance.

13.) At the request of the presiding officer, the Collection Division was asked for additional information regarding the XXXXX transaction. Collection Division’s response to the request is as follows:

XXXXX, Field Agent;

“This memo is being sent by your request as to a brief summary of my involvement with this case. This is strictly by memory since it has been approximately XXXXX years. I met withXXXXX at his business after he had received contradictory notices as to what was owed by him to the USTC. I don’t recall any specific amounts but there appeared to be discrepancies in what was owed. XXXXX submitted a waiver and/or and offer in compromise which was allegedly approved or accepted. I don’t think there were letters sent out indicating approval acceptance or denial. There was an audit done at about the same time. I also vaguely recall changes being made on the waiver and/or offer cover sheet. XXXXX handled the case after I did. If you have any questions, please contact me as soon as possible.”

XXXXX, Supervisor;

“Please be advised in reference to the above Appeal - My involvement in the case was for collection of special fuel taxes assessed as an audit (in house) - I was advised by XXXXX that he had settled the account in full for the time periods including the periods for which the audit was made.

XXXXX advised me he did not owe any more taxes and was appealing the audit. The account remained on my inventory for quite a while and then was removed due to the long period of time appeals were taking.”

XXXXX, Legal Manager;

“XXXXX applied for an offer in compromise (OIC) which was forwarded to the OIC unit in XXXXX. The amount offered was $$$$$. This OIC was denied on XXXXX. The Tax Compliance agent was requested to notify the taxpayer of the decision to deny the case. The taxpayer then applied for a waiver of the penalty and interest. The decision of the waiver was to reduce the penalty to $$$$$ and deny the interest. This left a balance due of $$$$$ which the taxpayer paid on XXXXX.

The audits for the periods of XXXXX, XXXXX and XXXXX were issued and assessed after XXXXX. When the Tax Commission processes on OIC or Waiver we can only Compromise or Waive the liability which is outstanding at the time of the OIC or Waiver. As the liabilities for the above listed 3 periods were assessed after I had completed the OIC and Waivers they would not have been part of the requests.”

14.) The Petitioner said he was no longer in business and that the business was sold shortly after the audit.


Utah Code Annotated provides in part:

59-13-211. Distributor’s records-Audit requirements-Deposit of revenues with treasurer-Dedicated credits.

(1) Every distributor shall keep a record, in a manner prescribed by the commission, of all purchases, receipts, sales, and distribution of motor fuel. The records shall include copies of all invoices or bills of all sales, and shall at all times during business hours of the day be subject to inspection by the commission or its deputies or other persons duly authorized by the commission. All records shall be preserved for a period of three years.

59-1-501. Procedure for obtaining redetermination of a deficiency.

Any taxpayer may file a request for agency action, petitioning the commission for redetermination of a deficiency.

59-1-503. Assessment and payment of amount determined.

(1) Following a redetermination of a deficiency by the commission, the entire amount redetermined as the deficiency by the decision of the commission, which has become final, shall be assessed and shall be paid within 30 days from the date of mailing of the notice and demand from the commission.

(2) If the taxpayer does not file a petition with the commission within the time prescribed for filing the petition, the deficiency, notice of which has been mailed to the taxpayer shall be assessed, and shall be paid within 30 days from the date of mailing of the notice and demand from the commission.

59-1-504. Time determination final.

The action of the commission on the taxpayer’s petition for redetermination of deficiency shall be final 30 days after the date of mailing of the commission’s notice of agency action. All tax, interest, and penalties are due 30 days from the date of mailing, unless the taxpayer seeks judicial review.

59-1-504 (10)

Upon making a record of its actions, and upon reasonable cause shown, The Commission may waive, reduce or compromise any of the penalties or interest imposed by this part.


Based on the information presented at the hearing and the records of the Tax Commission, the Commission finds that assessments issued for the three (3) months of XXXXX, XXXXX and XXXXX of XXXXX remain unpaid and are due and owing.

The records indicate that the assessments issued for the three months of XXXXX, XXXXX and XXXXX were independent assessments issued through the office audit procedure. The procedures employed by the Auditing Division are confusing and difficult to follow and it is understandable that taxpayers have difficulty following what was done in so far as reconciliation of the audited amounts. The Commission determines, however, that sufficient information was given to the Petitioner to show that the three months liability were assessed and billed separately from the field audit.

In so far as the payment submitted on XXXXX, the Commission determines that transaction to be a separate transaction dealing with an audit period which occurred prior to the period addressed in this Appeal. The payment tendered at that time applied to the proper period for which a liability was owing and should not be confused as payment for the three separate month assessments of the current period in question.

The Commission also finds that this is not an audit issue as no evidence was presented that a proper Appeal was made pursuant to a Petition for Redetermination. The issue in this Appeal is one of Collection and arose out of the confusion and coincidence of the timing of the transactions. The Petitioner thought it was dealing with a payment of a current balance, when in actuality the payment was for a balance owing for a prior period audit.

In this Appeal the Tax Commission finds in favor of the Collection Division and determines the liability to be as stated in the field audit summary. The liability is the amount of the three months assessment offset by the refund amount found in the field audit for a net tax liability of $$$$$.

The Tax Commission also finds that sufficient evidence is present to show that Commission procedures are culpable to warrant the waiving of all of the penalties and interest associated with the assessments at issue with this Appeal.

This decision does not limit a party’s right to a Formal Hearing. However, the Decision and Order will become final unless any party to this case files a written request within thirty (30) days of the date of this decision to proceed to a Formal Hearing. Such a Request shall be mailed to the address listed below and must include the Petitioner’s name, address and appeal Number:

Utah State Tax Commission

Appeals Division

210 North 1950 West

Salt Lake City, Utah 84134

Failure to request a Formal Hearing will preclude any further Administrative action on appeal rights in this matter.

DATED this 3 day of October, 1995.


W. Val Oveson Roger O. Tew

Chairman Commissioner

Joe B. Pacheco Alice Shearer

Commissioner Commissioner