BEFORE THE UTAH STATE TAX
COMMISSION
___________________________
In Re: )
: FINDINGS
OF FACT,
)
XXXXX, INC. : CONCLUSIONS OF LAW,
) AND FINAL
DECISION
:
) Appeal
Nos. 92-2136,
: 92-2137
& 92-2138
) Account
Nos. See Attached
_______________________________
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 was
XXXXX, Petitioner's controller.
Based
upon the evidence and testimony presented at the hearing, the Tax Commission
hereby makes its:
FINDINGS OF FACT
1. The taxes in question are sales and use tax,
corporate franchise tax and withholding tax.
2. The quarters in question regarding sales and
use tax are the second and fourth quarters of XXXXX. The years in question regarding corporate franchise tax are
XXXXX, XXXXX and XXXXX. The months in question
regarding withholding tax are May XXXXX, August XXXXX and June XXXXX through
February XXXXX.
3. In all of these periods in question,
Petitioner failed to timely file and pay the respective taxes. In the instance of sales and use taxes, the
Tax Commission assessed Petitioner a single ten percent late filing penalty and
another $$$$$ late payment penalty on each of the two quarters involved.
4. In the case of corporate franchise taxes,
the Tax Commission assessed Petitioner two $$$$$ late payment and late filing
penalties on each of the three years in question.
5. In the case of withholding taxes, the Tax
Commission assessed Petitioner at least a single ten percent late penalty on
each of the months in question, sometimes ten percent plus $$$$$, and on one
occasion two ten percent penalties.
6. Interest was charged on all periods in
question.
7. Petitioner is requesting a waiver of the
penalties and interest assessed on each of the three types of taxes over their
respective periods.
8. XXXXX, Petitioner's controller, testified
that he was hired by the company in May XXXXX and replaced the former
controller, XXXXX. As soon as Mr. XXXXX
assumed his position, he discovered that Mr. XXXXX had not carried out his
responsibilities handling the accounting and payroll obligations of the
company. Further, Mr. XXXXX's work in internally
auditing Petitioner's books showed that Mr. XXXXX had actually embezzled money
from the company.
9. Petitioner is a small business with the
parent company, The XXXXX, located in XXXXX.
10. Mr. XXXXX, a certified public accountant of
twenty years, worked as Petitioner's controller from February XXXXX through
April XXXXX. During this time, Mr.
XXXXX failed to file the necessary quarterly and yearly returns on all taxes
due to the state and I.R.S. with the exception of a few filings here and there.
11. Petitioner relieved Mr. XXXXX of his duties
in April XXXXX for failing to file and pay the payroll taxes on time. Mr. XXXXX's lack of handling the payroll
taxes appropriately was discovered after management found unsupported entries
in the accounting records.
12. After his release, Petitioner examined its
financial records and learned that Mr. XXXXX had embezzled at least $$$$$ from
the company during his tenure. On one
occasion, Mr. XXXXX, who had check signing authority, obtained a certified
check from Petitioner's bank to pay withholding taxes and then used the money
to buy himself a new car. Petitioner is
still unsure of exactly how much money and other items Mr. XXXXX unlawfully
took from the company.
13. Mr. XXXXX testified that Mr. XXXXX had
doctored the company's books to hide the fact that he had not paid the taxes or
filed returns.
14. Mr. XXXXX had also falsified expense reports
and obtained money in that manner.
15. Mr. XXXXX had not filed the necessary tax
returns nor made payment from the time he began working for the company. Per Mr. XXXXX, the embezzlement pattern
begins in August XXXXX.
16. After Petitioner was able to ascertain the
extent of Mr. XXXXX's activities, it requested and received approximately $$$$$
from the parent company to cover all of the taxes, penalty, interest amounts
and other outstanding debts Mr. XXXXX left behind.
17. In a letter, Petitioner's vice-president of
finance, XXXXX, states that he routinely questioned Mr. XXXXX about cash
balances to assure that there was always sufficient funds to cover payroll
taxes. Mr. XXXXX always responded that
the balances were sufficient.
18. In the end, Petitioner pursued Mr. XXXXX
through law enforcement, resulting in Mr. XXXXX's two misdemeanor theft
convictions in XXXXX.
19. Per Mr. XXXXX, the I.R.S. waived a
significant amount of penalties on Petitioner's behalf due to the
circumstances.
20. Further, the Utah Industrial Commission
disallowed the unemployment benefits that Mr. XXXXX was receiving after he left
XXXXX.
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).)
DEFINITION AND ORDER
The
foregoing findings of fact show that but for the dishonest employee's
embezzlement activities, Petitioner could have paid its tax obligations. Based upon the foregoing, the Tax Commission
finds that sufficient cause has been shown which would justify a waiver of the
penalties assessed on 1) the sales and use taxes due for the second and fourth
quarters of XXXXX, 2) the corporate franchise tax due for the years XXXXX and
XXXXX, and 3) the withholding taxes-due for the months XXXXX through XXXXX. No other penalties are waived on the
remaining periods, namely the XXXXX corporate franchise tax and the months May
and August XXXXX of withholding tax.
Interest is not waived on any period in question. It is so ordered.
DATED
this 10th day of June, 1993.
BY ORDER OF THE UTAH STATE TAX COMMISSION.
R. H. Hansen Roger
O. Tew
Chairman Commissioner
Joe B.
Pacheco S.
Blaine Willes
Commissioner Commissioner