BEFORE THE UTAH STATE TAX COMMISSION
In Re: )
XXXXX, ) FINDINGS OF FACT,
: CONCLUSIONS OF LAW,
) AND FINAL DECISION
) Appeal No. 93-1633
: Account No. XXXXX
STATEMENT OF CASE
A settlement conference was scheduled in this matter on XXXXX, at 1:30 p.m. Alan Hennebold, Administrative Law Judge (ALJ), presided on behalf of the Utah State Tax Commission. XXXXX, Accounting Supervisor, represented XXXXX. XXXXX and XXXXX represented the Auditing Division. XXXXX and XXXXX represented the Collection Division.
At the suggestion of the ALJ and with the consent of the parties, the settlement conference was converted to a formal hearing on the merits of XXXXX's appeal.
Based on the evidence presented at the hearing, the Commission hereby makes its:
FINDINGS OF FACT
1. XXXXX asks the Commission to waive a 10% negligence penalty assessed in connection with its sales tax liability arising from an audit for the period XXXXX through XXXXX. The audit determined that XXXXX had failed to pay sales tax in the amount of $$$$$ on materials it consumed in the manufacture of its diamond products.
2. Commission records indicate that penalty of $$$$$ has been assessed in this matter. The Audit Division concedes that the penalty was improperly computed and should be reduced to $$$$$.
3. XXXXX has been audited twice prior to the period in question. In each case, the Audit Division has found that the company failed to pay sales tax on materials it consumed in the production of its diamond products.
4. XXXXX explains that it has experienced a turnover in accounting personnel and that confusion existed as to which items were taxable and which were not. XXXXX concedes that the Audit Division's assessment of tax in its most recent audit is correct.
5. While the amount by which XXXXX underreported its sales tax was only 2.7% of its total sales during the audit period, the unreported tax amounted to approximately 17% of its total tax liability for that same period.
CONCLUSIONS OF LAW
If any underpayment of tax is due to negligence, the penalty is 10% of the underpayment. (Utah Code Ann. '59-1-401(3)(a).)
The Tax Commission is granted the authority to waive, reduce, or compromise penalties and interest upon a showing of reasonable cause. (Utah Code Ann. '59-1-401(8).)
DECISION AND ORDER
As noted above, XXXXX asks the Commission to waive the 10% negligence penalty imposed as part of the most recent audit of its sales tax liability.
In the Commission's opinion, the salient point regarding XXXXX's request for waiver is that the company has been audited twice before and has been found to commit the same type of errors each time. The Commission understands that the company's personnel has changed between audits. Nevertheless, XXXXX has been negligent in failing to adopt procedures to properly recognize its sales tax liability.
Based on the foregoing, the Commission finds that reasonable cause does not exist to waive the penalty associated with XXXXX's sales tax liability for the period of XXXXX to XXXXX. However, the amount of such penalty is hereby corrected by reducing it from $$$$$ to $$$$$. It is so ordered.
DATED this 2nd day of December, 1993.
BY ORDER OF THE UTAH STATE TAX COMMISSION.
W. Val Oveson Roger O. Tew
Joe B. Pacheco Alice Shearer
NOTICE: You have twenty (20) days after the date of the final order to file a request for reconsideration or thirty (30) days after the date of final order to file in Supreme Court a petition for judicial review. Utah Code Ann. ''63-46b-13(1), 63-46b-14(3)(a).