93-1671
Sales
Signed 1/31/94
____________________________________
In Re: :
)
XXXXX, : ORDER
)
: Appeal No.
93-1671
)
: Account
No. XXXXX
_____________________________________
STATEMENT OF CASE
This
matter came before the Utah State Tax Commission for a Settlement Conference
pursuant to the provisions of Utah Code Ann. §59-1-502.5. Lisa L. Olpin, Presiding Officer, heard the
matter for and on behalf of the Commission.
Representing the Petitioner were XXXXX and XXXXX. XXXXX and XXXXX were present on behalf of
the Auditing Division.
The
Auditing Division of the Tax Commission audited Petitioner for the period
XXXXX-XXXXX. This audit resulted in a
tax deficiency in the amount of $$$$$ in unreported sales and use tax. A ten percent negligence penalty of $$$$$
was assessed along with $$$$$ in interest.
Petitioner
claims that a new employee had inadvertently coded purchase orders of certain
chemicals as tax exempt sales. These
chemicals were namely caustic acid, ammonia and pet coke. Sales tax should have been collected on
these items.
Petitioner
claims that these chemicals were taxed properly before this new buyer made the
error.
In
earlier years, Petitioner had worked with the Commission to determine which
chemicals Petitioner uses are taxable and which are not. Confusion had existed because some chemicals
are consumed in the production process while others are not.
Petitioner
admits it made errors in the past while trying to clarify the tax status of all
of the chemicals. The tax deficiency
that appeared in this audit in question, however, was caused by employee
error. It asserts that this error is
not the result of negligence as it is reasonable for a person to conclude that
caustic acid is not taxable as Petitioner uses it.
Further,
Petitioner explained that while the audit was still in process and when it was
made known to Petitioner that these chemicals should have been taxed,
Petitioner paid $$$$$ on XXXXX in an effort to avoid incurring more interest.
Petitioner
paid another $$$$$ on XXXXX toward the tax and interest balance.
The
final notice aka statutory notice of the results of the audit itself were not
finalized until XXXXX. At that time,
Petitioner was assessed $$$$$ in sales and use tax, the ten percent penalty and
interest. The Auditing Division
credited Petitioner $$$$$ which had been paid previously. This payment, however, was first allocated
to the penalty, then interest and finally, to the tax amount. This left Petitioner with a tax amount owing
of $$$$$ plus accruing interest.
The
Auditing Division then allocated Petitioner's second payment of $$$$$ to
interest and then tax, leaving a tax balance of $$$$$ when the statutory notice
was issued.
Petitioner
is requesting that the Commission credit Petitioner's two payments to tax and
interest as there was no penalty assessed when the payments were made. Secondly, Petitioner wants the negligence
penalty abated.
The
Auditing Division explained that Petitioner was assessed a negligence penalty
once before for failing to tax these same chemicals (audit period
XXXXX-XXXXX). Petitioner concedes that
this penalty was probably proper as Petitioner had just set up its new plant
and was having difficulties categorizing which chemicals were taxable and which
were not.
An
interim audit for the period October XXXXX-XXXXX, however, was completed
without a penalty assessment. The
Auditing Division explained that this audit was not as in-depth as the previous
audit. Petitioner, however, concluded
that a negligence penalty was not assessed because Petitioner was in
compliance.
Petitioner
contends that the audit in question would have also been free of penalty but
for the employee error in miscoding the tax status of these three chemicals.
DECISION AND ORDER
Based
upon the information presented at the conference, and the records of the Tax
Commission, the Commission finds sufficient cause has been shown to waive the
ten percent penalty assessed for the audit period of XXXXX XXXXX-XXXXX. Petitioner's
payments are credited to its account, allocated first to interest and then to
the tax deficiency. The interest is
computed to XXXXX XXXXX.
This
Decision and Order will become the Final Decision and Order of the Commission
unless the parties to this case file a written request for a Formal Hearing
within ten (10) days of the date of this decision. 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
160 East 300 South
Salt Lake City, Utah 84134
It is so ordered.
DATED this 31st day of
January, 1994.
BY ORDER OF THE UTAH STATE TAX COMMISSION.
W. Val
Oveson Roger
O. Tew
Chairman Commissioner
Joe B.
Pacheco Alice
Shearer
Commissioner Commissioner
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 the final order to file in District Court a
petition for judicial review. Utah State
Tax Commission Administrative Rule R861-5A-1(p) and Utah Code Ann.
§63-46b-14(3)(a).