Signed 12/14/93






In Re: )





) Appeal No. 93-2154

: Account No. XXXXX




This matter came before the Utah State Tax Commission for a formal hearing upon an Order to Show Cause on XXXXX. Lisa L. Olpin, Presiding Officer, heard the matter for and on behalf of the Commission. Present and representing the Petitioner was XXXXX, an attorney. Present and representing the Respondent was XXXXX, Assistant Utah Attorney General.

Based upon the evidence and testimony presented at the hearing, the Tax Commission hereby makes its:


1. The tax in question is sales and use tax.

2. The audit period in question is XXXXX.

3. Petitioner is requesting a waiver of the penalty assessment.

4. Upon completion of its audit on sales and use tax, the Auditing Division of the Tax Commission sent Petitioner a notice of audit results in the first statutory notice dated XXXXX. A second statutory notice was sent on XXXXX with the audit summary attached.

5. This audit assessed Petitioner sales tax in the amount of $$$$$ (Exhibit A) for failing to collect sales tax on delivery charges. Interest in the amount of $$$$$ was added.

6. The audit also included an assessment for failure to remit use tax in the amount of $$$$$ (Exhibit B). Interest in the amount of $$$$$ was charged.

7. Petitioner chose not to dispute the assessment reflected in Exhibit B and paid the tax and interest amount ($$$$$) in full within 30 days on XXXXX.

8. Petitioner then filed a Petition for Redetermination on the remaining assessment (Exhibit A and the interest charged thereon) on a good faith belief that the assessment was in error.

9. Mr. XXXXX, executive vice-president and chief operating officer at XXXXX during the audit period, testified that he believed that Petitioner received billing notices from the Tax Commission between the time of filing the petition for redetermination and the hearing in the matter. He recalls that the billings showed not only the disputed tax amount and interest, but also a penalty. He presented no documentation, however, in support of this recollection.

10. By the time of the hearing, Mr. XXXXX understood that the Petition for Redetermination encompassed the tax, interest and a newly assessed penalty amount.

11. At the hearing held in XXXXX on the merits of the Petition for Redetermination, Petitioner addressed the question of whether or not the sales tax assessment was just; there was no mention of the interest and no reference to a penalty assessment.

12. In the final decision in this matter, the Tax Commission upheld the sales and use tax assessment. This written decision, however, was silent on whether or not the interest was waived or reduced.

13. Further, the Commission erroneously acknowledged in paragraph 11 of the final decision that Petitioner was disputing penalties that the Tax Commission had assessed previously. No ruling on a reduction or a waiver of a penalty was given, however.

14. As a result of the wording of the final decision, Mr. XXXXX testified that he assumed that the interest and any existing penalty had been waived.

15. Petitioner then filed a Petition for Reconsideration on the sales tax question in XXXXX which was denied in XXXXX.

16. In XXXXX, the Tax Commission billed Petitioner $$$$$ (the total tax initially assessed on Exhibits A and B), $$$$$ in interest and $$$$$ for late payment (a penalty).

17. In XXXXX, Petitioner began making payments to the Tax Commission on the total amount.

18. XXXXX, deputy director of the Auditing Division, testified that Petitioner's $$$$$ payment received in XXXXX was credited to Petitioner's outstanding interest amount previously assessed on the audit in question. This explains why the later billing in XXXXX reflects no change in tax amount owing.

19. Further, Mr. XXXXX stated that the Commission does not bill a taxpayer once an appeal has been filed. Tax Commission records show that a hold had been placed upon Petitioner's account and that no billings were reported during the appeals process in this matter.

20. Additionally, Mr. XXXXX testified that the ten percent penalty discussed above was assessed after the Petition for Reconsideration had been denied. This was done automatically by the computer once Petitioner failed to pay within 30 days of the denial order.

21. A review of Petitioner's account on the audit in question and the Tax Commission's written billing notice dated XXXXX show that no penalty whatsoever was assessed against Petitioner in this case until XXXXX.

22. Petitioner is requesting that the penalty amount be waived because the final decision dated XXXXX orders Petitioner to pay sales tax only. Further, Petitioner feels that it should be not required to pay a penalty when it had a good faith belief that it was not required to collect sales tax on deliveries. And lastly, Mr. XXXXX explained that XXXXX was sold in XXXXX, leaving any remaining tax liability on himself and other obligated individuals. Any assessment would be a financial burden to them especially when they could not feasibly seek payment from past customers.

23. Respondent argues that the ten percent late penalty assessed for failure to pay within 30 days of the denial of the Petition for Reconsideration is proper pursuant to Utah Code Ann. '59-1-401.


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).)


Based upon the testimony and evidence presented, the Tax Commission first finds that the ten percent penalty in dispute was assessed for failure to pay within thirty days of the Commission's denial of the Petition for Reconsideration. Since no acceptable reason for nonpayment was given, the Commission affirms the assessment of a ten percent penalty.

Further, the Commission orders the penalty calculated as follows:

$$$$$ (the total tax assessment)

-$$$$$ (full payment of Exhibit B)[1]


x .10

$$$$$ late payment penalty

The Collections Division is ordered to adjust the records and to recompute interest accordingly.

DATED this 14th day of December, 1993.



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 final order to file in Supreme Court a petition for judicial review. Utah Code Ann. ''63-46b-13(1), 63-46b-14(3)(a).




    [1] This amount is subtracted from the penalty calculation because Petitioner paid the full amount of the tax on Exhibit B within 30 days of the statutory notice, rendering this portion of the audit completely resolved.