94-0223
Sales and Use
Signed 6/22/95
BEFORE
THE UTAH STATE TAX COMMISSION
____________________________________
XXXXX, )
Petitioner, : FINDINGS OF FACT,
) CONCLUSIONS
OF LAW,
v. : AND FINAL DECISION
)
AUDITING DIVISION OF THE : Appeal
No. 94-0223
UTAH STATE TAX COMMISSION, )
Respondent. : Account No.XXXXX
) Tax
Type: Sales and Use
_____________________________________
STATEMENT
OF CASE
This matter came before the Utah State Tax
Commission for a Formal Hearing on XXXXX.
Jane Phan, Administrative Law Judge, heard the matter for and on behalf
of the Commission. Present and
representing the Petitioner were XXXXX.
Present and representing the Respondent were XXXXX, Assistant Attorney
General, and XXXXX XXXXX of the Auditing Division.
Based upon the evidence and testimony
presented at the hearing, the Tax Commission hereby makes its:
FINDINGS
OF FACT
1. At issue are XXXXX penalties
relating to sales and use tax that were assessed against Petitioner following
an audit. Petitioner is not appealing
the additional tax assessed.
2. The audit period in question
is XXXXX.
3. A XXXXX pursuant to Utah Code
Annotated '59-1-401 in the amount of $$$$$ was assessed
against Petitioner for Petitioner's failure to make the prepayment that was
required by Utah Code Annotated '59-12-108 (1990)[1]. The penalty was calculated as XXXXX that
should have been made by Petitioner.
4. A XXXXX based on the total
additional tax determined from the audit was assessed against Petitioner in the
amount of $$$$$. The assessment totaled
$$$$$ and included additional tax on XXXXX.
The additional tax on the XXXXX was $$$$$.
5. There had been a prior audit
of Petitioner for the period of XXXXX pursuant to which additional taxes
totalling $$$$$ were assessed against Petitioner including tax on XXXXX. The additional tax on the XXXXX was
$$$$$. The XXXXX were the same XXXXX
for both audit periods.
6. The total assessment for the
subject period was less than the assessment for the prior audit. However, the prior audit period was XXXXX
while the subject audit period was only XXXXX.
Respondent provided at the hearing, which was entered as Respondent's
Exhibit XXXXX, a XXXXX the prior audit to the subject audit.
7. The subject audit period
began on XXXXX, immediately following the prior audit which ended on XXXXX.
8. The
total additional assessment for the subject audit of $$$$$ was less than XXXXX
of Petitioner's total sales during that period. However, the majority of sales made by Petitioner were for XXXXX. The error rate on taxable sales was approximately
XXXXX.
CONCLUSIONS OF LAW
Certain taxpayers were required to make a prepayment of not less than
XXXXX of their sales and use tax liability for the months of XXXXX of each year
the prepayment requirement was in effect.
The return and payment were due on or before XXXXX.
Failure to make the required prepayment by XXXXX resulted in penalties
as provided in Utah Code Ann. ''59-12-108 and 59-1-401 (1990).
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) (1990).)[2]
Utah Administrative Code XXXXX in pertinent part states:
XXXXX.
The legislature has set out a penalty to be assessed when negligence is
involved in an underpayment of tax.
XXXXX which states, "XXXXXXXXXX."
ANALYSIS
I. PREPAYMENT PENALTY
At the hearing and in the documents supplied by Petitioner, Petitioner
asserts that the prepayment penalty should be waived because Petitioner did not
receive any notice of the newly imposed prepayment requirement nor did
Petitioner receive any forms to submit such prepayment to the Tax
Commission.
Although none of Petitioner's representatives at the hearing were
employed by Petitioner during the period in question and none could testify
with personal knowledge to the events that took place, Petitioner's representatives
alleged that Petitioner did receive from the Tax Commission the regular
preprinted quarterly tax forms. They
further alleged that these forms did not indicate a prepayment could be
necessary and Petitioner made payments in the usual manner in reliance on these
forms without making a prepayment.
Further, Petitioner asserted that the Tax Commission has a
responsibility to notify tax payers of the change in tax law and should have
provided prepayment forms under Utah Adminstrtive Code R865-19-86S (1990).
Respondent objected to the testimony of Petitioner's representatives as
it was not based on first hand or personal knowledge. It is Respondent's position that the duty to keep informed of the
tax law remains with the tax payer and that the Tax Commission's failure to
provide forms did not excuse the prepayment.
The language of Utah Adminstrtive Code R865-19-86S (1990) clearly
establishes that non-receipt of the form did not excuse failure to timely pay
the prepayment.
II. NEGLIGENCE PENALTY
Respondent assessed a XXXXX penalty because audit adjustments for the
subject audit were for the same types of errors found in the prior audit, the
amounts were significant, the percentage of the deficiency to the tax paid was
too high and the deficiency was not the result of an unclear law.
Petitioner's representatives stated that Petitioner was not negligent
and did in good faith attempt to fully comply with the Utah requirements,
including take reasonable efforts to track taxable sales. Petitioner argues that because Respondent
began the subject audit period immediately following the prior audit,
Petitioner did not have the knowledge or opportunity to implement necessary
changes before the subject audit began.
Neither Petitioner nor Respondent provided the Statutory Notice of the
results of the prior audit and it was
unclear as to when it was mailed to Petitioner or if and when an audit exit
interview was held. As none of
Respondent's representatives at the hearing were personally or directly
involved in either of these functions they could only testify that they assumed
these things occurred around the end of the prior audit period.
Further, Petitioner's
representatives stated that making it more difficult to correct the errors in
time for the subject audit was the fact that the prior audit was not
"resolved" until XXXXX, XXXXX into the subject audit. Respondent's representatives stated that
this was only because Petitioner had filed an appeal of the negligence
penalties and interest assessed in the prior audit. Petitioner paid the assessment for the prior audit in XXXXX and
filed a waiver request, then an appeal, of the negligence penalty. Petitioner
later withdrew the appeal.
Petitioner argued that the deficiency was small for the audit period
compared to its total sales and taxable sales and therefore, Petitioner was not
negligent. Petitioner was in compliance
in excess of XXXXX of its total sales and XXXXX of its taxable sales. Respondent argued that Petitioner's errors
had increased during the subject audit from the prior audit at a greater rate
than Petitioner's increase in sales.
Although Respondent's representatives lacked first hand knowledge, Respondent asserted that the
results of the prior audit and suggestions on how to correct errors would have
been discussed with Petitioner during the prior audit and exit interview so
that Petitioner was negligent in not making the corrections for the subject
audit period.
DECISION AND ORDER
At the outset, the Commission notes that the prepayment sales tax
requirement was an unusual circumstance that arose only when certain conditions
were met. Nevertheless, the legislature
by statute mandated the prepayment requirement and provided for penalties to be
imposed for failure to comply with the statute. Only under extraordinary
circumstances will the Commission waive the penalties imposed for having failed
to comply with the prepayment provisions.
Such extraordinary circumstances do not exist in the present case.
In considering whether or not to waive the negligence penalty the
Commission notes that the penalty resulting from the subject audit was not the
first negligence penalty assessed against Petitioner. A negligence penalty was assessed against Petitioner in the prior
audit and the same errors were made in the subject audit as in the prior
audit. Petitioner, who has the burden
of proof in this appeal, did not provide a copy of the Statutory Notice, or
other documents that might indicate when Petitioner was given notice of the
results of the prior audit. Further,
Petitioner did not provide a witness who could testify from first hand
knowledge as to when Petitioner would have known of the results of the prior
audit and the prior negligence penalty.
Based upon the foregoing, the Tax Commission finds that sufficient
cause has not been shown which would justify a waiver of the $$$$$ XXXXX or the $$$$$ XXXXX associated with the XXXXX
XXXXX audit period. It is so ordered.
DATED this 22nd day of June, 1995.
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 a final order to file a
Request for Reconsideration with the Commission. If you do not file a Request for Reconsideration with the
Commission, you have thirty (30) days after the date of a final order to file
a.) a Petition for Judicial Review in the Supreme Court, or b.) a Petition for
Judicial Review by trial de novo in district court. (Utah Administrative Rule R861-1-5A(P) and Utah Code Ann. ''59-1-601(1), 63-46b-13(1), 63-46-14(3)(a).)
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