Personal Penalty

Signed 2/6/95






Petitioner, : ORDER


v. : Appeal No. 94-1392 to

: 94-1394 &




Respondent. : Tax Type: Personal Penalty



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, on XXXXX. G. Blaine Davis, Administrative Law Judge, heard the matter for and on behalf of the Commission. Present and representing Petitioner was XXXXX, of the law firm XXXXX, together with XXXXX and XXXXX. Present and representing Respondent was XXXXX of the Collection Division.

XXXXX in XXXXX, Utah, was having serious financial problems. The petitioners, XXXXX and XXXXX, negotiated to take over the truck stop and manage and operate it, and as part of that take over they made offers to many of the creditors to try to make arrangements to make payments on the accounts. In attempting to work out arrangements with the Utah State Tax Commission for substantial amounts of taxes, penalties and interest which totaled $$$$$, the petitioners submitted a letter to the Utah State Tax Commission on XXXXX. In that letter, the petitioners proposed to take over the truck stop. They made the following written statements:

We are intending to pay as much of the outstanding taxes as the business will support. Based upon preliminary facts and figures we have been able to determine that the figure will be in the neighborhood of $$$$$. We propose to retire this tax debt from the proceeds derived from the day to day operation of XXXXX. We further propose that we would be unable to determine a monthly amount until such time that we have been able to establish a correct pattern of the business. The time frame we are asking in this proposal is a period of six months to make this determination. At the end of the six months, we would be able to make an exact determination as to the total amount of tax dollars this business will support and the monthly payment that can be made.

A concern that has been voiced in our previous meeting with your office has been the payment of on going taxes. We are prepared to guarantee payment of all special fuel use taxes commencing XXXXX and to set up a trust account that we will deposit tax dollars into semi-monthly.

* * * *

We will personally be liable for that amount of tax which is to be determined that is owed by XXXXX. At the point in time that a figure has been arrived at, we agree to execute a permanent agreement with the State of Utah to evidence that which we agree upon.

The Collection Division responded to that proposal only six days later, on XXXXX, when XXXXX, Director of Collections, wrote as follows:

The Collection Division of the Utah State Tax Commission has reviewed your proposal of XXXXX and agrees in principal with it. There are certain items that need further discussion. The total debt to the Tax Commission we believe is in excess of XXXXX. The exact amount is to be determined. The Tax Commission believes that during the six month period the actual amount can be determined and a figure acceptable to yourselves and the Commission can be reached.

The petitioners responded to the letter from XXXXX only two days thereafter on XXXXX, when they wrote as follows:

We have received the counter proposal dated XXXXX and executed by XXXXX, Director, wherein you have outlined basic acceptance of our proposal to you regarding the acquisition of XXXXX in XXXXX, Utah.

The petitioners then took over the XXXXX operation and operated it from XXXXX through XXXXX. During that time period, the business incurred another $$$$$ in sales tax, withholding tax, and special fuel tax.

The Collection Division has proposed a personal penalty assessment against Petitioner based upon successor liability concepts and upon what Respondent sees as a personal guarantee of the amount of taxes which were due and owing from XXXXX. In addition, the respondent is also pursuing Petitioners for the sales tax, withholding tax, and special fuel tax which were incurred from XXXXX through XXXXX.

The position of Petitioner is an acknowledgment that they owe certain amounts of sales tax, withholding tax, and special fuel tax for the time period for which they operated the facility, although they do not acknowledge that the amount assessed by Respondent is accurate. However, they acknowledge that they do not have any evidence that the amount should be other than that which has been proposed by Respondent.

With regard to the amounts which were due and payable from XXXXX prior to the time when Petitioners began operating the truck stop, they maintain that they never made a firm commitment to assume the liability and responsibility. It is their position that the documents indicate what they would have been willing to do once the amount was determined, but that they never entered into a firm written agreement with the former owner of XXXXX, and they never signed a written agreement with the Utah State Tax Commission.

With respect to the issue regarding the correctness of the amount for the sales tax, withholding tax, and special fuel tax which were incurred during the time when Petitioners operated the business, there has been no testimony or evidence presented that the total amount of $$$$$ is not correct. The respondent has made an assessment of that amount of taxes, and pursuant to law, the petitioners have the burden of proof to establish that the actions of Respondent are not in accordance with law, and they therefore have the burden of proof to establish that such amount is wrong. In the absence of any such evidence being presented by Petitioners that the amount is wrong, the amount assessed against Petitioners should be determined to be due and owing to the State of Utah and the Petition of Petitioners with respect to that obligation should be denied.

With respect to whether Petitioners are personally responsible for the amounts of taxes which were due and owing to the Utah State Tax Commission prior to the time when Petitioners commenced actual operations of the business, it is primarily an issue of contract law and whether Petitioners contractually agreed to accept responsibility for those amounts. Because the petitioners did not operate the business during the time when those taxes were incurred, they would only be responsible for those taxes if they agreed to accept that responsibility or took some other action which imposed successor liability upon them.

In the letters which were submitted by Petitioners dated XXXXX and XXXXX, together with the letter from XXXXX, the Director of the Collection Division of the Utah State Tax Commission, it appears that the letter dated XXXXX was an offer to the Utah State Tax Commission, and it further appears that the letter dated XXXXX from the Tax Commission was an acceptance of the offer of Petitioners. In fact, in the letter of XXXXX from Petitioners it was acknowledged that the Commission had accepted their proposal regarding the acquisition of XXXXX. Further, during that time period, because of the representations of Petitioners, the respondent did not pursue any collections activities on the obligation and did not seek to close down the business. This constituted partial performance of the agreement by Respondent, and was also detrimental reliance by Respondent. The petitioners were thereby able to take over the operation of the truck stop as they had desired to do, not withstanding that it ultimately did not succeed.

Accordingly, the Commission determines that the petitioners made an offer to the Tax Commission to assume personal responsibility for the obligations of XXXXX, and the Tax Commission accepted that offer. Thereafter, the petitioners were able to assume the operation and management of the truck stop and operate it for a period of time. During that time there was a forbearance by Respondent in collection activities to collect the debt and obligation. The respondent therefore detrimentally relied upon the representations of Petitioner that it would "personally be liable for that amount of tax which is to be determined that is owed by XXXXX." There has been partial performance and partial satisfaction of that agreement by letting Petitioner take over the operation of the business.


Based upon the foregoing, the Commission finds that the petitioners are obligated for sales tax, withholding tax, and special fuel taxes for the periods XXXXX through XXXXX in an amount of $$$$$ for taxes, together with any penalties and interest accrued thereon. The Commission further finds that Petitioners contractually agreed to assume personal responsibility for the tax obligations of XXXXX for the periods prior to the time when they actually commenced operation of the truck stop, and they did so for the consideration of permitting the business to remain open.

This decision does not limit a party's right to a formal hearing. However, this Decision and Order will become the Final Decision and Order of the Commission unless any party to this case files a written request within thirty (30) days of the date of this decision to proceed to a Formal Hearing. 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

210 North 1950 West

Salt Lake City, Utah 84134

Failure to request a Formal Hearing will preclude any further administrative action or appeal rights in this matter.

DATED this 6 day of February, 1995.


W. Val Oveson Roger O. Tew

Chairman Commissioner

Joe B. Pacheco Alice Shearer

Commissioner Commissioner