94-1392
Personal
Penalty
Signed 2/6/95
BEFORE THE UTAH STATE TAX
COMMISSION
____________________________________
XXXXX
:
Petitioner, : ORDER
:
v. : Appeal No. 94-1392 to
: 94-1394
&
COLLECTION
DIVISION OF THE : 94-1395 to
UTAH STATE TAX COMMISSION, :
94-1397
:
Respondent. : Tax Type: Personal Penalty
_____________________________________
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, 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.
DECISION AND ORDER
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.
BY ORDER OF THE UTAH STATE TAX COMMISSION.
W. Val
Oveson Roger
O. Tew
Chairman Commissioner
Joe B.
Pacheco Alice
Shearer
Commissioner Commissioner