94-1556
Sales Tax
Signed 10/12/95
BEFORE THE UTAH STATE TAX
COMMISSION
____________________________________
XXXXX, )
:
Petitioner, : ORDER
:
v. : Appeal No. 94-1556
:
AUDITING
DIVISION : Account No. XXXXX
OF THE UTAH
STATE :
TAX COMMISSION, :
Respondent. : Tax Type: Sales Tax
_____________________________________
STATEMENT OF CASE
This
matter came before the Utah State Tax Commission for an Initial Hearing
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. Present and representing Respondent was
XXXXX, together with XXXXX.
The
Petitioner XXXXX, which deals primarily with the XXXXX, and the activities of
Petitioner are included within XXXXX XXXXX.
Those activities otherwise comply with the general requirements to XXXXX
from sales tax which is XXXXX, as amended.
Respondent
performed a sales tax audit on Petitioner for the period XXXXX. Respondent assessed additional sales and use
taxes upon Petitioner for certain transactions which it had deemed to be
taxable and on which no taxes had been paid.
Approximately
XXXXX of the total audit is for sales tax which was imposed by Respondent upon
the XXXXX which are used to XXXXX. The
Petitioner and Respondent agree that in the normal course of the business, the
XXXXX by the Petitioner would have XXXXX and would therefore have been exempt
from sales tax. However, Petitioner did
not set up the XXXXX on his depreciation schedule for accounting purposes, but
instead, XXXXX, the business deducted the full XXXXX as a current expense.
The
reason the Respondent did not allow the purchase of such XXXXX from sales tax
pursuant to the XXXXX was because of the XXXXX, which are:
XXXXX
Accordingly,
Respondent has denied the sales tax XXXXX written off for income tax purposes
on the books and records of the company and XXXXX was not depreciated on the
accounting records of the company for a
period of XXXXX XXXXX. Respondent’s
position, therefore, is that the XXXXX had an accounting life of less than
XXXXX and is not eligible for the XXXXX.
The Commission has
reviewed the interpretation of XXXXX which has been proposed by the Respondent,
and finds that it is not consistent with Commission’s view or interpretation of
XXXXX. XXXXX must have a XXXXX the
XXXXX. The XXXXX in this case clearly
has a useful economic life of XXXXX. It
continues to be used in the business and is actively being used to generate
income for the business. In addition,
theXXXXX has an accounting life of XXXXX.
While no evidence was introduced, it is assumed that the Petitioner is
properly filing a XXXXX with the County in which the business operates, so that
the XXXXX. Pursuant to the XXXXX
schedules adopted by the Commission, the XXXXX would be taxed for XXXXX
XXXXX. Accordingly, the Commission
finds that XXXXX XXXXX has both an economic life and an accounting life of
XXXXX XXXXX, not withstanding that it has been fully deducted in a XXXXX on the
income tax return of the Petitioner.
Further, even though the Petitioner has been allowed to deduct the XXXXX
on its income tax return, generally accepted accounting principles (GAAP) would
require that the XXXXX over its useful life.
An additional part of
the audit assessment was to impose sales tax on XXXXX which did not XXXXX
pursuant to the XXXXX. Petitioner
acknowledges that the tax is proper, but felt that the interest was a
substantial amount and should not have been imposed upon him because of his
XXXXX and because he felt there was reasonable cause for not paying the sales
tax originally. However, Petitioner has
had the use of the money during the time since it should have been transmitted
to the state of Utah, and the State of Utah has been denied the use of the
money during that time period.
Therefore, it is reasonable and proper that the Petitioner should pay
interest on the amounts which were due to the state of Utah some time ago but
have not been paid.
Petitioner also
requested relief from some of the interest charges because the audit was
commenced in XXXXX, and an assessment was not made until XXXXX, and then the
matter has been in the Appeals process for more than XXXXX. Accordingly, Petitioner felt that he should
not be required to pay interest for that full period of time. However, again Petitioner has had the full
use of the money which would otherwise have been paid to the state of Utah, and
the state of Utah has been denied the use of that money for that time period.
The above statements
regarding interest are to be modified
by the adjustment of taxes determined herein, and interest should be
appropriately adjusted and imposed only upon the taxes determined to be due
after the decision of the Commission herein.
DECISION AND ORDER
Based upon the
information presented at the hearing, and the records of the Tax Commission,
the Tax Commission finds that the assessment of taxes which has been made
against Petitioner by Respondent, for the purchase of XXXXX which were written
off for income tax purposes is not consistent with Utah Law and is not in
accordance with the statutes and rules which have been adopted to provide for
the imposition of such sales taxes.
Accordingly, the audit assessment made by Respondent against Petitioner
for taxes is to be reduced to allow the XXXXX to apply to XXXXX which was
deducted as an expense for a period of XXXXX.
Interest is hereby affirmed on the balance of the audit assessment.
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 12th day of October, 1995.
BY ORDER OF THE UTAH STATE TAX COMMISSION.
W. Val
Oveson Roger
O. Tew
Chairman Commissioner
Joe B.
Pacheco Alice
Shearer
Commissioner Commissioner
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