95-0497

Sales Tax

Signed 9/2/8/95

BEFORE THE UTAH STATE TAX COMMISSION

____________________________________

XXXXX, )

Petitioner, : FINDINGS OF FACT,

) CONCLUSIONS OF LAW,

v. : AND FINAL DECISION

)

COLLECTION DIVISION OF THE : Appeal No. 95-0497

UTAH STATE TAX COMMISSION, )

Respondent. : Account No. XXXXX

) Tax Type: Sales Tax

_____________________________________

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 was XXXXX. Present and representing the Respondent was XXXXX.

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

FINDINGS OF FACT

1. The tax in question is sales tax.

2. The periods in question are XXXXX.

3. Penalties totalling $$$$$ and interest of approximately $$$$$ were assessed against Petitioner for the periods in question. Petitioner is appealing only the penalties. 4. For all but two quarters at issue the penalty was only a 10% late payment penalty. For the remaining two quarters at issue both a 10% late payment and a 10% late filing penalty were assessed.

5. Petitioner had filed the sales tax return timely for only XXXXX of the XXXXX quarters in question.

6. Petitioner had received from the IRS a notice dated XXXXX which stated that an additional $$$$$ was owed for the XXXXX quarter of XXXXX federal employment tax. Petitioner provided other later notices from the IRS concerning this deficiency. Petitioner also provided notices from the IRS which were dated in XXXXX concerning an overpayment of $$$$$ for the XXXXX and non receipt of filing for the XXXXX quarter of XXXXX, although apparently payment had been received by the IRS. Petitioner also submitted its amended XXXXX quarter XXXXX which was dated XXXXX. A XXXXX notice from the IRS requested payment of a deficiency of tax along with penalty and interest in the amount totalling approximately $$$$$ for the XXXXX quarter of XXXXX. Then a XXXXX notice stated that the IRS located the payment and applied it to the XXXXX quarter. In XXXXX the IRS waived a related penalty of $$$$$.

7. The significant factor in Petitioner's late payment for the seven quarters at issue was financial hardship.

APPLICABLE LAW

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(10).)

CONCLUSIONS OF LAW

Financial hardship is not accepted as reasonable cause for the purposes of waiving penalties and interest.

ANALYSIS

Petitioner presented several reasons for the waiver of the penalties assessed. The first was that financial hardship should be sufficient reasonable cause for waiver of penalties. Petitioner's representative insisted this was stated in the pamphlet provided to him by the Commission entitled Waivers: Reasonable Cause. However, when questioned Petitioner's representative admitted that there is no language in the pamphlet that specifically states that financial hardship can be reasonable cause, instead he felt that it was implied. Respondent is correct in its position that financial hardship is not accepted as sufficient reasonable cause for the purpose of waiving penalties.

A second reason asserted by Petitioner for waiver of the penalties was that Petitioner was unable to pay taxes to the State of Utah because the actions of the IRS and the actions of the IRS were similar to a bank error. Petitioner stated he had several problems with the IRS in that they misapplied funds, then required Petitioner to repay these funds which left Petitioner financially unable to pay taxes owed to the State of Utah.

An overview of the documents from the IRS provided by Petitioner is listed above. Clearly, from these documents in XXXXX the IRS sent a letter requesting payment of a $$$$$ deficiency for the XXXXX quarter of XXXXX. Then in XXXXX the IRS acknowledged locating Petitioner's payment. Apparently a related penalty was not waived by the IRS until XXXXX. The documents supplied also indicated other problems with Petitioner's account at the IRS, the first of which was the XXXXX, notice of a $$$$$ deficiency.

Petitioner's argument is unpersuasive because Petitioner's pattern of late payment and filing began prior to the dates of any of the provided notices from the IRS and the earliest deficiency, regardless of whether it was the Petitioner's or the IRS's error, was relatively small. Although the $$$$$ deficiency requested by the IRS in XXXXX was more significant in amount, it was less than the sales tax owed the State of Utah for any one of the delinquent quarters and at that point Petitioner was already late in filing and paying sales tax for the XXXXX quarters of XXXXX.

Petitioner also asserted that the penalties should be waved because of Petitioner's good intent. Petitioner's representative stated that Petitioner had filed and paid all other state taxes timely and had been timely on payment of sales tax prior to the periods in question. He stated that because of the IRS actions Petitioner was unable to pay the State timely, as it had to pay the IRS or the IRS would have closed Petitioner down.

It was the Respondent's position that the penalties should not be waived because Petitioner had not shown reasonable cause and Petitioner's late filing and/or late payment for the seven consecutive quarters at issue indicated a pattern of late filing and paying.

DECISION AND ORDER

Because Petitioner has explained that he was unable to pay both its federal employment tax owed to the IRS and the sales taxes owed to the State of Utah it appears that Petitioner's failure to pay timely for XXXXX quarters at issue was due to financial hardship and Petitioner had begun a pattern of late payment and filing prior to the IRS actions complained of. Further, Petitioner has not sufficiently explained why the sales tax returns were also filed late for most of the quarters at issue. Based upon the foregoing, the Tax Commission finds that sufficient cause has not been shown which would justify a waiver or reduction of the penalties associated with the XXXXX through XXXXX quarters of XXXXX and the XXXXX through XXXXX quarters of XXXXX in the amount of $$$$$. Interest was not appealed. It is so ordered.

DATED this 28th day of September, 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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