95-0656

Sales and Use

Signed 4/11/96

BEFORE THE UTAH STATE TAX COMMISSION

____________________________________

XXXXX,

Petitioner, : ORDER

v. : Appeal No. 95-0656

AUDITING DIVISION OF THE : Account No. XXXXX

UTAH STATE TAX COMMISSION, :

Respondent. : Tax Type: Sales and Use

_____________________________________

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, and pursuant to the written stipulation of the parties and submissions following memorandums. 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, Assistant Attorney General.

Respondent performed an audit on the books and records of the Petitioner and thereafter made an audit assessment for sales and use taxes. Following the filing of a timely Petition for Redetermination, and further following negotiations with the Auditing Division, the Respondent submitted a revised audit assessment dated XXXXX, which determined an additional amount of tax of $$$$$, together with penalty of XXXXX and interest thereon at the statutory rate. Petitioner has agreed with the amended audit report, except for the amount of the penalty. Petitioner has requested that the penalty be waived.

The reason set forth for the request for waiver of penalty, is that Petitioner alleges it has exercised reasonable care in the preparation of its Utah Sales and Use tax returns as demonstrated by its voluntary compliance rate of XXXXX. Petitioner alleges that the compliance rate of XXXXX reflects favorably when compared with Petitioner’s prior sales and use tax audit assessment which found a voluntary compliance rate of only XXXXX.

Respondent urges that the penalty be sustained. The Respondent alleges that Petitioner has been audited on two (2) prior occasions, and that the audit deficiencies found in this case are for very similar reasons to the significant audit deficiencies which were found in prior audits. In one of those cases, Petitioner asked for a waiver of the penalty, which had been imposed by the Auditing Division in an amount of XXXXX for intentional disregard of law or rule. That matter was heard in appeal number 91-1576, and in that case, the Commission sustained a negligence penalty of XXXXX, but did not sustain the XXXXX penalty for intentionally disregarding the rules. Respondent therefore suggests that Petitioner was very aware of the requirements and that it failed to make significant improvements.

In reviewing the amended audit report which has been agreed to between the Petitioner and Respondent, it is noted that the deficiencies are for several large transactions. There are numerous transactions with purchases in excess of $$$$$ on which the use tax was not properly accounted, and there are at least ten (10) transactions in excess of $$$$$ each, including three (3) transactions in excess of $$$$$ for which the use tax has not been properly accounted. Therefore, the problem has not been a large number of small transactions which have simply “slipped through the cracks.” Instead, it appears that Petitioner is not giving sufficient attention to properly accounting for the sales and use tax on its transactions, including some very substantial transactions.

The Commission is granted the authority to waive, reduce or compromise penalties and interest upon a showing of reasonable cause. The Commission finds that there has been no showing of reasonable cause for the waiver of the penalties which are imposed by statute.

Based upon the information presented at the Initial Hearing and the records of the Tax Commission, the Commission finds that the amended audit assessment dated XXXXX has been stipulated to between the parties and is hereby approved. The Commission further finds that sufficient cause has not been shown to waive or reduce the penalties or interest assessed pursuant to that audit.

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 11 day of April, 1996.

BY ORDER OF THE UTAH STATE TAX COMMISSION.

W. Val Oveson Roger O. Tew

Chairman Commissioner

Joe B. Pacheco Alice Shearer

Commissioner Commissioner