95-0941

Sales

Signed 1/30/96

BEFORE THE UTAH STATE TAX COMMISSION

____________________________________

XXXXX, )

:

Petitioner, : ORDER

:

v. : Appeal No. 95-0941

:

AUDITING DIVISION OF THE : Account No. XXXXX

STATE TAX COMMISSION, :

STATE OF UTAH, :

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. Gail S. Reich, Administrative Law Judge, heard the matter for and on behalf of the Commission. Present and representing Petitioner by telephone was XXXXX. Present and representing Respondent was XXXXX and XXXXX.

This appeal involves the issue of the validity of a 10% negligence penalty.

The Petitioner is an oil and gas producing company operating natural gas and oil wells within the State of Utah. During the audit period XXXXX through XXXXX the Petitioner purchased certain equipment from out of state vendors for which it did not accrue or remit use tax to the State of Utah. The amount of tax assessed in the audit report for this period is $$$$$. The assessed tax in the audit report amounts to 35% of sales and use tax reported on the sales and use tax returns for the period in issue. Petitioner underwent a prior audit for XXXXX, XXXXX and XXXXX which resulted in an assessment for unreported purchases subject to use tax in the amount of $$$$$.

Petitioner argues the negligence penalty was improperly imposed because the matter was simply a clerical oversight. Petitioner dismisses the issue of the prior audits on the grounds that the company is now processing 2-1/2 times the number of accounts payable than it was in the prior audit period, with increased total dollars in excess of 700%. Petitioner finds the deficiency de minimus since it represents less than 1% of the total documents and dollars processed during the audit and less than 2% of the documents reviewed by the Tax Commission auditors.

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).)

DECISION AND ORDER

The Commission finds that the Division properly relied on the fact that a prior audit resulted in an assessment for unreported purchases subject to use tax and the fact that the current unreported amounts constituted 35% of the sales and use tax reported on the sales and use returns in determining that Petitioner was subject to the negligence penalty.

Based upon the information presented at the hearing, the post hearing briefs and the records of the Tax Commission, the Commission finds sufficient cause has not been shown to waive the penalties assessed for the audit period XXXXX through XXXXX. It is so ordered.

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 30th day of January, 1996.

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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