95-1039
PERSONAL PENALTY
Signed 10/30/97
BEFORE
THE UTAH STATE TAX COMMISSION
____________________________________
PETITIONER, )
Petitioner, : FINDINGS OF FACT,
) CONCLUSIONS
OF LAW,
v. : AND FINAL DECISION
)
COLLECTION DIVISION OF THE : Appeal
No. 95-1039
UTAH STATE TAX COMMISSION, )
Respondent. : Account No. #####
) Tax
Type: Personal Penalty
_____________________________________
STATEMENT
OF CASE
This matter came before the Utah State Tax
Commission for a Formal Hearing on August 6, 1997. Jane Phan, Administrative Law Judge, heard the matter for and on
behalf of the Commission. Present and
representing the Petitioner was PETITIONERS REP., Esq., of XXXXX. Petitioner was also Present. Present and representing the Respondent were
Michelle Bush, Assistant Attorney General, along with Dan Engh and Jay
Andreason.
Based upon the evidence and testimony
presented at the hearing, the Tax Commission hereby makes its:
FINDINGS
OF FACT
1. The
assessment in question is a personal penalty assessment, made against
Petitioner for the unpaid withholding tax of XXXXX.
2. The periods in question are the second, third
and fourth quarters of 1994.
3. In
early April 1994 Petitioner became the President of XXXXX. Prior to this time Petitioner had been the
manager of XXXXX Orem branch.
4. In
February 1994 XXXXX was hired by XXXXX as a loan auditor and in early April
1994 was promoted to Chief Financial Officer.
As Chief Financial Officer, XXXXX oversaw the accounting functions,
including payroll and accounts payable.
She reported directly to Petitioner.
5. XXXXX
would present to Petitioner the lists of payables and he would determine which
bills were to be paid. Included in the
lists were the withholding taxes at issue and Petitioner had directed that they
not be paid in favor of other creditors. Petitioner had requested that XXXXX
report directly to him. From the time
that he became President until sometime in September 1994, Petitioner was a
signor on XXXXX checking account and signed checks for the payables. In September a new account was opened for
XXXXX without Petitioner as a signor on the account. 6. XXXXX prepared the withholding tax returns for the third and
fourth quarters of 1994. She did not
sign the returns because she knew the taxes had not been paid. XXXXX testified that Petitioner told her
they would only fund "net" payroll.
7. The
Tax Commission has not made a personal penalty assessment against XXXXX for
unpaid tax of XXXXX and there was no evidence to indicate bias or lack of
credibility on her part.
8. On
August 31, 1994, Petitioner sent a memo to the staff which indicated that he
would be spending more time in the field and less time in the office. On October 17, 1994 Petitioner resigned as
an employee of XXXXX. The resignation
was to take affect on October 31, 1994.
APPLICABLE LAW
Utah Law provides for a personal penalty
assessment for a company's unpaid withholding tax liabilities. It is listed in Utah Code Ann. '59-1-302(1994) and provides in pertinent
part:
(1) The provision of this section apply to
the following taxes in this title: . . .(g) withholding tax . . .
(2) Any person required to collect,
truthfully account for, and pay over any tax listed in Subsection (1) who
willfully fails to collect the tax, fails to truthfully account for and pay
over the tax, or attempts in any manner to evade or defeat any tax or the
payment of the tax, shall be liable for a penalty equal to the total amount of
the tax evaded, not collected, not accounted for or not paid over. This penalty is in addition to other
penalties provided by law . . .
(7)(a) in any hearing before the Commission
and in any judicial review of the hearing, the commission and the court shall
consider any inference and evidence that a person has willfully failed to
collect, truthfully account for, or pay over any tax listed in Subsection (1).
(b) It is prima facie evidence that a person
has willfully failed to collect, truthfully account for, or pay over any of the
taxes listed in Subsection (1) if the commission or a court finds that the person
charged with the responsibility of collecting, accounting for or paying over
the taxes:
(I) made a voluntary, conscious, and intentional decision to prefer
other creditors over the state government or utilize the tax money for personal
purposes;
(ii) recklessly disregarded
obvious or know risks, which resulted in the failure to collect, account for,
or pay over the tax; or
(iii) failed to investigate or to correct
mismanagement, having notice that the tax was not or is not being collected,
accounted for, or paid over as provided by law.
CONCLUSIONS
OF LAW
Petitioner was a person responsible for
paying over the withholding tax and willfully failed to pay over the
withholding tax such that the personal penalty was properly assessed pursuant
to Utah Code Ann. '59-1-302
for two of the quarters at issue.
DECISION
AND ORDER
At the Formal Hearing the parties presented
to the Commission two different accounts of the events that occurred at XXXXX
from April to October of 1994.
Petitioner asserted that he did not know of the tax delinquency and that
he was not much involved in the accounting functions of XXXXX. Respondent's position was that Petitioner
was not only aware of the tax delinquency, but that he also directed that the
tax not be paid in favor of other creditors.
In addition to witness testimony the parties
presented some memorandums and other documents. One of the memorandums was presented by Petitioner, dated April
4, 1994, which stated that he would be handling investor relations, insuring
department, recruiting loan officers and supervision of the processing
department. This memo went on to state
that XXXXX would supervise accounting.
However, one of the documents presented by Respondent was a memorandum
dated April 22, 1994, which indicated that the Chief Financial Officer would
oversee all accounting functions and report directly to Petitioner.
The Commission considered and weighed all of
the evidence presented and made its findings based thereon. As listed in the Findings of Fact, the
Commission found that Petitioner was the President of XXXXX, was aware that
taxes were not being paid and in fact directed that taxes not be paid in favor
of other creditors. The Commission
finds however, that Petitioner ceased to be a party responsible for the
collection and paying over of the withholding tax in October of 1994.
Based upon the foregoing, the Tax
Commission sustains the personal penalty assessment against Petitioner for the
second and
third quarters of 1994. The Commission orders that the assessment
for the fourth quarter of 1994 be
withdrawn. It is so ordered.
DATED this 30 day of OCTOBER, 1997.
BY ORDER OF THE UTAH STATE TAX COMMISSION.
W. Val Oveson Richard
B. McKeown
Chairman Commissioner
Joe B. Pacheco Pam Hendrickson
Commissioner Commissioner
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