95-1188

Sales Tax

Signed 4/1/96

BEFORE THE UTAH STATE TAX COMMISSION

____________________________________

XXXXX,

Petitioner, : ORDER

v. : Appeal No. 95-1188

COLLECTION DIVISION OF THE : Account No. XXXXX

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. Jane Phan, Administrative Law Judge, heard the matter for and on behalf of the Commission. Present and representing Petitioner were XXXXX, XXXXX and XXXXX. Present and representing Respondent were XXXXX and XXXXX.

Petitioner is appealing the assessment of late payment penalties of $$$$$ and interest of $$$$$ assessed relating to Petitioner's sales tax and late payment penalties of $$$$$ with interest of $$$$$ relating to Petitioner's tire tax for the period of XXXXX.

It was Petitioner's position that the penalty should be waived because it was not Petitioner's fault that the electronic transfer of the funds for payment of the tax at issue had been late. At the Initial Hearing Petitioner's representatives explained that they make the sales and tire tax payments by Electric Funds Transfer (EFT). XXXXX explained that she is Petitioner's controller and the person responsible for calling in the EFT payments. She stated that she always calls in the payment transfer in advance, using the warehousing function to specify the withdrawal date for the funds to transfer.

XXXXX explained that she made the telephone call on XXXXX and specified XXXXX as the date for the funds to transfer for the period at issue. She then noted in the Petitioner's general cash journals that the payment had been made on XXXXX. Petitioners representatives explained that they do not know why XXXXX, which processes the electronic wire transfers for the Tax Commission, did not make the transfer until XXXXX.

In support of this position, Petitioner's representatives provided several documents. XXXXX provided copies of pages in her personal day planner which indicated that she made the phone call to have the taxes transferred on XXXXX. Copies of the Petitioner's general cash journal for the relevant period were provided which indicated that Petitioner considered the funds for the tax to have been withdrawn from Petitioner's account on XXXXX. Petitioner also provided a copy of its bank statement for the period ending XXXXX which indicated that funds were available for the transfer.

Petitioner's representatives documented numerous phone calls to the Tax Commission in which they asked for information concerning the incident and the EFT procedures at XXXXX but were not given the information requested.

Petitioner's representatives were also concerned at the amount of the penalties assessed, stating they thought the penalties were excessive and punitive.

At the hearing Respondent's representatives explained that XXXXX had made the transfer of funds on XXXXX. They stated that they had been told by someone who was familiar with the system that the date on XXXXX summary sheet, XXXXX, was the date the transfer was called in. Respondent's representative provided a copy of the XXXXX summary sheet. Respondent's representatives did not have personal knowledge of the system and asked for a period of time to contact employees at XXXXX to see if they were aware of any errors during the days in question. Respondent later reported that XXXXX was not aware of any errors during the period in question.

Respondent's representatives also explained that the amount of the penalty was statutory, established by the legislature and it was not discretionary. Respondent's representatives explained that this was not the first error by Petitioner, penalties and interest had been waived on two prior occasions.

In response to Respondent's assertion that this was not a first time error Petitioner's representatives explained that on XXXXX, when the EFT procedure was first established, the telephone line to call in the payments was busy during the entire day that the payment was due until about 3:55 p.m. when they were able to get through to call in the payment. The late payment penalty and interest were waived in that situation and the Tax Commission added the warehousing provision to alleviate the overload of calls to the system.

Petitioner's representatives explained that the second waiver occurred when a small error was made in the calculation of the vendor discount which resulted in a small tax deficiency of $$$$$ for August through November of XXXXX. In that case the penalties were waived, but not the interest.

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

In reviewing the evidence presented by both parties and the lack of information concerning the EFT procedures, the Commission determines that Petitioner's payments of the sales and tire tax for the period of XXXXX were called in timely. The error occurred later in the EFT process.

Based upon the information presented at the hearing, and the records of the Tax Commission, the Commission finds sufficient cause has been shown to waive the penalties assessed of $$$$$ relating to the sales tax and of $$$$$ relating to the tire tax for the period of XXXXX. Because Petitioner did retain the use of the funds in its bank account until the transfer was actually made sufficient cause has not been shown to waive the interest assessed.

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 1 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