96-2088

Personal Penalty

Signed 11/22/96

BEFORE THE UTAH STATE TAX COMMISSION

____________________________________

XXXXX, )

Petitioner, : ORDER

v. : Appeal No. 96-2088

COLLECTION DIVISION OF THE : Account No. XXXXX

UTAH STATE TAX COMMISSION, :

Respondent. : Tax Type: Personal Penalty

_____________________________________

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 by telephone conference call were XXXXX and XXXXX. Present and representing Respondent were XXXXX and XXXXX of the Collection Division.

A personal penalty assessment has been made against Petitioner resulting from the sales and withholding tax liabilities of XXXXX. The penalties assessed against Petitioner for sales tax were from the second through fourth quarters of 19YY, the first quarter of XXXXX, the monthly filing periods of XXXXX, August through December XXXXX, and January through March XXXXX. The penalties assessed against Petitioner for withholding tax were from the third and fourth quarters of XXXXX, the first quarter of XXXXX, and the third and fourth quarters of XXXXX. The total assessment against Petitioner for these periods, as set out in the Statutory Notice dated XXXXX, was $$$$$.

It was Petitioner's position that the personal penalty assessment against her should be withdrawn. Petitioner asserted that she did not have sufficient control or authority over the business to see that the withholding and sales taxes were paid. Petitioner was an officer of the corporation, as the corporate secretary. In this capacity, she acknowledged that she had attended two or three corporate meeting for which she took the minutes. She stated that at these meetings the subject of delinquent taxes was never discussed. She maintained that she was unaware that the taxes had not been paid.

She said that she was not involved in the business, other than acting as secretary at the corporate meetings. She also stated that she occasionally visited the business, which was a restaurant, to act as quality control. She was a signer on the business checking account, but she said she rarely signed checks. She said it was her husband, XXXXX, who authorized which creditors were to be paid.

Petitioner explained that she did not understand what was going on with the business. Further, she was distracted by several unfortunate circumstances that were occurring in her life including the deaths of two of her children, one died prior to the period in question, the second towards the end of the period in question, and her husband’s illness which left him bedridden during the period in question, although he continued to manage the business.

She acknowledged that agents from the Collection Division did come to their home to meet with her husband and she would let them in. However, she states that she was unaware of the extent of the delinquency and her husband always told her that he would take care of everything.

It was Respondent's position that the penalty assessment against Petitioner should be upheld. Respondent's representative based this position on the fact that Petitioner was a corporate officer, that she should have had knowledge of the tax delinquency, that she assisted in the management of the business when her husband was ill, and that she was an authorized signer on the checking account. Further, Respondent's representative pointed out that the liability was based on the trust fund portion of the sales and withholding tax. The business had charged sales tax to its customers, but then failed to remit these funds to the State of Utah. Likewise, the business had withheld taxes from its employees paychecks but kept the money instead of remitting it to the State of Utah.

APPLICABLE LAW

The Utah Legislature has required that a penalty be assessed against officers, directors, or other responsible persons, for certain types of delinquent tax liability.

This provision is set out in Utah Code Ann. §59-1-302. In pertinent part this provision states that any person required to collect, truthfully account for, and pay over sales and withholding tax, who willfully fails to collect or fails to truthfully account for and turn over the tax, shall be liable for a penalty equal to the total amount of the tax not paid over. According to this section, it is prima facie evidence that a responsible party has wilfully failed to collect, truthfully account for, or pay over any of the tax if the Commission finds that he or she made a voluntary, conscious, and intentional decision to prefer other creditors over the state. (Utah Code Ann. §59-1-302.)

DECISION AND ORDER

After considering the information provided by both parties in this case, the Commission finds that although Petitioner was the corporate secretary and an authorized checking account signer, she did not have authority to issue checks for the business and was not a responsible party for the purposes of Utah Code Ann. §59-1-302.

Based upon the information presented at the hearing, and the records of the Tax Commission, the Commission orders that the personal penalty assessment against Petitioner in the amount of $$$$$ be withdrawn.

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 22nd day of November, 1996.

BY ORDER OF THE UTAH STATE TAX COMMISSION.

W. Val Oveson Richard B. McKeown

Chairman Commissioner

Joe B. Pacheco Alice Shearer

Commissioner Commissioner