96-2089

Personal Penalty

Signed 11/22/96

BEFORE THE UTAH STATE TAX COMMISSION

____________________________________

NAME )

Petitioner, ) ORDER

v. ) Appeal No. #####

COLLECTION DIVISION OF THE ) Account No. #####

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 October 10, 1996. Jane Phan, Administrative Law Judge, heard the matter for and on behalf of the Commission. Present and representing Petitioner by telephone conference call was NAME. Present and representing Respondent were NAME and NAME of the Collection Division.

A personal penalty assessment has been made against Petitioner resulting from the sales and withholding tax liabilities of COMPANY. The penalties assessed against Petitioner for sales tax were from the second through fourth quarters of 1994, the first quarter of 1995, the monthly filing periods of April 1995, August through December 1995, and January

through March 1996. The penalties assessed against Petitioner for

withholding tax were from the third and fourth quarters of 1994, the first quarter of 1995 and the third and fourth quarters of 1995. The total assessment against Petitioner for these periods, as set out in the Statutory Notice dated June 27, 1996, 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It was Petitioner's position that the personal penalty assessment against her should be withdrawn.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 employee of the business and her position was bookkeeper. She was not a corporate officer or director. She explained that although she did sign on the checking account, she did not have the authority to determine which bills would be paid from the business's limited funds. She explained that these decisions were made by her father, NAME. She would let him know which bills needed to be paid and he would tell her which bills she could pay. It was her understanding that she needed authorization from him for every check that she wrote.

Petitioner explained that she continually brought to her father's attention the fact that the taxes needed to be paid but he would tell her not to pay the taxes and to wait. She even worked out a payment agreement with an agent from the Collection Division, but her father would not authorize the required payments.

Petitioner explained that during the period in question she was a college student. She began taking accounting classes and learned that officers, directors, or other responsible parties could be held personally liable for certain corporate taxes. At this point, she made a further effort to have her father pay the delinquent taxes and when he did not pay, she resigned her position with the business. Later, when the business went into bankruptcy, she began doing the books for the business to prepare the bankruptcy financials. However, at this point current taxes were being paid.

It was Respondent's position that the penalty assessment against Petitioner should be upheld. Respondent's representative explained that because Petitioner was the bookkeeper and a signer on the checking account she was a responsible person. However, Respondent provided no evidence to contradict Petitioner's statements that she did not have the authority to authorize payment.

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 Petitioner was not a responsible party for the purposes of Utah Code Ann. '59-1-302. Petitioner was not an officer or director of the corporation. The fact that Petitioner was an employee, with the position of bookkeeper, and signed on the account is not sufficient in the absence of authority to make payments to creditors.

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 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