97-1344
____________________________________
PETITIONER :
: ORDER
Petitioner, :
: Appeal No.
97-1344
v. : Account No. ######
:
AUDITING
DIVISION OF : Tax Type: Sales Tax
THE UTAH STATE
TAX )
COMMISSION, : Presiding: Hendrickson
:
Respondent. :
_____________________________________
Presiding:
Pam Hendrickson,
Commissioner, with Joe B. Pacheco, Commissioner
Appearances:
For
Petitioner: NAME
For
Respondent: Gale
Francis, Assistant Attorney General
STATEMENT OF THE 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 May 22, 1998.
Petitioner
incorporated in January of 1994, then spent the following months in startup
activities, preparing to open the business to the public on April 1, 1994. Prior to opening the business, Petitioner
conferred with Tax Commission representatives on various occasions. On advice from the Tax Commission,
Petitioner applied for a sales tax license and a withholding account. Thereafter the Tax Commission issued the
accounts and advised Petitioner that liability for sales tax and withholding
reporting began April 1, 1994.
Respondent
notified Petitioner that it had been selected for an audit of its sales tax
account for the period of July 1, 1994 to June 30, 1997. In the course of the audit, Respondent
discovered that Petitioner had made certain purchases prior to April 1, 1994
from out-of-state vendors who did not collect Utah sales and use tax. Because Petitioner failed to report the use
tax accrued between January 1 and March 31,
Respondent extended the audit period to January 1, 1994 under authority
of Utah Code section 59-12-110 (b) (ii), which suspends the three year
statutory bar on deficiency assessments in cases where the taxpayer failed to
file a return. Petitioner argues that
because it filed a tax return for the tax period beginning April 1, Respondent
cannot extend the audit beyond three years.
DISCUSSION
Under
section 59-12-107 of the Utah Code, "[e]ach person storing, using, or
consuming tangible personal property under Subsection 59-12-103 (1) is liable
for the use tax imposed by this chapter."
There is no doubt that Petitioner was liable for the use tax on the
purchases in question. What is at issue is whether Respondent is barred by the
statute of limitations from assessing the tax deficiency more than three years
after the liability was incurred. To
answer that question, we must determine whether Petitioner had a responsibility
to file a return prior to the return filed for the Period beginning April 1,
1994.
Utah
Code Section 59-12-107 (4) (a) states:
Except as provided in
subsection (5) and in Section 59-12-108, the sales and use tax imposed by this
chapter is due and payable to the commission quarterly on or before the last
day of the month next succeeding each calendar quarterly period.
With regard to monthly
filers, section 59-12-108 (1) states:
Any person whose tax
liability under this part . . . was $50,000 or more for the previous year
shall, on or before the last day of the month next succeeding each calendar
month, file with the commission a return for the preceding monthly period.
These
code sections make clear that Petitioner was liable to pay the use tax within
the statutory time frames, whether on a quarterly basis or a monthly
basis. Therefore, the Commission finds
that Petitioner failed to file any return for the period of January 1, 1994 to
March 31, 1994 and, under section 59-12-110 (6) (b), Respondent may assess the
tax for that period at any time.
The
Commission is concerned that Petitioner contacted the Tax Commission on various
occasions to inquire as to its reporting obligations, but was never directed to
apply for a use tax registration prior to April 1. The evidence before us suggests that Petitioner made reasonable
inquiries as to how to comply with the tax reporting requirements and that it
followed the instructions given. On
that basis, the Commission waives any penalty and interest imposed on the
unpaid tax. Furthermore, the Commission
directs the Respondent to investigate any new evidence offered by Petitioner to
show that certain of the transactions at issue were not subject to use tax, and
to adjust the assessment as appropriate.
DECISION AND ORDER
Based
on the foregoing, the Commission sustains the assessment for unpaid use tax in
accordance with this order and waives any penalty and interest imposed as part
of the assessment.
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 appeal rights in this
matter.
DATED
this 20 day of July, 1998.
Pam Hendrickson
Commissioner
BY ORDER OF THE UTAH STATE TAX COMMISSION.
The
Commission has reviewed this case and the undersigned concur in this decision.
DATED
this 20 day of July, 1998.
W. Val
Oveson Richard
B. McKeown
Chairman Commissioner
Joe B.
Pacheco
Commissioner
^^