98-0085

Corporate Franchise

Signed 7/13/98

BEFORE THE UTAH STATE TAX COMMISSION

____________________________________

PETITIONER, :

Petitioner, : DECISION

v. :

COLLECTION DIVISION OF THE : Appeal No. 98-0085

UTAH STATE TAX COMMISSION, :

STATE OF UTAH, : Account No. #####

Respondent. : Tax Type: Corporate Franchise

_____________________________________

STATEMENT OF CASE

This matter came before the Utah State Tax Commission pursuant to the provisions of Utah Code Ann. §59-1-502.5 An Initial Hearing was held on May 4, 1998. G. Blaine Davis, Administrative Law Judge, heard the matter for and on behalf of the Commission. Present and representing Petitioner was NAME. Present and representing Respondent were Ms. Vickie Christoffersen and Ms. Laurie Allred, from the Collection Division.

Based upon the evidence in the file and presented at the hearing, the Commission makes its:

FINDINGS

Petitioner has been in business for approximately 20 years. In October 1990, they hired a new CPA who prepared their financial statements, income tax returns, tax planning, and estimated tax payments. For several years, there were no problems and Petitioner left such matters exclusively in the hands of the CPA.

By December 1995, Petitioners became aware that the CPA had failed to timely issue the quarterly financial statements. Officers inquired monthly regarding the progress of financial statements and income tax returns. On September 15, 1996, the tax filing deadline for the fiscal year ended June 30, 1996 return, the CPA informed them their income tax return was not prepared, but filed an extension along with an estimated tax payment which he assured the officers was sufficient to meet the requirements of prepayment. By October 1996, the return was still not completed, and in November 1996, Petitioners contacted COMPANY A regarding the CPA's which are on their payroll and specialize in the grocery industry. The CPA's for COMPANY A were retained in December 1996. NAME was assigned to handle the account, and contacted the former CPA to inquire regarding the accounts and was told they were nearly completed through June 1996 and all returns and financial statements through that date would be completed by March 1997, which was the extended due date of the return.

On March 15, 1997, NAME inquired regarding the financial statements and income tax returns for the year ended June 30, 1996, and was told the tax returns would not be ready to file on that date, but that since adequate tax payments had been made there would be no penalties incurred.

Approximately two weeks later, in early April 1997, NAME was instructed to pick up all of the income tax and accounting records from the former CPA, and to complete the unfinished financial statements and income tax returns. NAME obtained the records which constituted approximately eight to ten boxes of financial information, and found they were in complete disarray and that nothing had been processed since December 31, 1995. After taking months to process the financial information, NAME determined the estimated tax payments were not sufficient, and the June 30, 1996 tax return was filed on September 16, 1997, along with a payment for all tax monies owed.

The amount of the prior year's taxes was $$$$$, and Petitioner had paid in $$$$$ on the due date of the return, so there were sufficient taxes paid to meet the extension requirements. The total amount of tax due was $$$$$. The amount of taxes due for the prior years was slightly under $$$$$ per year.

Petitioner has an underestimate penalty for 1993 of $$$$$, and for 1995 of $$$$$. Further, the 1997 return was also late because it could not be prepared until NAME brought the records current for 1996, but he completed that return and filed it within a reasonable time thereafter.

A 10% late payment penalty and a 10% late filing penalty were both imposed on Petitioner.

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

The Tax Commission finds sufficient cause does exist to waive one of the 10% penalties, and the penalty is hereby reduced to a single 10% penalty. It is so ordered.

This Decision does not limit a party's right to a Formal Hearing. Any party to this case may file 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, UT 84134

Failure to request a Formal Hearing will preclude any further appeal rights in this matter.

DATED this 13 day of July, 1998.

BY ORDER OF THE UTAH STATE TAX COMMISSION.

G. BLAINE DAVIS

Administrative Law Judge

The agency has reviewed this case and the undersigned concur in this decision.

DATED this 13 day of July, 1998.

BY ORDER OF THE UTAH STATE TAX COMMISSION.

W. Val Oveson Richard B. McKeown

Chairman Commissioner

Joe B. Pacheco Pam Hendrickson

Commissioner Commissioner