20091028-IR-045090840NRA Letter of Findings Number: 09-0648P Use Tax – Negligence Penalty For the Periods 2006-2008  

  • DEPARTMENT OF STATE REVENUE
    04-20090648P.LOF

    Letter of Findings Number: 09-0648P
    Use Tax – Negligence Penalty
    For the Periods 2006-2008


    NOTICE: Under IC § 4-22-7-7, this document is required to be published in the Indiana Register and is effective on its date of publication. It shall remain in effect until the date it is superseded or deleted by the publication of a new document in the Indiana Register. The publication of this document will provide the general public with information about the Department's official position concerning a specific issue.
    ISSUE
    I. Tax Administration–Negligence Penalty.
    Authority: IC § 6-8.1-10-2.1; 45 IAC 15-11-2.
    Taxpayer protests the imposition of the ten percent negligence penalty.
    STATEMENT OF FACTS
    Taxpayer is a corporation doing business in Indiana. The Indiana Department of Revenue ("Department") conducted an audit of Taxpayer. As a result of the audit, the Department assessed use tax, interest, and negligence penalties on the assessments.
    Taxpayer initially protested one item in the assessments, and the Department reduced the assessment by the use tax assessed on that item. Taxpayer protested the penalties on the remaining balance of the assessments.
    The Department sent a letter to Taxpayer stating that Taxpayer could request a hearing by replying to the letter within twenty (20) days of the date of the letter. Taxpayer did not reply to the Department's letter. Due to Taxpayer's failure to reply, this Letter of Findings is written based on the information in Taxpayer's protest file and other Department records relating to Taxpayer.
    I. Tax Administration–Negligence Penalty.
    DISCUSSION
    Taxpayer protests the imposition of the ten percent negligence penalty on the use tax imposed as a result of the Department's audit.
    Penalty waiver is permitted if the taxpayer shows that the failure to pay the full amount of the tax was due to reasonable cause and not due to willful neglect. IC § 6-8.1-10-2.1. The Indiana Administrative Code, 45 IAC 15-11-2 further provides:
    (b) "Negligence" on behalf of a taxpayer is defined as the failure to use such reasonable care, caution, or diligence as would be expected of an ordinary reasonable taxpayer. Negligence would result from a taxpayer's carelessness, thoughtlessness, disregard or inattention to duties placed upon the taxpayer by the Indiana Code or department regulations. Ignorance of the listed tax laws, rules and/or regulations is treated as negligence. Further, failure to read and follow instructions provided by the department is treated as negligence. Negligence shall be determined on a case by case basis according to the facts and circumstances of each taxpayer.
    (c) The department shall waive the negligence penalty imposed under IC 6-8.1-10-1 if the taxpayer affirmatively establishes that the failure to file a return, pay the full amount of tax due, timely remit tax held in trust, or pay a deficiency was due to reasonable cause and not due to negligence. In order to establish reasonable cause, the taxpayer must demonstrate that it exercised ordinary business care and prudence in carrying out or failing to carry out a duty giving rise to the penalty imposed under this section. Factors which may be considered in determining reasonable cause include, but are not limited to:
    (1) the nature of the tax involved;
    (2) judicial precedents set by Indiana courts;
    (3) judicial precedents established in jurisdictions outside Indiana;
    (4) published department instructions, information bulletins, letters of findings, rulings, letters of advice, etc.;
    (5) previous audits or letters of findings concerning the issue and taxpayer involved in the penalty assessment.
    Reasonable cause is a fact sensitive question and thus will be dealt with according to the particular facts and circumstances of each case.
    Taxpayer argues that it has an "excellent record of compliance" with the Department and that various aspects of its business resulted in most of the assessments. Though Taxpayer had a number of previous assessments, the assessments were for issues unrelated to the issues in this audit. Taxpayer has provided sufficient information to conclude that it acted reasonably with regard to its use tax liabilities for the periods in question.
    FINDING
    Taxpayer's protest of the negligence penalties is sustained.

    Posted: 10/28/2009 by Legislative Services Agency

    DIN: 20091028-IR-045090840NRA
    Composed: Nov 01,2016 12:45:20AM EDT
    A PDF version of this document.

Document Information

Rules:
45IAC15-11-2