DEPARTMENT OF STATE REVENUE

0320050337P.LOF

Letter of Findings Number: 05-0337P

Nonresident Withholding

For Calendar Year 2004

ISSUE

The taxpayer protests the imposition of the ten percent (10%) negligence penalty.

STATEMENT OF FACTS

The taxpayer is an LLC that files as a partnership and is required to remit withholding on nonresident members. The taxpayer is in the telecommunications business. The Indiana Department of Revenue, hereinafter referred to as the "department," assessed a ten percent (10%) negligence penalty for failure to timely file and remit nonresident withholding.

DISCUSSION

The taxpayer protests the imposition of the ten percent (10%) negligence penalty pursuant to IC 6-8.1-10-2.1. Indiana Regulation 45 IAC 15-11-2 (b) clarifies the standard for the imposition of the negligence penalty as follows:

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.

The standard for waiving the negligence penalty is given at 45 IAC 15-11-2 (c) as follows:

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.

The taxpayer stated that it entered into several transactions during the latter part of calendar year 2004 and was unable to complete a final income amount until April 15, 2005. The taxpayer stated that they used reasonable care, but the nature of the transactions delayed the completion of the calculations until April 15, 2005. The taxpayer was under the impression from all calculations that there would be little if any income until the final sale was consummated the later part of December. The taxpayer has shown reasonable cause.

FINDING

The taxpayer's protest is sustained.

DIN: 20060830-IR-045060332NRA

Composed: May 04,2024 12:30:22PM EDT

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