DEPARTMENT OF STATE REVENUE

04-20060395P.LOF

03-20080012P.LOF

Letter of Findings Numbers: 06-0395P, 08-0012P

Sales and Withholding Tax-Penalty

For the Periods 2005-2006

ISSUE

Taxpayer protests the imposition of the ten percent negligence penalty.

STATEMENT OF FACTS

Taxpayer was assessed a penalty for late payment of sales and withholding taxes. Taxpayer protested the penalty.

The Department sent correspondence dated November 29, 2007, regarding substantiation of Taxpayer's stated reasons for penalty waiver. 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.

DISCUSSION

Taxpayer protests the imposition of a penalty for late payment of sales and withholding taxes.

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 indicated that she was incapacitated due to health-related issues and provided documentation to the effect that she suffered from health-related issues during the period in question. However, Taxpayer did not provide evidence to support incapacity to pay the appropriate taxes during the period in question. In addition, Taxpayer has a prior history of returned check penalties. Based on the lack of incapacity and the prior history of compliance, penalty waiver is not justified in Taxpayer's case.

FINDING

Taxpayer's protest is denied.

DIN: 20080402-IR-045080134NRA

Composed: Apr 27,2024 4:07:39PM EDT

A PDF version of this document.