Monday, July 28, 2014

Revenue Waives Penalty Where Taxpayer has "Reasonable Cause" for Failing to Pay Deficiency

Excerpts of Revenue's Determination follow:

Taxpayer is an Indiana company. As the result of an audit, the Indiana Department of Revenue ("Department") determined that the Taxpayer had not collected and remitted the proper amount of Indiana sales and use tax as a retail merchant for the tax years 2010, 2011, and 2012. This underpayment resulted in penalties and interest. Taxpayer is protesting the penalties and interest resulting from the proposed assessment.

In this case, Taxpayer incurred a deficiency which the Department determined was due to negligence under 45 IAC 15-11-2(b), and so was subject to a penalty under IC § 6-8.1-10-2.1(a). As a result of the protest process, Taxpayer has affirmatively established its failure to pay the deficiency was due to reasonable cause and not due to negligence, as required by 45 IAC 15-11-2(c). The penalty will be waived. However, now that Taxpayer is aware of its duties regarding sales tax collection, such a waiver may not be granted in the future.

However, pursuant to IC § 6-8.1-10-1(e) which states:

Except as provided by IC 6-8.1-3-17(c) and IC 6-8.1-5-2, the department may not waive the interest imposed under this section.

In other words, the Department does not have the authority to waive the interest in this case.