BEFORE THE STATE BOARD OF EQUALIZATION
FOR THE STATE OF WYOMING
IN THE MATTER OF THE APPEAL OF )
GOOFY’S TAVERN FROM A SALES & ) Docket No. 2009-25
USE TAX AUDIT ASSESSMENT BY THE )
EXCISE DIVISION OF THE DEPARTMENT )
OF REVENUE (Audit Period 1/1/05-12/31/07) )
FINDINGS OF FACT, CONCLUSIONS OF LAW, AND ORDER
John H. Coolbaugh appeared as accountant representative on behalf of Goofy’s Tavern, (Petitioner or Taxpayer).
Cathleen D. Parker, Senior Assistant Attorney General, and Megan L. Nicholas, Assistant Attorney General, appeared for the Department of Revenue (Department).
STATEMENT OF THE CASE
Petitioner, Goofy’s Tavern, was audited by the Department of Audit (DOA) for the time period January 1, 2005, through December 31, 2007. DOA issued an “Audit Findings” letter to Petitioner on August 1, 2008, finding a deficiency of $13,829.91 for sales and use tax on sales and purchases. On January 28, 2009, the Department issued an audit assessment letter to Petitioner which assessed accrued interest and penalty on the sales and use tax deficiency, indicating a total assessment due in the amount of $30,661.87. Petitioner filed an appeal of the Department’s assessment with the State Board of Equalization (Board) on February 9, 2009. A hearing before the Board was held August 18, 2009. Petitioner’s witnesses included Donna Keeney (a/k/a Donna Keeney-Giehm), who testified by telephone, and Petitioner’s accountant, John H. Coolbaugh. The Department’s witnesses were William McInerney of DOA, Kayla Thompson of DOA, and Daniel W. Noble of the Department.
The general issue to be decided in this matter is:
Did the Department correctly determine and assess the sales and use tax, and appropriately assess interest, and penalty for the audit period January 1, 2005, through December 31, 2007?
The specific issues are:
1. Did Petitioner collect all sales tax due on its business transactions?
2. Did Petitioner have sufficient business records to determine tax liabilities of its business transactions for audit purposes?
3. Was the Department’s imposition of interest and penalty proper?
We find Petitioner is subject to the assessment of sales and use tax, interest and penalty as imposed by the Department.
The Board shall review final decisions of the Department on application of any interested person adversely affected. Wyo. Stat. Ann. §39-11-102.1(c). A taxpayer’s appeal must be filed with the Board within thirty days of the Department’s final decision. Rules, Wyoming State Board of Equalization, Chapter 2 §5(a). Petitioners timely appealed the final decision of the Department, effective February 9, 2009, and the Board has jurisdiction to decide this matter.
The Board, consisting of Chairman Thomas D. Roberts; Vice Chairman Steven D. Olmstead; and Board Member Deborah J. Smith, held a hearing on August 18, 2009.
FINDINGS OF FACT
1. Petitioner is Goofy’s Tavern, a retail bar and package liquor vendor located in Cheyenne, Wyoming. [Notice of Appeal, Exhibit 500, pp. 0001-0003, Hearing Recording].
2. Goofy’s Tavern is a D/B/A owned by KZ Corporation, which is, in turn, owned by Donna Keeney (a/k/a Donna Keeney-Giehm). [Notice of Appeal, Exhibit 500, pp. 0001-0003, Hearing Recording].
3. Donna Keeney was initially contacted by DOA on March 13, 2008, concerning its plan to perform a sales tax audit of the business, Goofy’s Tavern. On June 30, 2008, DOA proceeded with the prior arranged audit of Petitioner for the time period of January 1, 2005, through December 31, 2007. [Exhibit 500, pp. 0001-0002; Hearing Recording].
4. The DOA issued an Audit Findings or Audit Report letter to Petitioner on August 1, 2008, indicating Petitioner owed $12, 534.63 in tax for sales, and, $1,295.28 for sales tax from purchases, for a total of $13, 829.91. [Exhibit 500, pp. 0001-0019; Hearing Recording].
5. On January 29, 2009, the Department issued an assessment letter to Petitioner, as the result of the DOA audit, for unpaid taxes, interest, and penalty for a total amount of $30,661.87. [Exhibit 501, pp. 0020-0022; Hearing Recording].
6. Petitioner filed a Notice of Appeal with the Board on February 9, 2009, challenging the final decision of the Department stated in the assessment letter of January 29, 2009. [Notice of Appeal; Exhibit 3; Hearing Recording].
7. The Board held a hearing on August 18, 2009. Donna Keeney appeared by telephone and testified under oath on behalf of Goofy’s Tavern. [Hearing Order; Hearing Recording].
8. Ms. Keeney testified she had been the owner of Goofy’s Tavern for the past twelve and half years. Ms. Keeney signed the sales and use tax returns submitted to the Department for Goofy’s Tavern for the audit period of January 1, 2005, through December 31, 2007, as owner. The Department’s “Wyoming Vendor Sales/Use Tax Return” form signed and submitted to the Department by Donna Keeney shows KZ Corporation as owner. [Exhibit 502, pp. 0023-0058; Exhibit 503, pp. 0059-0094 Hearing Recording].
9. Ms. Keeney did not know who filled out the Goofy’s Tavern “daily sheets” or “Daily Cash Report” forms during the audit period, but believed either her ex-husband, or Petitioner’s deceased accountant filled in the numbers on these forms. She believed the DOA, during a prior audit of Goofy’s Tavern, had approved the “Daily Cash Report” form. [Exhibit 506, pp. 0100-0106, Hearing Recording].
10. Although Ms. Keeney was at the business location on a regular or daily basis during the audit period, she did not have personal knowledge of the gross sales, or what made up the gross sales. She did not know the exact amount of sales tax collected from sales made at Goofy’s Tavern based upon the “Daily Cash Report”, and could not state with certainty where such information may be found in the business records of Goofy’s Tavern. [Hearing Recording].
11. Ms. Keeney admitted Goofy’s Tavern did not retain the “Z” tapes produced by the two business cash registers on a daily basis. She believed “Z” tapes were destroyed on a regular basis when the “Daily Cash Report, or daily sheets” were filled out. Ms. Keeney did not believe she was instructed by the Department or DOA to keep daily “Z” tapes during a prior audit by DOA. [Hearing Recording].
12. Ms. Keeney admitted certain retail purchases of tangible property were made with sales tax exemption certificates for Goofy’s Tavern. She admitted the items purchased were not resold by the business and were subject to sales tax. Petitioner did not refute the assessment of tax, interest and penalty associated with purchases. [Exhibit 500, pp. 0001-0019; Updated Summary of Uncontroverted Facts, ¶ 9; Hearing Recording].
13. Ms. Keeney believed sales tax was collected on sales made in the package liquor section of Goofy’s Tavern because it was included in the price of the item on the shelf. Ms. Keeney thought sales tax was included in the price of the drink in the bar section of Goofy’s Tavern. However, she was unable to discern the exact amount of sales tax collected from the information contained in the “Daily Cash Report” or any other records maintained by Petitioner for the audit period. [Exhibit 506, pp. 0100-0106, Hearing Recording].
14. Ms. Keeney instructed Mr. Coolbaugh to file amended monthly sales and use tax returns with the Department in order to correct errors discovered within the originally filed returns, after reviewing and comparing all the “Daily Cash Report(s)” with Petitioner’s filed federal income tax forms. [Hearing Recording].
15. Ms. Keeney admitted amending several monthly sales and use tax returns for Goofy’s Tavern for the audit period after the audit began. She said each amended monthly sales and use tax return was accompanied with a corrective tax payment to the Department, which Ms. Keeney stated she instructed to be applied towards sales tax first, and then to any interest or fees. [Hearing Recording].
16. Mr. Coolbaugh testified on behalf of Petitioner, as an accountant and representative, stating he had reviewed the accounting methods used by the prior accountant for Goofy’s Tavern. Mr. Coolbaugh thought the income lines on the “Daily Cash Report” included tax collected by the business for all sales. He was, however, unable to make a clear determination of the exact amount of sales tax collected by Petitioner without the cash register “Z” tapes. Mr. Coolbaugh stated he did not know of any available “Z” tapes retained for the audit period. [Exhibit 506, pp. 0100-0106, Hearing Recording].
17. Mr. Coolbaugh believed one of the problems discovered with the original sales and use tax returns filed with the Department was that credit card sales were not included in the gross sales. He said Ms. Keeney did not realize the credit card sales needed to be included on the “Daily Cash Report” forms. Mr. Coolbaugh was unable to explain why Ms. Keeney believed credit card sales were exempt from sales tax collection. [Hearing Recording].
18. Mr. Coolbaugh presented and discussed Petitioner’s Exhibit 1, which is a combination of Petitioner’s Daily Cash Report dated “7-1-08, [2004 (sic)]"; a “Z” tape of the bar sales dated “06-30-2008"; and a “Z” tape of the package sales dated “07-02-2008.” [Exhibit 1, Exhibit 4, Hearing Recording].
19. Mr. Coolbaugh argued Petitioner’s Exhibit 1 was a correct representation of Daily Cash Report with the corresponding “Z” tapes for the package and bar registers, which Petitioner would have used for each of the days during the audit period. Mr. Coolbaugh suggested the sales tax could be determined for each of the audit days based upon the representations of Exhibit 1. [Exhibit 1 and 4, Hearing Recording].
20. Mr. Coolbaugh stated he was advised by Petitioner, the “Daily Cash Report” tavern income and package store income represented all gross sales and tax collected for each day. [Exhibit 1 and 4, Hearing Recording].
21. Mr. Coolbaugh was not employed by Petitioner at the time the original sales and use tax returns were completed and filed with the Department for the audit period. Mr. Coolbaugh admitted he had no personal information of who prepared and filed the returns or who filled out the “Daily Cash Report(s).” Mr. Coolbaugh could not verify whether the information in the “Daily Cash Report” was an accurate representation of the actual sales for each day, and did not personally know whether the sales figures on report included sales tax. [Hearing Recording].
22. Mr. Coolbaugh filed several amended sales and use tax forms with the Department for Petitioner, as directed by Ms. Keeney, as a “good faith effort” to clear-up lingering sales and use tax issues raised during the audit. [Exhibit 503, pp. 0059-0094; Hearing Recording].
23. Kayla Thompson, an employee of the DOA, testified on behalf of the Department. Ms. Thompson is an auditor from the DOA Excise Tax Division, and was the lead auditor and examined the business records provided in the 2008 audit of Petitioner. [Exhibit 503, pp. 0059-0094; Hearing Recording].
24. Kayla Thompson prepared the DOA Audit Report letter mailed to Donna Keeney regarding Petitioner’s business audit for the period of January 1, 2005, through December 31, 2007. [Exhibit 500, pp. 0001-0002; Hearing Recording].
25. Ms. Thompson testified there were no cash register “Z” tapes provided to DOA to use in its audit period, January 1, 2005 through December 31, 2007, for Goofy’s Tavern. Ms. Thompson said the DOA could only rely upon the information in each “Daily Cash Report”, as there were no other records maintained by Petitioner for the audit period from which to determine sales made by Petitioner. Ms. Thompson said the DOA had previously informed Petitioner cash register “Z” tapes were an important record to be maintained by the business. [Exhibit 513; Hearing Recording].
26. Although Petitioner admitted selling cigarettes and food, Petitioner’s records were not clear whether sales tax was collected or paid on cigarettes and other tobacco items sold by Petitioner, and no tax was collected or accounted for in Petitioner’s business records for food sold at Goofy’s Tavern during the audit period. [Exhibit 500, p. 0001; Exhibit 511, p. 0219; Hearing Recording].
27. Petitioner’s records did not indicate how the transfer of liquor inventory from the package store to the bar was accounted for by Goofy’s Tavern. [Hearing Recording].
28. Ms. Thompson demonstrated how DOA determined sales tax on gross sales reported, and illustrated the procedure using Petitioner’s March 2006 “Daily Cash Report.” [Exhibit 503, p. 0073; Exhibit 514; Hearing Recording].
29. Petitioner’s sales tax deficiency was determined by totaling the “Daily Cash Report(s)” for each month, and comparing the total to the original amount of sales reported to the Department. Sales tax was assessed on the difference where the total of the “Daily Cash Report(s) was greater than the amount reported to the Department. Petitioner was given credit for the sales tax paid to the Department with the amended sales tax returns. [Exhibit 500, pp. 0017-0019; Hearing Recording].
30. Ms. Thompson estimated at least “thirty-six percent” of Petitioner’s monthly sales tax returns filed with the Department for the audit period were incorrect or contained errors. The errors were in the nature of underpayment of the sales tax due. Every original tax return filed by the Petitioner with the Department for the audit period was amended by Petitioner. [Hearing Recording].
31. The DOA reviewed all business records provided by Petitioner for the audit and made an initial finding of a tax payment deficiency in the amount of $13,829.91, as indicated in the August 1, 2008, “Audit Findings” letter from DOA to Petitioner. The deficiency was determined by comparing the totals of the “Daily Cash Report(s)” to Petitioner’s sales tax returns or amended sales tax returns. [Exhibit 500, pp. 0001-0019; Hearing Recording].
32. William “Bill” McInerney, a DOA audit supervisor, testified the DOA did not design or approve Petitioner’s “Daily Cash Report” form prior to the present audit. He did not believe either the Department or DOA specifically approved Petitioner’s “Daily Cash Report” forms. [Exhibit 506, pp. 0101-0106; Hearing Recording].
33. Mr. McInerney participated in a September 1, 1999, through August 31, 2002 audit of Petitioner by DOA. Mr. McInerney testified Ms. Keeney was informed during that audit of the importance of “Z” tapes as necessary business records to be provided for an audit. [Exhibit 513; Hearing Recording].
34. Mr. McInerney testified DOA would determine sales or use tax based upon vendor’s gross sales reported. Mr. McInerney testified Petitioner’s daily sheets or “Daily Cash Report” forms only indicate income receipts from the bar and package store, but are not gross sales and the form is not clear whether the “income” includes sales tax. [Exhibit 506, p. 0100; Exhibit 508, p. 145; Hearing Recording].
35. Mr. McInerney testified he supervised Kayla Thompson during the present audit and was informed no cash register “Z” tapes from Goofy’s Tavern were provided to DOA for the audit. [Hearing Recording].
36. Daniel W. Noble, Administrator for the Department’s Excise Tax Division, testified on behalf of the Department regarding its findings and the issues identified in the January 28, 2009, assessment letter sent to Petitioner concerning DOA’s audit findings. Mr. Noble has been the Administrator of the Department’s Excise Tax Division for over nine years. [Hearing Recording].
37. The Department’s January 28, 2009, letter to Petitioner, based upon DOA’s audit findings, was a final administrative decision. The Department determined there was due a tax deficiency of $86,918.30, along with a penalty of $8,691.87 and accrued interest of $19,082.65, for a total of $114,692.82 . The Department credited Petitioner for payments of $84,030.95, leaving a balance due of $30,661.87. [Exhibit 501, pp. 0020-0022; Hearing Recording].
38. The sales tax payments by Petitioner were applied by the Department, according to its Rule in Chapter 2, Section 4(b), in the following order: fees, interest, tax, and penalty. [Exhibit 501; pp. 0020-0022; Hearing Recording].
39. Mr. Noble testified the Petitioner amended all the monthly sales tax returns filed with the Department for the present audit period. He indicated Petitioner also had amended the monthly sales returns for Petitioner’s audit which encompassed September 1, 1999, through August 31, 2002. He further stated Petitioner had not amended any monthly sales tax returns during the intervening two year time period between the two audits. [Exhibit 503, pp. 0059-0094; Exhibit 508, pp.0143-0216; Updated Summary of Uncontroverted Facts ¶ 11; Hearing Recording].
40. The interest assessed to Petitioner was based upon the statutory requirement of Wyo. Stat. Ann. § 39-15-108(b)(i), and calculated on the remaining balance of sale tax due after all amended sales tax returns were filed and corresponding remittances were made. [Exhibit 501, pp. 0020-0022; Hearing Recording].
41. The penalty assessed to Petitioner was based upon the statutory requirement of Wyo. Stat. Ann. § 39-15-108(c)(i), and was assessed for each sales tax return filing made by Petitioner for the audit period. [Exhibit 501, pp. 0020-0022; Hearing Recording].
42. Petitioner was treated by the Department as having acted negligently in its payment of sales tax to the Department for penalty purposes. Mr. Noble further testified the amount of sales tax, interest and penalty determined by the Department was figured as of the final date of the payments made by Petitioner. [Hearing Recording].
43. Mr. Noble testified negligent filing of sales tax return by Petitioner was based on the sales tax returns being signed by Donna Keeney without verifying the accuracy of the returns contents; Petitioner’s excessive underreporting of sales, and collection and filing of sales tax; inconsistent reporting between Department sales tax returns and information filed with the Internal Revenue Service; and Petitioner’s failure to maintain adequate books, suitable records, and cash register receipts. [Hearing Recording].
44. On February 9, 2009, Petitioner filed a letter with the Board as a Notice of Appeal, challenging the Department’s sales tax, interest and penalty demand based on the January 28, 2009, Department final audit assessment letter. [Notice of Appeal].
45. Any portion of the Conclusions of Law: Principles of Law, or the Conclusions of Law: Application of Principles of Law set forth below, which includes a finding of fact, may also be considered a Finding of Fact and, therefore, is incorporated herein by reference.
CONCLUSIONS OF LAW: PRINCIPLES OF LAW
46. Upon application of any person adversely affected, the Board must review final Department actions concerning state excise taxes and “[h]old hearings after due notice in the manner and form provided in the Wyoming Administrative Procedure Act and its own rules and regulations of practice and procedure.” Wyo. Stat. Ann. §39-11-102.1(c)(viii). The Board must “[d]ecide all questions that may arise with reference to the construction of any statute affecting the assessment, levy and collection of taxes, in accordance with the rules, regulations, orders and instructions prescribed by the department.” Wyo. Stat. Ann. § 39-11-102.1(c)(iv).
47. The Board’s Rules provide that:
Except as specifically provided by law or in this section, the Petitioner shall have the burden of going forward and the ultimate burden of persuasion, which burden shall be met by a preponderance of the evidence. If Petitioner provides sufficient evidence to suggest the Department determination is incorrect, the burden shifts to the Department to defend its action. For all cases involving a claim for exemption, the Petitioner shall clearly establish the facts supporting an exemption. In proceedings involving the question of whether or not there is a taxable event under Wyoming law, the Petitioner shall have the burden of going forward and the Department shall have the ultimate burden of persuasion.
Rules, Wyoming State Board of Equalization, Chapter 2 § 20.
48. “The phrase, ‘preponderance of the evidence,’ has been given various definitions by different courts but, according to McCormick, et al. on Evidence 2nd Ed. H.B., s. 339, p. 794, the most acceptable meaning seems to be proof which leads the trier of fact to find that the existence of the contested fact is more probable than its non-existence.” Scherling v. Kilgore, 599 P.2d 1352, 1359 (Wyo. 1979).
49. The role of this Board is strictly adjudicatory:
It is only by either approving the determination of the Department, or by disapproving the determination and remanding the matter to the Department, that the issues brought before the Board for review can be resolved successfully without invading the statutory prerogatives of the Department.
Amoco Production Company v. Wyoming State Board of Equalization, 12 P.3d 668, 674 (Wyo. 2000). See also, Amoco Production Company v. Department of Revenue, 2004 WY 89, ¶ 22, 94 P.3d 430, 440 (Wyo. 2004). The Board’s duty is to adjudicate the dispute between taxpayers and the Department.
50. It is an elementary rule of statutory interpretation that all portions of an act must be read in pari materia, and every word, clause and sentence of it must be considered so that no part will be inoperative or superfluous. Also applicable is the oft-repeated rule it must be presumed the Legislature did not intend futile things. Hamlin v. Transcon Lines, 701 P.2d 1139, 1142 (Wyo. 1985). See also, TPJ v. State, 2003 WY 49, ¶ 11, 66 P.3d 710, 713 (Wyo. 2003).
51. “As we have often stated, our rules of statutory construction focus on discerning the legislature’s intent. In doing so, we begin by making an ‘inquiry respecting the ordinary and obvious meaning of the words employed according to their arrangement and connection.’ Parker Land and Cattle Company v. Wyoming Game and Fish Commission, 845 P.2d 1040, 1042 (Wyo.1993) (quoting Rasmussen v. Baker, 7 Wyo. 117, 133, 50 P. 819, 823 (1897)). We construe the statute as a whole, giving effect to every word, clause, and sentence, and we construe together all parts of the statute in pari materia. State Department of Revenue and Taxation v. Pacificorp, 872 P.2d 1163, 1166 (Wyo.1994).” Chevron U.S.A., Inc. v. Department of Revenue, 2007 WY 79, ¶ 15, 158 P.3d 131, 136 (Wyo. 2007).
52. To address an apparent ambiguity, we may resort to extrinsic aids to interpretation to confirm plain meaning. Parker Land & Cattle Company v. Wyoming Game and Fish Commission, 845 P.2d 1040, 1043 (Wyo. 1993). We will give deference to the statutory interpretation of an agency charged with administration of a statute, unless that interpretation is clearly erroneous. Parker Land & Cattle Company v. Wyoming Game and Fish Commission, 845 P.2d 1040, 1045 (Wyo. 1993).
53. The Wyoming Supreme Court has previously summarized a number of useful precepts concerning statutory interpretation:
In interpreting statutes, our primary consideration is to determine the legislature's intent. All statutes must be construed in pari materia and, in ascertaining the meaning of a given law, all statutes relating to the same subject or having the same general purpose must be considered and construed in harmony. Statutory construction is a question of law, so our standard of review is de novo. We endeavor to interpret statutes in accordance with the legislature's intent. We begin by making an inquiry respecting the ordinary and obvious meaning of the words employed according to their arrangement and connection. We construe the statute as a whole, giving effect to every word, clause, and sentence, and we construe all parts of the statute in pari materia. When a statute is sufficiently clear and unambiguous, we give effect to the plain and ordinary meaning of the words and do not resort to the rules of statutory construction. Moreover, we must not give a statute a meaning that will nullify its operation if it is susceptible of another interpretation.
Moreover, we will not enlarge, stretch, expand, or extend a statute to matters that do not fall within its express provisions.
Only if we determine the language of a statute is ambiguous will we proceed to the next step, which involves applying general principles of statutory construction to the language of the statute in order to construe any ambiguous language to accurately reflect the intent of the legislature. If this Court determines that the language of the statute is not ambiguous, there is no room for further construction. We will apply the language of the statute using its ordinary and obvious meaning.
BP Am. Prod. Co. v. Dep't of Revenue, 2005 WY 60, ¶ 15, 112 P.3d 596, 604 (Wyo.2005) (internal citations and quotations omitted). We must accept statutes as they are written; neither omitting words that are included, nor including words that are omitted. Id .; Hede v. Gilstrap, 2005 WY 24, ¶ 6, 107 P.3d 158, 163 (Wyo.2005); Fontaine v. Bd. of County Comm'rs of Park County, 4 P.3d 890, 895 (Wyo.2000); In re Adoption of Voss, 550 P.2d 481, 485 (Wyo.1976).
Cheyenne Newspapers, Inc. v. Building Code Board of Appeals of the City of Cheyenne, 2010 WY 2, ¶ 9, ___ P.3d ___, WL 47357 (Wyo. 2010).
54. “The omission of words from a statute must be considered intentional on the part of the legislature.…Words may not be supplied in a statute where the statute is intelligible without the addition of the alleged omission.…Words may not be inserted in a statutory provision under the guise of interpretation.…The Supreme Court will not read into laws what is not there.…” Matter of Adoption of Voss, 550 P.2d 481, 485 (Wyo. 1976) (citations omitted).
55. The Wyoming Statute Annotated provides that a “taxable event” means:
The sales price of every retail sale of tangible personal property within the state.
Wyo. Stat. Ann. §39-15-103(A).
56. “‘Retail sale’ means any sale, lease or rental for any purpose other than for resale, sublease or subrent.” Wyo. Stat. Ann. §39-15-101(a)(vi).
57. A taxable event also means the sales price paid for meals and cover charges at any place where meals are regularly served to the public, as well as, the sales price paid for alcoholic beverages. Wyo. Stat. Ann. §39-15-103 (a)(i)(F) & (N).
58. “‘Tangible personal property’ means all personal property that can be seen, weighed, measured, felt or touched or that is any other manner perceptible to the senses . . .” Wyo. Stat. Ann. §39-15-101(a)(ix).
59. “‘Alcoholic beverages’ means beverage that are suitable for human consumption and contain one-half of one percent or more of alcohol by volume.” Rules, Wyoming Department of Revenue, Chapter 2 §3(e).
60. “‘Sale’ means any transfer of title or possession in Wyoming for a consideration . .” Wyo. Stat. Ann. §39-15-101(a)(vii).
61. Wyoming Statute Annotated § 39-15-101 (a)(viii) defines sales price as:
(A) Shall apply to the measure to sales tax and means the total amount or consideration, including cash, credit property and services for which personal property or services are sold, leased or rented, valued in money, whether received in money or otherwise, without any deductions for the following:...
(I) The seller’s cost of property sold;
(II) The cost of materials used, labor or service cost, interest, losses, all costs of transportation to the seller and any other expenses of the seller.
62. Wyoming Statute Annotated § 39-15-107 provides in part:
(a) Returns, reports and preservation of records. The following shall apply:
(i) Each vendor shall on or before the last day of each month file a true return showing the preceding month’s gross and remit all taxes to the department. The returns shall contain such information and be made in the manner as the department by regulation prescribes. The department may allow extensions for filing returns and paying taxes by regulation, but no extension may be more than ninety (90) days.
Any vendor shall report whether the vendor sells cigarette, cigars, snuff or other tobacco products in this state to the department in the form and manner required by the department.
(ii) Every vendor and person liable for the payment of sales tax under this article shall preserve for three (3) years at his principal place of business, suitable records and books as may be necessary to determine the amount of tax for which he is liable under this article, together with all invoices and books showing all merchandise purchased for resale. All records, books and invoices shall be available for examination by the department during regular business hours except as arranged by mutual consent;
(iii) If any vendor or person liable for the payment of sales tax under this article fails to comply with paragraph (ii) of this subsection, he shall bear the burden of proof as the correctness of any assessment of taxes imposed by the department for the period for which records were not preserved in any court action or proceeding.
63. Wyoming Statute Annotated § 39-15-103(b)(i) provides:
(b) Basis of tax. The following shall apply:
(i) Except as provided by W.S. 39-15-105, there is levied and shall be paid by the purchaser on all sales an excise tax upon all events as provided by subsection (a) of this section.
64. Wyoming Statute Annotated § 39-15-103(c)(i) provides:
(c) Taxpayer. The following shall apply:
(i) Except as otherwise provided every vendor shall collect the tax imposed by this article and is liable for the entire amount of taxes imposed.
65. Wyoming Statute Annotated § 39-15-108(b)(i) provides:
(b) Interest. The following shall apply:
(i) If the amount of tax paid is less than the amount due, the difference together with interest thereon at the rate of one percent (1%) per month from the time the return was due shall be paid by the vendor or the any person liable for the payment of the sales tax under this article within ten (10) days after notice and demand is made by the department . . . .
66. Wyoming Statute Annotated § 39-15-108(c)(i) and (xi) provide:
(c) Penalty. The following shall apply:
(i) If any part of the deficiency is due to negligence or intentional disregard of rules and regulations, but without intent to defraud there shall be added a penalty of ten percent (10%) of the amount of the deficiency plus interest as provided by paragraph (b)(i) of this section. The taxes, penalty and interest shall be paid by the vendor or any person liable fora the payment of the sales tax under this article within ten (10) days after notice and demand is made by the department.
(xi) Every vendor and person liable for the payment of sales tax under this article shall preserve for three (3) years at his principal place of business, suitable records and books as may be necessary to determine the amount of tax for which he is liable under this article, together with all invoices and books showing all merchandise purchased for resale. All records, books and invoices shall be available for examination by the department during regular business hours except as arranged by mutual consent.
67. Negligence is defined as “[t]he failure to exercise the standard of care that a reasonably prudent person would have exercised in a similar situation...” Black’s Law Dictionary, 8th Ed. p. 1061 (Thomson West, 2004). Downtown Auto Parts, Inc. v. Toner, 2004 WY 67, ¶ 8, 91 P.3d 917, 919 (Wyo. 2004); Cervelli v. Graves, 661 P.2d 1032, 1036 (Wyo. 1983).
68. Negligence is also defined as “the quality of condition of being negligent; specif., a) habitual failure to do the required thing, b) carelessness in manner or appearance; indifference...” Webster New World College Dictionary, 4th Ed. p. 964 (IDG Books Worldwide, Inc., 2000).
69. “Payments made for sales/use tax liabilities shall be applied in the following order: fees, interest, tax, penalty.” Rules, Wyoming Department of Revenue Chapter 2 § 4(b).
70. The Department had adopted rules addressing bar businesses:
Taxes Calculated on Gross Receipts. Where receipts do not normally accompany each sale e.g. (coin operated vending, bars, movie theaters) vendors must maintain records of tax calculated on the following formula:
Tax = Gross Receipts - (Gross Receipts ÷ (1 + Tax Rate))
Example Gross Receipts = $1,000
Tax Rate = 6%
Tax = $1,000 - ($1,000 ÷ (1 + .06))
Tax = $1,000 - 943.40
Tax = 56.60
Rules, Wyoming Department of Revenue Chapter 2 § 7(j).
71. “Purchases by Businesses. Purchases by businesses and professional persons of equipment, tools and supplies for use in conducting their businesses or professions shall be subject to the sales or use tax.” Rules, Wyoming Department of Revenue Chapter 2 § 15 (bb).
72. “Certificates of Exemption. Vendors shall obtain completed exemption certificates for all sales transactions, other than those qualifying under Section 8 of these rules, where sales tax is not collected from purchaser at the time of sale. Purchasers shall file a single exemption certificate with each selling vendor for exempt purchases made.” Rules, Wyoming Department of Revenue Chapter 2 § 9 (b).
CONCLUSIONS OF LAW: APPLICATION OF PRINCIPLES OF LAW.
73. Petitioner’s appeal was filed timely and the Board has jurisdiction to hear this matter. Wyo. Stat. Ann. §39-11-102.1(c); Facts, ¶¶ 4-5, 36-37, 44.
74. Petitioner, as a Wyoming retail bar and package liquor business, sold alcoholic and other beverages, packaged alcoholic and non-alcoholic goods, as well as, prepared food and tobacco products. Petitioner was required to collect the appropriate sales tax on each sales transaction, as imposed by Wyoming statutes. Facts, ¶¶ 1, 13, 26 ; Conclusions, ¶¶ 55-61, and 64.
75. Petitioner, as a Wyoming vendor, was liable for the payment of sales tax and was required preserve for three years, at the principal place of business, suitable records and books as necessary to determine the amount of tax for which it was liable. Wyo. Stat. Ann. §39-11-107. Goofy’s Tavern, in providing only “Daily Cash Report” without the additional cash register “Z” tapes, did not maintain the required suitable records necessary to make a clear determination of sales tax liability. Facts, ¶¶ 1,10-11, 16, 25 and 35; Conclusions, ¶¶ 62 and 64.
76. Ms. Keeney and Mr. Coolbaugh admitted business records, particularly the cash register “Z” tapes, were routinely destroyed, or otherwise not preserved and maintained for examination by DOA or the Department, as required by statute as a suitable record. There were no witnesses who testified on behalf of Petitioner who could provide firsthand evidence or information regarding how the data in Petitioner’s “Daily Cash Report(s)” were generated and the meaning of the data entries. Facts, ¶¶ 10-11, 13, and 21; Conclusions, ¶¶ 62, and 64.
77. Ms. Keeney also admitted purchasing tangible personal property that was not tax exempt, and did not refute the sales and use tax amount assessed by the Department for such purchases. Such retail purchases not for resale or not tax exempt are subject to sales and use tax. [Updated Summary of Uncontroverted Facts]; Facts, ¶ 11; Conclusions, ¶¶ 55-58, 60-63,and 71-72.
78. Adequacy of the records Petitioner provided for the audit was minimal, at best, in providing suitable information on the amount of sales tax, if any, was collected by Goofy’s Tavern on a daily basis. Petitioner’s “Daily Cash Report” provided no determination of actual sales tax collected as it only listed “income” from the bar and package store, adjusted with beginning and ending cash in registers, as well as cash paid out. The “income,” entries on the “Daily Cash Report”, whether it was gross or net, could only be used by DOA as sufficient evidence of actual gross receipts upon which sales tax could be determined. Facts, ¶¶ 12-13, 25, 28-29; Conclusions, ¶¶ 55-59, 64, and 70.
79. The DOA took reasonable and proper steps in comparing the monthly totals of Petitioner’s “Daily Cash Report(s)” to Petitioner’s actual, original or amended, sales tax returns filed with the Department. The comparison showed a consistent pattern of underpayment of sales tax to the Department. Facts, ¶¶ 28-31, 34; Conclusions, ¶ 70.
80. The DOA determined approximately thirty-six percent (36%) of monthly sales tax returns filed by Petitioner during the audit period were incorrectly filled out or contained errors, which required reconciliation by DOA, in order to determine the correct sales tax liability. Facts, ¶¶ 28-31, 34; Conclusions, ¶ 70.
81. Although Petitioner’s accountant utilized a “Daily Cash Report” from a post-audit date as an example for Petitioner’s method of determining sales tax due for both bar sales and package sales, along with the cash register “Z” tapes for that date, the example explanation was only speculative, as no actual documentary evidence was provided for any audit date with a comparison of the “Daily Cash Report” with the corresponding “Z” tapes. Furthermore, Petitioner’s accountant admitted having no personal knowledge on the amount of sales tax collected for any sales corresponding to the dates during the audit period. Facts, ¶¶ 16-21; Conclusions, ¶¶ 55-60, and 62.
82. Petitioner argues it should not be subject to interest or civil fees, because it paid the sales tax due with the amended tax returns filed with the Department. Petitioner’s argument fails for following reasons.
83. First, Petitioner was subject to a prior audit in which the necessity of adequate and suitable records was required and discussed. Particularly, the necessity of Petitioner’s cash register “Z” tapes was made known to Petitioner. The Department demonstrated that in a prior audit Petitioner had failed to pay full sales tax on transactions similar to those identified by the current audit. Petitioner did not dispute that tax deficiency. Based upon the results of the prior audit, Petitioner knew or should have known transactions identified in the current audit, including sales of food and tobacco products and credit card sales were subject to sales tax. Petitioner’s prior knowledge of the obligations imposed upon it by Wyoming’s sales tax statutes and Department rules, and its failure to remit those taxes when due, constitute a failure to exercise the standard of care that a reasonable prudent person would have exercised in a similar situation. Facts, ¶¶ 9-13, 25, 32-33, and 39; Conclusions, 66-68.
84. Second, Petitioner amended each of the monthly sales tax returns for the prior audit, due to underpayment of sales tax to the Department. Facts, ¶ 40; Conclusions, 65.
85. Third, Petitioner amended each months sales tax return with the Department for the current audit, due to underpayment of sales and use taxes. Facts, ¶¶ 15, 22, 29 and 39; Conclusions, 62.
86. We agree with the Department that Petitioner was negligent. The Department was correct in the assessment of unpaid sales tax, and the imposition of interest and the civil penalty against Petitioner was appropriate. Facts, ¶¶ 10-14, 22, 25-27, 35, 42-43; Conclusions, ¶¶ 55-61, 66-68, and, 71-72.
87. Petitioner argued interest should be reduced because it paid all the sales and use tax due when it submitted amended sales tax returns to the department. Again, Petitioner’s argument is without merit. The Department followed its rule determining the proper order or application of payment from the amount tendered by Petitioner, by applying payment in the following order: fees, interest, tax, and penalty. Facts, ¶¶ 14-15, 22 and 40; Conclusions, ¶¶ 69.
88. The Department, using the information provided by DOA, along with the amended sales tax returns submitted by Petitioner, properly concluded Petitioner’s sales transactions met the Wyoming statutory standards for imposition of sales tax. The tax was properly imposed based upon the records. If Petitioner had kept suitable records of its gross receipts and sales tax collected, it would not have been necessary for DOA or the Department to make presumptions concerning gross receipts, or whether sales tax was collected. Delay by Petitioner in tendering the sales tax properly resulted in appropriate interest and civil penalty. Facts, ¶¶ 28-31, 34, and 37-43; Conclusions, ¶¶ 48-53, 62-68, and 71-72.
89. Goofy’s Tavern was negligent in maintenance of its records and remitting sales tax as required by Wyoming law. Petitioner’s business required the collection of sales tax, but its records did not clearly indicate how or if sales tax was collected. Petitioner failed to meet either burden of going forward or its ultimate burden of proof. The Department’s determination of sales tax due was correct, given the records provided and amended returns filed by Petitioner. We further conclude the careless and consistent underreporting of sales tax during this audit period, given Petitioner’s experience from a prior audit, warranted the Department’s imposition of interest and penalty, based on negligence, as determined by the Department’s decision letter of January 28, 2009. Facts, ¶¶ 28-31, 34, and 37-43; Conclusions, ¶¶ 48-53, 62-68, and 71-72.
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THEREFORE, IT IS HEREBY ORDERED the Department’s levy of tax, interest, and civil penalty against Petitioner is affirmed.
Pursuant to Wyo. Stat. Ann. § 16-3-114 and Rule 12, Wyoming Rules of Appellate Procedure, any person aggrieved or adversely affected in fact by this decision may seek judicial review in the appropriate district court by filing a petition for review within 30 days of the date of this decision.
DATED this day of February, 2010.
STATE BOARD OF EQUALIZATION
Thomas D. Roberts, Chairman
Steven D. Olmstead, Vice-Chairman
Deborah J. Smith, Board Member
Wendy J. Soto, Executive Secretary