Finance Committee considering tax fairness bill

(March 28, 2008) If a company mistakenly pays its sales taxes to a nonresident contractor instead of directly to the state, should the company be hit with extra penalties for an “intent to evade” its tax liability?

If a business has a good-faith disagreement with the state tax department, should it have to prove its case in court by “clear and convincing evidence” — rather than the “preponderance of the evidence” standard used in most civil cases?

These questions were posed by several people testifying before the Finance Committee this week on SB-702, a bill that would reverse a trend in tax court that has tipped the scales in favor of the state and against taxpayers. Proponents of the bill, including CBIA, say that “intent to evade” penalties should be applied only when there is evidence that a taxpayer is trying to avoid paying a tax, not when that tax has been paid improperly.

Similarly, taxpayers shouldn’t have to meet a higher standard in appealing a tax department ruling unless fraud or other criminal conduct is alleged. Without that kind of allegation, a taxpayer should be able to prove his or her case by a preponderance of the evidence.

The state invests considerable power in its taxing authority, and taxpayers should at least have a level playing field in court. On balance, the tax court has been a fair arbiter of tax cases, but SB-702 is needed to make sure that we maintain that level playing field.

For more information, contact CBIA’s Bonnie Stewart at 860-244-1925 or bonnie.stewart@cbia.com.