JM Body Shop

02-13

The Taxpayer owned a paint and body shop from 1997 to 1999.  When the Taxpayer started his business, he hired an accountant to advise him of his tax responsibilities and to file his gross receipts tax returns. The accountant told the Taxpayer he could take deductions for receipts from work for auto dealerships and other legitimate businesses, that sold used cars on which he performed paint and body work.  The accountant didn’t explain the use of non-taxable transaction certificates (NTTC’s) or advise the Taxpayer that no deduction could be taken unless the customer provided the Taxpayer with an appropriate NTTC in a timely manner. The Taxpayer did not receive NTTC’s from some of his clients in a timely manner.  In 2001, following a Department audit, the Taxpayer was assessed for gross receipts tax, penalty and interest.  The Taxpayer protested the assessment by contending it was unfair to assess him for gross receipts taxes he never collected from his customers, when this failure resulted from his lack of knowledge and his accountant’s failure to properly advise him concerning the use of NTTC’s.  Held:  The Taxpayer is liable for gross receipts and interest on the disallowed deductions set out in the Department’s audit, however, the Taxpayer reasonably relied on the advice of his accountant and was not negligent in failing to report gross receipts tax during the period at issue.  Protest granted in part and denied in part.