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Ernest J. & Jean Marie Rose



The Taxpayer was assessed gross receipts tax on his gross receipts from performing services as an independent contractor, severing timber which was owned by another person. The Taxpayer had not reported or paid gross receipts tax on his receipts, however, because he believed his receipts were deductible under Section 7-9-35. In fact, an earlier version of Section 7-9-35 did operate in such a manner as to make deductible from gross receipts tax the receipts from severing timber for another person.  Section 7-9-35 was amended in 1989, however, and now it only operates to provide a deduction from the sale or processing of natural resources (including timber) when the sale or processing is subject to the taxes imposed by the Resources Excise Tax Act. Because the Taxpayer neither sold nor processed the timber, he is not eligible for the deduction provided at Section 7-9-35. Additionally, the Taxpayer’s mistaken belief that he was eligible for the deduction amounted to negligence for purposes of imposition of penalty because taxpayers have an ongoing duty to keep abreast of changes in the tax laws which affect how taxes apply to their activities. Protest denied.