On Jul 26, 2017, the Department assessed the Taxpayer for gross receipts tax, penalty, and interest for the filing periods January 1, 2013 through December 31, 2013. The Taxpayer filed a timely protest with the Department. The Taxpayer is in the construction business. The matter at issue is this hearing is if the Taxpayer had to pay gross receipts tax on receipts from a specific project with a library where there was compensation for payroll expenses paid. The Taxpayer argued that the receipts should be excluded because it received the receipts as an agent on behalf of a principal in a disclosed agency capacity. The Taxpayer did not disagree that the compensation for services that it provided under the projects contract were subject to gross receipts. However, the Taxpayer believes that the separate payments that were intended to compensate the Taxpayer’s payroll expenses for the project, which were not addressed in the contract, should not be subject to tax as they were in a disclosed agency capacity. The Taxpayer argued that it was a disclosed agent of the Library because the Library was ultimately responsible for the payment of its payroll expenses and the employees were aware of the arrangement. The Hearing Officer determined that the reasoning provided by the Taxpayer was not sufficient enough for the employees to know that they would not be able to enforce payroll obligations against the Taxpayer. The paychecks were issued by the Taxpayer, and the taxpayer withheld taxes and other payroll fees of the employee’s behalf, provided worker’s compensation insurance, and it never made an affirmative disclosure to the employees of any agency relationship. For the forgoing reasons, the Taxpayer’s protest is denied.
Paragon Construction, LLC