Salt Report 3693 – The Washington Department of Revenue Appeals Division upheld the assessment of a 50% misuse penalty against a contractor working for the United States Navy. Although the contractor’s good faith use was accepted by the division the request for relief was denied.
“In the present case, the Taxpayer used its reseller permit when it purchased materials for use in the US Navy contract with [the subcontractor]. As a result, it did not pay the retail sales tax, and it also did not pay use tax. While we have no reason to dispute the Taxpayer’s claim that it was acting in good faith when it made the error of using its reseller permit when it should not have, the penalty cannot be waived because the buyer was unaware of its proper use in this case. Because, by statute and administrative rule, the Taxpayer has not shown that the misuse was due to circumstances beyond its control, we deny the penalty waiver request.”