Dudley B. and La Donna K. Merkel - Page 5

                                         -5-                                          
          North Carolina's Sales and Use Tax                                          
               SLC was engaged in the business of leasing computer systems            
          in the State of North Carolina during the relevant period.  The             
          North Carolina Department of Revenue (the Department of Revenue)            
          issued a “Notice of Sales and Use Tax Due” (the notice) to SLC              
          dated June 14, 1991.  The notice identifies the amount of taxes,            
          penalties, and interest due, a total of $980,511.84, and states             
          that the assessment is final and conclusive.  The assessment of             
          sales and use tax identified in the notice was for taxes that               
          were never collected by SLC.  After receipt of the notice, SLC's            
          recourse was to pay the assessed amount and file a suit for                 
          refund or to protest the assessment if the Department of Revenue,           
          in the exercise of its discretion, permitted additional time to             
          file a protest.  As of August 31, 1991, SLC had not paid the                
          amount identified as due on the notice, nor had SLC requested               
          time to file a protest.                                                     
               On October 14, 1991, petitioners engaged an attorney to                
          protest the sales and use tax assessment.  The Department of                
          Revenue granted SLC 60 days to file a protest.  As a result of              
          that protest, the Department of Revenue abated the assessment               
          against SLC in full.                                                        
               The Department of Revenue never proposed nor made an                   
          assessment against any of petitioners relating to the sales and             
          use tax assessed against SLC.                                               






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Last modified: May 25, 2011