Chapter 9:  Penalties

901.   Willful violation of revenue laws.
902.   Monthly penalty upon unpaid taxes and fees.

      901.  Willful violation of revenue laws.
     Except where another penalty is specified for a violation of a provision of this title, any person who willfully violates any of the provisions of this title, or any license, rule, or regulation issued thereunder, shall upon conviction be imprisoned for a period of not more than one year, or fined not more than $500, or both.

Source: COM PL 3-32 1(part); TT Code 1970, 77 TTC 201; TT Code 1980, 77 TTC 201; PL 9-139 59.

      902.  Monthly penalty upon unpaid taxes and fees.
     In case of failure to pay any tax, fee, or charge levied or imposed under this title when due, there shall be added to the amount due 10 percent of the amount of such tax, fee, or charge if the failure is not for more than one month, with an additional 10 percent for each additional month or fraction thereof during which such failure continues, not exceeding 100 percent in the aggregate.

Source: COM PL 3-32 1(part); TT Code 1970, 77 TTC 202; TT Code 1980, 77 TTC 202.

Case annotations:  The statement in 54 FSMC 144(2) that penalties provided in chapter 1 will apply to the gross revenue tax law does not preclude the penalty specified in 54 FSMC 902 from applying.  FSM v. George, 2 FSM Intrm. 88, 91 (Kos. 1985).

PL 3-32, the predecessor of 54 FSMC 902, is subject to the interpretation that it was to be a catch-all provision applicable to all taxes which subsequently might be established by Congress.  FSM v. George, 2 FSM Intrm. 88, 94 (Kos. 1985).

The penalty provisions of 54 FSMC 902 apply to failure to make timely payment of the gross revenue tax imposed under 54 FSMC 141.   FSM v. George, 2 FSM Intrm. 88, 94 (Kos. 1985).

Statutory provisions designed to enhance the capacity of the government to enforce penalties for failure to pay taxes are penal, not remedial, and should be strictly construed.  In re Island Hardware, Inc., 3 FSM Intrm. 428, 432 (Pon. 1988).

Under 54 FSMC 902, a monthly penalty is imposed on delinquent payment of any tax specified in Title 54, including gross revenue tax.  Setik v. FSM, 5 FSM Intrm. 407, 409 (App. 1992).

By statute, a taxpayer is liable for penalties and interest on any underpayment of his gross revenue tax liability regardless of the reason for underpayment, unless some other principle of law applies to afford the taxpayer relief.  NIH Corp. v. FSM, 5 FSM Intrm. 411, 413-14 (Pon. 1992).

Where the governments prior audit methods had the effect of permitting gross revenue tax computation on the cash basis and where the governments attempts to advise businesses that they are required to use the accrual method have for many years been woefully inadequate, the government will be barred by equitable estoppel from assessing penalties and interest on any underpayment of taxes that was the result of being led to believe that the cash basis was an acceptable method of tax computation.  NIH Corp. v. FSM, 5 FSM Intrm. 411, 415 (Pon. 1992).
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