Tax Type
Withholding Taxes
Description
Corporation's president was the responsible officer
Topic
Collection of Delinquent Tax
Persons Subject to Tax
Records/Returns/Payments
Taxability of Persons and Transactions
Date Issued
01-11-2008
January 11, 2008
Re: § 58.1-1821 Application: Withholding Tax
Dear ****:
This will reply to your letter seeking reconsideration of the Department's determination letter of April 9, 2007, issued to your client, ***** (the "Taxpayer").
***** (the "Corporation") was assessed withholding taxes, penalties, and interest for the periods January through December 2002 and October through December 2004. When the Corporation did not pay the assessments, the liability was converted to the corporate officers, pursuant to Va. Code § 58.1-1813.
The Taxpayer contested the penalty, asserting that the Corporation's president was the responsible officer. In its determination, published as Public Document (P.D.) 07-29 (4/9/2007), the Department found that the Taxpayer signed checks to pay Virginia withholding tax for other periods, had the authority to make disbursements from the Corporation's bank account, and was responsible for all day-to-day operations of the Corporation. Based on these findings the Department upheld the penalty assessed against the Taxpayer.
The Taxpayer requests a reconsideration of the Department's determination. He contends that evidence has come to light that the president of the Corporation had specifically dictated that corporate debt be paid, rather than tax liability, because the president had personally guaranteed the corporate debt.
When a corporation fails or is unable to pay its tax deficiencies, the Department is permitted to assess any corporate officers for a penalty of the amount of the tax evaded, or not paid, collected or accounted for and paid over. See Va. Code § 58.1-1813. The term "corporate or partnership officer" as used in this statute means an officer or employee of a corporation, who as such officer is under a duty to perform on behalf of the corporation, the act in respect of which the violation occurs and who (1) had knowledge of the failure or attempt as set forth herein and (2) had authority to prevent such failure or attempt.
While the assertions in your letter may implicate the president to a greater degree, the Taxpayer has not produced any objective evidence to affirm these assertions. Moreover, the Taxpayer's assertions do not absolve the Taxpayer from being a corporate officer as defined in Va. Code § 58.1-1813. The Department is not limited to assessing the penalty against one officer, but may assess any and all responsible officers as defined in Va. Code § 58.1-1813. As you acknowledge in your letter, the Taxpayer meets the definition of "corporate officer" in Va. Code § 58.1-1813 because he had knowledge of the failure to pay the withholding tax assessments and had authority to prevent such failure.
As such, the Taxpayer's request for the abatement of the penalty assessed as a responsible officer is denied. While I recognize the Taxpayer's continuing disagreement with the validity of the penalty assessed, my letter of April 9, 2007, clearly sets forth the Department's authority for the assessments.
The outstanding assessments remain due and payable. The Taxpayer should remit payment for the balance of within 30 days from the date of this letter to avoid collection action. Payment should be sent to: Virginia Department of Taxation, 3600 West Broad Street, Suite 160, Richmond, Virginia 23230, Attention: *****. If you have any questions concerning payment of the assessment, you may contact ***** at *****.
The Code of Virginia section cited and other reference documents are available on-line at www.tax.virginia.gov in the Tax Policy Library section of the Department's website. If you have any questions regarding this determination, please contact ***** in the Department's Office of Policy and Administration, Appeals and Rulings, at *****.
-
-
-
-
-
-
-
- Sincerely,
-
-
-
-
-
-
-
-
-
-
-
-
-
- Janie E. Bowen
Tax Commissioner
- Janie E. Bowen
-
-
-
-
-
-
AR/1-1471857974B
Rulings of the Tax Commissioner