Document Number
09-116
Tax Type
Retail Sales and Use Tax
Description
Converted assessments; Corporate officers
Topic
Corporate Distributions and Adjustments
Persons Subject to Tax
Responsible Officer
Date Issued
07-31-2009


July 31, 2009




Re: § 58.1-1821 Application: Retail Sales and Use Tax

Dear *****:

This is in response to your correspondence requesting waiver of the retail sales and use tax assessments converted to ***** (the "Taxpayers") for the periods of March, April, May, June, August and November 2006. I apologize for the delay in responding to your letter.

FACTS


The officers of ***** (the "Corporation") consisted of a president, vice president, and Secretary. The Taxpayers were the Corporation's president and secretary. The Corporation was issued assessments for unpaid sales taxes. When the Corporation failed to pay the tax, interest, and penalty deficiencies, the Department converted the assessments to the Taxpayers, pursuant to Va. Code § 58.1-1813.

The Taxpayers contest these converted assessments, claiming they were not "corporate officers" under Va. Code § 58.1-1813, as they had no duty to collect and remit the sales taxes and had no knowledge of the unpaid sales taxes prior to December 1, 2006. The Taxpayers contend that the Corporation's vice president (who was also the store manager) had such tax reporting and payment responsibilities until November 30, 2006, and he is responsible for the Corporation's failure to remit the sales taxes at issue.

DETERMINATION


Virginia Code § 58.1-1813 A states, "Any corporate, partnership or limited liability officer who willfully fails to pay, collect, or truthfully account for and pay over any tax administered by the Department of Taxation, or willfully attempts in any manner to evade or defeat any such tax or the payment thereof, shall in addition to other penalties provided by law, be liable to a penalty of the amount of the tax evaded, or not paid, collected or accounted for and paid over, to be assessed and collected in the same manner as such taxes are assessed and collected."

Virginia Code § 58.1-1813 B defines the term "corporate, partnership or limited liability officer" as "an officer or employee of a corporation, or a member, manager or employee of a partnership or limited liability company, who as such officer, employee, member or manager is under a duty to perform on behalf of the corporation, partnership or limited liability company 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 the authority to prevent such failure or attempt."

In Angelson v. Commonwealth of Virginia, 25 Va. Cir. 319 (City of Richmond, 1991), the court pointed out that four conditions of Va. Code § 58.1-1813 must be met before a person can be held individually liable for taxes assessed against a corporation. "First, the person must willfully fail to pay, collect, or truthfully account for and pay over a state tax, or willfully attempt in any manner to evade or defeat such tax or its payment. Second, the person must be an officer or employee of the corporation and have a duty to perform the act in respect of which the violation occurs. Third, the person must have (actual) knowledge of the failure or attempt as set out in the statute. And fourth, the person must have authority to prevent such failure or attempt." [Insert added.] The court stated that the absence of any one of these conditions prohibits the Department from collecting corporate taxes from an individual.

In the instant case, I find that three of those conditions are not met. The documentation and facts presented show that at no time were the Taxpayers under a duty to report and pay sales taxes owed prior to December 1, 2006. The Taxpayers have also shown that they had no knowledge of the unpaid sales taxes prior to December 1, 2006. Further, the Taxpayers did not willfully evade the payment of taxes owed prior to December 1, 2006. Accordingly, based on the evidence presented, I find no basis for upholding the assessments issued for the periods March, April, May, June and August 2006.

The Taxpayers, however, are liable for the unpaid sales taxes for the period of November 2006, because such taxes were not due until December 20, 2006. Dealers are required to report and remit sales taxes by the twentieth day of the month for all taxable transactions occurring in the preceding month. See Va. Code §§ 58.1-615 and 58.1-616. Thus, the sales taxes for November 2006 were due at any time between December 1, 2006 and December 20, 2006. Because of his termination on December 1, 2006, the store manager was not responsible for filing and remitting such taxes. Rather, the Taxpayers were responsible for the reporting and remittance of the sales taxes owed for November 2006.

CONCLUSION


Based on the foregoing, I will abate the converted assessments issued to the Taxpayers for the periods of March, April, May, June and August 2006. The Taxpayers will each receive updated bills for November 2006. The liability for such period should be paid within 30 days of the bill date to avoid collection action.

The Code of Virginia sections cited 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 Tax Policy, Appeals and Rulings, at *****.
                • Sincerely,


                • Janie E. Bowen
                  Tax Commissioner



AR/1-2467918423.R


Rulings of the Tax Commissioner

Last Updated 08/25/2014 16:46