Document Number
19-52
Tax Type
Retail Sales and Use Tax
Description
Administration: Officer’s Liability - Converted Assessment
Topic
Appeals
Responsible Officer
Date Issued
05-09-2019

 

May 9, 2019

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

Dear *****:

This is in response to your letter in which you seek correction of the retail sales and use tax assessments converted to ***** (the “Taxpayer”) as a result of liabilities incurred by ***** (the “Company”) for various periods between October 2015 and September 2016. I apologize for the delay in responding to your letter.  

FACTS

The Company operated a restaurant in Virginia. Prior to the Company’s closing, it incurred certain unpaid retail sales and use tax liabilities. The unpaid tax liabilities of the Company were converted to the Taxpayer pursuant to Virginia Code § 58.1-1813.

The Taxpayer states that throughout the Company’s existence, she had no involvement with, responsibility for, duties, or knowledge of the Company’s sales tax liabilities or daily operations. The Taxpayer states she was only on the lease for the building because it was required by the landlord. The Taxpayer requests an abatement of the converted assessments.

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 four conditions of Virginia Code § 58.1-1813 that 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 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.

The court stated that the absence of any one of these conditions prohibits the Department from collecting corporate taxes from an individual.  Under the standard of willfulness applied by the courts, all that needs to be shown is that the act was “voluntary, conscious, and intentional.” Hewitt v U.S., 377 F.2d 921, 924 (C.A.  Tex.) 

While the Taxpayer contends she does not meet the criteria set forth in Angelson, the only documentation provided to support this contention is the Articles of Organization for *****  The registered agent in these articles is the Taxpayer’s late husband, but the articles do not state that he is the only registered agent or member of the organization. Further, the Department’s records show the Taxpayer is a member of the organization.  

In the appeal, the Taxpayer asserts that her husband had the sole authority to sign checks and handle the Company’s finances. The Taxpayer maintains that she never had control of the finances or the estate. Documentation was requested in order to further investigate the Taxpayer’s claim, but no additional documentation has been received.  

If the Taxpayer has documentation outlining how she does not meet the tests set out in Angelson, the Department will review it. Such documentation must be provided within 30 days from the date of this letter. Documentation should be provided to: Virginia Department of Taxation, Office of Tax Policy, Appeals and Rulings, Attn: *****, Post Office Box 27203, Richmond, Virginia 23261-7203.

CONCLUSION

Based on the foregoing, there is no basis to adjust or abate the converted assessments. No evidence to disprove the requirements set out in Angelson has been provided. If the Taxpayer does not submit the requested documentation within 30 days of the date of this letter, the assessment will be upheld. In that event, the Taxpayer will receive updated bills with interest accrued to date. The bills should be paid within 30 days to avoid the accrual of additional interest.

The Code of Virginia sections cited are available on-line at www.tax.virginia.gov in the Laws, Rules and Decisions section of the Department’s website.  If you have any questions regarding this determination, please contact ***** in the Office of Tax Policy, Appeals and Rulings, at *****.

Sincerely,

 

Craig M. Burns
Tax Commissioner

AR/1422L

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Last Updated 07/19/2019 09:01