Tax Type
Retail Sales and Use Tax
Description
Liability of corporate officer
Topic
Collection of Delinquent Tax
Date Issued
10-26-1989
October 26, 1989
Re: §58.1-1821 Application: Sales, Income and Withholding Tax
Dear*****************
This is in reply to your letter of August 11, 1989, on behalf of *********** (taxpayer), in which you submit an application for correction of sales and use, income and withholding tax for the period of January 1987 through December 1988.
FACTS
The taxpayer is seeking relief of tax, penalty and interest incurred by (the corporation). The taxpayer feels he is not liable for the tax under Virginia Code §58.1-1813 in that he did not willfully refuse to pay, collect or truthfully account for all taxes, nor did he willfully evade or defeat such taxes. The taxpayer states he had no knowledge of failure to pay such taxes, nor did he have the authority to prevent such failure. The department has held the taxpayer liable for tax, penalty and interest due from the corporation under Virginia Code §58.1-1813.
DETERMINATION
Virginia Code §58.1-1813 addresses the liability of corporate officers and employees and states the following:
-
- Any corporate or partnership officer who willfully fails to pay, collect or truthfully account for and pay over any state 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. The term "corporate or partnership officer" as used in this section means an officer or employee of a corporation, or a member or employee of a partnership, who as such officer, employee or member is under a duty to perform on behalf of the corporation or partnership 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.
Based on my understanding of the situation, the taxpayer's relationship to the corporation is as follows:
- The taxpayer was the sole stockholder/owner of the corporation.
- The Articles of Incorporation name the taxpayer as the sole director on the Board of Directors.
- The sales and use tax and withholding tax registration list the taxpayer as the president of the corporation.
- All sales and use tax returns and payments had to be approved by the taxpayer prior to remittance to the state.
- The taxpayer had the final say in all decisions made on behalf of the corporation.
Based upon this information, it is apparent that the taxpayer exercised significant control over the operation of the corporation. The fact that all sales and use tax returns and payments had to be approved by the taxpayer prior to remittance to the state further supports the department's assessment, as the taxpayer had the authority to prevent the underpayment of the tax by the corporation. However, I am willing to provide the taxpayer with 45 days in which to provide additional information on his relationship to the corporation such as to refute the validity of the department's assessment under Virginia Code §58.1-1813.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner