Tax Type
Retail Sales and Use Tax
Description
Taxpayers do not qualify as corporate officers as defined under the statute
Topic
Collection of Delinquent Tax
Date Issued
07-22-1997
July 22, 1997
Re: § 58.1-1821 Application: Retail Sales and Use Tax and Withholding Tax
Dear***************
This is in reply to your letter in which you seek correction of assessments issued to your clients, **********(the "Taxpayers"). I apologize for the delay in responding to your letter.
FACTS
The Taxpayers held an ownership interest in a limited liability company (the "Company"). The Company had numerous unpaid sales and withholding tax assessments for the months September 1995 through December 1995. Upon failure to collect the deficiency from the Company, the department converted the assessments to the Taxpayers, under Code of Virginia § 58.1-1813.
You contest the converted assessments, claiming the Taxpayers were not "responsible officers" under Code of Virginia § 58.1-1813, as they had no duty or authority to pay and monitor the payment of taxes by the Company.
DETERMINATION
Code of Virginia § 58.1-1813 states that “[a]ny corporate or partnership officer who willfully fails to pay, collect, or truthfully account for any 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 ... be liable to a penalty of the amount of the tax evaded, or not paid, collected or accounted for and paid over...."
The statute defines the term "corporate or partnership officer" as an officer or employee of a corporation, or a member or employee of a partnership, who is under a duty to perform on behalf of the corporation, partnership the act in respect of which the violation occurs and who (1) had knowledge of the failure or attempt, and (2) had the authority to prevent it.
Based on the information provided, the Taxpayers did not possess signatory power on any of the Company's checking accounts. The Taxpayers were not charged with the responsibility for paying the Company's debts. Another individual was designated as the "Tax Matters Partner" and managing member of the Company and was authorized to sign all checks. The Taxpayers had no authority to prevent the Company's failure to remit sales and withholding taxes.
Accordingly, the Taxpayers do not qualify as corporate officers as defined under the statute, as they were not responsible for payment of the taxes. The assessments against the Taxpayers for sales and withholding taxes attributable to the Company will be abated.
If you have any questions regarding this matter, you may contact *******of the department's Office of Tax Policy at *********** .
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/11409F
Rulings of the Tax Commissioner