Tax Type
Withholding Taxes
Description
Taxpayer taxes, penalties and interest owed by the Corporation will be discharged
Topic
Persons Subject to Tax
Records/Returns/Payments
Date Issued
09-11-2008
September 11, 2008
Re: § 58.1-1821 Application: Withholding Tax
Dear *****:
This will reply to your letter in which you seek correction of the penalty assessments issued to ***** (the "Taxpayer"), resulting from withholding assessments issued against ***** (the "Corporation") for the periods January 2003 through December 2004.
FACTS
The Department issued assessments against the Corporation for failure to remit withholding tax for the periods January 2003 through December 2004. Upon failure to collect the deficiencies from the Corporation, the Department assessed the Taxpayer penalties in the amount of the taxes, as well as penalties and interest owed by the Corporation, pursuant to Va. Code § 58.1-1813.
On behalf of the Taxpayer, who is now deceased, you contest conversion of the assessments. You admit that the Taxpayer was the president and CEO of the Corporation until 1987, at which time his son succeeded him as president. Although he remained as a director, declining health forced the Taxpayer to reduce the amount of time that he worked for the Corporation. By 2003, all executive decisions, including financial ones, were made by the Taxpayer's son in his capacity as president and treasurer of the Corporation. As such, you contend that the Taxpayer is not a corporate officer as defined in Va. Code § 58.1-1813 and cannot be held liable for the taxes, penalties and interest assessed to the Corporation.
DETERMINATION
Virginia Code § 58.1-1813 addresses the liability of corporate officers and provides, in pertinent part, the following:
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 tax evaded, or not paid ....
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 to evade taxes and (2) had authority to prevent such failure or attempt.
You assert that the Taxpayer's poor health necessitated a progressive reduction of his authority over the financial administration of the Corporation. During the taxable periods at issue, he came into the office at most two days a week, and his only job responsibility was to consult on technical issues. You state that the corporation's tax problems were not disclosed to him. An affidavit from a long-time employee has been submitted supporting the assertion that the Taxpayer had a diminishing role in the Corporation due to health issues.
During the taxable years at issue no withholding returns were filed. However, other returns that were filed both prior and subsequent to the taxable years at issue bear the signature of the Taxpayer's son.
The available evidence appears consistent with statements made in your appeal that the Taxpayer did not have authority over the financial affairs of the Corporation, and was even prevented from gaining information about the Corporation's financial condition. Accordingly, I find that the Taxpayer did not have sufficient knowledge of the failure or attempt to evade taxes, or the authority to prevent synch failure or attempt pursuant to Va. Code § 58.1-1813. The penalties assessed against the Taxpayer in the amount of the taxes, penalties and interest owed by the Corporation will be discharged.
If you have any questions regarding this determination, you may contact ***** in the Department's Office of Tax Policy, Appeals and Rulings, at *****,
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- Sincerely,
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- Janie E. Bowen
Tax Commissioner
- Janie E. Bowen
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AR/1-2342935324.B
Rulings of the Tax Commissioner