December 18, 2024
RE: § 58.1-1821 Application: Retail Sales and Use Tax
Dear *****:
This is in response to your letter submitted on behalf of ***** (the “Taxpayer”) in which you seek relief from the litter tax, withholding tax, and sales and use tax assessed against the Taxpayer as an officer of ***** (the “Corporation”) for the period July 2017 through February 2021.
FACTS
The Corporation was assessed taxes, penalty, and interest for unpaid sales and use taxes, litter taxes, and withholding taxes for various periods from July 2017 through February 2021. When the Corporation failed to satisfy the assessments, the Department issued converted assessments to the Taxpayer for the delinquent taxes. The Taxpayer filed an application for correction contending he was not the responsible officer during the tax periods at issue because he had sold 95% of his ownership and resigned as an employee, officer, and director of the company.
DETERMINATION
Responsible Officer
Virginia Code § 58.1-1813 A provides that a corporate officer, partner of a partnership, or limited liability member “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.”
With his application, the Taxpayer submitted a sales agreement, affidavit, and corporate filings to the State Corporation Commission indicating he was not a responsible party for the periods at issue. In August 2015, the Taxpayer entered into a sales agreement with ********* (the “Buyer”) to sell 95% of the Corporation. The Taxpayer retained a 5% interest as collateral until the promissory note was paid in full. When the sale of the Corporation was finalized in September 2015, the Taxpayer resigned as an employee, director, and president and remanded all financial responsibility to the Buyer in accordance with the sales agreement. In his affidavit, the Taxpayer states he had no knowledge of the delinquent taxes until the Memorandum of Lien was issued against him by the Department. In addition, the annual filings for the Corporation for 2016 through 2021 list the Registered Agent as the Buyer, the new president and purchaser of the Corporation. As a result of the sale, the Taxpayer maintains that the Department has not shown that he willfully failed to pay, collect, or truthfully account for and pay over a state tax, or that the Taxpayer willfully attempted to evade making payment.
The Taxpayer asserts that the Department has not shown that he had knowledge of the Corporation’s failure to pay the state tax or that he attempted to evade or defeat the tax or its payment. Finally, the Taxpayer maintains that the Department has not demonstrated that the Taxpayer had the authority to prevent the failure of the Corporation to pay the tax or attempt to evade paying the state tax.
Because the conditions, as required under Virginia Code § 58.1-1813, have been met for the periods July 2017 through February 2021 for sales and use taxes, litter taxes, and withholding taxes, the converted assessments issued to the Taxpayer will be abated in full.
The Code of Virginia sections, regulations, and public documents cited are available online at www.tax.virginia.gov in the Laws, Rules, and Decisions section of the Department’s website. If you have any questions about this response, you may contact ***** in the Department’s Office of Tax Policy and Legislative Affairs, Tax Adjudication and Resolution Division, at (***) *****.
Sincerely,
James J. Alex
Tax Commissioner
Commonwealth of Virginia