Virginia – Corporate Officer Not Liable for Unpaid Taxes

SALT Report 1617 – The Virginia Department of Taxation found that an individual taxpayer was not liable for the unpaid retail sales and use taxes of a Virginia corporation because he did not satisfy the criteria that is needed to determine a corporate officer and personal liability as defined by Va. Code Ann. 58.1-1813.

During the period in question, the taxpayer was elected president and owned 20% of the corporation.  Although the taxpayer was an officer, his election as president of the corporation was in name only because he continued to perform the duties of the shop foreman. The taxpayer sold, installed, repaired, and serviced tires only.  He did not have the responsibility of reporting and paying taxes on behalf of the corporation.

In his defense, the taxpayer claimed he had no knowledge of the corporation’s failure to file and pay its taxes until after the resignation of the secretary-treasurer, who the taxpayer claimed oversaw all of the financial, payroll, accounting, tax, monetary and office duties for the corporation.

Based on the above facts, the Department determined there was no evidence that the taxpayer willfully failed to pay the taxes owed by the corporation as he had no actual authority or control over the business affairs. Therefore, the Department ruled that the taxpayer did not satisfy all of the criteria to be considered a corporate officer, and all assessments and liabilities against the taxpayer were abated.

For Further Information:

Virginia Department of Taxation – Ruling of Commissioner P.D. 12-100