BTA Expands Its Definition of “Responsible Party”
On September 23, 2014, we posted about the expansion of who qualifies as a “responsible party.” In that case, Wilson v. Testa, the Board of Tax Appeals found an “investment partner” was a responsible party. Recently, the Board of Tax Appeals again expounded upon its definition of “responsible party” in Gillan v. Testa, Ohio BTA, Dkt. No. 2014-1340 (10/22/2014) and Qaimari v. Testa, Ohio BTA, Dkt. No. 2014-538 (10/22/2014).
In Gillan v. Testa, the Ohio Board of Tax Appeals denied a taxpayer’s argument that he was not the “appropriate” responsible party, finding that R.C. 5739.33 does not require liability to attach to only one individual. The taxpayer contended, “while he was a corporate officer, i.e., a responsible party, he was not the ‘appropriate’ responsible party.” In particular, he argued that others, including the corporate controller, were more “appropriate” responsible parties regarding fiscal matters.
The Board of Tax Appeals, however, disagreed, finding that R.C. 5739.33 does not require liability to attach to only one individual. Rather, R.C. 5739.33 may be read to include anyone who either exercised or had the power to exercise the requisite control over the financial affairs as a responsible party.
In Qaimari v. Testa, the Board of Tax Appeals found that a taxpayer’s delegation of day-to-day business responsibilities to a third party does not relieve him/her of “responsible party” status under R.C. 5739.33. The taxpayer argued that he was not a responsible party for purposes of sales tax assessment because the business was managed by a third party pursuant to a management agreement during the period at issue. The Board of Tax Appeals found no management agreement, however. Even if such agreement did exist, the taxpayer’s delegation of day-to-day business responsibilities to a third party did not relieve him of his responsibility.
In regards to the taxpayer’s challenge to the underlying assessment against the business itself, the Board of Tax Appeals found that liability under R.C. 5739.33 is concerned only with the liability of the person assessed, not the corporation.
Any person asserted to be a responsible party must work on parallel fronts to protect his/her interests: (a) making sure the corporation’s liability is correct before it becomes final; (b) making sure the Department of Taxation pursues all responsible parties; and (c) of course, fully defending the assertion of his/her responsible party status. If you have any questions regarding whether you are a responsible party or how to protect your interest, please contact Steve Dimengo, Rich Fry, or Casey Davis.