STATE OF WISCONSIN
TAX APPEALS COMMISSION
870 Foxworth Blvd., Apt. 208
Lombard, IL 60148-7006
WISCONSIN DEPARTMENT OF REVENUE
P.O. Box 8933
Madison, WI 53708
|DOCKET NO. 99-S-156
RULING AND ORDER AWARDING SUMMARY JUDGMENT
THOMAS M. BOYKOFF, COMMISSIONER:
This case is before the Commission on respondent Wisconsin Department of Revenue's ("Department") motion for summary judgment under Wis. Stat. § 802.08. The Department filed a sworn affidavit and exhibits supporting its position on the motion.
Other than participation in a May 31, 2000 telephone conference by Attorney N. David Blocker of Lindenbaum Coffman Kurlander & Brisky, Ltd., petitioner was not represented, and she did not file a brief. The Department appeared by Attorney Michael J. Buchanan.
Having considered the entire record, the Commission finds, rules, and orders as follows:
Undisputed Jurisdictional Facts
1. Under date of May 28, 1998, the Department issued a personal liability assessment for $21,193.12 to petitioner as an officer, employee or other responsible person of Sheboygan Mattress Superstore, Inc., asserting that she intentionally failed to withhold, account for or pay over to the Department the sales tax of that business under Wis. Stat. § 77.60(9).
2. Under date of July 23, 1998, petitioner filed a petition for redetermination with the Department, which the Department denied under date of July 15, 1999.
3. Petitioner filed a timely appeal to the Commission.
Other Undisputed Material Facts
4. Petitioner was the incorporator of "Sheboygan Mattress Superstore, Inc.", having drafted and filed its Articles of Incorporation with the Wisconsin Secretary of State in November 1995.
5. On July 23, 1996, petitioner signed Articles of Amendment as president and filed them with the Wisconsin Department of Financial Institutions to change the name of the business to Specialty Sleep Products Company ("the corporation").(1)
6. The corporation's principal activity was the sale of retail bedding and supplies.
7. The months at issue are February through December 1996 but not August ("the period under review"). The corporation held a seller's permit. Sales tax returns were filed for each month except December 1996. Six of these returns were signed by petitioner as president. With five of the monthly returns, no money was paid. For several months, returns were filed late, and the Department imposed late filing fees and penalties.
8. Petitioner held herself out as the corporation's president by signing the Articles of Amendment and five sales tax returns as "president".
9. On August 9, 1996, a corporate checking account was opened for the corporation at Norwest Bank Wisconsin, N.A. in Sheboygan, Wisconsin. Petitioner was the only person authorized to sign checks on this account.
10. In August of 1996, petitioner was informed by a revenue agent of the Department that the corporation was delinquent in paying its sales tax. She was also informed at that time that the corporation had failed to file returns for May, June, and July of 1996. At her request, the revenue agent sent her tax forms for those months. The forms were completed, and petitioner signed them as corporate president and filed them on December 18, 1996, without remitting any tax.
11. Petitioner signed and filed the August 1996 sales tax return on September 27, 1996, and paid the tax shown on that return with a check written on the corporate account.
12. During the months of October, November, and December 1996, tens of thousands of dollars were in the corporate account and used to pay creditors other than the Department for sales tax owing.
APPLICABLE WISCONSIN STATUTES
77.60 Interest and penalties.
* * *
(9) Any person who is required to collect, account for or pay the amount of tax imposed under this subchapter and who wilfully fails to collect, account for or pay to the department shall be personally liable for such amounts, including interest and penalties thereon, if that person's principal is unable to pay such amounts to the department. The personal liability of such person as provided in this sub-section shall survive the dissolution of the corporation or other form of business association. Personal liability may be assessed by the department against such person under this subchapter for the making of sales tax determinations against retailers and shall be subject to the provisions for review of sales tax determinations against retailers, but the time for making such determinations shall not be limited by s. 77.59(3). "Person", in this subsection, includes an officer, employe or other responsible person of a corporation or other form of business association or a member, employe or other responsible person of a partnership, limited liability company or sole proprietorship who, as such officer, employe, member or other responsible person, is under a duty to perform the act in respect to which the violation occurs.
CONCLUSIONS OF LAW
1. There is no genuine issue of material fact, and this matter is appropriate for summary judgment.
2. Petitioner is personally liable under Wis. Stat. § 77.60(9) for unpaid sales tax of the corporation for February through December 1996, except August.
The elements necessary(2) to establish the personal liability for unpaid withholding taxes are:
1. The authority to pay -- or to direct the payment of --
2. The duty to pay -- or to direct the payment of -- the taxes;
3. The intentional breach of that duty.
Gerth and Kelly v. Wisconsin Department of Revenue, Wis. Tax Rep. (CCH) ¶ 203-367 (WTAC 1992); Michael A. Pharo v. Wisconsin Department of Revenue, 1997 Wisc. Tax LEXIS 28 (WTAC 1997), aff'd (Dane Co. Cir. Ct. June 8, 1998); Irvin L. Hougom v. Wisconsin Department of Revenue, 1999 Wisc. Tax LEXIS 21 (WTAC 1999); and Danny R. Senf v. Wisconsin Department of Revenue, 1999 Wisc. Tax LEXIS 42 (WTAC 1999).
If the Department presents clear and satisfactory evidence of the three elements, petitioner bears the burden of proving otherwise by clear and satisfactory evidence. Drilias v. Wisconsin Department of Revenue, Wis. Tax Rep. (CCH) ¶ 400-222 (WTAC 1996). In this case, the Department has presented evidence showing that petitioner was a responsible person with respect to sales tax not withheld, accounted for or paid during the period under review. Petitioner has not proven the contrary.
Petitioner Had The Authority To Pay The Taxes
Petitioner was the incorporator of Sheboygan Mattress Superstore, Inc., in November 1995. In July 1996, she signed, as president, and filed Articles of Amendment which changed the corporation's name to Specialty Sleep Products Company.
Petitioner signed sales and use tax returns of the corporation for May and July through November 1996, designating herself as the corporate president. By holding herself out as president, petitioner had the authority to pay corporate tax or to direct their payment. Petitioner was the only person with check-signing authority on the corporate checking account at Norwest Bank Wisconsin, N.A., in Sheboygan, Wisconsin.
Between October and December 1996, under her check-signing authority, petitioner personally signed and issued corporate checks to corporate creditors with some of the tens of thousands of dollars in the account. She did not, however, pay the corporation's sales tax to the Department, although she knew the tax was due, owing, and unpaid.
Petitioner Had A Duty To Pay The Taxes
When a person has authority to pay the taxes due and knows that they are unpaid, he or she becomes personally obligated to see that corporate funds are used to pay this liability. Gerth and Kelly v. WDOR, supra, and Lepp v. WDOR, supra.
In August of 1996, a revenue agent of the Department informed petitioner that the corporation was delinquent in its sales tax payments and that tax returns for May, June, and July 1996 were not filed. At petitioner's request, the revenue agent sent her the proper forms to file.
Petitioner Intentionally Breached Her Duty To Pay The Sales Tax
The Department is not required to show bad faith, malice or evil intent to prove an intentional breach of the duty to pay withholding tax due. Consistent interpretation of both state and federal officer liability statutes have held that all that is necessary for intent to be proven is to show that there was a decision to use corporate funds to pay other creditors with knowledge of taxes being due. See, Gerth and Kelly, supra, and Garsky v. U.S., 600 F.2d 86, 79-2 USTC ¶ 9436 (7th Cir. 1979).
During the months of October, November, and December 1996, while knowing that sales tax was due, petitioner issued checks to the corporation's creditors. The checks were on the corporate checking account on which she had sole check-signing authority.
1. The Department's motion is granted, and the Department is awarded summary judgment.
2. The Department's action on petitioner's petition for redetermination is affirmed.
Dated at Madison, Wisconsin, this 2nd day of August, 2000.
WISCONSIN TAX APPEALS COMMISSION
Mark E. Musolf, Chairperson
Don M. Millis, Commissioner
Thomas M. Boykoff, Commissioner
ATTACHMENT: "NOTICE OF APPEAL INFORMATION"
2 The Commission has held that the amount of an assessment may also be an element of personal liability. Monfre v. Dep't of Revenue, 1998 Wisc. Tax LEXIS 7, at 29-30 (WTAC 1998). The amount of the assessment is not an issue in this case.