STATE OF WISCONSIN
TAX APPEALS COMMISSION
DANIEL J. BENDER
CAROL J. BENDER
1231 Corey Avenue
Wisconsin Rapids, WI 54494,
WISCONSIN DEPARTMENT OF REVENUE
P.O. Box 8907
Madison, WI 53708 ,
|DOCKET NO. 01-V-120|
DOCKET NO. 01-V-117
RULING AND ORDER
THOMAS M. BOYKOFF, COMMISSIONER:
These cases come before the Commission on the parties' cross-motions for summary judgment under Wis. Stat. § 802.08, with each party asserting that there are no genuine issues as to any material fact and that the party is entitled to judgment as a matter of law. Wis. Stat. § 802.08(2).
Attorney Terrence J. Byrne, of Byrne, Goyke, Tillisch & Higgins, S.C., Wausau, Wisconsin, represents petitioners. Attorney Michael J. Buchanan represents respondent, Wisconsin Department of Revenue ("Department").
With their motion, each party filed affidavits with exhibits and a brief supporting their motion and opposing the other party's motion.
Having considered the entire record, the Commission hereby finds, concludes, rules, and orders as follows:
UNDISPUTED MATERIAL FACTS
1. Under date of January 25, 2001, the Department issued separate assessments for $64,930.11 to Daniel J. Bender ("Mr. Bender") and Carol J. Bender ("Ms. Bender") as officers, employees, fiduciaries or agents who were responsible for paying motor vehicle fuel tax, interest, penalties, and other charges that had been incurred but not paid by L. L. Bender Oil Corporation ("corporation") for July 1998. See Wis. Stat. § 78.70(6).
2. Under date of February 8, 2001, both petitioners filed petitions for redetermination with the Department.
3. Under date of August 8, 2001, the Department denied both petitions for redetermination, whereupon petitioners filed timely petitions for review with the Commission.
Additional Material Facts
4. In July 1998,(1) the period under review, Mr. Bender was the president, treasurer, and majority stockholder of the corporation, and Ms. Bender was the vice-president of the corporation. Mr. Bender's authority for the corporation included hiring and firing employees, paying bills, doing the banking, placing orders, handling maintenance and deliveries, and generally managing the business. Ms.
Bender performed services for the corporation such as running errands.
5. During July 1998, the corporation received at least 15 shipments of motor vehicle fuel ("fuel") from Phillips 66 Company ("Phillips"), a division of Phillips Petroleum Company. The corporation did not pay Phillips for the fuel, but sold the fuel to its customers in Wisconsin and deposited customer payments into its business checking accounts.
6. The corporation had business checking accounts in the Nekoosa Port Edwards State Bank, in Nekoosa, Wisconsin; the Whiting Plover Credit Union, in Stevens Point, Wisconsin; and the Wood County National Bank, in Wisconsin Rapids, Wisconsin. Both petitioners had check-signing authority for the business accounts in the three financial institutions.
7. In July and August 1998, substantial deposits (i.e., far exceeding $20,000) were made into each business checking account, and these funds were available to pay creditors. Checks bearing Mr. Bender's signature were drawn on the business accounts in the two banks for purchases (e.g., to the U. S. Postal Service) and to pay creditors (including Phillips), attorneys, an employee, February through August 1998 sales taxes, and January through August 1998 withholding taxes.
8. The corporation collected the fuel tax on each sale of fuel to its customers, but did not remit the taxes due to the Department on sales made during July 1998.
9. Phillips provided the Department with substantiation that it was unable to recover the fuel tax from the corporation pursuant to Wis. Stat. § 78.01(25). The Department then issued a Notice of Entitlement to Tax Credit to Phillips for the fuel tax on the motor fuel the corporation failed to pay Phillips for, and issued a personal liability assessment for the fuel tax to each petitioner.
Is each petitioner personally liable for the unpaid motor vehicle fuel tax incurred by the corporation in July 1998, pursuant to Wis. Stat. § 78.70(6), as a corporate officer, employee, fiduciary or agent responsible for paying the taxes?
APPLICABLE WISCONSIN STATUTES
78.01 Tax imposed; collected; exceptions.
(1) IMPOSITION OF TAX AND BY WHOM PAID. An excise tax . . . is imposed on all motor vehicle fuel received by a supplier for sale in this state, . . . . Except as otherwise provided in this chapter, a person who receives motor vehicle fuel under s. 78.07 shall collect from the purchaser of the motor vehicle fuel that is received, and the purchaser shall pay to the person who receives the motor vehicle fuel under s. 78.07, the tax imposed by this section on each sale of motor vehicle fuel at the time of the sale, irrespective of whether the sale is for cash or on credit. In each subsequent sale or distribution of motor vehicle fuel on which the tax has been collected . . ., the tax collected shall be added to the selling price so that the tax is paid ultimately by the user of the motor vehicle fuel.
78.70 Actions to collect tax and penalties.
* * *
(6) PERSONAL LIABILITY. Any officer, employee, fiduciary or agent who is responsible for paying taxes, interest, penalties or other charges under this chapter incurred by another person, as defined in s. 77.51 (10), is personally liable for those taxes, interest, penalties or other charges. Sections 71.88 (1) (a) and (2) (a), 71.89 and 71.90, as they apply to appeals of income or franchise tax assessments, apply to appeals of assessments under this subsection.
Statutory Standard for Summary Judgment
Under Wis. Stat. § 802.08(2), summary judgment "shall be rendered if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." (Emphasis supplied.)
Standard for Personal Liability for the Tax
These cases concern whether petitioners are each personally liable under § 78.70(6) for the motor vehicle fuel tax which was incurred by the corporation in July 1998 but not paid to the Department. The amount of the tax is not in dispute. Petitioners dispute their personal liability for paying the tax.
The statute requires the presence of three elements for personal liability to be imposed. First, the person must be an officer, employee, fiduciary or agent of the corporation. Second, the person must have the authority to pay the tax. Third, the person must have the duty to pay the tax. See Thomas v. Dep't of Revenue, Wis. Tax Rptr. (CCH) ¶ 400-147 (WTAC 1995), and Mach v. Dep't of Revenue, Wis. Tax Rptr. (CCH) ¶ 400-317 (WTAC 1997).
Officer, employee, etc. There is no dispute that in July 1998, Mr. Bender was the corporation's president, treasurer, employee, and agent. As corporate president, he set the policies of the corporation. As its treasurer, he was responsible for its finances, including receiving and depositing funds, and writing checks to pay creditors. As its agent, he could hire and fire employees, place orders, pay bills, do the banking, handle maintenance and deliveries, and handle the business' general management. Mr. Bender was designated as an employee on the corporation's 1993 Wisconsin and federal franchise/income tax returns.
There is also no dispute that Ms. Bender was an officer of the corporation, i.e., its vice-president. The Benders were so designated on the corporation's Annual Report covering fiscal year October 1, 1997 thru September 30, 1998, which was filed with the Wisconsin Department of Financial Institutions.
Authority. In July 1998, petitioners both had check-signing authority for the corporation's three business checking accounts. They could disburse corporate funds and decide what bills to pay. Mr. Bender issued several checks to creditors, including to the Department for sales and withholding taxes. But neither petitioner paid the July 1998 fuel tax to the Department.
Duty. The corporation's president and vice-president, with authority to pay fuel taxes and who knew or should have known that the taxes were unpaid, were personally obligated to see that they were paid.
The Department is not required to show that petitioners acted in bad faith or with malice or evil intent. All that need be shown is that corporate funds were used to pay corporate creditors, with knowledge that fuel taxes were owing. Mr. Bender paid several creditors from the ample funds in the corporate accounts, while the fuel tax for July 1998 was not paid.
This third standard is adopted from similar personal liability cases involving the nonpayment of sales/use tax and withholding tax. See Gerth and Kelly v. Dep't of Revenue, Wis. Tax Rptr. (CCH) ¶ 203-367 (WTAC 1992); Thomas v. Dep't of Revenue, supra; and Senf v. Dep't of Revenue, Wis. Tax Rptr. (CCH) ¶ 400-441 (WTAC 1999), aff'd, Wis. Tax Rptr. (CCH) ¶ 400-474 (Dane Co. Cir. Ct. 2000).
Petitioners assert that the fuel tax statutes (ch. 78, subchs. I and IV) do not apply to them and that the Department has not shown otherwise. They argue that the corporation was not a "licensee" and that only licensees must pay the fuel tax. They contend that "The statute [§ 78.01] does not impose the tax on purchasers directly, rather the purchaser must pay to the seller the tax that was imposed on it."(2)
We believe that the fuel tax statutes are not "very simple", as the Department states.(3) Under § 78.01(1), the fuel tax is imposed on all fuel received by a supplier for sale in Wisconsin, and the tax is "imposed . . . on each sale of motor vehicle fuel at the time of the sale. . . ." [Emphasis supplied.] The tax is added to the selling price, so that the tax is ultimately paid by the fuel's user.
In this case, the corporation did not pay Phillips for the fuel it received in July 1998. Nor did it pay Phillips any fuel tax required by statute. However, the corporation did collect the fuel tax when it sold the fuel to its customers at its gas station in Wisconsin, but did not pay the fuel tax to the Department.
Petitioners now argue that the corporation had no responsibility to pay the fuel tax to the Department. This is disingenuous. Why should the corporation collect and keep the tax from the consumer on fuel the corporation never paid its supplier for? Because, petitioners assert, the corporation is not a "licensee", and only licensees are required to pay the tax. See Wis. Stat. § 78.10 ("Licensing process").
This position, however, contradicts § 78.12(3), which provides in part that, "Any person . . . who is not a licensee and . . . who has possession of any motor vehicle fuel . . . upon which the motor vehicle fuel tax has not been paid . . . shall file a report and pay the tax on that motor vehicle fuel . . . in the same manner as is provided for licensees." This provision specifically requires the corporation in this case to pay the tax it collected. Any other reading of this statute would allow a purchaser or seller of motor fuel to avoid paying to the Department the fuel tax it collects, by refusing to become licensed or by surrendering its license. This would lead to an absurd conclusion, which we may not accept. See South Milwaukee Savings Bank v. Barczak, 229 Wis. 2d 521, 536-37 (Ct. App. 1999), citing State v. Young, 180 Wis. 2d 700, 704 (Ct. App. 1993).
Once liability of the corporation for the fuel tax is established, and the corporation does not or cannot pay the tax, § 78.70(6) ("Personal liability") clearly authorizes the Department to collect the tax from "[a]ny officer, employee, fiduciary or agent who is responsible for paying taxes . . . under this chapter incurred by another person" (i.e., the corporation). We conclude that the Department has done so under its authority as discussed earlier in this ruling.
1. Petitioners' motions for summary judgment are denied.
2. The Department's motion for summary judgment is granted, and its actions on the petitions for redetermination are affirmed.
Dated at Madison, Wisconsin, this 11th day of December, 2002.
WISCONSIN TAX APPEALS COMMISSION
Don M. Millis, Commission Chairperson
Thomas M. Boykoff, Commissioner
Richard F. Raemisch, Commissioner
ATTACHMENT: "NOTICE OF APPEAL INFORMATION"
February 3, 2003 Petition for rehearing denied under § 227.49(3)
March 7, 2003 Appealed to Wood County Circuit Court(03CV79).