Opinion
No. 90-357
Submitted October 25, 1990 —
Decided January 23, 1991.
Taxation — Sales tax — Principal shareholder, as president of corporation, personally liable for sales tax assessments when he has authority to exercise control or supervision over tax return and tax payment activities.
APPEAL from the Board of Tax Appeals, No. 86-G-337.
On April 1, 1986, the Tax Commissioner, appellant, issued an assessment of $44,488.85 against Lowell McGlothin, appellee, as a responsible officer of Springdale, Inc., under R.C. 5739.33. Springdale, Inc. operated Faces Restaurant for varying periods between July 1, 1979 and December 31, 1982.
On appeal, the Board of Tax Appeals ("BTA") reversed the Tax Commissioner's assessment. It found that appellee was not a responsible corporate officer because, among other things, he played an ancillary role in the restaurant, had nothing to do with the day-to-day operation of the business, and did not pay the sales taxes or prepare and file the tax returns.
The Tax Commissioner, consequently, appealed to this court.
Appellee formed Springdale, Inc. in 1977 and obtained vendor's and liquor licenses to operate Faces Restaurant. He and his former wife owned all the shares of stock of the corporation and appellee served as president. Although he had check-writing authority he seldom wrote checks. He employed his mother, Elizabeth McGlothin, to do the bookkeeping for the restaurant and to work with the company accountant relative to the filing of tax returns. Elizabeth McGlothin also wrote most of the checks, including checks in payment of sales tax obligations. Appellee, moreover, hired Doug Campbell to manage the restaurant. Appellee's principal occupation and the source of his income was as a model for Ford Models, Inc. in New York City where he resided. He spent ninety-five percent of his time in the modeling business. Because of appellee's principal occupation he could act only as a public relations host at the restaurant on an irregular basis for approximately two weekends per month. Despite having a substantial investment in Faces Restaurant, he never received a salary as president of the corporation.
The matter is before this court upon an appeal as of right.
Ronald G. Logan, for appellee.
Lee I. Fisher, attorney general, and Barton A. Hubbard, for appellant.
R.C. 5739.33 imposes personal liability on corporate officers who have control or supervision of, or are charged with the responsibility of, filing returns and making payments of sales tax due the state of Ohio.
The BTA found that appellee was not a responsible corporate officer and was not subject to the statute. Based upon the facts before the BTA, that conclusion is unreasonable and the decision of the BTA is reversed.
This court will not overrule findings of fact of the BTA that are based upon sufficient probative evidence. Hawthorn Mellody, Inc. v. Lindley (1981), 65 Ohio St.2d 47, 19 O.O. 3d 234, 417 N.E.2d 1257, syllabus. In the instant case, the decision of the BTA is not based upon sufficient probative evidence.
Our recent decision in Spithogianis v. Limbach (1990), 53 Ohio St.3d 55, 559 N.E.2d 449, is dispositive of this appeal. In that case the corporate officer had the authority to control or supervise the tax return and tax payment activities of the corporation. He was also the principal shareholder of the corporation and, while he did not conduct the corporate affairs on a day-to-day basis, he had delegated the operational, and tax return and tax payment responsibilities, to other corporate employees. As we observed in Spithogianis, supra, at 57, 559 N.E.2d at 451:
"The General Assembly intended, through the enactment of R.C. 5739.33, to hold those officers or employees who were in charge of the operations of a defaulting corporation personally liable for unpaid sales tax if such persons filed returns or paid taxes, or controlled or supervised others who performed those tasks, or had responsibility for such tasks. R.C. 5739.33 does not permit responsible officers or employees to escape liability by delegating those duties to others."
The decision of the BTA, being unreasonable and unlawful, is reversed.
Decision reversed.
MOYER, C.J., SWEENEY, HOLMES, DOUGLAS, WRIGHT, H. BROWN and RESNICK, JJ., concur.