Summary
In Willis v. Lindley (1980), 61 Ohio St.2d 356, 15 O.O.3d 438, 402 N.E.2d 1185, we upheld the personal liability of a corporate officer under R.C. 5739.33 where his corporation had borrowed money from a bank which prohibited payment of any bills other than those authorized by the bank.
Summary of this case from Delassus v. TracyOpinion
No. 79-1138
Decided March 26, 1980.
Taxation — Sales taxes — Liability of officer for corporation's failure to pay tax.
APPEAL from Board of Tax Appeals.
Duane Willis, appellee herein, was President and General Manager of Opticron, Inc., from October 1969, to February 1973. Pursuant to R.C. 5739.33, the Tax Commissioner of Ohio held Willis personally liable for the unpaid sales tax of Opticron, Inc., and assessed Willis for the amount of this unpaid tax. Willis appealed the assessment to the Board of Tax Appeals.
The Tax Commissioner levied two assessments against Willis and one Samuel Tate. With respect to the first, dealing with Vendor' License Nos. 18-302199, 18-304607, and 18-313048, Willis was found liable, with the exception of the semiannual period of February 1, 1973, to July 31, 1973, under Vendor's License No. 18-313048. Under the second assessment, dealing with Vendor's License No. 52-014877, Willis was held liable for the unpaid tax, with the exception of the semiannual period of November 1, 1972, to April 30, 1973. Samuel Tate was also found personally liable for these assessments.
The board found that Willis' duties included signing sales tax returns and issuing checks in payment of sales tax owed by Opticron. The board also found that Opticron borrowed $325,000 from Union Commerce Bank (bank) in March 1972. As a condition of the loan, Opticron's revenues were deposited into a cash collateral account at the bank. Willis made a list of Opticron's bills, gave the list to the bank, and the bank decided which bills should be paid. Funds to pay the sales taxes were deposited into the cash collateral account at the bank. In January 1973, the Small Business Administration called the loan, at which point the bank informed Opticron that only payments for rent, utility, product and payroll bills would be authorized. The Small Business Administration locked up Opticron's offices on February 21, 1973, and Willis resigned as President of Opticron effective February 22.
The board determined "*** that the element of `control' was not vested with *** [Willis] from February 1, 1973, through July 31, 1973." On that basis, the board reversed the final order of the commissioner.
The cause is now before this court upon an appeal as of right.
Mr. Duane Willis, pro se. Mr. William J. Brown, attorney general, and Ms. Barbara E. Lapworth, for appellant.
R.C. 5717.04 provides for appellate review by this court of a decision of the Board of Tax Appeals. That section provides, in pertinent part: "If upon hearing and consideration of such record and evidence the court decides that the decision of the board appealed from is reasonable and lawful it shall affirm the same, but if the court decides that such decision of the board is unreasonable or unlawful, the court shall reverse and vacate the decision or modify it and enter final judgment in accordance with such modification."
The applicable statute to our determination, R.C. 5739.33, provides: "If any corporation required to file returns and to remit tax due to the state under the provisions of sections 5739.01 to 5739.31, inclusive, of the Revised Code, fails for any reason to make such filing or payment, any of its officers or employees having control or supervision of or charged with the responsibility of filing returns and making payments, shall be personally liable for such failure. The dissolution of a corporation shall not discharge an officer's or employee's liability for a prior failure of the corporation to file returns or remit tax due. The sum due for such liability may be collected by assessment in the manner provided in section 5739.13 of the Revised Code." (Emphasis added.)
This court has construed R.C. 5739.33, holding that: "The personal liability of officers of a corporation for failure of the corporation to file returns or pay the Ohio sales tax, provided for by R.C. 5739.33, is limited to those officers who have control or supervision of or are charged with the responsibility of filing returns and making payments." Weiss v. Porterfield (1971), 27 Ohio St.2d 117.
Applying R.C. 5739.33 to the facts of this case, as found by the board, we conclude that Willis is personally liable for the unpaid sales tax of Opticron, Inc. Willis was the officer who had control or supervision over the filing of the sales tax returns and payment of that tax. The loan arrangement with the bank does not alter Willis' liability under the language of R.C. 5739.33.
Thus, we are of the opinion that the decision of the board was unreasonable and unlawful. Accordingly, that decision must be reversed and Willis held personally liable for the sales tax assessment as determined by the Tax Commissioner.
Decision reversed.
CELEBREZZE, C.J., HERBERT, W. BROWN, P. BROWN, SWEENEY and LOCHER, JJ., concur.
I must dissent from the majority herein because, in my opinion, the record clearly shows that the element of control over the payment, or nonpayment, of the sales tax in this business was not vested in appellee Willis. The funds for the payment of the obligations of this company, inclusive of the sales tax, were deposited in the Union Commerce Bank in a cash collateral account. Here the bank had made the determination of which creditors to pay, which determination excluded the sales tax due.
It is my position that, absent a showing that the appellee had designed such an arrangement to avoid payment of the sales tax, or that he had some continuing control as to which creditors were in fact paid from these funds held by the bank, the individual taxpayer should not be held responsible pursuant to R.C. 5739.33.