Determination Form - New York Division Of Tax Appeals (Page 3 of 5) in pdf

issue, petitioner did inform the board of the company's tax liabilities and continued to file withholding tax

returns without payment, thereby placing the State of New York on notice that the taxes had not been paid. The

board was aware of these filings.

11. Beginning in 1998, GER had difficulty meeting its payroll and the company never recovered financially. In

May 2002, William Goffe, a former board member of Holdings, offered to purchase the outstanding shares of

Holdings from each of its board members. In exchange for their shares and resignations, members were to be

held harmless for an $80,000.00 New York State tax liability. Petitioner tendered his shares and resigned in July

2002.

SUMMARY OF PETITIONER'S POSITION

12. Petitioner contends that his authority to pay the taxes in issue was severely limited and restricted by the

board of directors and the executive committee which decided what liabilities would be paid. Although he

dutifully filed the payroll tax returns, petitioner noted that he could issue no checks without authorization from

the board and, therefore, it cannot be said that he "willfully" failed to pay the payroll taxes.

CONCLUSIONS OF LAW

A. Tax Law § 685(g) provides:

Willful failure to collect or pay over tax.--Any person required to collect, truthfully account for,

and pay over the tax imposed by this article who willfully fails to collect such tax or truthfully

account for and pay over such tax or willfully attempts in any manner to evade or defeat the tax or

the payments thereof, shall, in addition to other penalties provided by law, be liable to a penalty

equal to the total amount of the tax evaded, or not collected, or not accounted for and paid over.

Tax Law § 685(n) defines "persons" subject to the section 685(g) penalty as follows:

[T]he term person includes an individual, corporation or partnership or an officer or employee of

any corporation (including a dissolved corporation), or a member or employee of any partnership,

who as such officer, employee, or member is under a duty to perform the act in respect of which the

violation occurs.

B. The question of whether someone is a "person" under a duty to collect and pay over withholding taxes is a

factual one, similar in scope and analysis to the question of whether one is a responsible individual for sales and

use tax purposes. Factors which should be considered are, inter alia, whether the particular individual signed

tax returns, derived a substantial part of his income from the corporation, or had the right to hire and fire

employees (Matter of Malkin v. Tully, 65 AD2d 228, 412 NYS2d 186; see, Matter of MacLean v. State Tax

Commn., 69 AD2d 951, 415 NYS2d 492, 494, affd 49 NY2d 920, 428 NYS2d 675). Other pertinent areas of

inquiry include the person's official duties, the amount of corporation stock he owned, and his authority to pay

corporate obligations (Matter of Amengual v. State Tax Commn., 95 AD2d 949, 464 NYS2d 272, 273; see,

Matter of McHugh v. State Tax Commn., 70 AD2d 987, 417 NYS2d 799, 801).

C. In this matter, it was established that petitioner was a person under a duty to collect and pay over the

withholding tax on behalf of GER. The positions he held during his tenure at the company gave him a unique

and in-depth view of the company's financial position.

He occupied executive managerial positions which, pursuant to the terms of his employment agreement,

compensated him handsomely with the possibility of annual bonuses based on his performance and that of the

company. Additionally, he received stock in Holdings which represented a 10% ownership share in the

company, which, although not a controlling interest, was a significant one in such a small company.

As vice president of finance and chief financial officer, petitioner was directly responsible for the day-to-day

operations of

the company, including maintenance of the books and records, preparation of balance sheets, income statements

Determination Form - New York Division Of Tax Appeals Page 3