Determination Form - New York Division Of Tax Appeals (Page 4 of 5) in pdf

and cash

flow reports which he reported to the chief executive officer, board of directors and executive committee of the

board. The individuals to whom he reported utilized the data to make critical and strategic decisions on behalf

of GER, highlighting petitioner's sensitive, trusted and important position within the enterprise. Petitioner was

well aware of his duties and

obligations and that the other executives relied on his reports.

In addition, petitioner conceded that he prepared and signed the withholding tax returns for the periods in issue

and prepared the sales and use tax and corporation income tax returns as well. Petitioner knowingly filed the

withholding tax returns with no remittance, an action which immediately created a self-assessed tax liability for

the corporation and its responsible officers and employees. Whether or not petitioner realized that individuals,

including himself, would be held liable for the taxes is irrelevant, for ignorance of the law is not a valid excuse.

(Genesee Brewing Co. v. Village of Sodus Point, 126 Misc 2d 827, 482 NYS2d 693, 700, affd 115 AD2d 313,

496 NYS2d 720; accord, Matter of Nathel v. Commissioner of Taxation & Fin., 232 AD2d 826, 649 NYS2d

196 [wherein it was held that ignorance of the law is no excuse and that a taxpayer is charged with knowledge

of the law, including subsequent judicial interpretation thereof].)

Although expenditures were reviewed and approved by the board of directors, petitioner was one of very few

persons in the company with authorization to sign and co-sign checks. He contends that his signatory authority

was merely ministerial and that he only issued checks as directed by the board. Despite petitioner's credible

testimony to these facts, his argument demands a leap of faith which this forum is not inclined to take without

further evidence.

The same factual situation presented itself in Matter of Byram (Tax Appeals Tribunal, August 11, 1994), where

the petitioner, an executive director of a not-for-profit hospital corporation, was held liable for withholding

taxes because he did not establish that the board of directors precluded him from paying the taxes. In Byram,

petitioner claimed that the United States Bankruptcy Court and the New York State Department of Health had

directed that any monies available be used to keep the hospital running, necessarily excluding the payment of

withholding taxes. This is analogous to the instant situation, where the board of directors made the choice to

fund the marketing of a satellite system which it believed would sell and salvage the company from its demise.

Unfortunately, the system was not sold, the funds never materialized and the taxes were never paid.

Petitioner knew or should have known that abetting such a risky decision would have consequences and that

individuals as well as the company would be liable. Despite petitioner's discontent with collection action against

other board members, the entire liability is collectible from every person found liable. (See, Matter of Phillips,

Tax Appeals Tribunal, May 11, 1995 [where the Tribunal held that liability for penalty under Tax Law § 685(g)

is joint and several, provided the Division is not attempting to collect more than the total amount of tax owed

for the periods in issue].)

Finally, petitioner received a salary during the periods in issue. Expenditures for salaries were authorized by the

same board which chose not to make any payments to the State of New York with its tax returns due to

insufficient funds. As mentioned, petitioner was a member of this board and chose to continue his employment

with GER with the hope that the company would prosper once it sold the satellite system.

By choosing to continue his employment with a company he knew was paying salaries, including his own, but

not taxes, petitioner acknowledged his consent to the board's decision. No one knew the financial situation of

the company better than petitioner, including its ability to pay its liabilities, and it is difficult to believe that he

would advise the board with any conviction to authorize payment of taxes and not his own salary. In fact, there

is no evidence that he advocated for the payment of taxes, only that he informed the board of its tax liability.

D. With respect to withholding tax, having decided that petitioner is a person under a duty to collect and pay the

tax, it must now be decided whether his failure was willful. The question of willfulness is related directly to the

question of whether petitioner was a person under a duty, since a person under a duty to collect and pay over the

taxes is the one who can consciously and voluntarily decide not to do so. However, merely because one is

determined to be a person under a duty, it does not automatically follow that a failure to withhold and pay over

income taxes is "willful" within the meaning of that term as used in Tax Law § 685(g). As the Court of Appeals

Determination Form - New York Division Of Tax Appeals Page 4

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