Form St 07-25 - Sales Tax - 2007 Page 5
ADVERTISEMENT
1
2
3
4
5
6
7
8
9
10
11An officer or employee of a corporation will therefore be personally liable for the
corporation's taxes if the individual had: 1) control, supervision or responsibility for filing
the ROT/UT returns and paying the taxes, and 2) wilfully failed to perform these duties.
For guidance in determining whether a person is responsible under section 3-7 the
Illinois Supreme Court has referred to cases interpreting section 6672 of the Internal
2
Revenue Code (26 U.S.C. §6672)
. Branson v. Department of Revenue, 168 Ill. 2d 247,
254-56 (1995); Department of Revenue v. Heartland Investments, Inc., 106 Ill. 2d 19, 29-
30 (1985). These cases state that the critical factor in determining responsibility is
whether the person had significant control over the corporation's finances. Purdy Co. of
Illinois v. United States, 814 F. 2d 1183, 1186 (7th Cir. 1987). Responsibility is
generally found in high level corporate officials who have control over the corporation's
business affairs and who participate in decisions concerning the payment of creditors and
the dispersal of funds. Monday v. United States, 421 F. 2d 1210, 1214-1215 (7th Cir.
1970), cert. den. 400 U.S. 821.
In addition, these cases define "wilfull" as involving intentional, knowing and
voluntary acts or, alternatively, reckless disregard for obvious known risks. Branson at
254-56; Heartland at 29-30. Wilfull conduct does not require bad purpose or intent to
defraud the government.
Branson at 255; Heartland at 30.
Wilfullness may be
established by showing that the responsible person (1) clearly ought to have known that
(2) there was a grave risk that the taxes were not being paid and (3) the person was in a
position to find out for certain very easily. Wright v. United States, 809 F. 2d 425, 427
(7th Cir. 1987). Moreover, the courts have adopted a broad interpretation of the words
“wilfully fails.” Department of Revenue ex rel. People v. Corrosion Systems, Inc., 185
th
Ill. App. 3d 580 (4
Dist. 1989). Under this broad interpretation, a responsible officer is
liable if he fails to inspect the corporate records or otherwise fails to keep informed of the
2
This section imposes personal liability on corporate officers who willfully fail to collect, account for, or
pay over employees' social security and Federal income withholding taxes.
5
ADVERTISEMENT
0 votes
Related Articles
Related forms
Related Categories
Parent category: Financial