Under the rule imposing personal liability for Wisconsin Sales Taxes, a person must be required to collect, account for or pay the amount of sales tax due and willfully fail to make that payment. Further, before an individual can be held personally liable for the sales taxes, the business itself must be established not to be able to pay the amount to the Department.
When an individual receives a notice from the Department of Revenue that it intends to pursue collection of a business’s sales tax liability from the person himself or herself, the first analysis that takes place is whether the Department of Revenue can, in fact, collect the sales tax from that person under the law.
In conducting the analysis, we will look to the specific facts and circumstances surrounding that person and their involvement with the business. We will look to the relationships of the parties, any governing documents and other circumstances that may have led to the assertion of the sales tax against that individual. Based on the specific facts and circumstances of a case, a variety of information may be useful in demonstrating that a person should not be liable for the sales tax, including documentation, explanations and sworn affidavits.
If this information is unavailable, another option may exist. The Statute imposing personal liability requires that the principal (i.e. the business) is unable to pay the amounts due. Therefore, if an arrangement for payment between the business and Department of Revenue is made (possibly an installment agreement), the Department of Revenue will withhold from collecting the Sales Tax from an individual pending the business’s payment of the tax.
This may mean that the person who could be liable for the Sales Taxes needs to allow the Department additional time to consider the personal liability issue. In most instances where this is required, the extension of time does not prejudice the person and prevents the personal liability from being assessed. Without an assessment of the tax, there should be no liens, levies, garnishments or other collection action taken against that person unless the business fails to pay the tax.
When an individual receives a notice from the Department of Revenue that it intends to pursue collection of a business’s sales tax liability from the person himself or herself, the first analysis that takes place is whether the Department of Revenue can, in fact, collect the sales tax from that person under the law.
In conducting the analysis, we will look to the specific facts and circumstances surrounding that person and their involvement with the business. We will look to the relationships of the parties, any governing documents and other circumstances that may have led to the assertion of the sales tax against that individual. Based on the specific facts and circumstances of a case, a variety of information may be useful in demonstrating that a person should not be liable for the sales tax, including documentation, explanations and sworn affidavits.
If this information is unavailable, another option may exist. The Statute imposing personal liability requires that the principal (i.e. the business) is unable to pay the amounts due. Therefore, if an arrangement for payment between the business and Department of Revenue is made (possibly an installment agreement), the Department of Revenue will withhold from collecting the Sales Tax from an individual pending the business’s payment of the tax.
This may mean that the person who could be liable for the Sales Taxes needs to allow the Department additional time to consider the personal liability issue. In most instances where this is required, the extension of time does not prejudice the person and prevents the personal liability from being assessed. Without an assessment of the tax, there should be no liens, levies, garnishments or other collection action taken against that person unless the business fails to pay the tax.
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