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New York Division of Tax Appeals Finds Owner Personally Liable for Sales Tax

New York Division of Tax Appeals Finds Owner Personally Liable for Sales Tax

The New York Division of Tax Appeals recently issued a decision that serves as a warning to business owners who fail to comply with their sales tax obligations. The case involved a business owner who was found personally liable for sales tax owed by the business, despite having delegated responsibility for tax compliance to an employee. This decision highlights the importance of understanding your tax obligations as a business owner and taking steps to comply with the law.

The case involved a business that operated a store in New York City. The business collected sales tax from customers but failed to remit the tax to the state. After the state issued a tax warrant for the unpaid tax, the business filed for bankruptcy. The state then pursued the owner of the business personally for the unpaid tax.

The owner argued that he was not personally liable for the sales tax because he had delegated responsibility for tax compliance to an employee. However, the Division of Tax Appeals found that the owner had failed to exercise reasonable care in supervising the employee and had therefore acted negligently. As a result, the owner was held personally liable for the unpaid tax.

Under New York law, owners of businesses that collect sales tax are personally responsible for ensuring that the tax is collected and remitted to the state. This means that even if you delegate responsibility for tax compliance to an employee or a third-party service provider, you are still ultimately responsible for ensuring that the tax is paid.

To avoid personal liability for sales tax, it is important to understand your tax obligations and to take steps to comply with the law. This may include registering for a sales tax permit, collecting, and remitting the correct amount of tax on each sale, and maintaining accurate records of sales and tax payments.

If you are unsure about your sales tax obligations as a business owner, it is important to consult with a qualified tax professional like Evolved. We can help you understand your obligations and develop a plan to comply with the law. Failure to comply with sales tax laws can result in significant financial consequences, including penalties, interest charges, and personal liability for unpaid tax.

Article by Zaid Butt, Director 

Zaid Butt
Author: Zaid Butt
Zaid is a certified public accountant with significant tax compliance and consulting experience in diverse industries, including private equity, software, construction, manufacturing, retail, and financial services.