Taxpayer is an Indiana company (also referred to as "Company"), which purchased and distributed cigarettes and other tobacco products ("OTPs") in Indiana. The Indiana Department of Revenue ("Department") determined that Taxpayer failed to remit the taxes on cigarettes which it purchased during July, August, and September 2011. The Department also determined that Taxpayer failed to remit the taxes on OTPs which it purchased and distributed during January 1 through September 30, 2011. As a result, the Department assessed Taxpayer additional cigarette tax, other tobacco product tax, interest, and penalty. Taxpayer ceased its business operation in late 2011.
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Taxpayer and the shareholders/officers stated that
"Company admits the liabilities as described above and does not protest
them in this matter." Rather, the shareholders/officers contended, in
relevant part, that:
[T]he shareholders, officers and possible responsible officers of the corporation do protest the liability and do so because Ball v. Indiana Department of Revenue (563 N.E.2d 522) (1990) says that there is no notice which is forwarded to responsible corporate officers since the Company has received a notice which is acknowledged herein. Thus, [the shareholders/officers] do hereby protest the liability as it may relate to them personally and in their capacity as officers [for] the Company. (Taxpayer and its shareholders' protest letter, page 2).
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IC § 6-8.1-10-9 further provides, in relevant part, that:
(a) As used in this section:
(1) "Dissolution" refers to dissolution of a
corporation under IC 23-1-45
through IC 23-1-48,
IC 23-17-23,
or IC 23-17-24.
(2) "Liquidation" means the operation or act of
winding up a corporation's affairs, when normal business activities have
ceased, by settling its debts and realizing upon and distributing its assets.
(3) "Withdrawal" refers to the withdrawal of a
foreign corporation from Indiana under IC 23-1-50
or IC 23-17-26.
(b) The officers and directors of a corporation effecting dissolution,
liquidation, or withdrawal shall do the following:
(1) File all necessary tax returns in a timely manner as
required by this title.
(2) Make all tax payments due or determined due to the
department or a county treasurer in a timely manner as required by this title.
(3) File with the department a form of notification within
thirty (30) days of the issuance of a certificate of dissolution, decree of
dissolution, the adoption of a resolution or plan, or the filing of a statement
of withdrawal. The form of notification shall be prescribed by the department
and may require information concerning:
(A) the corporation's assets;
(B) the corporation's liabilities;
(C) details of the plan or resolution;
(D) the names and addresses of corporate officers, directors,
and shareholders;
(E) a copy of the minutes of the shareholders' meeting at
which the plan or resolution was formally adopted; and
(F) such other information as the department may require.
The department may accept, in lieu of its own form of notification,
a copy of Form 966 that the corporation filed with the Internal Revenue
Service.
(c) Unless a clearance is issued under subsection (g), for a
period of one (1) year following the filing of the form of notification with
the department, or the filing of all necessary tax returns as required by this
title, including the final tax return, whichever is later, the corporate
officers and directors remain personally liable, subject to IC 23-1-35-1(e)
or IC 23-17, for any
acts or omissions that result in the distribution of corporate assets in
violation of the interests of the state or a political subdivision (as defined
in IC 36-1-2-13).
An officer or director held liable for an unlawful distribution under this
subsection is entitled to contribution:
(1) from every other director who voted for or assented to
the distribution, subject to IC 23-1-35-1(e)
or IC 23-17; and
(2) from each shareholder for the amount the shareholder
accepted.
(d) The corporation's officers' and directors' personal
liability includes all taxes, penalties, interest, and fees associated with the
collection of the liability due the department or the county. In addition
to the penalties provided elsewhere in this title, a penalty of up to thirty
percent (30 [percent]) of the unpaid tax may be imposed on the corporate
officers and directors for failure to take reasonable steps to set aside
corporate assets to meet the liability due the department or the county.
...
(i) This section does not limit the liability of a
responsible corporate officer for withheld income taxes or collected gross
retail taxes.
(Emphasis added).
In this instance, Taxpayer/Company stated that it agrees
with the Department's proposed assessment concerning its tax liabilities and it
does not protest the assessments against Taxpayer. Taxpayer's
shareholders/officers, however, assert that they should not be held personally
responsible for Taxpayer/Company's tax liabilities because the tax liabilities
at issue here are not "sales tax" or "withholding tax,"
which specifically states that the responsible officers remain personally
liable.
The Department must respectfully disagree. IC § 6-8.1-10-9
specifically states that a corporation's officers remain personally responsible
for the corporation's tax liabilities, which include "all taxes,
penalties, interest, and fees associated with the collection of the liability
due the department." The same provision also "does not limit the
liability of a responsible corporate officer for withheld income taxes or
collected gross retail taxes." Since Taxpayer/Company admits its tax
liabilities, its shareholders/officers remain personally responsible pursuant
to IC § 6-8.1-10-9.
In short, the protest of Taxpayer/Company's
shareholders/officers is respectfully denied.
