Summary
In Spithogianis v. Limback (1990), 53 Ohio St.3d 55, 559 N.E.2d 449, Spithogianis, the president of the taxpayer corporation, had authority to oversee the operations of the corporation.
Summary of this case from Skuratowicz v. TracyOpinion
No. 88-1929
Submitted February 15, 1990 —
Decided August 8, 1990.
Taxation — Sales tax — Principal shareholder, as president and co-chairman of corporation, personally liable for sales tax assessments when he has authority to exercise control or supervision over tax return and tax payment activities.
APPEAL from the Board of Tax Appeals, No. 87-J-1193.
In November 1982, Nick J. Spithogianis, appellee, and another person formed a corporation known as Rains International, Limited. Appellee served as president and co-chairman of the board of directors, and was the majority shareholder of the corporation during the audit period, September 1, 1984 through August 31, 1985.
The Tax Commissioner, appellant, assessed the corporation for unpaid sales tax and penalty of $298,103.42. When the assessment was not paid, the commissioner, under R.C. 5739.33, assessed appellee personally, and appellee appealed to the Board of Tax Appeals ("BTA"). The BTA, upon review of the evidence presented to it, reversed the sales tax assessment against appellee.
According to the evidence presented to the BTA, appellee had the authority to oversee the operations of Rains International and he spent one or two days per month in that activity. However, he had appointed John Bernard as a full-time consultant to direct the day-to-day operations, and had authorized Bernard to approve all corporate checks. Appellee also had reserved the right to sign checks and control the disbursement of funds, but, except for the creation of a facsimile signature plate, he did not actually sign checks. He participated in the process of obtaining liquor licenses, and in the filing of franchise tax returns and federal income tax returns, but had no involvement in the preparation of Ohio sales tax returns, or in the payment of any Ohio sales tax obligations. He delegated responsibility for filing sales tax returns and making payment of taxes to the accounting department, to other employees, or to an accountant.
Appellee learned of the delinquent sales tax obligation during bankruptcy proceedings involving Rains International which began in the fall of 1985. He had previously instructed the accounting department that all taxes should be paid, but he evidently took no steps to verify that his instructions were carried out.
The matter is before this court upon an appeal as of right.
Robert L. Eberhart Co., L.P.A., and Robert L. Eberhart, for appellee.
Anthony J. Celebrezze, Jr., attorney general, and Barton A. Hubbard, for appellant.
This appeal presents a question of personal liability of a corporate officer for unpaid corporate sales tax.
The BTA found that since the responsibility for filing sales tax returns and making payments was delegated to others throughout the audit period and since appellee did not control or supervise the employees charged with these responsibilities, he was not personally liable for unpaid corporate sales tax. That decision is unreasonable and unlawful and we reverse.
During the audit period, R.C. 5739.33 read as follows:
"If any corporation required to file returns and to remit tax due to the state under the provisions of sections 5739.01 to 5739.31, inclusive, of the Revised Code, fails for any reason to make such filing or payment, any of its officers, or employees having control or supervision of or charged with the responsibility of filing returns and making payments, shall be personally liable for such failure. The dissolution of a corporation shall not discharge an officer's or employee's liability for a prior failure of the corporation to file returns or remit taxes due. The sum due for such liability may be collected by assessment in the manner provided in section 5739.13 of the Revised Code."
R.C. 5739.33 imposes personal liability on officers or employees when a sales tax assessment against a corporation remains unpaid. Parkinson v. Limbach (1990), 49 Ohio St.3d 163, 551 N.E.2d 200. That obligation is qualified, however. The person assessed must have control or supervision or be charged with the responsibility of filing returns and making payment of sales tax. Hile v. Limbach (1989), 44 Ohio St.3d 197, 199, 542 N.E.2d 651, 653; Kihm v. Lindley (1982), 70 Ohio St.2d 76, 24 O.O. 3d 149, 434 N.E.2d 1354; see Willis v. Lindley (1980), 61 Ohio St.2d 356, 15 O.O. 3d 438, 402 N.E.2d 1185.
The facts presented in this appeal indicate that Nick J. Spithogianis had the authority, as principal shareholder, president and co-chairman of Rains International, to exercise control or supervision over tax return and tax payment activities. The evidence also shows that he had delegated that responsibility to other corporate employees or representatives; and likewise, that he had delegated the supervision and control over day-to-day operations of Rains International to John Bernard.
Appellee had given his facsimile signature stamp to employees and other officers of the corporation. The evidence is unclear as to whether he had written any checks or signed any returns, but some checks and some returns bear his signature. In terms of management of corporate affairs, he spent one or two days per month at corporate headquarters directing the affairs of the corporation and, in addition, was kept advised once or twice a month on the financial affairs of the corporation. He engaged an accountant to "make sure that no one really stole money from the company," and he hired the consultant who directed corporate affairs on a day-to-day basis. He also exercised his authority by firing that consultant. In addition, he hired and fired other officers and accountants. He was paid a salary of $101,000 per year, was one of the original incorporators, and, until the bankruptcy of the corporation, owned eighty percent of its stock.
The General Assembly intended, through the enactment of R.C. 5739.33, to hold those officers or employees who were in charge of the operations of a defaulting corporation personally liable for unpaid sales tax if such persons filed returns or paid taxes, or controlled or supervised others who performed those tasks, or had responsibility for such tasks. R.C. 5739.33 does not permit responsible officers or employees to escape liability by delegating those duties to others.
The BTA erred in failing to find that appellee was the responsible corporate officer and that the Tax Commissioner's assessment was proper.
Decision reversed.
MOYER, C.J., SWEENEY, HOLMES, DOUGLAS, WRIGHT, H. BROWN and RESNICK, JJ., concur.