State v. Tunkey
1 CA-TX 21-0006
| Ariz. Ct. App. | Apr 19, 2022Background:
- KT McClintock LLC (doing business as Silver Mine Subs) collected transaction privilege tax (TPT) charges and filed returns showing TPT owed for several months in 2010 and 2012 but did not remit the amounts to the Arizona Department of Revenue (ADOR).
- Peter Tunkey was a KT manager during the relevant period; he communicated with ADOR, set up payment arrangements, and made some payments on behalf of KT.
- ADOR sued KT, the Tunkeys, and another KT manager under A.R.S. § 42-5028 for responsible-party liability; default judgments were entered against KT and the other manager.
- ADOR sought to recover unpaid TPT from the Tunkeys personally despite never issuing a separate deficiency assessment against them.
- The tax court granted ADOR’s summary judgment, denied the Tunkeys’ motion, and entered joint-and-several judgment against the Tunkeys for $25,941.08.
Issues:
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether ADOR must issue a formal deficiency assessment against responsible persons before suing to collect unpaid TPT | ADOR: No assessment required; § 42-1114 authorizes suit to recover unpaid taxes where taxpayer admits tax due | Tunkey: ADOR must assess under §§ 42-1104/42-1108 before collection; four-year notice limitation applies | Court: No assessment required; § 42-1114 permits collection suit when tax is admitted; ADOR's action was timely under the 10-year collection period |
| Whether liability under A.R.S. § 42-5028 is a separate tax requiring a separate assessment | ADOR: § 42-5028 creates concurrent personal liability for persons (including officers), not a distinct tax | Tunkey: Action Marine’s phrase ‘non-derivative personal liability’ implies a separate tax that must be assessed | Court: § 42-5028 imposes concurrent personal liability, not a separate tax; no separate assessment needed |
Key Cases Cited
- Ariz. Dep't of Revenue v. Action Marine, Inc., 218 Ariz. 141 (2008) (corporate officers and directors can be personally liable under § 42-5028; distinguishes responsible-party liability from entity penalties)
- State ex rel. Ariz. Dep’t of Revenue v. Tunberg, 249 Ariz. 5 (App. 2020) (entities may bill and collect TPT from customers and remit collected charges to ADOR)
- Orme School v. Reeves, 166 Ariz. 301 (1990) (summary-judgment standard: no genuine issue of material fact)