*1
Barry D. an individual as an America, Inc.,
officer of Below, Appellant
Petitioner
Virgil HELTON, Acting T. State Tax Virginia,
Commissioner West
Respondent Below, Appellee.
No. 33379.
Supreme Appeals Court of Virginia.
Submitted Jan. 2008.
Decided Feb. 2008.
Concurring Opinion Dissenting Albright April
Justice *2 Bowles, Rice, Caryl, Esq.,
Michael E. WV, Charleston, McDavid, Love, Graff & Appellant. McGraw, Jr., General, Attorney III.
Darrell V. Pollack, Attorney “Fenway” Assistant
A.M. Discussion Charleston, WV, Genera], Appellee. presented issues are in the instant
Two *3 case. The first issue is whether Mr. Sehmehl STARCHER, J. can be held liable for sales taxes by Filly’s that were collected but not remit- by uphold a decision this ease we ted to the State.1 The second issue is wheth- County holding Circuit Court of Jefferson er, assuming proper, bookkeeper for that a officer and applicable statute of limitations bars col- can held lia- bar1and restaurant business lection of unremitted from Mr. Department Tax for consum- ble to the State Sehmehl. by collected er sales taxes were customers, but not sent business were required by
in to the State as law. A. Liability Personal Unremitted
I.
Sales Taxes
begin
by
our discussion of
We
this issue
Background
Facts &
identifying
principles
of
law
will
guide our decision. Then we discuss the
case,
In the instant
Court of
Circuit
particular
light
facts of the instant case
of
order,
County,
July
in a
2006
Jefferson
principles.
those
by
upheld
ruling
Virginia
Office
West
appellee,
Appeals
of Tax
in favor of the
primary appliсable
statute
involved
of
Tax Commissioner
the State West Vir-
Va.Code,
the instant case is W.
11-15-17
ginia. The Tax Commissioner had ruled that
[1978],
states,
which
in full:
Sehmehl,
Barry
appellant,
D.
was liable
taxpayer
If the
is an association or cor-
$172,816.63.
Virginia
to the State of
West
poration,
per-
the officers thereof shall be
represented
This sum
unremitted consumer
liable,
sonally
jointly
severally,
any
and
taxes that
collected from custom-
were
part
default on the
of the association or
making purchases
ers
at a bar and restau-
payment
of the tax and
Ranson,
rant
in the Town of
in Jefferson
any
tax, penalties
additions
and interest
County,
Virginia plus penalties
—
imposed by
thereon
article ten
11-10-1
[§
interest. The bar and restaurant was owned
seq.]
chapter may
et
of this
be enforced
by
operated
Virginia corporation,
a West
against
against
them as
the association or
America,
Filly’s
(“Filly’s”).
Inc.
they represent.
Filly’s
secretary
Sehmehl was
Addressing prior
but similar version
bookkeeper.
pertinent
principal
Additional
W.Va.Code,
[1978],
11-15-17
this Court
presented in
III of
facts are
section
Syllabus
held in
Point 2 of State ex rel.
opinion.
Awning,
Haden v. Calco
153 W.Va.
170
(1969):
S.E.2d 362
II.
statute,
taxing
“To establish that a
valid
face,
on its
is so unreasonable or
Standard
Review
process
as to amount to a denial of due
largely
applied
particular
in the instant case
in-
in a
issues
law when
application
undisputed
taxpayer
prove
cogent
volve the
must
clear and
facts,
establishing
in which circumstances we review the
evidence facts
unreasonable-
rulings
4, Syllabus,
lower tribunals’
under a de novo stan-
ness or arbitrariness.” Point
489, 490,
Petrey,
Railway Company
dard.
In re
525
and Western
W.Va.
Norfolk
Field,
(1999).
(100
796).
S.E.2d
duty, responsibility part on the officer’s ques- regarding of the taxes * * Ms tion, unconstitutionally potential had presumption of the constitu- While property deprive officer of with- tionality of a statute is not conclusive process of out due law. *4 convincing proof of unrea- takes clear and Reversing court in Calco Awn- the circuit successfully or arbitrariness to sonableness ing, this Court stated: Statutes, As stated in 17 M.J. rebut it. principal appeal The issue on this is the 29, “A not be declared Section statute will Code, provisions of constitutionality of the repugnance unless its unconstitutional 1931, 11-15-17, That code as amended. plain palpable.” and the constitution be section, pertinent, provides: “If the where the instant case the defendants assert corporation, taxpayer is an association or arbitrary, and statute is unreasonable personally be lia- the officers thereof shall proof, No capricious application. in its ble, severally, any jointly and default however, support of this offered corpora- part of the association or on the assertion, having the case been submitted tion, may the tax be and en- In the cir- pleadings. for decision on the against against them as the associa- forced present there is cumstance of the record they corporation represent.” tion or statute way no to determine whether the commissioner, course, de- The tax alleged by the applied in the manner constitutionality of that section. fends defendants. position defendants take individual An examination of the statute fails subject deprives them of that the statute any language that render would reveal process property their without This is a tax which unconstitutional. upon them a tax of a third by imposing purchaser shall collect from the vendor (the party corporation) and is therefore pay to the tax commissioner as violative of the Consti- unconstitutional tangible personal prop- privilege selling Virginia and the Constitu- tution of West erty ser- dispensing and of certain selected the United States. tion of Code, 1931, 11-15-3, as amended. vices. vendor, Calco in the instant
Said money this tax merely collects and holds [by contentions the defendants These effect, money, in This for the state. merit. The Awning are without ] Calco in trust.2 held corporation, an of a rela- position of tive to his individual corporation, liability for the debts is not sacrosanct. [*] [*] [*] that a repeatedly has held ordinarily held This Court are not re-
While officers
face
debts,
may
constitutional on its
it is well
sponsible
may
applied in an unconstitutional
pro-
but
a statute so
established
where
cogently reflected in Nor-
This is
may
required
manner.
directors or officers
vides
Company v.
Railway
and Western
personally for certain obli-
to account
folk
storekeep-
opinion
"That's for our Governor!"
when
chase.
of this
remеmbers
author
say, dropping
the container.
keep
coins into
country
er would
stores would
small town
computers
separation almost ev-
Today,
do this
jar
next to the cash
like a
or box
container
counter,
re-
erywhere
principle
sales tax
storekeeper
register
where the
on the
—but
by
separately
the mer-
ceipts
held in trust
portion
are
placed
the consumer sales
changed.
pur-
for the State has
money paid by
of a
chant
customers at the time
Field,
personally
any
143 W.Va.
100 S.E.2d
shall be
liable for
consum-
point
any
wherein the Court said in
3 of
along
ers sales and service tax
with
statute,
syllabus,
taxing
additions,
“A
though
penalties,
valid on
thereon
interest
face, may
applied
corporation.
its
be invalid
owed
was held
file several state tax returns and to remit all
Frymier-Hallomn,
Id.,
computer problems
of the tax due.” Id. at
366
question
state tax
193 W.Va.
15-17
in a
which reads as follows: “To establish that
prove by
This Court also addressed W.
ness.”
establishing unreasonableness or arbitrari-
unreasonable or
particular circumstances or conditions of a
particular- taxpayer.” Demonstrating that
the burden of
a denial of due
sailant of the tax is
stitutionality of a statute
*5
(citations
153 W.Va. at
taxing
[1978]
particular case,
compliance
(the
687,
statute,
clear- and
be
omitted, emphasis
secretary
Frymier-Halloron
W.Va.Code,
(1978), explicitly
thorize the collection of unremitted consumer
provides
that an officer of a
sales taxes from
officers.4 Howev-
76,
recognized
71,
Legislature
(1997) (Mullins
3. This Court has
that the
483 S.E.2d
75-76
v. Ven-
may require
a
officer to be
principles
"corporate
able
that
officers
a
have
unpaid obligations
corpo-
liable for certain
law,”
duty
corporation obeys
tо see that their
“knowingly permits”
ration if the officer
"al-
or
"corporate
may
and
officers
not hide behind the
personal
low[s] with
allow[s]
information or
escape liability
skirt to
for their unlaw-
position
person
virtue of a
in which the
should
mischief,”
very persuasive).
ful
remain
obligation
paid.
have
known[]”
not to be
Labor,
McDaniel v. W. Va. Division
214 W.Va.
Taxes,
(No-
4. 68 Am.Jur.2d Sales & Use
Sec. 243
719,
10,
277,
(2003),
725 n.
591 S.E.2d
283 n. 10
2007)
vember
states:
Venable,
92,
quoting Mullins v.
171 W.Va.
n.
95
jurisdictions, personal liability
2,
866,
some
(1982) (both
for a
297 S.E.2d
870
2n.
cases
corporation’s unpaid
may
sales or use taxes
involving unpaid wages). See also Britner v.
Card, Inc.,
imposed upon corporate
352, 356,
employee,
officer or
Security
Medical
200 W.Va.
734,
may
(1997) (it
penalties
also include
or interest
489 S.E.2d
738
was no defense to
personal
personal liability
due on the tax.
company
For
for a
officer to
claim
imposed,
employee
paid
compa-
that workers were
the officer or
"because the
must have a
ny
duty
responsible
filing
payments.”)
corpora-
did not have
or be
funds to make the
Bowling
Chrysler-Plymouth-Dodge,
payment
v.
tion's
Ansted
sales or use tax return or
Cf.
Inc.,
468,
statutes,
(1992) (cor-
although
188 W.Va.
103
W.Va.Code,
in trust until
holds them
party
third
er,
indicates
our research
Id. at
742
(and
to the state is due.”
regulations)
remittance
associated
11-15-17 [1978]
im-
Applying
that,
at 1213.
a statute
jurisdic- A.2d
may
unique in
unlike other
unremitted use
give
tions,
regulations
posed
Virginia law and
duty
have
guid-
officers who
process-based
or
policy-based
no
due
lengthy
after
deciding
to collect and remit
ance or standards
federal cases
imposed in a
of related state and
may not be
discussion
or
statutes,
concluded:
the court
running the risk of be-
given ease—without
unreasonable,
ing
capricious
however,
contention,
appellant’s
As for
pro-
exceeding
of due
the bounds
or without
he had a
Department
inferred
(See Marcus
cess and fundamental fairness.
duty
taxes at issue
to remit the trust
508, 527,
Holley,
618 S.E.2d
217 W.Va.
president of
of his status as
the mere fact
(2005) (“[a]
analysis
found-
process
536
of the rec-
corporation,
quick
review
fair-
upon
concept of fundamental
ed
findings demon-
Department’s
ord and
ness”).
legislative
of such
In the absence
contrary
they are re-
strates
cases from other
guidance, we shall review
establishing appellant’s
plete
factors
with
interpreting
applying
jurisdictions
corpora-
authority
and control over
liability”
and standards.
“personal
statutes
frequent
and his
exercise
tion’s finances
By adopting
authority and control.
Wirick,
Equalization v.
In State Board of
(po-
above
three-part
inquiry set forth
Cal.App.4th
Cal.Rptr.2d
person’s
person
sition of
(2001),
that a
applicable
statute stated
bylaws
or con-
established
super
corporate officer who had “control
tract,
of con-
aсtual exercise
person’s
of,
charged
was]
with
[or
vision
who
finances),
specific federal
trol over
filing of returns or the
responsibility for the
automatic
having potential but not
factors
tax,
under
[or was]
or who
*6
deliberately place the focus
relevancy, we
...
duty
corporation
shall
to act for
over form-a
inquiry
on substance
any unpaid taxes and
personally liable for
the federal
professed at
focus that while
taxes, if the
penalties on those
interest and
of the case law.
is lost in much
level
wilfully
pay
cause to be
...
fails to
or
officer
...”
corporation
paid any taxes due from
8,
at 1218.
Id. at
742 A.2d
417,
Cal.Rptr.2d at
112
Cal.App.4th
93
at
Dept. Taxa
Vogel
In
v. New York State
of
court held
923.5 The California
222,
Finance,
N.Y.S.2d
413
&
98 Misc.2d
tion
impose per
properly applied to
statute was
(1979),
that a “silent”
the court held
862
unpaid taxes
liability
an officer for
sonal
role in
played no active
corporate officer who
by
corporation—
paid
that had not been
knowledge of
and hаd no
corporate affairs
paid
corporation had
time the
at the same
personally liable for
unpaid
taxes was
of dollars.
Id. at
creditors millions
other
contrast,
Skaper
unpaid
taxes.
In
sales
418,
remitted sales
support
sufficient evidence to
the tax
Robinson,
Copeland
Kan.App.2d
v.
25
court’s decision. Benoit v. Commissioner
717,
(1998),
personal
P.2d
where
liabil-
(Minn.
Revenue,
336,
453 N.W.2d
ity
statutorily
taxes was
linked to
1990).
law, including
Conclusions of
inter-
responsibility
preparing
control or
are, however,
pretations of
subject
statutes
payment
returns and
the court held
to de novo review.
Math,
person charged
personal
that a
process right
oppor-
had a due
to an
corporation
aWhen
collects sales tax
tunity
prove
that no such control or re-
parties,
from third
does so
sponsibility existed.
obligation
under an
to hold the tax
trust
pay
for and to
over
the state of
218,
Tracy,
In DeLassus v.
70 Ohio St.3d
goes unpaid
Minnesota. When sales tax
(1994),
638 N.E.2d
529-30
thе court
personal liability may
held that
the fact that a
imposed
parties
on certain
involved
required
permission
“was
obtain the
corporation_
conclude that in
We
person]
any corpo-
[another
instant
of liabili-
obligation by
rate
check” did not relieve the
ty
on a
officer for a
personal liability
officer from
unremitted
issue,
deficiency
Spithogianis
sales tax collections. See also
is at
the Benoit
factors
Limbach,
53 Ohio St.3d
can
govern
analysis
6.In
the court said:
The federal cases
cases,
liability provisions
ap-
§
From all of these New
at 26 U.S.C.A. 6671
York
several
*7
First,
principles
gleaned.
holding
pear
can be
the
to be consistent with the New York cases
not,
itself,
corporate
office does
in and of
imposition
personal liability
corpo-
in the
on
permit
personal liability upon
the
Although liability
rate officers.
is based on a
corpora-
the office holder for
taxes of a
mentioned,
balancing
previously
of the factors
Second,
tion.
the determination of whether a
however,
appears,
emphasis
there
to be an
duty
to act on behalf of the
exists
placed
degree
on the
of influence and control
depends upon
balancing
the
of a number of
which an officer exercised in the affairs of the
include,
factors. These factors
but are not
corporation. Specifically, the federal courts
limited to:
focus on the nature and extent of the active
corporate by-laws.
1. The contents
(1)
participation
of the
officer in:
2. One's status as an officer
stock-
and/or
(2)
the financial affairs of the
holder.
concerning
priority
payment
decisions
to
Authority
sign
3.
to
checks and actual exer-
creditors,
(3)
per-
and
the derivation of some
authority.
cise of this
corporation's
sonal benefit from the
failure to
Authority
employees
4.
to hire and fire
and
Premo,
pay
supra,
taxes. See In re
116 B.R.
authority.
actual exerсise of this
(Bankr.E.D.Mich.1990)
[a]t [515] 525-30 [
] for
Responsibility
prepare
sign
5.
to
tax
and/or
comprehensive
analysis
a
review and
of the
returns.
personal liability
federal
Day-to-day
decisions. The
con-
6.
involvement in business or
decisions,
cept,
responsibility management.
as revealed
federal
payment
penalize
solely
7. Power to control
not to
a
be-
officer,
creditors and taxes.
cause he or she
anis
but to reach the
Knowledge
of the failure to remit taxes
party
parties actually responsible
when due.
corporation’s
pay
failure to
the tax.
9. Derivation of substantial income or ben-
(Footnote omitted.)
corporation.
efits from the
And,
argues, be-
he
(1)
officers,
person” standard.
directors
identity of the
The
businessper-
prudent
corporation and
he acted as
cause
and stockholders
(2)
duties;
ability
sign checks
payment
The
setting
their
in
the tax
son
(3)
corporation;
The iden-
avail-
ensuring
funds were
highest priority,
on behalf
and fired
tity
hired
tax,
employing
of the individuals who
pay
able
(4)
identity of the individ-
employees;
matters,
relying upon Reese to handle
the financial
control of
uals who were
not be held liable.
he should
(5)
corporation; and
affairs of the
ambig-
that the statute is
Igel’s contention
entrepreneu-
identity
an
of those who had
clear on
The statute is
uous has no merit.
corporation.
in the
rial stake
entity
by a business
its face-when
owed
Company,
officer of
As
person-
paid, person,
... becomes
is not
meaning
“person”
Igel
within
unpaid tax. Neither the
ally
for that
liable
ques-
liability statute. The
personal
statute,
dictionary, nor common
nor the
of, supervi-
had “control
tion is
he
whether
a “best ef-
the inclusion of
sense dictate
of,
responsibility for” the
sion
pay
tax. Sec-
defense for failure
forts”
court, Igel con-
of taxes. Before the tax
duty on certain
imposes a
tion 270.101
the Benoit
that he satisfied all of
ceded
company’s taxes
that a
persons to ensure
offi-
he had been an
factors. He admitted
paid, such
taxes are not
paid.
are
When
Company’s
and shareholder since
cer
delinquency.
persons are liable for
signing au-
inception;
that he had check
hiring
thority;
part
took
that he
argument that he
his
To further bolster
employees;
signed
that he
financial
firing
Igel points to the
pay,”
did not “fail to
behalf of the Com-
and other documents on
imposes liabil-
provision
federal law
meetings to
pany; that he was involved
responsi-
only
ity
paid;
discuss
creditors would
how
“willfully”
to collect
person
fails
ble
entrepreneurial stake in the
that he had an
argues that because
... He
pay over taxes
nevertheless,
Company.
argued,
He
interpret
is used
federal law sometimes
personally liable for
not be held
should
statutes,
ought to
this court
this state’s
tax because he did not
standard
impose the federal “willfulness”
unpaid until
tax was
know
in section
detailed
the sales tax scheme
longer
company and he no
after he left the
the absence of
Igel ignores
270.101.
that time.
signing
had check
in the
stat-
requirement
state
“willfulness”
rejected
argument,
con-
The tаx court
essentially
to insert
asks this court
ute and
the un-
irrelevant that
cluding that was
unambiguous stat-
into an otherwise
words
Igel
after
left the
paid tax
discovered
ute,
to do. We
something
are loath
we
company.
suggestion that we
up Igel’s
take
decline to
court, Igel makes
appeal
On
before this
the tax scheme
insert
into
First,
conceding
arguments.
without
two
sug-
requirements
additional
satisfied, he
are
Benoit factors
plain
required,
much less
gested,
*8
because he
ought not be liable
contends he
language
the statute.
tax, as
pay
to
the sales
did not “fail”
likewise,
is,
un-
argument
Igel’s second
liability....
personal
required
impose
to
in
much as he did
argues,
He
persuasive.
he did not fail
argument, that
Igel’s first
court,
personally
to be held
the tax
tax,
premised on the conten-
pay the
to
control,
liable,
to have
he must be shown
person-
imposes
tion that the statute which
mat-
for tax
responsibility
supervision
ambiguous in
“person,” ...
liability on a
al
goes unpaid
at the time the sales
ters
unclear.
meaning
pay”
of “fail to
that the
discov-
discrepancy is
the time the
and at
legislature could not
According
Igel,
to
“absolutely no
Igel had
Because
ered.
prudently
acts
person
intended a
who
have
deficiency
dis-
the time the
control at
unpaid tax. For
for
to be held liable
factors
covered,”
argues that the Benoit
contends,
tax, Igel
pay”
person to “fail to
therefore,
is,
and he
are not satisfied
negligent; it
person’s
must
behavior
personally liable.
“prudent business-
some
must fall below
Liability
disagree.
personal
corporation’s
for
fund
for a
We
trust
whom
tax,
including
may
imposed.
arises at the
unpaid sales taxes
Most of
time the tax is
statutory
collected. See Olsen
language
has the decision ulti-
(8th
States,
236,
952 F.2d
Cir.
United
mately resting
person
to
whether
1991) (noting
for federal em
degree “responsible”
some
for the taxes be-
ployment
withholding's
coincides with
ing paid,
“duty” regarding
pay-
had a
collection of funds and not the date the
taxes, or,
instances,
in
ment of the
some
employer
required
pay
them
to
over
pay
thе failure to
the taxes was
whether
government). Thus,
the critical time
The case
re-
“willful.”
law
we have
frame for determination of
liabili
usually
proper interpre-
viewed
involves
ty ...
is the time of collection. This is the
application
statutory
tation and
of these
point
Igel
at which
became a trustee of the
terms,
in
and the factors to be considered
continuing
sales tax funds. He had a
obli
so;
doing
up
come
courts have
with
gation to turn over those
funds
considered,
range
wide
of factors to be
se-
duty
state-his
did not cease when he left
lecting
light
specific
those factors in
Company.
A rule such as the one
statutory language
question,
rarely
in
suggested by Igel
lead to
would
absurd
having any one factor be determinative.
framework,
Igel’s
results. Under
in which
sketchy
We now turn to the
but
somewhat
liability may
imposed only
person
if the
essentially undisputed facts of the instant
responsibility
inwas
control of or had
case. Mr. Schmehl
associated
Fil-
with
deficiency
taxes both at time of the
and at
Ranson,
ly’s
operation
bar
аnd restaurant
deficiency’s discovery,
the time of the
an
Virginia
inception.
West
from its
He was
employer
conceivably
could
embezzle sales
(secretary)
made a
funds due
the state of Minnesota
was formed
and re-
liability by leaving
and avoid tax
the com
secretary,
appears,
mained its
it
until
least
anyone
pany before
discovered the theft.
(In
2005.7
2005 Mr. Schmehl testified at an
sum,
unpersuaded by
In
Igel’s
we are
hearing
Depart-
administrative
before a Tax
arguments
“per-
and conclude that he
ais
ment ALJ
connection
instant
...
pay
son”
who failed to
tax and is
case, stating inter alia that
an
he became
Compa-
therefore
liable for the
Virginia
officer of
liquor
because West
ny’s unpaid
periods
sales tax for the
end-
require
Virginia
laws
resident as a
January 31,
ing
February
1994 and
officer;
appears
that the other
1994....
officers
not have been West
(some
further
from
of case law
foregoing
discussion
status,
change
suggest
that
the status
or
legislative
that
jurisdictions has shown
other
duties.)
change of
actual
coincided with
jurisdictions
in
taxing bodies
different
period, Mr. Sehmehl
During the 1999-2002
many ways similar
but in
have used different
bookkeeping
services
performed all of
connection a
sort of
tеrms to delineate what
he had a heart
corporation;
a business
corporate officer must have with
year.”
a
He
“off for about
attack and was
taxes, and courts
sales
to be liable
bookkeeper in
a
returned to service as
identifying
language by
out that
have fleshed
bookkeeping
included
Mr. Schmehl’s
work
range
factors to be considered
a
wide
computerized
taking
information from
sales
language.
applying that
computing the amount of
register and
cash
noted,
However,
Virginia we
in West
as
from cus-
that had been collected
sales tax
giving guidance
statutory language
no
have
could,
as I
He testified: “As often
tomers.
liability
un-
imposing personal
is
toas when
and send it
tax]
I’d
a check [for
write
reasonable,
imposing such
or to test when
Mr.
On
occasions when
the State.”
those
capricious—
arbitrary and
would
(when
bookkeeping
did not do the
Sehmehl
“duty”
semi-tautological words
not even the
time),
“quit”
period
for a
ill or had
no
are
case
“responsible.” We
aware
boоkkeeping
done
that the
he testified
jurisdiction in
the stan-
another
Horn,
by Filly’s
Paul
by Filly’s president,
determination as
applied,
to be
and the
dards
Frailey. Mr.
vice-president, Angie
Sehmehl
application of those standards
whether
Filly’s
working for
that when he was
testified
unreasonable,
arbitrary
capricious or
person
bookkeeper,
primary
he was
as
princi-
entirely derived from constitutional
preparing
tax returns
responsible for
ples.
paid.
making
He
sure the
were
“approve”
that
Horn had to
also testified
course,
policy- and fairness-based
Of
on occasion Mr.
payments, and that
of such
long
the standards
standard-setting, as
as
“quit”
period
of time
had
Sehmehl
limits,
in the first
fall within constitutional
being
like “not
able
problems
because of
Legis-
for the
properly
more
task
instance
be taken
things that needed to
take care of
rather
than
branches
and Executive
lative
of,
Mr. Sehmehl
the sales tax]”.
care
[like
gov-
those branches
for this Court —should
generally aware
that he was
testified
on that task. Hоw-
choose to take
ernment
collecting
tax from custom-
delineation,
ever,
in the absence of such
money
remitting that tax
to the
not
ers and
juris-
to other
can and should look
this Court
State.
and “funda-
policy-based
dictions that have
stan-
process-based
per-
fairness”
imposing
mental
concedes
Mr. Sehmehl
unpaid sales
dards
liability on him for the
sonal
in their
Va.Code,
expressed
by W.
for such
facially authorized
taxes is
applied
their
however,
interpreted and
statutes and
argues,
He
[1978].8
courts,
choice of
jurisdictions’
if
constitutionally applied
to see
those
must be
this statute
par-
statutory language, or the delineation
him,
v. Calco
properly cites to Haden
applying
to be considered
ticular factors
proposition that such
Awning, supra, for the
standards,
should
jurisdictions’
capri-
those
imposition must not be
adopted
this Court.
Department
The Tax
or unreasonable.
cious
returns, sign
W.Va.Code,
prepare tax
gues
that he did
argues
11-
also
8. Mr. Sehmehl
officer,
checks,
employeе or
(1978)
but as an
"liberally
etc. as an
construed"
should be
15-17
no case or
We are aware of
points
specific
contractor.
to no
But Mr. Sehmehl
his favor.
purported distinction
suggests
that such
language
construed
statutory
that needs to be
personal tax liabili-
significance in a
imposes
clearly
exists or has
way
another. The statute
one
ty
ar-
case.
Mr. Sehmehl also
on Mr. Sehmehl.
*10
review,
Upon
employees
Filly’s)
such
as contained in the
other
and creditors of
at
discussion,
foregoing
a
part
money
we conclude that
least in
the tax
with
that was
particular
paid by Filly’s
of
term
choice
to describe
customers —and held
trust
pay-
Filly’s
officer’s connection
with
to be remitted to the State. Fur-
“duty,”
thermore,
ment of
taxes —like
or
sales
“wilful-
Mr. Schmehl would have known
ness,”
“responsibility”
or
not
anyone
constitu-
that fact better than almost
—is
—because
Rather,
tionally compelled.
person
we conclude that
responsibility
he was
direct
with
“arbitrary
capricious
sending
and
or unreason-
for computing аnd
in the taxes.
imposing personal
able” standard for
Additionally, Mr. Sehmehl’s self-serv
forth in
this Court set
Haden v. Calco
ing assertion
that the ultimate
Atoning, supra
good
as
is
other. This
approval
sending
of
lay
taxes to the State
permitting
standard
the benefit of
has
refer-
owner,
Horn,
with the business’s
Mr.
does
ence to relevant ease
from all
not relieve Mr. Schmehl from his own inde
jurisdictions that have decided cases in this
pendent
responsibility to
follow
law.
area,
unnecessarily
prov-
does not
invade the
DeLassus,
(Slcaperdas,
supra). Knowing
government,
of
ince of other branches
and
with,
being complied
not
law was
principle
consistent
with
stare decisis.
resign
not
report
did
wrongdoing. And while Mr.
foregoing,
on all of the
Schmehl was
Based
hold
we
process
apparently
actively
protections
Filly’s
that under the due
not
involved in
Constitution,
during
portion
Virginia
III,
business affairs
Article
of the time
Sec
remitted,
being
taxes
statutory
regula
tion
in the
when
were not
absence
when he
tory language setting forth
returned to the business he
standards for the
resumed the
practice
remitting
imposition
personal liability
of not
taxes.
with clear and
thorization
rate officers
son
tal
unremitted
and such
[1978],
fairness test.
arbitrary
seeking
deference to
such
imposition
such
imposition
pursuant
to avoid such
liability may
convincing
capricious
taxes on
The
is in an
subject
to W.
burden is on the
statute’s
individual
evidence,
Va.Code,
to a fundamen
individual
unreasonable,
such
imposed
general
to show
liability,
11—15—
giving
corpo
only
per
case
au
for the
provisions of
son
trary
Court has
dence that it is
demonstrated with clear and
Under
applied
judgment
County
every
capricious
to him to
identified,
is affirmed.
W.Va.Code,
of the Circuit Court of Jeffer-
fundamentally
standard
impose
or unreasonable for the
Mr. Schmehl has not
issue.9 On this
personal liability
convincing
unfair or arbi-
case that this
[1978]
issue,
evi-
fundamentally
that it
unfair
would
and an
B.
capricious
or unreasonable act
impose
liability.
Statute
Limitations
second issue whether the statute of
applying
this test
in the instant
Department
Tax
limitations bars the
case,
we observe that
Schmehl
not a
recovering unpaid taxes from Mr. Schmehl.
(Vogel, supra),
“silent”
but
Again,
proceed by
identifying
we
first
directly
with the
involved
business on
applicable legal principles,
applying
and then
daily
did not deny
basis. He
re
principles
those
to the facts of the instant
significant
ceived a
financial benefit from the
ease.
unfair,
fact,
It is not
business.
assumption
make
that Mr.
general
Schmehl
limitations for as-
paid
bookkeeping
sessing
(along
his
services
amount
W. Va.
Corporations
purchase
personnel.
&
sometimes
Errors
of some sort for
If insurance or
O”)
("E
Omissions
&
or similar
insur-
bonding covered Mr. Schmehl
in the instant
policies
indemnify corpo-
ance
defend and
only by legally establishing
be that
they may
rate officers for
liabilities
in-
personal liability
proceeds
his
could the
thereof
regarding
cur in their
role. Laws
become available.
require
businesses that sell alcohol often
a bond
*11
ll-10-15(a),
corporation.
Code,
pertinent
petitioner
as an officer
[2006] states
five-year
if
that
thе
Mr. Schmehl concedes
part:10
posed
is
General
additions
articles of this
applicable
rule. —The amount
this article or
tax, penalties
shall
chapter
be assessed
to which
any of the
and interest im-
ivithin three
of
this
any tax,
article
other
missioner acted within
statute
collection action
against corporate officers set forth
C.S.R.
§
of
110-15-4a.7.1
limitations
against
for collection actions
the
[1993]
him,
applicable period.
the
applies
Tax Com-
in W.Va.
to the
vided, That in the
tax, or in case no return was
years after
lent return
assessment
after the date
(whether
or
may
not
filed
the
prescribed
such return was
be made
date the
case
the intent to
of a false or fraudu-
return was
for
any
filing):
time.
filed
filed,
evade
on or
filed
Pro-
the
ute of limitations in W.
porate
cause
added),
corporation they represent [ ]”
“payment
Mr. Schmehl
W.Va.Code, 11-15-17
officers]
therefore
...
may
as
argues,
the same
against
be enforced
Va.Code, ll-10-15(a),
however, that be-
the
[1978]
three-year
association
against
states that
(emphasis
[cor-
stat-
(Emphasis
added.)
[2006]
for
assessing
the amount of tax due
[1978]
As
If the
previously
states:
taxpayer
noted,
an association
W.Va.Code,
corpo-
the assessed amount
quent enforcement
corporation
must
action
also
by a
seeking payment
apply
to a subse-
officer.
of
ration,
person-
the officers thereof shall
However,
legislative grant
per
of
the
liable, jointly
severally,
any
for
ally
unremitted
taxes
mission
collect
part
of the association or
default
not a mandate to
officers is
'payment
of the tax and
actions
initiate such eolleetion/enforcement
tax,
penalties
additions to
and interest
three-year
limitation
time
under
same
imposed by
of
article ten
this
thereon
amount
required for the assessment
against them
chapter
enforced
against
corporation.
Legisla
corporation
against
association
regulation going
approved a
ture has rather
they represent.
which
issue,
directly
110-15-
W.Va.C.S.R.
added).
(1993)
(Emphasis
stating that
4a.7.1
such enforcement
[1993]
Finally,
An assessment
states,
W.Va.C.S.R.
pertinent part:
against
officers
§
110-15-4a.7.1
consid-
limitations.
and collection actions
cers
are
subject
to a
against corporate offi
five-year
statute
proceeding
the collection
to be
of In re
ered
cites to the
ease
(Bankr.S.D.W.Va.1990).
corporation or Bowen,
of the tax
Conchision financial limited control he had emphasize serving bookkeeper. We our decision reaches as the only permis- clearly was downplayed majority, narrow issue—whether it While discerning regulations sible under laws and enacted Mr. Schmehl offered factual and approved by Legislature arguments legal support position the Tax of his personal to seek of tax Commissioner to recover judice. Among sales taxes Mr. Schmehl. We have sub indefensible the case applied Legislature particulars the law as the wrote it he identified was the fact that
HI period emphasizеs The Court Petitioner year for an covered entire Appeal Tax contradicted himself against levied tax assessment stating hearing by he did own Office’s him, working compa- he not even a few stock and then minutes ny recovering as he from heart attack Therefore, denying later he owned stock. July 2002.1 suffered self-serving testimony the Court finds his fully discuss the Rather than inconstant only that he contract worker and *13 pattern employment2 Mr. Schmehl’s suspect. in For not fact an officer the why the he offers as to tax numerous bases Tax Ap- same reason Court finds the the liability imposed, the majority not be should peal Office’s Petitioner cannot view that opts gloss the critical facts over that clear- superiors escape liability by claiming that ly tip justice away impos- the scales of authority final had the is rational. ing personal particular in this tax ruling the trial court’s Between time of the careful, ease. A unbiased review of the facts decision in this matter and this Court’s in of this that Mr. in case reveals Schmehl did Lee, Stephen this P. Executive Di- fact for both responsibility preparing have rector, Virgi- Clerk of the West of the Court corporate preparing returns and for con- tax Appeals, Office of executed an affida- nia Tax returns, tax sumer sales and service which hearing pertaining evidentiary vit to the remitting payments. included the actual contains this matter. That affidavit aver- Admittedly, Mr. one Schmehl was of several indepen- an ments that Mr. Lee conducted persons sign authorized cheeks on the recording of dent review of the audio the corporate by bank account. Overlooked the transcript listening to the and that after re- majority, however, is the fact that the when times, cording came to ten the least corporate to pay funds were insufficient all of following conclusion: obligations, outstanding corporate the ex- the perfectly clear that a clerical error [I]t authority to clusive and ultimate determine in by forth transcriptionist the is set the paid obligations which not would rested рage 16, transcript On written as follows. corporation’s the Appellant, but with hearing transcript, line this stockholder, president majority Paul counsel, Caryl, is Petitioner’s Mr. conduct- one-year period Horn. In to the in addition witness, ing a line of his questions toward not which he did work Barry the Petitioner Schmehl. exist- recovery attack, due to from a heart Mr. his you “Do ing transcript here: written states continually that he did not Schmehl states any corporation?” My have in the stock bookkeeper corporate as his serve out of thorough recording of the audio review being to fully not able exe- frustration over question clearly discloses the actual that job. cute the of his duties corpora- in the any “She stock was: have context, appears question tion?” In acknowledged trial court Mr. Although the Frailly, Angela whom referring to an that his lack of ulti- Schmehl’s contention vice-pres- just identified as witness authority regarding mate disbursement corporation. ident of against corporate weighed imposing funds wholly trial liability, evidentiary court significance conclu- of this position, ap- presumed, as Mr. Schmehl’s that trial court its discounted sion is demonstrates, clearly that Mr. parently credibility, represen- on a based order his Frailly’s “yes” as to Ms. Schmehl answered that tation made the State in responding refer- ownership, stock he was corporation. light in the owned stock stock, ownership ence to his Appellant’s ownership the fact stock that corporation’s rather than that of the vice disestablished, recently has been president. placed trial court on this emphasis undue of this issue to a rendering opinion suggests Relegating any its discussion issue footnote, cursorily acknowledges majority untenable: ruling below is recognized the "on and he did 2. The trial court's order 1. Mr. states that not resume Schmehl employment as a nature of Mr. Schmehl’s off” Filly's July working until bookkeeper Filly's. 15,My 1993, the transcript hearing in the on and after “[effective “[t]he legislative instant case in Schmehl testified consumers’ sales and service tax balance, suggests, regulations that he did not own the broad reach of follow W.Va. stock Filly’s_” and further recognizes Code § [1978] basing court unpaid corporate lower referred to Mr. “[t]he officer consum Schmehl’s recorded inconsistent answers ers’ upon sales and service ownership uphold- about stock as factor in status as a offi officer’s ing cer, the Tax Rather than officer, Commissioner.” long during as the assess recognize significance of this conclusion period(s), managerial ment had actual regarding Mr. Schmehl’s lack of stock owner- on behalf of the ship ownership the stock the effect issue is, merely he or an she clearly decision, trial had on the court’s only”). Consequently, argument name majority chose to immaterial “deem[ ] that Mr. Schmehl raised as to lack below his *14 ruling.” our decision-making authority of as to payments deserving in issue was of more quoted portion From the of the trial scrutiny than that accorded either above, question there court’s order is no majority. trial court or the argu- trial court chоse discount the ments Mr. raised on the his Schmehl issue of then, only On I can balance reach the authority corporate lack of final to make per- impose conclusion that the decision to payment-related decisions. The court char- liability against sonal tax Mr. Schmehl —an testimony acterized Mr. Schmehl’s as “self corporate no individual who held title but serving” the contradictory3 and offered evi- continuously occupy stock and who did ownership dence on the issue his of stock position corporate bookkeeper one opinion as the sole basis for its arbitrary, capricious, clearly un- credibility. Mr. Schmehl devoid of Ac- reasonable under facts of this case. Court, From this the record before we have cordingly, respectfully I must dissent presume if the issue of Mr. Schmehl’s by majority. result reached ownership lack of stock had been known court,
the trial issue of Mr. Schmehl’s itself,
credibility, if not the ultimate decision
might
altered.
have been
ration, rejecting claim that election ne flaws March Decided gated imposition liability); 06-026C, 06-027W, Admin. Dec. W.Va. Office 2006)
of Tax Appeals (April (ruling that "yes” personal ownership 3. The trial the evidence his court viewed as "contra- concerned dictory” Mr. Schmehl's denial based on of stock stock. hearing answering ownership while at the same "yes” responding query regarding to a argued only 4. Mr. Schmehl he was made a ownership Frailly, corpo- stock held Ms. officer in first instance meet a above, president. residency requirement. rate As discussed vice the trial His lack of thought mistakenly possibility. court stock Schmehl's answer seems to confirm