Cleaning Company Owner Loses Ohio Responsible Party Appeal

In an appeal involving the listed owner (Daniel Biskind) of an Ohio cleaning company (Contract Cleaning LLC) regarding who was the responsible party for tax assessments issued for the period July-September 2016, the Ohio Board of Tax Appeals (BTA) affirmed the Ohio Tax Commissioner’s findings that Biskind was indeed the responsible party of the business. The company was previously assessed for sales tax and employer withholding tax due to unfiled returns and did not fully satisfy those assessments. The Commissioner assessed Biskind as a responsible party. Biskind petitioned claiming he should not be considered a responsible party given changes to the business operations managers between 2008 and 2016. Even though Biskind portrayed his role as a passive member who delegated responsibilities for taxes to others, the BTA affirmed he met the definition of officer and employee per Ohio Adm. Code 5703-9-49 and as 100% owner. To be a responsible party, a person does not need to be a direct overseer of business operations. The sales tax responsible party statute R.C. 5739.33 includes a provision for personal liability for filing returns and remitting tax. Ohio Adm. Code 5703-7-15 additionally provides clarification on whether a member is “responsible for the execution of the employer’s fiscal responsibilities.” A person will have “control or supervision” if “the person has direct or indirect authority over” the person preparing and filing returns. The BTA found satisfactory evidence to show that Biskind maintained sufficient control over employees who handled tax returns, performed functions of hiring and employee termination, received financials for review, and instructed employees. As responsible party, Biskind is personally held liable for the unpaid tax assessments.

Taxpayers and businesses should consider who is listed as officers, directors, and responsible parties on their sales tax accounts with the Department of Revenue/Department of Taxation and on their registrations with the Secretary of State when registered in a given state. These documents should be updated when state Annual Reports or Sales Tax License renewals are due and when changes otherwise occur. Careful consideration should be given when determining and listing the individual who will be named as responsible party on a sales tax registration. The significance of this appeal is that the definitions and functions of responsible party are key to determining who exercises control and could be held personally liable for a tax assessment. (Ohio Board of Tax Appeals, Biskind v. Harris, Case No. 2019-2398; Biskind v. McClain & Harris, Case No. 2019-2434, August 24, 2023)

Owner of Ohio Cleaning Company Loses Responsible Party Appeal | Tax Notes

Posted on September 13, 2023