Mofo New York Tax Insights - May 2011 - Volume 2, Issue 5


In this issue: New Policy Offers Partial Relief from Controversial Responsible Person Liability; Successful Challenge to Assessment Does Not Entitle Taxpayers to an Award of Costs; Update on Barker Vacation Home Case; New York 2011-12 Executive Budget Signed into Law; E-Books Are Not a Taxable Information Service Under the Sales Tax; Entitlement to QEZE Credits Upheld; and Insights in Brief.

Excerpt from 'New Policy Offers Partial Relief...':

The Department of Taxation and Finance has enacted a new policy that offers partial relief from personal liability for sales tax for qualifying limited partners and members of limited liability companies. “New Policy Relating to Responsible Person Liability Under the Sales Tax Law,” TSB-M-11(6)S (N.Y.S. Dep’t of Taxation & Fin. Apr. 14, 2011).

Under the New York sales tax law, certain shareholders, corporate officers, and employees can be personally liable for a corporation’s sales and use tax liability if the individual is under a “duty to act” for the corporation. In contrast, the law imposes strict liability for the business’s sales tax liability on every partner (whether general or limited) of a partnership, and on every member of a limited liability company, regardless of whether the partner or member was under a duty to act. In Matter of Santo, DTA. No. 821797 (N.Y.S. Tax App. Trib., Dec. 23, 2009), the Tax Appeals Tribunal upheld a sales tax assessment against an individual who formerly held a membership interest in a defunct restaurant operated as an LLC, even though he had no responsibility for the company’s financial affairs, including its sales tax collection and filing obligations.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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