Tribunal Upholds Personal Liability of LLC Members for Sales Tax -

The New York State Tax Appeals Tribunal has affirmed the determination of an Administrative Law Judge that a member of a limited liability company (“LLC”) holding a minority interest in the LLC is liable for a portion of a sales and use tax assessment against the LLC itself. Matter of Eugene Boissiere and Jason Krystal, DTA Nos. 824467, et al. (N.Y.S. Tax App. Trib., July 28, 2015).

Eugene Boissiere and Jason Krystal held 14% and 13% membership interests, respectively, in an LLC. Neither individual had managerial responsibility, knowledge or control over the LLC’s financial affairs, or authority to sign the LLC’s tax returns. The New York State Department of Taxation and Finance performed a sales tax audit of the LLC, and assessed sales tax, plus interest, against the company for the period June 1, 2004 through May 31, 2009. The Department also issued separate Notices of Determination to Mr. Boissiere and Mr. Krystal, each assessing the full amount of the sales tax, plus penalty and interest, for the period during which each held a membership interest in the LLC. After negotiations between the Department and the taxpayers, and in keeping with the Department’s policy as set forth in Technical Memorandum, TSB-M-11(17)S (N.Y.S. Dep’t of Taxation & Fin., Sept. 19, 2011), the Department reduced the individuals’ liability for the sales tax to reflect their percentage of ownership in the business, plus interest.