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Ippolito v. Commissioner of New York State Department of Taxation & Finance
Citations: 116 A.D.3d 1176; 984 N.Y.S.2d 198
Court: Appellate Division of the Supreme Court of the State of New York; April 10, 2014; New York; State Appellate Court
A CPLR article 78 proceeding was initiated to review a determination by the Tax Appeals Tribunal, which upheld a sales and use tax assessment against Cai Restaurant, Inc. and its chairperson, the petitioner. The Department of Taxation and Finance audited Cai for taxes owed from September 1, 2003, to May 31, 2006, resulting in a $66,620.28 assessment against the petitioner. Following an uncontroversial stipulation, an Administrative Law Judge (ALJ) ruled that the petitioner, as a corporate officer, was personally liable for the tax deficiency under Tax Law § 1131 (1) and § 1133 (a). The petitioner contested this decision, claiming he acted temporarily under a power of attorney for his ill wife and was not involved in corporate management. The Tax Appeals Tribunal affirmed the ALJ's ruling, rejecting his argument. Tax Law § 1133 (a) establishes personal liability for individuals responsible for tax collection, including corporate officers. Determining whether an individual has such responsibility is case-specific, considering factors like authority to sign checks, management duties, hiring abilities, corporate officer status, and income derived from the corporation. The court emphasized the focus should be on the person's authority and responsibility to control the corporation, rather than their actual exercise of that authority. Evidence presented indicated that the petitioner was involved in preparing tax returns, making significant business decisions, managing the business, owning stock, overseeing financial matters, and hiring personnel. Petitioner was identified as the president of the corporation on a questionnaire by an enrolled agent, aligning with Secretary of State records that named him as the sole chairperson and/or CEO. Despite indications that his wife also held a corporate officer position, petitioner clearly maintained the authority to act as a corporate officer, evidenced by his ability to manage the corporation during his wife's illness. The key factor is his authority to act on behalf of the corporation, not how frequently he exercised that authority, as established in previous cases. The Tribunal found substantial evidence supporting that petitioner was a responsible person liable under Tax Law § 1131 (1) and § 1133 (a) for outstanding sales and use taxes owed by the corporation. The Tribunal's determination was upheld, dismissing the petition without costs. The Department had assessed the corporation for approximately $160,000 in sales and use tax deficiencies, which included interest for the audit period. Although Cai contested the assessment initially, the petition was later withdrawn. The assessment against petitioner covered only part of the audit period, and his wife's passing occurred during the proceedings. Petitioner attempted to introduce external documents to argue he was not a responsible person, but these were not considered as they were not part of the administrative record.