The owners of three companies and their employee, a certified public accountant (CPA), serving as the vice president of finance for those companies, were all responsible persons for purposes of the trust fund recovery penalty. The owners were the founders, officers, board members and equal shareholders of each of the three companies. They had check-signing authority, could hire and fire employees, could exercise control over the companies' finances, including the payment of payroll taxes, and were intimately involved in running the companies. Although the CPA/employee had no check-signing authority, he supervised the accounting department, oversaw the preparation of checks, including payroll and federal tax deposit checks and had the authority to direct the accounting department to draft checks to the IRS instead of to other creditors. 

Further, the individuals acted willfully when they made payments to other creditors despite knowing that the trust fund taxes remained unpaid. The owners' argument that they were not responsible persons was rejected because they were aware of the company's tax liabilities but displayed reckless disregard by failing to investigate and ensure that the CPA/employee was, in fact, handling the tax delinquencies. Moreover, they could not avoid liability by delegating responsibility for the payroll taxes to the CPA. In addition, the CPA knew that the owners continued to sign checks made payable to other creditors instead of the IRS, but he failed to correct the situation. Finally, the involuntary bankruptcy proceeding instituted for one of the companies did not strip the owners' of control and authority to pay that company's withholding tax obligations.

S.P. Davis, Sr., DC La., 2008-2 USTC

Illinois - Sales and Use Tax: Taxation of Shipping Charges on Internet Purchases Upheld

A retailer's imposition of Illinois sales tax on shipping charges for goods purchased through its Web site did not violate Illinois law because the shipping charges were held to be part of the total selling price of the items purchased. There was an inseparable link between the sale of goods and the associated shipping charges because customers could not purchase items at the Internet site without selecting a shipping option and agreeing to pay for shipping. This necessary link between the consumers' online purchase of goods and purchase of shipping services was sufficient to render those shipping charges subject to sales tax. 

Dismissal of Class Action Complaint

The fact that the retailer contracted with a third party to perform the delivery services did not alter the outcome; it was the connection between the delivery service and the sale of goods that was dispositive, not who actually provided the delivery service. 

The plaintiffs' argument that the shipping charges were separate from the charge for the goods was rejected because even though the shipping charge might have been separately listed on the receipt, it was paid for in the same credit card transaction and was a prerequisite to the transfer of ownership of the goods at issue. In this sense, the shipping charge was not separate from the purchase of the good, but rather was inseparably linked with it. 

The plaintiffs' contention that the shipping service was intangible and thus not taxable was rejected because services may be subject to sales tax to the extent that they are inseparably linked with sales of tangible goods. 

In reaching its conclusion, the Illinois Appellate Court affirmed a circuit court's dismissal of the plaintiffs' class action lawsuit seeking damages and injunctive relief.

Kean v. Wal-Mart Stores, Inc., Illinois Appellate Court, First District, No. 1-07-1341, November 21, 2008