In Kihm, the appellees, Joseph H. Kihm and William Ridmann, were the presidents of separate contracting firms which did remodeling work for the taxpayer company, Central Oyster House Inc., a restaurant.Summary of this case from Smith v. Limbach
Decided May 19, 1982.
Taxation — Sales taxes — Liability of corporate officers — R.C. 5739.33 — Not established, when.
APPEAL from the Board of Tax Appeals.
In 1971, appellee Joseph H. Kihm was the president of a general contracting firm, J.B. Schmitt Company, and appellee William Ridmann was the president of Ridmann Electric Company, an electrical contracting firm. Both of appellees' companies performed extensive remodeling work for the Central Oyster House, Inc., a Cincinnati restaurant. After the work was performed, the restaurant defaulted in making payments to its creditors. With a view toward obtaining payment of the amounts due them, appellees and others acquired all of the stock of Central Oyster House, and the restaurant continued to operate. Appellees finally disposed of their interests in Central Oyster House, Inc., on November 15, 1974.
Between 1971 and November 15, 1974, Kihm served as the president of Central Oyster House, and Ridmann served as its treasurer. However, to oversee the operations of the restaurant, a general manager, bookkeeper, and accountant were hired. During this period of time, neither appellee was involved in the actual management or operation of the restaurant. During the period that appellees were officers of Central Oyster House, neither appellee received a salary, dividend distribution, or other benefit from the restaurant.
In 1977, appellant, the Tax Commissioner of Ohio, pursuant to R.C. 5739.33 levied a sales tax assessment including penalty of $10,832.23 against appellees. The assessment related to the months of October 1973, February, April and May 1974, and July through December 1974.
R.C. 5739.33 provides as follows:
"If any corporation required to file returns and to remit tax due to the state under the provisions of sections 5739.01 to 5739.31, inclusive, of the Revised Code, fails for any reason to make such filing or payment, any of its officers, or employees having control or supervision of or charged with the responsibility of filing returns and making payments, shall be personally liable for such failure. The dissolution of a corporation shall not discharge an officer's or employee's liability for a prior failure of the corporation to file returns or remit tax due. The sum due for such liability may be collected by assessment in the manner provided in section 5739.13 of the Revised Code."
Upon review of appellees' petitions for reassessment, appellant, apparently recognizing that appellees had disposed of their interests in the corporation in November 1974, reduced the total assessment including penalty to $7,076.01. Thereupon, appellees appealed the Tax Commissioner's final determination to the Board of Tax Appeals.
The Board of Tax Appeals found that the general manager, and not appellees, was responsible for making and filing sales tax returns; and, that during the assessment period, the only signature appearing on the sales tax returns was that of the general manager. The Board of Tax Appeals thereupon concluded that neither appellee was personally liable for the remitted sales tax and reversed the Tax Commissioner's final determination.
The cause is now before this court upon an appeal as of right.
Messrs. Graydon, Head Ritchey and Mr. Anthony G. Covatta, for appellees.
Mr. William J. Brown, attorney general, and Mr. Mark A. Engel, for appellant.
The sole issue presented herein is whether the Board of Tax Appeals erred in its determination that appellees are not personally liable for the unremitted sales tax.
Appellant argues that appellees are liable for the unremitted taxes because they "possessed the requisite degree of control or supervision over the employees who filed returns and made payments so as to render them personally liable." The gist of appellant's argument appears to be that liability attaches under R.C. 5739.33 simply because a person is a corporate officer or director and, thus, ultimately has the power to supervise corporate employees. The Board of Tax Appeals rejected this argument and, we find, properly so.
The record herein is devoid of any evidence that appellees were directly responsible for the preparation or filing of returns or the making of payments. Similarly, there is no evidence that appellees, at any time, actually filed such returns or made such payments.
In Weiss v. Porterfield (1971), 27 Ohio St.2d 117, we held that "[t]he personal liability of officers of a corporation for failure of the corporation to file returns or pay the Ohio sales tax * * * is limited to those officers who have control or supervision of or are charged with the responsibility of filing returns and making payments." The mere fact that a person is an officer of a corporation is not sufficient, in and of itself, to impose personal liability for unpaid sales taxes pursuant to R.C. 5739.33.
As in Weiss, the Board of Tax Appeals found that there was no evidence that appellees were charged with the responsibility of, or had control or supervision over, or had any connection with, filing returns and making tax payments. Rather, the general manager, bookkeeper and accountant were entrusted with the day-to-day financial responsibilities pertaining to the corporation. Under the facts of this case, we are neither inclined to disturb nor do we find any basis for disturbing the decision of the Board of Tax Appeals.
For the foregoing reasons, the decision of the Board of Tax Appeals is hereby affirmed.
W. BROWN, Acting C.J., REILLY, MOYER, LOCHER, HOLMES, C. BROWN and KRUPANSKY, JJ., concur.
REILLY, J., of the Tenth Appellate District, sitting for CELEBREZZE, C.J.
MOYER, J., of the Tenth Appellate District, sitting for SWEENEY, J.