Current through Rules and Regulations filed through March 20, 2024
(1)
Purpose. O.C.G.A. §
48-2-52permits the collection of an entity's unpaid trust fund taxes from the
party(ies) responsible for collecting, paying over, and accounting for such
taxes on behalf of an entity. The Department of Revenue uses this as a
collection mechanism when taxes are not fully collected or collectible from the
entity itself. This regulation sets forth the Department's policies for
determining, assessing, and collecting against a Responsible Party, as well as
procedures for protesting a Responsible Party assessment with the
Department.
(2)
Definitions.
(a) "Entity" as used in this
regulation means any limited liability entity incorporated or organized under
Title 14 of the O.C.G.A.
(b)
"Person" shall have the meaning set forth in O.C.G.A. §
48-1-2(18).
(3)
Trust Fund
Taxes. O.C.G.A. §
48-2-52applies to taxes that are required to be collected and held in trust. In
Georgia, trust fund taxes include sales, withholding, and prepaid 911 tax, and
may include any amounts that are required to be collected and remitted to the
Department.
(4)
Incorporation
of IRS Law. O.C.G.A. §
48-2-52mirrors the federal responsible party statute, I.R.C. § 6672. Responsible
Party liability is a two-prong test: 1) the person must be "responsible," and
2) the nonpayment of the tax must be "willful."
(5)
Prong 1: Identifying the
Responsible Party.
(a)
Definitions. A "Responsible Party" is:
A person who has control over, or entitlement to, the funds
or assets of the entity, such that the person has the ability to directly or
indirectly control, manage, or direct the disposition of the entity's funds
and/or assets. Providing capital to an entity, with no corresponding ability to
control, is insufficient.
(b)
Registration. Every entity
that is legally required to collect trust fund taxes must register with the
Department.
1.
Identification.
Each registered entity must identify the person(s) responsible for
collecting, paying over, or accounting for state taxes. An entity may identify
multiple persons, and designate each such person's responsibility for a
respective tax type.
(i) Any entity that has
previously registered with the Department but has not provided Responsible
Party information must identify the Responsible Party.
(ii) Any change of Responsible Party
information must be reported to the Department. It is the taxpayer's burden to
update this information.
(iii) An
entity may add, remove, or otherwise edit its Responsible Party information any
time by accessing its online Georgia TaxCenter account.
2.
Presumption of
Responsibility. Failure to identify the Responsible Party creates a
rebuttable presumption that those persons identified as the entity's officers
in the registration with the Department are responsible.
(c)
Indicia of Responsibility.
Merely holding the title of officer in a corporation, partner in a limited
liability partnership, or member in a limited liability company is insufficient
to conclusively establish responsibility. The key determination is whether the
person has the duty and authority to make payments. Thus, Responsible Party
status is a functional determination-liability will be imposed upon those
actually responsible for failure to collect and/or pay over the tax.
1.Factors suggesting responsibility include,
but are not limited to:
(i) Holding the
position of officer, director, partner, member, manager, or principal;
(ii) Duties described by corporate
by-laws, corporate operating agreement, partnership agreement, or other entity
records;
(iii) Day-to-day
involvement in or responsibility for management of the business;
(iv) Control over financial affairs and
payment of debts;
(v) Signing tax
returns;
(vi) Ability to hire and
fire employees;
(vii) Authority to
sign checks or otherwise make payments on behalf of the entity;
(viii) Knowledge of failure to pay the tax;
and
(ix) Receipt of substantial
income or benefits from the entity.
(d)
Delegation of Responsibility.
Delegating authority to an employee or a third-party does not relieve a
Responsible Party of liability.
1.Determination of responsibility will be
based on case-specific factors, including, but not limited to:
(i) The Responsible Party's knowledge of a
pattern of noncompliance by the third-party payer;
(ii) The third-party's use of fraud to cover
up the non-payment of taxes; and
(iii) Receipt of notices of nonpayment by the
Responsible Party and actions taken subsequent to such receipt.
(e)
Multiple
Responsible Parties. The Department may designate more than one person
responsible. The existence of one Responsible Party does not negate another
person's liability as a Responsible Party.
(6)
Prong Two: Willfulness. A
Responsible Party's nonpayment of the tax will be willful if the failure to pay
the tax is voluntary and knowing, or reckless. Willfulness does not require a
bad motive or intent to defraud the state.
(a)
Knowledge. Willfulness requires that the Responsible Party has
knowledge of the tax liability and ability to pay such liability, but chooses
not to pay the tax.
(b)
Reckless Disregard. Reckless disregard for the duty to pay the tax
can constitute willfulness. Examples of such reckless disregard include, but
are not limited to, ignoring an obvious risk of nonpayment, failing to
investigate a risk of nonpayment, or failing to inquire into the status of
taxes when the entity is in financial trouble.
(c)
Examples of indicia of
willfulness include, but are not limited to:
1.Deliberate choice to pay other creditors of
the entity before paying the tax;
2.Knowledge of the tax liability but no
action to arrange for payment;
3.Failure to investigate or correct
mismanagement to address the unpaid tax; and
4.Action or inaction that results in failure
to satisfy the entity's tax liability.
(7)
Assessments. All Responsible
Party assessments will conform to the procedures set forth in this paragraph.
(a)
Assessment amount. Once a
person is determined to be a Responsible Party, the Department may issue an
assessment against that person for the delinquent trust fund taxes owed by the
entity. Such assessment will reflect the taxes owed for the periods for which
the person is responsible. Once the assessment against the Responsible Party is
issued, interest and appropriate penalties on the assessed tax will begin to
accrue consistent with O.C.G.A. §
48-2-40.
See O.C.G.A. §
48-2-52(b)(providing
that assessment and collection under the responsible party statute is the same
as for the underlying entity's tax liability).
(b)
Assessment Process. Upon
determination of responsibility, the Department will first issue a Proposed
Assessment to the Responsible Party. The Proposed Assessment will state the
basis of the liability (O.C.G.A. §
48-2-52),
the entity for which the person is being held responsible, the tax type, and
the periods for which the person is liable. This Proposed Assessment will
include information for how to protest the Proposed Assessment (procedures for
which are discussed in Paragraph 8 in detail). If the person does not properly
protest, the Department will issue an Official Assessment and Demand for
Payment. The Official Assessment may be appealed in accordance with O.C.G.A.
§
48-2-59.
(c)
Statute of
Limitations
1. An assessment against a
Responsible Party follows the time limitations set forth in O.C.G.A. §
48-2-49.
Thus, an assessment against a Responsible Party must be made within three years
after the relevant entity's return or report is filed. O.C.G.A §
48-2-49(b).
If the entity does not file a return or the filed return is fraudulent, the
liability may be assessed at any time. O.C.G.A. §
48-2-49(b).
2. An entity's consent or waiver of the
statute of limitations in accordance with O.C.G.A. §
48-2-49(d)
is also effective against a Responsible Party.
3. A Responsible Party's liability survives
the dissolution of the underlying entity.
(d)
Joint & Several
Liability. Because more than one person may be liable as a Responsible
Party, the total liability can be collected from any one or a combination of
such assessed Responsible Parties. The Department will only collect the
entity's total liability once.
(8)
Protests. A person may
protest a Responsible Party Proposed Assessment to the Department within 30
days of the Issue Date of the Assessment. O.C.G.A. §
48-2-46.
The person must complete and submit the Protest of Proposed Assessment
or Refund Denial Form (TSD-1), available on the Department's website.
Only this form and no other correspondence will constitute a
Protest. Once the Department receives this form, all
collections activities against the person for the Responsible Party liability
will be stayed, and the statute of limitations for issuing a final assessment
will be tolled. O.C.G.A §
48-2-46.
If the person desires a conference with the Department for consideration of the
protest, the person must check the appropriate box on the form.
(a)
Conferences. If the person
requests a conference, the Department will generally contact the person within
30 days of receipt of the protest to schedule a conference.
1.
Informal Conference. The
conference is informal; it is not a hearing governed by the Administrative
Procedure Act and will not prejudice the rights of any taxpayer or the
Department. Ga. Comp. R. & Regs.
560-1-1-.12.
2.
Conferees. The conference
will be conducted by a representative from the Department's Legal Affairs &
Tax Policy Division. Upon review of the protest and assessment, the
representative will determine whether other Department representatives should
be in attendance. The person may bring representation to the conference, but
such representatives should submit a Power of Attorney (RD-1061).
3.
Content. The conference is an
opportunity for the person to present evidence challenging the bases for the
assessment. Such evidence may include, but is not limited to, proof of the
person's cessation of control of the entity, proof of the person's ignorance of
the tax liability, contracts showing limitation of duties, or other proof of
the person's inability to exercise authority over collection and/or payment of
the tax.
4.
Settlement.
The conferees may come to a mutual settlement to resolve the tax
liability. Such settlement agreement will be memorialized in writing and signed
by the person and the Department's representative.
5.
Decision. Absent a
settlement, the Department's representative will issue a written letter to the
protesting person. The letter will state the outcome of the conference-a grant,
denial, or partial grant of the protest. The letter will also detail how the
Department intends to proceed.
(b)
Protests without a
Conference. If a protest is filed, but no conference is requested, a
representative from the Department's Legal Affairs & Tax Policy Division
will consider any and all information submitted with the protest and the
underlying facts to make a determination. The Department's representative will
contact the person if a settlement is a possibility, or the Department's
representative will issue a written letter stating the Department's decision on
the protest-a grant, denial, or partial grant of the protest. The letter will
also detail how the Department intends to proceed.
(9)
Disclosures. The person may
request from the Department the information used to conclude that the person is
a Responsible Party. Information about third parties is subject to
confidentiality laws. O.C.G.A. §
48-2-15.
(a)
Disclosure of third-party
information. The Department cannot disclose any information regarding
collections activities against other persons. O.C.G.A. §
48-2-15.
(b)
Entity Information. Because
the person was assessed as a Responsible Party for an entity's debt, such
person may request the tax return information of that entity. This includes
information on any payments made towards the entity's total liability
owed.
O.C.G.A. §§
48-2-12, 48-2-52.
