Although a person having an officer title, being listed on tax documents as a “responsible person,” and having check signing authority will usually be found to be a “responsible person” for New York sales and use tax purposes, an individual was able to overcome this with the power of uncontroverted testimony. In re: Richard E. Saslaw, DTA No. 830808 (N.Y.S. Div. of Tax App., July 11, 2024).

As in most states, the New York sales tax imposes liability on persons who have the ability to remit sales taxes on behalf of a business and generally does so when the business fails to remit the proper taxes. Oftentimes, as in this case, a state will seek payment of taxes from an individual when the business has gone into bankruptcy.

Facts: Richard Saslaw was for a time the Director of Finance of an ice cream shop known as Ample Hills Astoria, LLC (“Astoria”). For the period September 1, 2019, through November 30, 2019, Astoria filed a New York sales tax return but did not remit the full amount of taxes stated as due. For the period December 1, 2019, through February 29, 2020, Astoria filed a return but did not remit any of the taxes stated as due. During these time periods (the “Periods at Issue”), Astoria was facing financial difficulties and ultimately filed for bankruptcy in March 2020.

The Division of Taxation (“Division”) reviewed various returns filed by Astoria that specifically identified Mr. Saslaw as a responsible person. A schedule to one return identified Mr. Saslaw’s duties as including check-signing authority, authority over business decisions, and being involved in operating the business on a daily basis. Based on these and other returns filed by Astoria, the Division asserted that Mr. Saslaw was a responsible person and liable for the taxes that Astoria did not pay with its returns for the Periods at Issue.

The Determination: Despite what appeared to be overwhelming documentary evidence that he was a responsible person, Mr. Saslaw testified that around January 1, 2019, Astoria’s parent corporation stopped approving all payments for Astoria and instructed Mr. Saslaw to stop all auto payments and cutting of checks. He further testified that he was not allowed to distribute any checks or money, or pay any parties in any way, and that those functions were under the control of the board of directors and owners of Astoria’s parent company and Astoria’s managing member.

Mr. Saslaw admitted that while he had previously signed many tax documents and tax returns and had check-signing privileges, during the Periods at Issue that was no longer true. The two other remaining employees of Astoria also testified that Mr. Saslaw was not authorized to distribute checks or make payments during the Periods at Issue.

Based on Mr. Saslaw’s unrefuted testimony, which was corroborated by two individuals, the Administrative Law Judge (“ALJ”) concluded that Mr. Saslaw did not have sufficient authority or control over Astoria’s corporate affairs during the Periods at Issue to assure that sales tax was remitted on behalf of Astoria. Accordingly, the ALJ cancelled the notices of determination. The case is a reminder of how powerful undisputed testimony can be in a case, especially when it is corroborated by others.