Anthony Wayne Russell v. Indiana Department of State Revenue

PETITIONER APPEARING PRO SE:    ATTORNEYS FOR RESPONDENT:
ANTHONY WAYNE RUSSELL    STEVE CARTER
Columbus, IN     ATTORNEY GENERAL OF INDIANA
    Indianapolis, IN
    
     LINDA I. VILLEGAS
    DEPUTY ATTORNEY GENERAL
    Indianapolis, IN
    

_____________________________________________________________________

    IN THE INDIANA TAX COURT _____________________________________________________________________

ANTHONY WAYNE RUSSELL, ) ) Petitioner, ) ) v. ) Cause No. 49T10-0103-SC-31 ) INDIANA DEPARTMENT OF ) STATE REVENUE, ) ) Respondent. ) ______________________________________________________________________
ON APPEAL FROM A FINAL DETERMINATION
OF THE INDIANA DEPARTMENT OF STATE REVENUE
 

NOT FOR PUBLICATION
December 6, 2001
FISHER, J.
 
    Anthony Wayne Russell challenges the Indiana Department of State Revenue's (Department) finding that he, as president of Carrollton Tool and Engineering (Carrollton), was personally liable for Carrollton's unpaid withholding taxes, plus penalties and interest, for the years 1985 through 1987.
    The issue in this case is whether the Department properly assessed Russell for the withholding taxes, penalties, and interest. For the reasons stated below, the Court AFFIRMS the Department's assessment.
FACTS AND PROCEDURAL HISTORY
    In 1983, Russell incorporated Carrollton for business as a tool and die shop. Russell was president and sole owner of the corporation. As president, Russell was involved in the day-to-day operations of Carrollton, including sales, filing corporate tax returns, and filling out the withholding returns. During the tax years at issue, Russell had from one to fifteen employees.
    During 1985 to 1987, the Department sent proposed assessments to Carrollton for unpaid withholding taxes. The Department informed Carrollton that its withholding returns had been received without payment of the withholding taxes. Thereafter, neither Carrollton nor Russell paid the withholding taxes. After September 1987, Russell left Carrollton to work elsewhere. A few months later, Carrollton filed bankruptcy.
    In March 1995, the Department sent proposed assessments to Russell personally for the unpaid withholding taxes. See footnote Thereafter, Russell protested the proposed assessments. The Department held a hearing in September 2000, denied Russell's protest, and found him liable for the unpaid withholding taxes, penalties, and interest.
    On March 26, 2001, Russell filed an original tax appeal. This Court conducted a trial and took the matter under advisement. Additional facts will be supplied as needed.
ANALYSIS AND OPINION
Standard of Review
    This Court reviews final determinations of the Department de novo and is not bound by either the evidence presented or issues raised at the administrative level. Ind. Code § 6-8.1-5-1(h); see also Tri-States Double Cola Bottling Co. v. Dep't of State Revenue, 706 N.E.2d 282, 283 (Ind. Tax Ct. 1999). Although statutes that impose tax are to be strictly construed against the State, "[t]he burden of proving that the proposed assessment is wrong rests with the person against whom the proposed assessment is made." I.C. § 6-8.1-5-1(b); see also Longmire v. Indiana Dep't of State Revenue, 638 N.E.2d 894, 898 (Ind. Tax Ct. 1994). To meet his burden of proof, the taxpayer must present a prima facie case, that is, one in which the evidence is sufficient to establish a given fact and which if not contradicted remains sufficient. Longmire, 638 N.E.2d at 898.
Discussion
    Russell argues that he should not have to remit Carrollton's unpaid withholding taxes, interest, and penalties to the Department. The withholding tax statute states that:
every employer making payments of wages subject to tax under IC 6-3 . . . who is required . . . to withhold, collect, and pay over income tax on wages paid by such employer to such employee, shall, at the time of payment of such wages, deduct and retain therefrom the amount prescribed in withholding instructions issued by the department . . . . Such employer making payments of any wages:

shall be liable to the state of Indiana for the payment of the tax
required to be deducted and withheld under this section . . . .
Ind. Code § 6-3-4-8(a). Any money that an employer deducts and withholds "shall immediately upon such deduction be the money of the state" and "shall [be held] . . . in trust for the state of Indiana[.]" Ind. Code § 6-3-4-8(f). Moreover, the law provides that in a corporation, "every officer, employee, or member of such employer, who, as such officer, employee, or member is under a duty to deduct and remit such taxes shall be personally liable for such taxes, penalties, and interest." I.C. § 6-3-4-8(g).
    During the tax years at issue, Carrollton had one to fifteen employees. (Trial Tr. at 34.) Thus, Carrollton was required to withhold taxes on wages paid to its employees and hold those taxes in trust for the State. See I.C. §§ 6-3-4-8(a), (f). Furthermore, Indiana Code § 6-3-4-8 holds Carrollton liable to the State for the payment of these taxes withheld. See I.C. § 6-3-4-8(a)(1). Russell admitted that, as president of Carrollton, he was responsible for filing the withholding forms and taxes. (Trial Tr. at 23.) Because Russell was president and owner of Carrollton and had a duty to remit the withholding taxes, he is liable for Carrollton's unpaid withholding taxes, interest, and penalties for the years at issue. See I.C. § 6-3-4-8(g).
    Russell does not dispute the fact that he is personally liable for the unpaid withholding taxes. Instead, Russell argues that he should not be required to pay the withholding taxes because he did not receive proper personal notice of the assessment and because the assessment of the withholding taxes is barred by the statute of limitations. Russell also argues that the interest and penalties should be waived. The Court disagrees with Russell.
    First, Russell received sufficient notice of the proposed assessment. Where the Department provides notice of a proposed assessment to the corporation, it is not required to provide personal notice to the responsible officer. Ball v. Indiana Dep't of Revenue, 563 N.E.2d 522, 524 (Ind. 1990). During the tax years at issue, the Department sent proposed assessments to Carrollton for the unpaid withholding taxes. (Resp't Ex. 2.) Thus, the Department's notices to Carrollton provided sufficient notice to Russell. See Id. at 525.
    Second, the assessment of Carrollton's unpaid withholding taxes is not barred by the statute of limitations. If the Department determines that a taxpayer has failed to pay a tax, it may issue a proposed assessment only if it is not more than three years after the latest of the date the return was filed or the due date of the return. Ind. Code § 6-8.1-5-2. The Department sent Carrollton notice of proposed assessments of its unpaid withholding taxes within the same year that Carrollton was liable for those taxes. (Resp't Ex. 2.) Thus, notice to Carrollton was timely, and that notice constituted notice to Russell. See Ball, 563 N.E.2d at 525.
    Because the withholding taxes remained unpaid, the Department sent notice of the proposed assessment to Russell, as a responsible officer of Carrollton, in 1995. Russell's claim that the 1995 notices were past the three year statute of limitations is without merit. The fact that the Department did not send Russell personal notice of assessment until 1995 is of no moment because the timely notice to Carrollton tolled the statute of limitations for Russell. See Ball, 563 N.E.2d at 525. Thus, the Department's assessment of unpaid withholding tax is not barred by the statute of limitations. See Id.
    Moreover, Russell's argument that the interest and penalties should be waived is also without merit. Russell argues that the Department should waive the interest and penalties assessed to him because of the delay between his liability for the withholding taxes and his personal notice of the assessment (1987 to 1995) and because of the delay between his notice of assessment and his hearing before the Department (1995 to 2000). See footnote Russell bases his argument on Indiana Code § 6-8.1-10-2.1, which states:
A person who wishes to avoid the penalty imposed under this section must make an affirmative showing of all facts alleged as a reasonable cause for the person's failure to . . . timely remit [withholding] tax held in trust, in a written statement containing a declaration that the statement is made under penalty of perjury. The statement must be filed with the return or payment within the time prescribed for protesting departmental assessments.

Ind. Code § 6-8.1-10-2.1(e) (emphasis supplied).
    Russell's reliance on this statute does not support a waiver of interest. Indiana Code § 6-8.1-10-2.1 only applies to "penalties." I.C. § 6-8.1-10-2.1(e). Furthermore, the statute dealing with liability for interest does not allow the Department to waive interest imposed. See Video Tape Exchange Co-op. of America, Inc. v. Indiana Dep't of State Revenue, 533 N.E.2d 1302, 1306 (Ind. Tax Ct. 1989) (citing Ind. Code § 6-8.1-10-1(e)). Therefore, the Department correctly denied Russell's request to waive the interest.
    Finally, Russell has not made a showing that entitles him to a waiver of penalties. To waive a penalty, the statute requires that the taxpayer show reasonable cause why he failed to timely pay the withholding tax. I.C. § 6-8.1-10-2.1(e). To establish reasonable cause, a taxpayer "must demonstrate that [he] exercised ordinary business care and prudence in carrying out or failing to carry out a duty giving rise to the penalty imposed[.]" Video Tape Exchange, 533 N.E.2d at 1305 (quoting Ind. Admin. Code 45, r. 15-11-2(c)). Russell has failed to make such a showing.
    At trial, Russell admitted receiving some of the withholding assessments when the Department sent them to Carrollton. (Trial Tr. at 29.) He stated that he paid some and did not pay others. (Trial Tr. at 23.) Russell has offered no reasonable cause showing why the taxes were not paid. Instead, he merely points the finger of blame at the Department for a delay in holding a hearing. See footnote Because Russell has failed to show reasonable cause for his failure to pay the withholding taxes, he is not entitled to a waiver of any penalties associated with those unpaid taxes.
CONCLUSION
    For the above stated reasons, this Court AFFIRMS the Department's finding that Russell is liable for the withholding tax, interest, and penalties.

Footnote: The specific months at issue are: December 1985, March 1986, September 1986, December 1986, and January through June 1987. (Resp't Ex. 3.)
Footnote: Russell did not argue the issue of waiver of penalties before the Department. However, because this Court is not bound by either the evidence presented or issues raised at the administrative level, it will review the penalty waiver issue. See Ind. Code § 6-8.1-5-1(h); Tri-States Double Cola Bottling Co. v. Dep't of State Revenue, 706 N.E.2d 282, 283 (Ind. Tax Ct. 1999).
Footnote: While the Court does not condone any alleged delay by the Department in resolving Russell's protest, Russell's delay complaint does not provide support for his required showing of reasonable cause of why he failed to timely pay the taxes due.