Summary
The Supreme Court of Ohio held that a person assessed as responsible for a corporation's delinquent sales taxes under R.C. 5739.33 may challenge the service of the underlying corporate assessment. The court affirmed seven assessments for which certified-mail service on the corporation was established, vacated the decision as to the remaining 20 assessments, and remanded for additional fact-finding on service. The court also denied the tax commissioner's motion to dismiss the appeal.
Topics
Practice areas
Questions Presented
- Whether Cruz's notice of appeal adequately specified an error under R.C. 5717.04 and invoked the Supreme Court of Ohio's jurisdiction.
- Whether a person assessed under R.C. 5739.33 may challenge the validity of service of the underlying corporate assessment as a defense to the derivative personal-responsibility assessment.
- Whether the record established perfected service of the underlying corporate assessments, and whether additional evidence was necessary for the 20 assessments lacking proof of completed service.
Holdings
- Cruz's notice of appeal adequately identified the service issue when read in the context of the objections and evidence presented below; the appeal therefore invoked the court's jurisdiction.
- When an assessment against a responsible person under R.C. 5739.33 is predicated on an earlier assessment against the corporation, the responsible person may challenge the service of the corporate assessment as a defense to the personal assessment. If service on the corporation was not perfected, the derivative assessment against the responsible person is invalid.
- The record established perfected certified-mail service for seven corporate assessments, supporting the corresponding personal assessments against Cruz. The record did not establish completed service for the other 20 assessments, so additional evidence and fact-finding were required.
Key quotations
“A successful challenge to the service on the corporation will invalidate the derivative-liability assessment against the responsible individual.” (¶ 42)
“when an assessment made against a responsible person under R.C. 5739.33 is predicated on an earlier assessment against the corporation itself, the person may contest the assessment against her personally by challenging the service of the corporate assessment on the corporation.” (¶ 42)
“If the corporation was not properly served, then its omission to contest the assessments cannot be regarded as oscitant, i.e., the corporation did not sleep on its rights.” (¶ 38)
Factual background
Cruz was the majority shareholder and president of Cruz-Samsa Corporation, a Petland retail business that incurred sales-tax liabilities from late 2007 through the first half of 2010. The Tax Commissioner issued 27 assessments against the corporation and later issued corresponding personal-responsibility assessments against Cruz under R.C. 5739.33. The record established completed certified-mail service for seven corporate assessments, but the remaining 20 were marked returned, unclaimed, refused, or NoFinlEvnt, with no evidence of required follow-up service.
Procedural history
The Tax Commissioner issued 27 personal-responsibility sales-tax assessments against Cruz under R.C. 5739.33 for liabilities of Cruz-Samsa Corporation. Cruz challenged, among other things, the service of the underlying corporate assessments. The Tax Commissioner rejected the service challenge, and the Board of Tax Appeals affirmed. The Supreme Court denied the motion to dismiss, reversed the BTA's ruling that Cruz could not challenge corporate service, affirmed the seven assessments for which completed service was shown, and vacated and remanded as to the remaining 20 assessments for additional fact-finding.
Remand instructions
The BTA must take additional evidence as it deems necessary and determine whether service of each of the 20 remaining corporate assessments was perfected under the version of R.C. 5703.37 in effect when the assessment was issued and consistent with due process. If service was completed, the corresponding assessments against Cruz should be upheld; if service was not perfected, those assessments should be canceled.