The Department is trying to collect my former employer's unpaid sales and withholding taxes from me personally because I was a shift manager there -- can they do that if I never had access to the bank account or authority over which bills got paid?

Plain-English summary

A restaurant corporation racked up unpaid withholding tax (2013-2015) and retail sales and use tax (2014-2015), plus penalties and interest. When the corporation didn't pay, the Department converted those delinquent assessments to an individual as a "responsible officer" -- a mechanism that lets the state collect a corporation's unpaid taxes directly from certain individuals connected to the business. That individual appealed, explaining that during the periods at issue she was only a shift manager at the restaurant: never an owner, partner, or shareholder, with no control over which bills got paid, no access to the corporate bank account, and no authority to sign checks on the corporation's behalf.

Virginia's responsible-officer statute (Va. Code § 58.1-1813) and a 1991 Virginia circuit court case interpreting it, Angelson v. Commonwealth, lay out a strict four-part test, and the Department can only convert a corporate tax debt to an individual if ALL four parts are met: (1) the person willfully failed to pay, collect, or account for the tax (meaning a voluntary, conscious, and intentional act -- typically, knowingly paying other company debts instead of the tax owed); (2) the person was an officer or employee with an actual duty to perform the act that was violated; (3) the person knew about the failure; and (4) the person had the authority to prevent it. Missing even one of these four elements bars the Department from collecting from that individual.

Based on the facts presented, the Department found the taxpayer didn't willfully fail to remit anything, had no duty to remit the taxes, and had neither the knowledge nor the authority to prevent the corporation's failure to file and pay. She failed all four parts of the test (any one of which would have been enough to defeat the conversion), so the assessments converted to her were abated in full.

What this means for you

Managers or other employees who don't own or control a business but are pursued for its unpaid taxes

Being called a "manager" alone doesn't make you personally liable for your employer's unpaid sales or withholding tax. What matters is whether you actually had a duty to remit the tax, knew it wasn't being paid, and had real authority (like bank or check-signing access) to prevent the failure -- not just a job title.

Business owners or bookkeepers who DO control payments and bank accounts

The flip side of this ruling is a warning: if you're the person who actually decides which bills get paid and knowingly keeps the business running while sales or withholding tax goes unremitted, you're squarely within the kind of role this four-part test is built to catch.

Anyone contesting a "converted assessment" notice

Focus your appeal on concrete facts about your actual role -- ownership status, bank and check-signing access, and whether you had real decision-making authority over which obligations got paid -- since any one missing element defeats the conversion under this test.

Common questions

Q: What does it mean for a corporate tax assessment to be "converted" to an individual?
A: It means the Department shifts a corporation's unpaid tax liability to a specific individual connected to the business -- a "responsible officer" -- so that person becomes personally liable for the debt, typically because the corporation itself failed to pay.

Q: Does having the title "manager" automatically expose me to personal liability for my employer's unpaid taxes?
A: No. Liability requires meeting all four parts of Virginia's statutory test -- willful failure, a duty to perform the act, knowledge of the failure, and authority to prevent it. A manager without financial control or decision-making authority over tax payments generally won't meet this test.

Q: What does "willful" mean in this context?
A: Under the standard applied here (from a federal case, Hewitt v. U.S.), willful means the act was voluntary, conscious, and intentional -- essentially, that the person knowingly and intentionally paid other operating expenses or debts while aware the tax liability was going unpaid.

Citations and references

• Va. Code § 58.1-1813 A (personal liability of a corporate, partnership, or LLC officer who willfully fails to pay/collect/account for tax)
• Va. Code § 58.1-1813 B (defines "corporate, partnership or limited liability officer" as one with a duty to act, knowledge of the failure, and authority to prevent it)
• Angelson v. Commonwealth of Virginia, 25 Va. Cir. 319 (1991) (sets out the four-part test for converting a corporate tax debt to an individual)
• Hewitt v. U.S., 377 F.2d 921 (1967) (willfulness means a voluntary, conscious, and intentional act)

Subject

Withholding, Sales : Responsible Officer, Converted Assessment

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 22-14

Original ruling text

January 25, 2022

Re: § 58.1-1821 Application: Withholding Tax and Retail Sales and Use Tax

Dear *:

This is in response to your letter submitted on behalf of * (the “Taxpayer”) in which you seek correction of the withholding tax and sales and use tax assessments converted to the Taxpayer as a responsible officer of *** (the “Corporation”) for the period July 2015 through November 2015. I apologize for the delay in responding to your appeal.

FACTS

The Corporation was assessed withholding taxes, plus applicable penalties and interest for the period July 2013 through November 2015. The Corporation was also assessed retail sales and use taxes, plus applicable penalties and interest for the period June 2014 through November 2015. When the Corporation failed to satisfy the assessments, the delinquent assessments were converted to the Taxpayer as a responsible officer. The Taxpayer maintains that during the periods at issue she was a shift manager at the Corporation’s restaurant. The Taxpayer states that she has never been an owner, partner or shareholder of the Corporation. The Taxpayer also states that she has never had control of the bills that were paid, has never had control over the corporate bank account, and was never authorized to sign checks on behalf of the Corporation. The Taxpayer contends that the converted assessments are erroneous and requests that the converted assessments be abated in full.

DETERMINATION

Responsible Officer

Virginia Code § 58.1-1813 A provides:

Any corporate, partnership or limited liability officer who willfully fails to pay, collect or truthfully account for and pay over any tax administered by the Department of Taxation, or willfully attempts in any manner to evade or defeat any such tax or the payment thereof, shall, in addition to other penalties provided by law, be liable to a penalty of the amount of the tax evaded, or not paid, collected or accounted for and paid over, to be assessed and collected in the same manner as such taxes are assessed and collected.

Further, Virginia Code § 58.1-1813 B states:

The term "corporate, partnership or limited liability officer" as used in this section means an officer or employee of a corporation, or a member, manager or employee of a partnership or limited liability company, who as such officer, employee, member or manager is under a duty to perform on behalf of the corporation, partnership or limited liability company the act in respect of which the violation occurs and who (1) had knowledge of the failure or attempt as set forth herein and (2) had authority to prevent such failure or attempt.

In Angelson v. Commonwealth of Virginia , 25 Va. Cir. 319 (1991), the court determined that the four conditions stated in Virginia Code § 58.1-1813 must be met before a person can be held individually liable for taxes assessed against a corporation. The court found that:

First, the person must willfully fail to pay, collect, or truthfully account for and pay over a state tax, or willfully attempt in any manner to evade or defeat such tax or its payment. Second, the person must be an officer or employee of the corporation and have a duty to perform the act in respect of which the violation occurs. Third, the person must have knowledge of the failure or attempt as set out in the statute. And fourth, the person must have authority to prevent such failure or attempt. ( id . at 321)

The court further stated that the absence of any one of these conditions prohibits the Department from collecting corporate taxes from an individual. Under the standard of willfulness applied by the courts, all that needs to be shown is that the act was “voluntary, conscious, and intentional.” Hewitt v. U.S. , 377 F.2d 921 (1967). In other words, it need only be shown that the corporate officer was aware of the outstanding liability and knowingly and intentionally paid operating expenses or other debts of the Corporation.

In order for the delinquent liabilities of the Corporation to be converted to a responsible officer, all parts of the four part test established in Virginia Code § 58.1-1813 and addressed in the Angelson decision, must be met. Based on the information before me, the Taxpayer did not willfully fail to remit the taxes at issue, nor did the Taxpayer have a duty to remit such taxes. I further find that the Taxpayer did not have the knowledge or the authority to prevent the Corporation’s failure to file and remit the taxes. Accordingly, I find that the Taxpayer was not a responsible officer to whom the delinquent liabilities of the Corporation could be converted for the periods at issue. The assessments at issue will be abated in full.

The Code of Virginia sections cited are available on-line at www.tax.virginia.gov in the Laws, Rules and Decisions section of the Department’s web site. If you have any questions about this response, you may contact * in the Department’s Office of Tax Policy, Appeals and Rulings, at ***.

Sincerely,

Craig M. Burns

Tax Commissioner

AR/1935P