On November 4, 2016, the Wisconsin Tax Appeals Commission (WTAC) in Heckel v. Wisconsin Department of Revenue held corporate officers of a group of marinas (“Petitioners”) personally liable for sales tax owed to the Wisconsin Department of Revenue (“Department”).1 The WTAC found that the corporate officers 1) had the authority to pay sales tax collected, 2) had the duty to pay the collected sales tax to the Department, and 3) breached that duty by paying creditors other than the Department.
The Petitioners, having financial troubles as a result of an attempt to expand their marina business, entered into a forbearance agreement with its bank. The Petitioners also agreed to a bank requirement that all inflows to be deposited into a bank-controlled account, including all sales receipts and sales tax, as well as hiring a bank preapproved consultant to help operate daily affairs. The Petitioners then acquiesced to the bank’s procedure of choosing which creditors/vendors would be paid and when. The Department was on such priority list, but was at some point removed, which the Petitioners were aware. Subsequently, the Petitioners attempted to pay the Department for delinquent sales tax payments, but by the time the check reached the Department, the bank had already withdrawn all funds from the bank-controlled account.
Despite deflecting responsibility by showing the bank’s and consultant’s control of the marinas’ operations, the Petitioners were still liable for the tax. By admitting they owned the marinas, were corporate officers, collected tax from sales at the marina, knew that sales tax was not being paid to the Department, were authorized signers on the accounts, and paid other creditors, the officers admitted to all three prongs for establishing liability of a responsible person under Wisconsin law.
The WTAC emphasized that when “a taxpayer collects sales taxes, that money is not his to use. It is to be held in trust until remitted to the state. The taxpayer cannot use that money to keep the business going or for any other noble purpose. Even if paying the taxes over to the Department brings hardship and leaves little hope of paying other creditors, the taxpayer still has no legal alternative.” Accordingly, the Petitioners should have paid the sales tax to the Department as required.
The take-away here is that the collection of sales tax creates a fiduciary role for businesses and corporate officers and/or owners of a business to remit any sales tax collected to the appropriate tax jurisdiction.
 Heckel v. Wisconsin Department of Revenue, Nos. 14-S-099, 14-S-100, 14-S-101, 14-S-102, 14-S-103, and 14-S-104 (WTAC 2016).