Was Andrew Winton personally liable for an LLC restaurant's unpaid withholding tax because registrations listed him as an agent, manager, and officer?

Plain-English summary

Andrew Winton was not personally liable for a New Mexico restaurant LLC's unpaid withholding tax because he never controlled wage payments or any other part of the business. The AHO abated the full assessment of $3,372.70 tax, $910.49 penalty, and $170.84 interest.

Winton registered the LLC in Texas on behalf of his son-in-law and was listed as registered agent and manager. The son-in-law actually owned and operated the restaurant in New Mexico.

Later New Mexico filings also identified Winton as an agent, manager, or officer. Winton credibly testified that he did not know about or authorize those registrations.

Individual liability depended on wage-payment control

New Mexico required employers withholding federal income tax from wages to withhold and pay state income tax. A “withholder” was a payor, employer, or other person required to withhold.

The statutory employer definition could include an LLC's officer, agent, or employee, so individual liability was possible despite the entity form. The key language asked whether that person had “control of the payment of wages.”

The decision looked to federal withholding cases treating control as belonging to the person who actually made payments or controlled the bank account from which they were made.

Registration titles did not prove operational authority

Winton did not work for the restaurant or LLC, receive compensation, handle finances, hold account authority, know suppliers, supervise employees, know wages, or participate in operations. His only business contact was eating at the restaurant a few times.

The Texas filing formally removed Winton as agent and manager on April 1, 2009. More importantly, the evidence showed he never paid wages or expenses and never controlled LLC assets during the assessed November 2008 through March 2009 periods.

Credible testimony overcame the assessment

The Department relied on registration records identifying Winton. His detailed testimony rebutted the assessment presumption, and the Department presented no contrary evidence of actual wage-payment control.

The AHO discussed general LLC protection from entity debts but found that issue ultimately unnecessary to resolve. New Mexico could impose withholding liability on an individual officer or agent when the statutory control test was met; Winton simply did not meet it.

Result: protest GRANTED. Winton was not an employer or withholder, and the assessment was fully abated.

What this means for you

LLC officers, managers, and registered agents

A title on organizational paperwork can trigger scrutiny, but withholding liability depends on the governing statute and evidence of actual authority, especially control over wage payments.

People lending their names to a business filing

Keep formation agreements, amendments, account-authority records, payroll permissions, and communications showing who actually operates the business. Correct inaccurate public and tax registrations promptly.

Businesses assigning payroll responsibility

Document who can authorize wages, sign checks, access bank accounts, and direct payroll. Those operational facts can determine individual liability for collected taxes.

Common questions

Q: Why was Winton listed in LLC records?
A: He formed the Texas LLC on behalf of his son-in-law and appeared in later New Mexico registrations, but the son-in-law actually owned and operated the restaurant.

Q: Can an LLC officer or agent ever be personally liable for withholding tax?
A: Yes. The decision read New Mexico law to permit liability when the individual qualifies as an employer or withholder and controls wage payments.

Q: Did Winton control the restaurant's bank accounts?
A: No. He was not authorized on accounts and did not control assets or finances.

Q: Did he supervise employees or pay wages?
A: No. The record showed no involvement with employees, wages, payroll, or expenses.

Q: What did the AHO abate?
A: The entire $4,454.03 assessment, including tax, penalty, and interest.

Citations and references

Statutes:

• NMSA 1978, §§ 7-3-2 through 7-3-5 and 7-3-9 — employer and withholder definitions, collection, payment, and employee credit
• NMSA 1978, § 53-19-13 — general liability protection for LLC members and managers
• NMSA 1978, §§ 7-1-17 and 7-1-3 — assessment presumption and inclusion of penalty and interest in “tax”

Cases cited:

• United States v. Total Employment Co., 305 B.R. 333 (M.D. Fla. 2004) — wage-payment and bank-account control in federal withholding context
• Otte v. United States, 419 U.S. 43 (1974) — federal withholding control cited by the AHO
• MPC Ltd. v. New Mexico Taxation and Revenue Department, 2003-NMCA-021 — burden shifts after sufficient evidence rebuts an assessment
• Fin & Feather Club v. Leander, 415 S.W.3d 548 — LLC liability protection absent a basis to pierce the entity veil

Source

• Listing: New Mexico Decisions & Orders
• Decision post: Andrew Winton
• Decision PDF: D&O 15-32

Original ruling text

STATE OF NEW MEXICO
ADMINISTRATIVE HEARINGS OFFICE
TAX ADMINISTRATION ACT

IN THE MATTER OF THE PROTEST OF
ANDREW WINTON, No. 15-32
TO THE ASSESSMENT ISSUED UNDER
LETTER ID NO. L0651859008

DECISION AND ORDER

A formal hearing on the above-referenced protest was held on August 31, 2015, before

Hearing Officer Dee Dee Hoxie. The Taxation and Revenue Department (Department) was

represented by Ms. Elena Morgan, Staff Attorney. Mr. Tom Dillon, Auditor, also appeared on

behalf of the Department. Mr. Andrew Winton (Taxpayer) appeared for the hearing by

telephone, and his attorney, Mr. Robert Skipworth, appeared in person. The Hearing Officer

took notice of all documents in the administrative file. Based on the evidence and arguments

presented, IT IS DECIDED AND ORDERED AS FOLLOWS:

FINDINGS OF FACT

1. On January 28, 2010, the Department assessed the Taxpayer for withholding tax, penalty,

and interest for the tax periods from November 2008 through March 2009. The

assessment was for $3,372.70 tax, $910.49 penalty, and $170.84 interest.

2. On February 2, 2010, the Taxpayer filed a formal protest letter.

3. On March 31, 2015, the Department filed a Request for Hearing asking that the

Taxpayer’s protest be scheduled for a formal administrative hearing.

4. On March 31, 2015, the Hearings Office issued a notice of hearing.

5. On April 7, 2015, a motion for scheduling hearing was filed. The request was granted

and a scheduling hearing was conducted on May 15, 2015.

6. The scheduling order and notice was issued on May 18, 2015 and an amended notice was

issued on June 9, 2015.

7. The Taxpayer filed a motion to appear by telephone due to health concerns. The motion

was granted.

8. A second amended notice was issued on July 6, 2015

9. The Taxpayer filed a brief on August 19, 2015.

10. On February 26, 2007, the Taxpayer filed to register a limited liability company (LLC) in

the state of Texas. The LLC was organized to engage in the restaurant business.

11. The Taxpayer filed as the registered agent and manager of the LLC.

12. The Taxpayer filed the LLC on behalf of his son-in-law. The son-in-law was not able to

register an LLC in Texas at that time as he was not a U.S. citizen.

13. The son-in-law was the one who actually owned and operated the restaurant under the

LLC. The son-in-law opened and operated his restaurant in New Mexico.

14. The LLC registered with PRC as a foreign LLC in New Mexico on June 26, 2007. This

registration listed the Taxpayer as the agent of the LLC. It also listed the Taxpayer, his

son-in-law, and the son-in-law’s business partner as officers of the LLC.

15. The LLC registered with the Department for gross receipts taxes on July 27, 2007. The

application for business tax identification number included a list that identified the

Taxpayer as one of the managers of the LLC. The son-in-law and his business partner

were also listed as managers, as well as presidents, CEOs, and owners. Two other

businesses were also listed as owners. The son-in-law’s business partner signed the

application.

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Letter ID No. L0651859008
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16. From November 2008 through March 2009, the LLC filed its withholding tax, but failed

to pay the amounts due.

17. The LLC’s original registration in Texas was amended on April 1, 2009. That

amendment removed the Taxpayer from the registration and indicated that the son-in-law

was the agent and manager of the LLC.

18. The Taxpayer was aware that his son-in-law was running the restaurant in New Mexico

and ate there on a few occasions.

19. The Taxpayer was unaware of any business or tax registrations that were done in New

Mexico and had not consented to the use of his information on any such registrations.

20. The Taxpayer did not work in the restaurant or LLC, was not paid by them, did not deal

with any of their finances, was not authorized on any of their accounts, did not know who

their suppliers were, did not have any control over or knowledge about their employees

or wages, and did not participate in any aspects of their business.

DISCUSSION

The issue to be decided is whether the Taxpayer is liable for withholding tax, penalty,

and interest for the tax periods from November 2008 through March 2009.

Burden of Proof.

Assessments by the Department are presumed to be correct. See NMSA 1978, § 7-1-17.

Tax includes, by definition, the amount of tax principal imposed and, unless the context

otherwise requires, “the amount of any interest or civil penalty relating thereto.” NMSA 1978, §

7-1-3. See also El Centro Villa Nursing Ctr. v. Taxation and Revenue Department, 1989-NMCA-

070, 108 N.M. 795. Therefore, the assessment issued to the Taxpayer is presumed to be correct,

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Letter ID No. L0651859008
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and it is the Taxpayer’s burden to present evidence and legal argument to show that he is entitled

to an abatement.

Withholding tax.

Employers who are required to deduct and withhold federal income tax from their

employees’ wages are also required to deduct and withhold state income tax from those wages

and to pay that amount to the state. See NMSA 1978, § 7-3-3 (1996). Those deductions are

considered to be a collected tax, the employee has no cause of action against an employer for

taking those deductions, and the state credits the employee against his/her tax liability for those

deductions. See NMSA 1978, § 7-3-4 and § 7-3-9.

“Every withholder shall be liable for amounts required to be deducted and withheld”.

NMSA 1978, § 7-3-5 (2010). A withholder is “a payor, an employer or any person required to

deduct and withhold”. NMSA 1978, § 7-3-2 (M) (2010). The assessment identified the

Taxpayer as an employer. The Taxpayer argued that he was not liable for the withholding tax.

The Taxpayer argued that as a manager of an LLC, he was protected from the debts of the LLC,

including any tax debts. The Taxpayer also argued that he was not an employer for purposes of

withholding tax.

Generally the members and managers of an LLC are protected from debts of the LLC.

See NMSA 1978, § 53-19-13 (1993). See also Fin & Feather Club v. Leander, 415 S.W. 3d 548,

556 (holding that members of an LLC are protected from the debt of the LLC absent a showing

of fraud that would justify piercing the corporate veil). There are situations when tax liabilities

are considered to be debts. See Lopez v. Lopez, No. 31,217 mem. op. (N.M. Ct. App. May 29,

2013) (non-precedential). See also Nelson v. Nelson, 1971-NMSC-027, § 3, 82 N.M. 324.

However, there are also situations when tax liability and debt are given diametrically opposed

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Letter ID No. L0651859008
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legal constructions. See Schneller v. Schneller, 1994-NMCA-014, ¶ 8, 117 N.M. 197. There

does not appear to be a case directly on point for the Taxpayer’s situation.

Ultimately, though, the issue is moot. New Mexico tax law clearly contemplates holding

an individual liable for withholding tax. The definition of person includes an LLC. See NMSA

1978, § 7-3-2 (H). However, the definition of an employer includes “a person or an officer,

agent or employee of that person”. NMSA 1978, § 7-3-2 (C). Consequently, the individual

employee, officer, or agent can be held liable as an employer and withholder. See NMSA 1978,

§ 7-3-2 and § 7-3-5. The key inquiry appears to be whether the individual had “control of the

payment of wages”. NMSA 1978, § 7-3-2 (C).

“Control of the payment of wages” is not defined. See id. The primary goal in

interpreting a statute is to give it the effect that the Legislature intended. See State v. Davis, 2003-

NMSC-022, 134 N.M. 172. Statutory construction begins by looking at the plain meaning of the

language. See id. See also Wood v. State Educ. Ret. Bd., 2011-NMCA-020, ¶ 12, 149 N.M. 455.

See also State v. Maestas, 2007-NMSC-001, 149 P.3d 933. See also Johnson v. NM Oil

Conservation Com’n, 1999-NMSC-021, 127 NM 120. In the federal context of withholding,

“control” has been found to be in the hands of the person actually making the payment or having

control of the bank account from which payments were made. See U.S. v. Total Employment Co.,

Inc., 305 B.R. 333, 339 (M.D. Fla. 2004). See also Otte v. U.S., 419 U.S. 43, 50 (1974).

I found the Taxpayer’s testimony to be credible. The Taxpayer had no dealings with the

LLC other than as a customer of the restaurant. He was not authorized on any accounts and did

not control any of the LLC’s assets. He was officially removed from the LLC’s paperwork on

April 1, 2009. He never paid any wages or any other expenses of the LLC. There was no

evidence presented that contradicted his testimony. See MPC Ltd. v. N.M. Taxation and Revenue

Andrew Winton
Letter ID No. L0651859008
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Dep’t., 2003-NMCA-021, ¶ 13, 133 N.M. 217, 62 P.3d 308 (filed October 2, 2002) (holding that

the burden shifts to the Department when a taxpayer presents sufficient evidence to rebut the

presumption). In this case, the Taxpayer was not the individual who had control over the

payment of wages. Therefore, he is not personally liable for the withholding tax, penalty, or

interest owed by the LLC.

CONCLUSIONS OF LAW

A. The Taxpayer filed a timely written protest to the Notice of Assessment of

withholding taxes issued under Letter ID number L0651859008, and jurisdiction lies over the

parties and the subject matter of this protest.

B. The Taxpayer was not an employer for purposes of withholding tax as he did not

control the payment of wages. See NMSA 1978, § 7-3-5 and § 7-3-2.

C. Consequently, the Taxpayer is not liable for the tax, penalty or interest of the LLC,

and the assessment is HEREBY ABATED.

For the foregoing reasons, the Taxpayer's protest is GRANTED.

DATED: September 29, 2015.

Dee Dee Hoxie
DEE DEE HOXIE
Hearing Officer
Administrative Hearings Office
Post Office Box 6400
Santa Fe, NM 87502

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Letter ID No. L0651859008
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