Did the Richmond Circuit Court uphold Virginia sales-tax successor liability against GFT, Inc. in P.D. 07-210?

Subject

GFT successor-liability assessment upheld

Plain-English summary

The Richmond Circuit Court upheld Virginia's successor-liability tax assessment against GFT, Inc. The court found that GFT was the successor to Tavern at Great Falls, LLC for purposes of Va. Code § 58.1-629.

The court also found that the Department's assessment and its related procedures were not arbitrary and capricious. It denied GFT's renewed motion for summary judgment, declared GFT subject to successor liability, and upheld the assessment.

The final order says the reasons appeared in a July 9, 2007 letter opinion, but that opinion is not included in the published document. The order therefore does not provide the transaction details, assessment amount, or a fuller explanation of why GFT qualified as the successor.

What this means for you

• Buying or continuing a business can create exposure for the predecessor's Virginia tax liability under the successor-liability statute.
• In this case, the court accepted both the Department's successor finding and its assessment procedures.
• The published order establishes the outcome but omits the detailed facts and analysis contained in a separate letter opinion.
• This is a circuit-court order involving named parties, not taxpayer-specific advice issued by the Tax Commissioner.

Common questions

Who won the case?

The Virginia Department of Taxation. The court denied GFT's renewed summary-judgment motion and upheld the assessment.

What business was GFT found to have succeeded?

Tavern at Great Falls, LLC.

Why was GFT treated as the successor?

The final order states the finding but does not reproduce the July 9, 2007 letter opinion containing the court's reasons.

Does the order state the amount due?

No. The published text does not disclose the assessment amount.

Citations and references

• Va. Code § 58.1-629.
• GFT, Inc. v. Commonwealth of Virginia Department of Taxation, Civil Action No. CL06-7245-00 (Richmond Circuit Court, final judgment entered Nov. 27, 2007).

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 07-210

Original ruling text

P. D. 07-210

VI RGINIA:

IN THE CIRCUIT COURT FOR THE CITY OF RICHMOND

John Marshall Courts Building

GFT, INC.,

Plaintiff,

v. Civil Action No. CL06-7245-00

COMMONWEALTH OF VIRGINIA

DEPARTMENT OF TAXATION,

Defendant.

FINAL JUDGMENT ORDER

On April 17, 2007, Plaintiff GFT, Inc. and Defendant Commonwealth of Virginia, Department of Taxation, by counsel, appeared before the Honorable Melvin R. Hughes, Jr., for trial upon the pleadings filed herein and presented evidence for decision. After reviewing the parties' stipulations and hearing the plaintiff's evidence and the arguments of counsel, the Court took the matter under advisement.

IT APPEARING that after reviewing the parties' stipulations and the evidence presented herein and hearing the arguments of counsel, the Court finds that:

(1) GFT, Inc. was the successor to the Tavern at Great Falls, LLC, for purposes of Va. Code Ann. § 58.1-629; and

(2) The Department's assessment and attendant procedures in assessing said taxes were not arbitrary and capricious.

Accordingly, based on these findings as set forth in the Court's letter opinion dated July 9, 2007, it is therefore

ADJUDGED, ORDERED, AND DECREED as follows:

(i) GFT's renewed Motion for Summary Judgment is hereby denied.

(ii.) GFT is subject to successor liability for the reasons cited in Paragraph 1 above.

(iii) The Department's assessment of successor liability pursuant to Va. Code Ann. § 58.1-629 is upheld.

All objections and exceptions to the Court's ruling on matters raised in the trial of this matter are hereby noted for the reasons set forth in the trial transcripts. All objections and exceptions of GFT, Inc. to this Final Judgment Order are noted.

Nothing further remaining to be done herein, this case is, stricken, from the docket, to be indexed among the ended actions at law.

The Clerk of Court is direct to send a certified copy of this Order to each counsel of record.

Endorsement waived pursuant to Rule 1:13.

ENTER: 11/27/07

The Honorable Melvin R. Hughes, Jr.

I ask for this:

COMMONWEALTH OF VIRGINIA

DEPARTMENT OF TAXATION

Flora T. Hezel, (VSB No. 47482)

Assistant Attorney General-II

Office of the Attorney General of Virginia

900 East Main Street

Richmond, Virginia 23219

Telephone: (804) 786-8816

Facsimile: (804) 786-1904

Counsel for Defendant Commonwealth of Virginia,

Department of Taxation

Seen and Objected to:

GFT, INC.

Monica McCarroll (VSB No. 45622)

WILLIAMS MULLEN

A Professional Corporation

Two James Center

1021 East Cary Street

P. O. Box 1320

Richmond, VA 23218-1320

Telephone: (804) 643-1991

Facsimile: (804) 783-6507

Michael J. Bowen (VSB No. 65288)

WILLIAMS MULLEN

A Professional Corporation

222 Central Park Avenue, Suite 1700

Virginia Beach, VA 23462-3035

Telephone: (757) 499-8800

Facsimile: (757) 473-0395

Counsel for Plaintiff GFT, Inc.