I'm listed as a corporate officer and minority shareholder of a restaurant, but I only ever worked in the kitchen -- can the state make me personally pay the restaurant's unpaid taxes?

Plain-English summary

Two affiliated restaurants were assessed delinquent litter tax, withholding tax, and retail sales and use tax, plus penalties and interest, for periods from January 2017 through December 2018. When the restaurants failed to pay, the Department converted the assessments to a taxpayer personally — records showed him listed as vice president of Restaurant 1 and as a corporate officer of Restaurant 2. But this taxpayer was a minority shareholder and the chef, not the business's financial manager. He argued he wasn't liable because he had no involvement in payroll, bookkeeping, invoices, or tax payments — those responsibilities belonged to the president and majority owner — and he had no knowledge of the delinquent taxes and no authority to have prevented the failure to pay them. He supported this with employee affidavits confirming his role was limited to menu creation, specials, and overseeing food preparation and kitchen staff.

The four-part responsible-officer test. Virginia Code § 58.1-1813 A lets the Department personally assess a corporate officer who willfully fails to pay, collect, or account for a tax the corporation owes. Section 58.1-1813 B and the case Angelson v. Commonwealth set out four conditions that must ALL be met before someone can be held personally liable: (1) willful failure to pay/collect/account for the tax; (2) officer or employee status with a duty to perform the relevant act; (3) knowledge of the failure; and (4) authority to have prevented it. Courts define "willful" broadly — the act only needs to be "voluntary, conscious, and intentional" (Hewitt v. United States) — meaning it's enough to show the officer knew about the unpaid liability and knowingly chose to pay other expenses instead.

Why the title alone didn't matter here. Although this taxpayer was formally listed as an officer on both corporations, the Department found his actual role carried no fiduciary responsibility for taxes — no duty to perform any tax-related act, no knowledge of the delinquency, and no authority to prevent it. Holding an officer title on paper isn't enough by itself; the Department looks at whether the person's real duties and knowledge satisfy all four Angelson conditions. Because they didn't, the Department abated the converted assessments against him in full, for both restaurants and all three tax types.

What this means for you

Minority shareholders or non-financial officers of a corporation

Holding an officer title (or being listed as one in corporate records) doesn't automatically expose you to personal liability for the company's unpaid taxes. What matters is whether you actually had a tax-related duty, knew about the delinquency, and had the authority to fix it.

Corporate officers facing a converted assessment

Document your actual role with specifics — job duties, lack of financial signing authority, and (as here) affidavits from coworkers or employees confirming what you did and didn't do — to show you don't meet all four conditions of the responsible-officer test.

Business owners structuring management roles

Keep a clear record of who actually holds financial and tax-related duties versus who holds a title without those responsibilities; this ruling shows that distinction can be the difference between abatement and personal liability if the business later falls behind on taxes.

Common questions

Q: I'm listed as a corporate officer but have no role in finances or taxes — can the state still come after me personally for unpaid company taxes?
A: Not if you can show you lack a tax-related duty, had no knowledge of the delinquency, and had no authority to prevent it — all four conditions of Virginia's responsible-officer test must be met, and a title alone doesn't satisfy them.

Q: What does "willful" mean under Virginia's responsible-officer statute?
A: The failure must be voluntary, conscious, and intentional — meaning the officer knew about the unpaid liability and knowingly chose to pay other expenses instead of the tax. It doesn't require intent to defraud.

Q: Does this affect multiple tax types at once?
A: Yes — this ruling addressed sales and use tax, litter tax, and withholding tax together in a single responsible-officer determination, since all three were owed by the same delinquent corporations.

Citations and references

Statutes and regulations:

• Va. Code § 58.1-1813 A — personal penalty against a corporate officer who willfully fails to pay, collect, or account for a tax the corporation owes
• Va. Code § 58.1-1813 B — defining "corporate officer" as someone with a duty to act, who had knowledge of the failure and authority to prevent it

Case law:

• Angelson v. Commonwealth, 25 Va. Cir. 319 (City of Richmond, 1991) — the four-part test for personal officer liability
• Hewitt v. United States, 377 F.2d 921 (5th Cir. 1967) — "willful" means voluntary, conscious, and intentional

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 24-124

Original ruling text

November 18, 2024

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

Dear *:

This will reply to your letter in which you seek relief from the retail sales and use, litter, and withholding tax responsible party penalty issued against * (the “Taxpayer”).

FACTS

* (Restaurant 1) and *** (Restaurant 2), collectively the “Restaurants,” were assessed for delinquent litter tax, withholding taxes, and retail sales and use taxes, plus applicable penalties and interest, for multiple taxable periods from January 2017 through December 2018. Information reviewed by the Department indicated the Taxpayer was listed as vice president for Restaurant 1 and as a corporate officer for Restaurant 2. When the Restaurants failed to satisfy the assessments, penalties were assessed against the Taxpayer, a minority shareholder and chef. The Taxpayer filed an application for correction contending that he is not liable for the converted assessments because he was not involved in any financial aspects of the Restaurants. In addition, the Taxpayer maintains that he did not willfully fail to pay sales taxes, had no duty to pay taxes or any invoices for the Restaurants, had no knowledge of delinquent taxes, and had no authority to prevent the failure to pay any taxes.

DETERMINATION

Virginia Code § 58.1-1813 A states, “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.”

Under Virginia Code § 58.1-1813 B, the term “corporate officer” is defined as “an officer or employee of a corporation... who as such officer [or] employee... is under a duty to perform on behalf of the corporation... 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 the authority to prevent such failure or attempt.”

In Angelson v. Commonwealth , 25 Va. Cir. 319 (City of Richmond, 1991), the court set out four conditions that must be met before a person can be held individually liable for taxes assessed against a corporation:

1. 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.

2. 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.

3. The person must have knowledge of the failure or attempt as set out in the statute.

4. The person must have the authority to prevent such failure or attempt.

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, 924 (5th Cir. 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 entity.

According to the Taxpayer, his role in both Restaurants was limited to handling menu creation, creating specials, and overseeing food preparation and the kitchen staff. The Taxpayer also contends that he had no financial or bookkeeping responsibilities of the Restaurants and had no role in payroll or the payment of taxes. Rather, the Taxpayer maintains that such responsibilities were the duties of the president and business manager who is also the majority owner in both restaurants. To support these facts, the Taxpayer submitted employee affidavits stating that his involvement was limited to food preparation and overseeing the kitchen and that the president handled the financial activities of the Restaurants.

Although listed as a corporate officer, the Taxpayer’s role within the Restaurants did not involve any fiduciary responsibilities that included the payment of taxes. Based on the evidence provided and the cited authorities, the Taxpayer is not a responsible officer for either Restaurant 1 or Restaurant 2. Accordingly, the converted assessments issued to the Taxpayer will be abated.

The Code of Virginia sections cited are available online at law.lis.virginia.gov. If you have any questions regarding this determination, you may contact * in the Office of Tax Policy, Appeals and Rulings, at or **.

Sincerely,

James J. Alex

Tax Commissioner

Commonwealth of Virginia

AR\2223.F

Related Documents

09-116

10-90

12-100

17-105