What is a Responsible Person?
A responsible person may be any officer or employee of a corporation who is under the duty to collect and remit trust fund taxes to the State of New Jersey on behalf of the corporation. Trust fund taxes are considered to be Sales tax, Gross Income Withholding tax and Motor Fuels tax. A responsible person may be held personally liable for any of these taxes due from the corporation.
How is it determined that an officer or employee is responsible?
In 1993, the Tax Court of New Jersey addressed the issues of responsible persons in a case,Cooperstein v. Director, Division of Taxation, 13 NJ Tax 68. The Court analyzed the following nine factors in their determination:
- The contents of the corporate by-laws.
- Status as an officer and/or stockholder.
- Authority to sign checks and exercise of this authority.
- Authority to hire and fire and exercise of this authority.
- Responsibility to prepare and/or sign tax returns.
- Day-to-day involvement in the business or responsibility for management.
- Power to control payment of corporate creditors and taxes.
- Knowledge of failure to remit taxes when due.
- Derivation of substantial income or benefits from the corporation.
The Division of Taxation will analyze the above factors when there is a question of the personal responsibility of a corporate officer or employee. There may also be additional information requested. Subsequent Tax Court cases addressing responsibility have based their determinations on these factors.
Responsible Person Acknowledgement and Judgment Authorization