200407791H 



HEARING NO. 44,195 

RE:  **************
TAXPAYER NO.:  **************
AUDIT OFFICE:  N/A 
AUDIT PERIOD:  APRIL 1, 1994  THROUGH  JUNE 30, 1996 

SALES AND USE TAX/RDT 

BEFORE THE COMPTROLLER
OF PUBLIC ACCOUNTS
OF THE STATE OF TEXAS

ROY G. SCUDDAY
Administrative Law Judge

VICTOR JOHN SIMONDS
Representing Tax Division

**************
Representing Taxpayer


COMPTROLLER'S DECISION


PRELIMINARY DISCUSSION:

This case was heard at an oral hearing held in **************, Texas, on June 
7, 2004.  Petitioner ************** was represented at the hearing by attorney 
**************, who presented the testimony of Petitioner.  The Tax Division 
was represented by Associate General Counsel Victor John Simonds, who presented 
the testimony of Cheryl Shepherd, of the ************** Audit Office. 

Unless otherwise indicated, Section references are to Title 2 of the Texas Tax 
Code, and Rule references are to sections of Title 34, Texas Administrative 
Code.  Notice has been taken of all Comptroller's records pertinent to 
Petitioner or the issues raised in this case.

PETITIONER'S CONTENTIONS:

1.  Petitioner contends that the assessment is barred by limitations.

2.  Petitioner contends that he should not be assessed as officer/director of 
************** ("COMPANY") for tax collected and not remitted by the 
corporation.

3.  Petitioner contends that he was released from all sales tax liability.

4.  Petitioner contends that the assessment is barred by laches. 

FINDINGS OF FACT:

1.  Petitioner ************** was the President and Secretary of COMPANY.  
COMPANY, formerly INCORPORATED, provided construction services.

2.  COMPANY was audited for the period from April 1, 1994, through June 30, 
1996.  The Comptroller issued COMPANY a Notification of Audit Results dated 
June 17, 1997, for tax, penalty, and interest amounting to $**************. On 
August 15, 1997, the Comptroller filed a lien against COMPANY.  COMPANY 
requested redetermination of the assessment, resulting in Hearing No. 38,214. 

3.  Petitioner was audited for the period from January 1, 1993, through March 
31, 1994.  The Comptroller issued Petitioner a Notification of Audit Results 
dated July 10, 1997, for tax, penalty, and interest amounting to 
$**************.  Petitioner requested redetermination of the assessment on 
September 5, 1997, resulting in Hearing No. 38,215.    The Comptroller Decision 
in Hearing Nos. 38,214/38,215 was issued January 10, 2001, with the assessed 
amount against COMPANY being $**************, and the amount assessed against 
Petitioner being $**************.  On January 23, 2001, COMPANY filed for 
bankruptcy.  That case is still pending.  On March 16, 2001, the Comptroller 
filed a lien against Petitioner in the amount of $**************.  On August 
19, 2003, Petitioner paid the amount owed pursuant to the assessment against 
him, and the lien against him was released.

4.  The Comptroller assessed Petitioner in a Notice of Tax Due dated September 
3, 2003, for tax, penalty, and interest amounting to $**************, based on 
his fiduciary relationship to COMPANY.  Petitioner timely requested 
redetermination of that assessment, resulting in this hearing.

5.  Exam 20 of the COMPANY audit scheduled six transactions as having included 
sales tax that was not remitted to the state.  According to the exam footnotes, 
the ************** transaction (Record No. 2196-27) dated March 6, 1995, and 
the ************** transaction (Record No. 2196-21) dated May 3, 1995, are 
shown as being "Tax Collected But Not Reported."  The ************** 
transaction (Record No. 2426-37) dated March 27, 1996, is shown as "Job Done In 
************** County.  Check #5259 Issued For ************** States Remodel.  
Sales Tax On Contract.  Not Reported."  One of the ************** transactions 
(Record No. 2196-22) dated February 2, 1995, is shown as "Tax Collected But Not 
Reported.  Total Contract Is For **************. Tax Included."  The 
************** transaction (Record No. 2426-83) dated April 30, 1995, is shown 
as "Contract Sales Tax Included Total Job Is **************."  There is no 
footnote to the remaining ************** transaction (Record No. 2196-18) dated 
December 12, 1994.  No documents regarding these transactions are in the 
record.  

6.  COMPANY was never permitted for sales tax, and did not file sales tax 
returns during the audit period.

7.  Petitioner exercised financial control over COMPANY as a result of his 
having authority to write checks on COMPANY's accounts, authority to receive 
and disburse funds on behalf of COMPANY, and of his ownership interest in the 
corporation.  

8.  Although the parties were uncertain as to the method of accounting used by 
COMPANY, it appears clear from the record that COMPANY was on the cash basis of 
accounting.

9.  There is no evidence in the record as to the amount of tax collected by 
COMPANY from its customers, i.e. bank records, account receipts, etc., to 
determine how much, if any, tax was actually collected by COMPANY that was not 
remitted to the state.  The auditor reviewed ************** invoices, which 
were lump sum amounts, and noted "tax included" was written on the invoices, 
providing the basis for the footnotes for Record Nos. 2196-22, and 2426-83.  

CONCLUSIONS OF LAW AND DISCUSSION: 

Petitioner's first contention that the assessment against him is barred by 
limitations should be granted.

Section 111.201 provides that no tax imposed may be assessed after four years 
from the date that the tax becomes due and payable.   Section 111.205(a)(2) 
provides that Section 111.201 does not apply if no report for tax has been 
filed.   However, Section 111.205 would not apply to Petitioner as it was 
COMPANY, not Petitioner, that was required to file the sales tax report.  

Section 111.016(b) provides that "an individual who controls or supervises the 
accounting for and paying over of the tax or money, and who willfully fails to 
pay for or cause to be paid the tax or money is liable as a responsible 
individual for an amount equal to the tax or money not paid or caused to be 
paid."  Based on the language of the statute, Petitioner's liability under 
Section 111.016(b) arises at the point where the tax was due and payable by 
COMPANY, i.e., pursuant to Section 151.401, on the "20th day of the month 
following the end of each calendar month" where the amount owed is more than 
$************** a calendar month. 

Tax on the six transactions at issue was due on January 20, 1995, March 20, 
1995, April 20, 1995, May 20, 1995, and April 20, 1996.  Four years from each 
of those dates occurred prior to the assessment against Petitioner.  (Tolling 
of limitations pursuant to Section 111.207(d) would not apply because it was 
COMPANY'S administrative proceeding on the redetermination of its tax 
liability, not Petitioner's.)  As a result, the assessment against Petitioner 
is barred by limitations.

Based on the conclusion regarding the first contention, the remainder of 
Petitioner's contentions is moot.

RECOMMENDATION:

Based upon the findings of fact, conclusions of law, and discussion contained 
herein, the ALJ recommends that the assessment against Petitioner be dismissed.

SIGNED July 8, 2004.


ROY G. SCUDDAY
Administrative Law Judge


HEARING NO. 44,195


ORDER OF THE COMPTROLLER


The above decision of the Administrative Law Judge is approved and adopted in 
all respects.  This decision becomes final twenty-three (23) days from the date 
of this Order.

If a rehearing is desired, a Motion for Rehearing must be filed with the 
Administrative Law Judge no later than twenty-three (23) days after the date of 
this Order, and must state the grounds upon which the motion is based.

RENDERED and ISSUED July 8, 2004.


CAROLE KEETON STRAYHORN 
Texas Comptroller 




ACCESSION NUMBER: 200407791H   
SUPERSEDED: N 
DOCUMENT TYPE: H 
DATE: 07/08/2004 
TAX TYPE: SALES