Update to NY Sales Tax Law Affecting Responsible Person Assessments Against Certain Limited Liability Company Members

Peter Alizio Sales Tax

Part X of the NYS executive budget is the piece of the legislation that more or less codified NYSDTF administrative policy published in TSB-M-11(17)S. 

The NYS Department of Taxation and Finance website now reads: TSB-M-11(17)S is obsolete and new guidance will be issued shortly.

I read the provision which sets the stage for a more formal application process in which eligible individuals may request tax relief as previously described in TSB-M-(17)S  to not be held jointly and several liable for the entire sales tax liability of the LLC but only for their pro rata share of liability determined by their ownership percentage in the LLC at issues.

The most noticeable difference between the new law and the old tax department administrative policy:

I. There will be a formal application form to file to request relief.  The information provided in such application must be true and complete in all material respects.  Providing material false or fraudulent information on such application shall disqualify taxpayer for requested tax relief, and shall void any agreement with the commissioner with respect to such relief, and shall result in taxpayer bearing strict liability for the total amount of tax, interest, and penalty owed by the LLC.  Under the old policy in order to be granted relief eligible taxpayer needed to be willing to cooperate with the Department by providing information to help identify other potentially responsible persons.  I believe the new “application” will inquire about other possible responsible persons.

II. The commissioner must approve the application and may deny an application for relief if the commissioner finds:

(1) Individual acted on behalf of the LLC in complying with sales tax obligations of the LLC.

(2) Individual has been convicted of a crime. 

(3) Individual has a past-due liability as described in section 171(v).

*Past-Due Liability as described in section 171(v) means any tax liability or liabilities which have become fixed and final such that the taxpayer no longer has any right to administrative or judicial review.

Peter Alizio is a CPA and Tax Attorney.  When he is not solving IRS and NYS tax problems he likes football and playing amateur chef.  He also enjoys meeting new people, preferably over coffee, whiskey or cigars.