Virginia Department of Taxation (‘Virginia DOT’) has recently stepped up its enforcement of state laws relating to officer responsibility for delinquent trust fund taxes such as employment and sales taxes. Virginia corporate officers who may not even be responsible for the business’s tax matters under the bylaws of the business are routinely targeted by Virginia tax authorities as responsible officers of the corporation or of limited liability companies organized in Virginia. Such designation usually leads to assessment of business taxes against responsible officers. The targeted individuals then receive tax bills for Virginia sales taxes or employment taxes which should have been paid by the business. Failure to timely contest the ‘responsible officer’ designation will lead to a final determination which no longer may be appealed.
Virginia tax appeals officers make their determinations based on the applicable Virginia law which has many similarities to the federal statute governing trust fund penalty cases.