Tax Rules: Final: 5703-7
5703-7-15 - Income tax; withholding;
corporate officer liability
(A) As used in this rule and in division (F) of section
5747.07 of the Revised Code:
(1) "Officer" or "corporate officer" means the president,
vice-president, treasurer, secretary, chief executive officer
of a corporation, or any person holding a similar title or
position in a corporation or business trust. Any person who
holds an ownership interest in a corporation or beneficial
interest in a business trust and performs any of the
functions specified in paragraphs (C) through (H) of this
rule shall be deemed an officer. In the case of an affiliated
group of corporations, as that term is defined in paragraph
(A)(10) of rule 5703-9-46 of the Administrative Code, any
officer of one corporation in that group that performs any of
the functions listed in paragraphs (C) through (H) of this
rule for another corporation in the group shall be deemed an
officer of that corporation.
(2) "Employee" means a person who works for a corporation or
business trust, whether for pay or not. An employee may also
be an officer of a corporation or business trust.
(3) "Trustee" means any person responsible for the
management, administration or control of a business trust.
(4) "Business trust" has the same meaning as in division (A)
of section 1746.01 of the Revised Code.
(B) The officers, employees, or trustees of a corporation or
business trust that fails to file returns or reports or pay
taxes required to be filed and paid under section 5747.07 of
the Revised Code, are liable for the unpaid liability of the
corporation or trust under the conditions defined in
paragraphs (C) through (H) of this rule. Personal liability
may be assessed as provided in section 5747.13 of the Revised
Code.
(C) An officer or trustee is personally liable for the
withholding tax liability, including tax, penalty, and
interest, of a corporation or business trust as provided in
division (F) of section 5747.07 of the Revised Code if the
officer or trustee was responsible for the execution of the
corporation's or trust's fiscal responsibilities on the date
on which the return or report for the period is filed or is
required to be filed, whichever is earlier. A person has
demonstrated responsibility for the execution of the
corporation's or trust's fiscal responsibilities if any of
the following apply:
(1) The officer or trustee signs any return or report
required by section 5747.07 of the Revised Code or prepares
and submits without signing any return or report required by
that section;
(2) The officer or trustee signs or prepares and submits
without signing any other tax returns required by the laws of
this state or any of its subdivisions or the Internal Revenue
Code of the United States unless the officer or trustee can
provide sufficient evidence to establish that the corporation
or trust divided the responsibility for filing of tax returns
in such a manner that the responsibility for filing reports
required by section 5747.07 of the Revised Code was assigned
explicitly to another officer or trustee;
(3) The officer or trustee exercises management control or
authority over employees whose duties include the
preparation, signing, or filing of returns or reports
described in paragraph (C)(1) or (C)(2) of this rule;
(4) The officer or trustee retains, directs or otherwise
exercises control over outside accountants, bookkeepers, or
other persons who are charged with filing returns or reports
required under section 5747.07 of the Revised Code on behalf
of the corporation or business trust;
(5) The officer or trustee exercises authority to sign checks
or authorizes the use of his signature stamp or facsimile to
sign checks, drawn on the corporation's or trust's accounts,
in payment of tax liabilities;
(6) The officer or trustee determines priorities by which the
corporation's or trust's creditors are paid instead of the
state. A payment to a creditor in the form of an in-kind
distribution of corporate or trust assets is a payment for
purposes of this paragraph;
(7) The officer or trustee uses or manages taxes withheld by
the corporation or business trust as required by division (A)
of section 5747.06 of the Revised Code and held by the
corporation or business trust in trust for the benefit of the
state;
(8) The officer or trustee instructs any employee of the
corporation or business trust to use or manage taxes withheld
by the corporation or business trust as required by division
(A) of section 5747.06 of the Revised Code and held by the
corporation or business trust in trust for the benefit of the
state;
(9) The officer or trustee deducts and withholds income tax
under section 5747.06 of the Revised Code from the
compensation of an employee;
(10) The officer or trustee instructs anyone to use taxes
withheld by the corporation or business trust under section
5747.06 of the Revised Code in a manner other than holding
such taxes in trust and remitting them as required by section
5747.06 of the Revised Code;
(11) The officer or trustee participates in the payment of
compensation to an employee without deducting and withholding
therefrom income tax required by section 5747.06 of the
Revised Code; or
(12) The officer or trustee performs any other function which
would indicate control over the fiscal operations of the
corporation or business trust.
(D) An employee is personally liable for the withholding tax
liability of a corporation or business trust as provided in
division (F) of section 5747.07 of the Revised Code if, for
the benefit of the corporation or business trust, the
employee performs one or more of the following activities:
(1) The employee signs or prepares and submits without
signing returns or reports required under section 5747.07 of
the Revised Code;
(2) The employee supervises or controls other employees who
perform the activities listed in paragraph (D)(1) of this
rule; or
(3) The employee exercises authority to sign checks drawn on
the account of the corporation or business trust in payment
of tax liabilities.
(E) An employee of a corporation or business trust who meets
one or more of the conditions listed in paragraphs (D)(1) to
(D)(3) of this rule will not be considered responsible if the
employee can establish that his failure to comply with the
requirements of section 5747.07 of the Revised Code resulted
from orders from an officer, trustee, or supervisory employee
of the corporation or business trust which prevented the
employee from complying with the requirements of that
section.
(F) If the officers of a corporation own directly or
indirectly, either collectively or individually, more than
fifty per cent of the ownership interest in the corporation,
the owner/officers are responsible for the execution of the
fiscal responsibility of the corporation and personally
liable under division (F) of section 5747.07 of the Revised
Code, regardless of any attempt to delegate such
responsibility, if one or more of the following apply:
(1) The corporation filed returns or reports required under
section 5747.07 of the Revised Code showing the liability
without submitting payment;
(2) The corporation failed to file returns or reports
required under section 5747.07 of the Revised Code;
(3) The records of the corporation or other evidence
indicates that the corporation withheld the tax required by
section 5747.06 of the Revised Code; or
(4) The owner/officer of the corporation actually controlled
or supervised the preparation and submission of returns or
reports required under section 5747.07 of the Revised Code.
(G) If the trustees of a business trust own directly or
indirectly, either collectively or individually, more than
fifty per cent of the beneficial interest in the business
trust, the owner/trustees are responsible for the execution
of the fiscal responsibility of the business trust and liable
under division (F) of section 5747.07 of the Revised Code,
regardless of any attempt to delegate such responsibility, if
one or more of the following apply:
(1) The business trust filed returns or reports required
under section 5747.07 of the Revised Code showing the
liability without submitting payment;
(2) The business trust failed to file returns or reports
required under section 5747.07 of the Revised Code;
(3) The records of the business trust or other evidence
indicates that the business trust withheld the tax required
under section 5747.06 of the Revised Code; or
(4) The owner/trustee of the business trust actually
controlled or supervised the preparation and submission of
returns or reports required under section 5747.07 of the
Revised Code.
(H) If more than one person is personally liable under
division (F) of section 5747.07 of the Revised Code for the
unpaid liability of a corporation or business trust, their
liability shall be joint and several.
(I) The provisions of paragraphs (C) to (H) of this rule are
not exclusive and the commissioner may use any available
evidence to establish the liability of an officer, trustee,
or employee for the unpaid withholding tax liability of the
corporation or business trust.
(J) No officer or trustee shall have any liability under
section 5747.07 of the Revised Code or under this rule if the
corporation or business trust did not actually withhold any
tax pursuant to section 5747.06 of the Revised Code and
reported the amounts as payments to independent contractors
and not to employees for federal income tax and FICA purposes
on information returns furnished to the Internal Revenue
Service.
Effective: 9-20-92
Promulgated under: 5703.14
Authorized by: 5703.05
Amplifies: 5747.07