Legal Resources - Tax Rules

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