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Sales Tax - Personal Liability - Does Dissolving the Business Prevent Personal Liability?

By Robert B. Teuber • Mar 15th, 2009 • Category: Newest Post, Tax Law

Most businesses are formed as corporations or LLCs.  This is done to provide liability protection to the owner of the business from the risks, debts and obligations of the business.  Absent special circumstances (for example, “piercing the corporate veil” or personal guaranties of debts) creditors cannot look past the corporate entity to recover unpaid obligations.  These entity based liability shields, however, mean nothing when dealing with Wisconsin Sales and Use taxes.  Because of Wisconsin Statue Section 77.60(9), the Wisconsin Department of Revenue can look past the liability protection of a business and directly pursue business owners or employees for unpaid sales taxes.

Dissolving a business does not absolve the owners of their personal liability for the sales tax due.  In fact, the statute allowing for personal liability for Wisconsin Sales Taxes specifically provides that the personal liability will survive the dissolution of the business.  Moreover, dissolving a business may speed up the Department’s collection efforts against the potentially liable persons because there is no longer the ability for the business to pay the debts.  

So, business owners should keep in mind that closing the doors on their business may not do anything to avoid liability for sales tax.  Rather, because the company is no longer around to work out a payment arrangement themselves, it may forclose certain techniques that could help prevent a business owner from having to pay the tax them self. 

Rob Teuber is a tax attorney located in Milwaukee, Wisconsin.  His practice includes Wisconsin state and local tax matters and federal tax problem resolution nationwide.  For more information on Rob Teuber’s federal tax law practice, see www.federaltaxlawforum.com.

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Robert B. Teuber is an attorney in the Milwaukee office of Weiss Berzowski Brady LLP where his practice focuses on tax disputes and controversies, tax and business planning and commercial litigation. You can contact Rob at: Phone: (414) 276-5800 E-mail: [email protected] Website: www.wbb-law.com Address: 700 North Water Street, Milwaukee, WI 53202
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