Thursday, August 28, 2008

SALES TAX – Personal Liability for Wisconsin Sales Taxes, What if a Business that first had the Tax Liability is Dissolved?

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. Because of Wisconsin Statue Section 77.60(9), the Wisconsin Department of Revenue can look past the liability protection of a business and 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. 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.

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