[This opinion has been published in Ohio Official Reports at
75 Ohio St.3d 477.]
SOLTESIZ, APPELLANT v. TRACY, TAX COMMR., APPELLEE.
[Cite as Soltesiz v. Tracy, 1996-Ohio-150.]
Taxation—Income tax—Former R.C. 5747.07(F), now R.C. 5747.07(G), imposes
personal liability for penalties and interest owed by the corporation upon
the employee responsible for filing the report and paying the employee
withholding tax.
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Former R.C. 5747.07(F), now R.C. 5747.07(G), is clear and unambiguous and
imposes personal liability upon the responsible employee for the
consequences of failing to file the employer’s tax report or failing to remit
the employee withholding tax. Accordingly, the responsible employee is
personally liable for the taxes, the penalty, and the interest accrued.
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(No. 94-1444—Submitted February 6, 1996—Decided May 22, 1996.)
APPEAL from the Board of Tax Appeals, Nos. 92-R-1569 through 92-R-1572.
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{¶ 1} On November 28, 1990, the Ohio Department of Taxation issued an
assessment against P.T.M., Inc., an Ohio Corporation, for unpaid employee
withholding tax. The Department of Taxation also assessed against P.T.M., Inc.
penalties and interest accrued pursuant to R.C. 5747.07 and 5747.15. On February
5, 1991, the Department of Taxation personally assessed the unpaid employee
withholding tax against appellant, Joseph R. Soltesiz, Sr., the officer of P.T.M., Inc.
who was responsible for filing the tax report and for making the tax payments.
{¶ 2} On April 12, 1991, appellant petitioned the Department of Taxation
for a reassessment of the penalties and interest owed. On November 24, 1992,
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Roger W. Tracy, the Tax Commissioner of Ohio, affirmed the assessment of taxes,
penalties, and interest against appellant. On June 10, 1994, the Board of Tax
Appeals affirmed the decision of the Tax Commissioner.
{¶ 3} The cause is now before this court pursuant to an appeal of right.
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Dettelbach, Sicherman & Baumgart, Jerome Leiken and Michael D.
Zaverton, for appellant.
Betty D. Montgomery, Attorney General, and Janyce C. Katz, Assistant
Attorney General, for appellee.
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ALICE ROBIE RESNICK, J.
{¶ 4} The issue presented by this case is whether former R.C. 5747.07(F),
now R.C. 5747.07(G),1 imposes personal liability for penalties and interest owed
by the corporation upon the employee responsible for filing the report and paying
the employee withholding tax. R.C. 5747.06 requires that all employers withhold
from their employees’ compensation an amount substantially equivalent to the
income tax reasonably estimated to be due from the employees. Employers are
required to file a return and pay the tax withheld according to the schedule set forth
in R.C. 5747.07(B). R.C. 5747.07(G) imposes personal liability upon the employee
responsible for filing the tax report and making the tax payments:
“An employee of a corporation, limited liability company, or business trust
having control or supervision of or charged with the responsibility of filing the
report and making payment, or an officer, member, manager, or trustee of a
1. At the time that appellee issued the assessment against appellant, the statute imposing personal
liability upon the responsible employee was set forth in R.C. 5747.07(F). The General Assembly
revised R.C. 5747.07, effective July 22, 1994. R.C. 5747.07(G), with minor additions, now contains
the identical provision governing personal assessments against responsible employees. For
purposes of this decision and opinion, we will refer to the provision as R.C. 5747.07(G), the current
section.
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January Term, 1996
corporation, limited liability company, or business trust who is responsible for the
execution of the corporation’s, limited liability company’s, or business trust’s fiscal
responsibilities, shall be personally liable for failure to file the report or pay the tax
due as required by this section. The dissolution, termination, or bankruptcy of a
corporation, limited liability company, or business trust does not discharge a
responsible officer’s, member’s, manager’s, employee’s, or trustee’s liability for a
failure of the corporation, limited liability company, or business trust to file returns
or pay tax due.”
{¶ 5} Appellant does not contest that he, as chief executive officer of
P.T.M., Inc., is the employee responsible for the filing of the tax returns and making
the payments. He does not dispute that pursuant to R.C. 5747.07(G), he is
derivatively liable for the tax itself. He does however contend that the statute does
not impose upon him derivative liability for the penalties and interest assessed
against the corporation. Both the Tax Commissioner and the Ohio Board of Tax
Appeals found that appellant is derivatively liable for the penalties and interest as
well as the tax.
{¶ 6} Appellant asserts that because R.C. 5747.07(G) imposes personal
liability solely for the “failure to file the report or pay the tax due,” the liability
necessarily excludes the penalties and the interest. Appellant points out that when
the General Assembly refers to the imposition of penalties and interest, it
specifically denotes them as such. See, e.g., R.C. 5747.06(D), former
5747.07(E)(5) (now 5747.07[F][5]), 5747.08(G), 5747.12, and 5747.15. He
argues, therefore, that the lack of such specific denotation in R.C. 5747.07(G)
implies that the General Assembly did not wish to impose these fees upon the
responsible employee.
{¶ 7} On the contrary, appellee asserts, as the board and the commissioner
determined, that because R.C. 5747.07(G) states that the responsible employee
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“shall be personally liable for failure to file the report or pay the tax due,” the statute
imposes personal liability for the penalties and interest assessed as well as the tax.
(Emphasis added.) The board and the commissioner determined that the
consequence of failing to file the report and pay the tax is the imposition of penalties
and interest, and thus liability for “failure” necessarily includes those added
assessments.
{¶ 8} When a statute is clear and unambiguous in its terms, we must apply
the statute, not interpret it. Storer Communications, Inc. v. Limbach (1988), 37
Ohio St.3d 193, 194,
525 N.E.2d 466, 467. R.C. 5747.07(G) imposes personal
liability upon the responsible employee for either (1) the employer-corporation’s
failure to file the employee withholding tax report, or (2) the employer-corporation’s failure to pay the tax due. An employer-corporation that fails to file
a tax report is liable for a monetary penalty. R.C. 5747.15(A)(1). An employer-corporation that fails to pay the tax due under R.C. Chapter 5747 or fails to remit
the tax withheld from its employees is liable for interest, R.C. 5747.07(F)(5), and a
monetary penalty, R.C. 5747.15(A)(3) and (4). The employer failing to remit taxes
is also criminally liable. R.C. 5747.99(A).
{¶ 9} Accordingly, when an employer-corporation fails to either (1) file a
tax return or (2) remit the withheld taxes owed, it is liable for the taxes, the penalty,
and the interest accrued. Former R.C. 5747.07(F), now R.C. 5747.07(G), is clear
and unambiguous and imposes personal liability upon the responsible employee for
the consequences of failing to file the employer’s tax report or failing to remit the
employee withholding tax. Accordingly, the responsible employee is personally
liable for the taxes, the penalty, and the interest accrued.
{¶ 10} The decision of the Board of Tax Appeals is affirmed.
Decision affirmed.
MOYER, C.J., DOUGLAS and COOK, JJ., CONCUR.
PETREE, F.E. SWEENEY and PFEIFER, JJ., dissent.
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January Term, 1996
CHARLES R. PETREE, J., of the Tenth Appellate District, sitting for WRIGHT, J.
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PETREE, J., dissenting.
{¶ 11} Being unable to concur in the conclusion reached by the majority, I
must respectfully dissent.
{¶ 12} This cause involves the construction of a state statute in the area of
income tax withholding. R.C. 5747.07(G) imposes liability upon a responsible
corporate officer or employee for failure to pay or file a report of taxes withheld, as
follows:
“An employee of a corporation, limited liability company, or business trust
having control or supervision of or charged with the responsibility of filing the
report and making payment, or an officer, member, manager, or trustee of a
corporation, limited liability company, or business trust who is responsible for the
execution of the corporation’s, limited liability company’s, or business trust’s fiscal
responsibilities, shall be personally liable for failure to file the report or pay the
tax due as required by this section. The dissolution, termination, or bankruptcy of
a corporation, limited liability company, or business trust does not discharge a
responsible officer’s, member’s, manager’s, employee’s, or trustee’s liability for a
failure of the corporation, limited liability company, or business trust to file returns
or pay tax due.” (Emphasis added.)
“Strict construction of taxing statutes is required, and any doubt must be
resolved in favor of the citizen upon whom or the property upon which the burden
is sought to be imposed.” Gulf Oil Corp. v. Kosydor (1975), 44 Ohio St.3d 208,
73
O.O.2d 507,
339 N.E.2d 820, paragraph one of the syllabus. When faced with the
General Assembly’s use of ambiguous language, this court must opt for the
meaning that favors the taxpayer. Storer Communications, Inc. v. Limbach (1988),
37 Ohio St.3d 193, 195,
525 N.E.2d 466, 468.
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{¶ 13} This statute does not expressly state that the responsible corporate
officer is liable for interest and penalties. In an effort to avoid rules of construction
which favor appellant, the majority concludes that the phrase “personally liable for
failure to file the report or pay the tax due” clearly evidences the General
Assembly’s intention to impose liability upon the responsible corporate officer for
interest and penalties. I disagree.
{¶ 14} At a minimum, this court must question whether a statue which was
allegedly intended to impose liability upon a responsible party for penalties and
interest would omit those specific terms. In my view, the General Assembly could
have evidenced its intentions to impose liability upon a responsible corporate
officer for interest and penalties by simply inserting the phrase “including penalties
and interest” in the wording of the statute. Indeed, that is precisely what the General
Assembly did when it enacted another subsection of the same section, pertaining to
the liability imposed upon the purchaser of a business. Under R.C. 5747.07(H),
liability is imposed upon a successor as follows:
“[H]e shall be personally liable for the payment of taxes, interest, and
penalties accrued and unpaid.”
{¶ 15} It is obvious from the expressed terms of R.C. 5747.07(H) that the
General Assembly intended to impose the additional obligation for payment of
penalties and interest charges upon a successor. In the case before us, the General
Assembly has failed to clearly evidence its intention to place that burden upon the
responsible officer. Moreover, it is also obvious from R.C. 5747.07(H) that the
terms “tax,” “interest,” and “penalty” have distinct and different meanings under
the state income tax laws. As noted by appellant, when the General Assembly
refers to interest and penalties in other provisions of the income tax withholding
laws, it employs those specific terms. See R.C. 5747.06(D), 5747.07(F)(5),
5747.08(G), 5747.12 and 5747.15. The General Assembly omitted those terms
from R.C. 5747.07(G).
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January Term, 1996
{¶ 16} The primary duty of this court in construing a statute is to give effect
to the intention of the General Assembly, and, in ascertaining that intent, the court’s
duty is to give effect to the statutory language, not to delete words used or to insert
words not used. Bernardini v. Conneaut Area City School Dist. Bd. of Edn. (1979),
58 Ohio St.2d 1,
12 O.O.3d 1,
387 N.E.2d 1222; E. Ohio Gas Co. v. Pub. Util.
Comm. (1988),
39 Ohio St.3d 295,
530 N.E.2d 875.
{¶ 17} While I do not question the state’s ability to impose liability upon a
responsible corporate officer for the payment of penalties and interest in the area of
income tax withholding, I do not believe that this court should add words to the
statute to accomplish that purpose. If the General Assembly deems it desirable to
enact a statute in this area which imposes liability upon a responsible party for
penalties and interest, it is free to draft legislation which accomplishes that purpose.
{¶ 18} Indeed, when the General Assembly drafted analogous provisions of
the state sales tax, it clearly evidenced its intention to impose the obligation for
penalties and interest upon the responsible party by expressly including interest and
penalties as part of the assessment made against that party. See R.C. 5739.33,
5739.132, and 5739.133. The sales tax laws exemplify the willingness and ability
of the General Assembly to draft tax laws which clearly evidence its intention to
impose full liability upon the responsible party for taxes, penalties and interest. The
General Assembly did not do so in this instance.
{¶ 19} Appellee argues that there is no reason to treat a responsible party
differently for income tax withholding purposes and sales tax purposes. However,
I believe that there is a reasonable justification for the General Assembly’s
imposing greater liability upon a responsible party in the area of sales tax when one
considers the fact that the collection of sales tax is accompanied by a stream of
revenue to the seller, the source of which is a third party. In contrast, income tax
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withholding occurs when an employer pays wages to his employee, regardless of
whether revenue has been generated by the business entity.
{¶ 20} In the final analysis, the possible loss of revenue to the state in those
instances where an employer is insolvent is not, in my opinion, sufficient to justify
judicial enlargement of R.C. 5747.07(G). For the foregoing reasons, I would
sustain appellant’s first, second, sixth, seventh and eighth propositions of law, and
reverse the decision of the Board of Tax Appeals.
F.E. SWEENEY and PFEIFER, JJ., concur in the foregoing dissenting opinion.
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