Skip to main content

Are state sales taxes dischargeable in bankruptcy?

Elmsford, NY |

I have some old sales tax liabilities dating back around ten years. If I file chapter 7 , can I discharge these in bankruptcy?

Attorney Answers 7

Posted

No. State sales taxes that are owed are never dischargeable in bankruptcy. Some personal income taxes could be dischargeable, but you'd have to meet some very specific criteria to do it, and it's nearly impossible to achieve. But, sales taxes are not included - you'd owe it no matter what.

We can be reached at 507.334.0155 (Toll Free: 888.777.5009). Our web address is: www. corbin-law-office.com. Answers on Avvo are not to be considered a response to a specific legal issue in a specific jurisdiction - they are to be considered only general responses to hypothetical scenarios posed by the questioner. For specific legal advice, please consult with a licensed attorney in your jurisdiction. No information contained herein should be construed as a solicitation for business, an offer to perform legal services in any jurisdiction in which the attorneys of Corbin Law Office are not licensed, or the dissemination of legal advice. No creation of an attorney-client relationship should be assumed or implied. We are a debt relief agency. Corbin Law Office helps people file for bankruptcy relief under the bankruptcy code.

Mark as helpful

7 lawyers agree

Posted

Depends if it is a corporation and what percentage you owned.

If this answer is helpful, then please mark the helpful button. If this is the best answer, then please indicate it. Thanks. For further information you should see an attorney and discuss the matter completely. If you are in the New York City area, then you can reach me during normal business hours at 718 329 9500 or www.mynewyorkcitylawyer.com.

Mark as helpful

6 lawyers agree

1 comment

William J. Neild

William J. Neild

Posted

If these are NY sales taxes that YOU owe whether because you were held responsible by NY state or that you owe from your own business such as a dba they are not dischargeable.

Posted

No, they are not dischargeable.

Mark as helpful

6 lawyers agree

Posted

Sales tax cannot be discharged in bankruptcy, but your state might have a statute of limitations on how long it can collect the tax.

Mark as helpful

8 lawyers agree

1 comment

William J. Neild

William J. Neild

Posted

NY statute is 20 years from date that NY warrant could have been file for purposes of collection but only 10 years from warrant filing date for real property in county where warrant is filed.

Posted

It depends on whether or not the sales taxes are defined as a an "excise" or "trust fund" tax, which varies from state to state. In NYS, sales tax is considered a trust fund tax and is excepted from discharge in bankruptcy.

This material does not constitute tax, legal or accounting advice. It was not intended or written for use and cannot be used by any taxpayer for the purpose of avoiding any IRS or NYS penalty. The information contained herein is for informational purposes only as a service to the public, and is not legal advice or a substitute for legal counsel, nor does it constitute advertising or a solicitation. This response is not intended to create, and does not create, an attorney-client relationship between you and the author.

Mark as helpful

5 lawyers agree

Posted

Generally speaking the answer is no - to the business that owes the tax. If this is related to tax the business collected but did not remit, then you probably want your bankruptcy attorney to force as much of your business assets towards this debt as possible. There is the real likelihood that this type of debt can become personal, or even criminal. If, however, this is sales tax that the state determined you should have collected but did not, then it will likely remain a business debt. As long as the business was a separate legal entity, then it likely will not become personal.

I hope this helps.

James Sutton, CPA, Esq.
www.FloridaSalesTax.com

Mark as helpful

3 lawyers agree

Posted

If these are NY sales taxes the answer is no. You can discharge the penalties that are associated with the tax. You can also pay the taxes through a Chapter 13 proceeding and depending on circumstances not incur anymore interest which is about 14% per year if paid outside bankruptcy. NY sales taxes now are collectible for 20 years from the date a NY warrant could have been filed and a lien on real property for 10 years from the date the warrant was filed at the county.

Mark as helpful

3 lawyers agree

Bankruptcy and debt topics

Top tips from attorneys

What others are asking

Can't find what you're looking for?

Post a free question on our public forum.

Ask a Question

- or -

Search for lawyers by reviews and ratings.

Find a Lawyer

Browse all legal topics