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Shorten Your Statute for Responsible Person Liability on CA Sales Tax

In California under Revenue and Taxation Section 6829 a responsible person can be held liable for the non-payment of sales taxes by a company if they willfully failed to pay the taxes. A responsible person is an officer of the company, a check signer, or a return signer (someone that has the ability to direct the funds of the entity). A willful non-payment occurs when the reposnsible party has knowledge that the tax is due, but fails to pay it. Failure to pay is usually shown by indicating that something else, like payroll was paid instead of sales tax.

A company that files the required sales tax return has a three-year statute of limitations. If a return is not filed, then an 8 year statute applies. The responsible party is only liable for taxes during the period that they are actually a responsible party. The statute of limitations for a responsible party is 8 years since it is deemed that they did not file a tax return if the entity only filed one. Therefore, it is prudent for responsible parties to file their own tax return showing a zero liability to shorten the statute of limitation for themself to only 3 years. There is no special form for this process and it may draw the attention of the State Board of Equalization. However, this is the only way to cut down the statute to three years for a responsible party. This could mean the difference between having responsible party liability or not.

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