NY State Senate Bill 2009-S2409

Senate Bill S2409

2009-2010 Legislative Session

Provides that for the purposes of sales and use tax collection, "persons required to collect tax" shall not include a member of a partnership or llc

download bill text pdf

Archive: Last Bill Status - In Senate Committee Investigations And Government Operations Committee

Introduced
- In Committee Assembly
- In Committee Senate
- On Floor Calendar Assembly
- On Floor Calendar Senate
- Passed Assembly
- Passed Senate
Delivered to Governor
Signed By Governor

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Actions

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	Assembly Actions - Lowercase Senate Actions - UPPERCASE
Jun 10, 2010	print number 2409b
Jun 10, 2010	amend and recommit to investigations and government operations
Mar 24, 2010	print number 2409a
Mar 24, 2010	amend and recommit to investigations and government operations
Jan 06, 2010	referred to investigations and government operations
Feb 19, 2009	referred to investigations and government operations

Bill Amendments

Original

B (Active)

2009-S2409 - Details

Current Committee:: Senate Investigations And Government Operations
Law Section:: Tax Law
Laws Affected:: Amd §1131, Tax L
Versions Introduced in 2011-2012 Legislative Session:: S3520

2009-S2409 - Summary

Provides that for the purposes of sales and compensating use tax collection, "persons required to collect tax" and "person required to collect any tax imposed by this article" shall not include any member of a partnership or limited liability company.

2009-S2409 - Sponsor Memo

                                 BILL NUMBER:  S2409

 TITLE OF BILL :
An act to amend the tax law, in relation to the definition of "persons
required to collect tax" and "person required to collect any tax
imposed by this article" for the purposes of the collection of sales
and compensating use taxes


 PURPOSE :
To amend section 1131(1) of the New York State Tax Law so that all
members and limited partners of limited liability companies that are
passive investors having no role in the operation of the entity's
business be relieved of personal liability for any unpaid sales taxes
so that this section of law will conform to the liability provisions
of Tax Law 685 (g).

 SUMMARY OF PROVISIONS :
Section 1 of the bill amends subdivision 1 of section 1131 of the Tax
Law by removing a portion of the existing language and replacing it
with language that is analogous to the personal liability provisions
found in Tax Law 685 (g).

 EXISTING LAW :
Section 1131(1) appears on its face to impose absolute liability for
unpaid sales taxes on all members of an LLC and on all limited

partners of a limited partnership, without regard to whether the
member or limited partner had an active role or significant
involvement in the financial affairs or management of the business.

 JUSTIFICATION :
As set forth above, Section 1131(1) of the Tax Law imposes absolute
liability for unpaid sales taxes on all members of an LLC and on all
limited partners of a limited partnership, without regard to whether
the member or limited partner had an active role or significant
involvement in the financial affairs or management of the business.
This result is contrary to the "responsible person" concept that has
been followed by state and federal taxing authorities for many years
under New York State Tax law section 685(g) and federal Internal
Revenue Code 6672 as evidenced by its large body of case law. The
absolute liability imposed by section 1131(1) is also in direct
contrast to other provisions of New York law intended to encourage
investment in LLC's and limited partnerships (See Limited Liability
Company Law section 609(a) and New York Partnership law section
121-303).

The existing language of Tax Law 1131(1) that creates personal
liability in passive investors is not just grossly unfair, it could
deter investment in New York State businesses. By enacting this
legislation, Section 1131(1) will conform to the trust fund liability
provisions of New York State Tax Law section 685(g) and Internal
revenue Code section 6672 and the "responsible person" rule will
apply.

This legislation is being introduced at the request of the New York
State Bar Association Tax law Section.

 LEGISLATIVE HISTORY :
Section 1131(1) of the Tax Law was made as part of the creation of New
York's Limited Liability Company Law.

 FISCAL IMPLICATIONS :
Unknown.

 LOCAL FISCAL IMPLICATIONS :
Unknown.
 EFFECTIVE DATE :
This act shall take effect immediately.

2009-S2409 - Bill Text download pdf

                            
                    S T A T E   O F   N E W   Y O R K
________________________________________________________________________

                                  2409

                       2009-2010 Regular Sessions

                            I N  S E N A T E

                            February 19, 2009
                               ___________

Introduced  by  Sen.  O. JOHNSON  -- read twice and ordered printed, and
  when printed to be committed to the Committee  on  Investigations  and
  Government Operations

AN  ACT  to amend the tax law, in relation to the definition of "persons
  required to collect tax" and  "person  required  to  collect  any  tax
  imposed  by  this article" for the purposes of the collection of sales
  and compensating use taxes

  THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND  ASSEM-
BLY, DO ENACT AS FOLLOWS:

  Section 1. Subdivision 1 of section 1131 of the tax law, as amended by
chapter 576 of the laws of 1994, is amended to read as follows:
  (1)  "Persons  required to collect tax" or "person required to collect
any tax imposed by this article" shall include: every vendor of tangible
personal property or services; every recipient of amusement charges; and
every operator of a hotel. Said terms shall also include  any  [officer,
director or employee of a corporation or of a dissolved corporation, any
employee  of a partnership, any employee or manager of a limited liabil-
ity company, or any employee of an individual proprietorship who as such
officer, director, employee or manager is under a duty to act  for  such
corporation,   partnership,  limited  liability  company  or  individual
proprietorship in complying with any requirement of  this  article;  and
any  member  of  a  partnership  or  limited  liability  company] PERSON
REQUIRED TO COLLECT, TRUTHFULLY  ACCOUNT  FOR,  AND  PAY  OVER  THE  TAX
IMPOSED  BY  THIS  ARTICLE  WHO  WILLFULLY  FAILS TO COLLECT SUCH TAX OR
TRUTHFULLY ACCOUNT FOR AND PAY OVER SUCH TAX OR  WILLFULLY  ATTEMPTS  IN
ANY MANNER TO EVADE OR DEFEAT THE TAX OR THE PAYMENT THEREOF.  Provided,
however,  that any person who is a vendor solely by reason of clause (D)
or (E) of subparagraph (i) of paragraph [(8)] EIGHT of  subdivision  (b)
of  section  eleven  hundred  one OF THIS ARTICLE shall not be a "person
required to collect any tax imposed by this article" until  twenty  days
after the date by which such person is required to file a certificate of
registration  pursuant  to  section  eleven  hundred thirty-four OF THIS
PART.
  S 2. This act shall take effect immediately.

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
                                                           LBD09020-01-9

co-Sponsors

2009-S2409A - Details

Current Committee:: Senate Investigations And Government Operations
Law Section:: Tax Law
Laws Affected:: Amd §1131, Tax L
Versions Introduced in 2011-2012 Legislative Session:: S3520

2009-S2409A - Summary

2009-S2409A - Sponsor Memo

                                 BILL NUMBER:  S2409A

 TITLE OF BILL :
An act to amend the tax law, in relation to the definition of "persons
required to collect tax" and "person required to collect any tax
imposed by this article" for the purposes of the collection of sales
and compensating use taxes


 PURPOSE :
To amend section 1131(1) of the New York State Tax Law so that all
members and limited partners of limited liability companies that are
passive investors having no role in the operation of the entity's
business be relieved of personal liability for any unpaid sales taxes
so that this section of law will conform to the liability provisions
of Tax Law 685 (g).

 SUMMARY OF PROVISIONS :
Section 1 of the bill amends subdivision 1 of section 1131 of the Tax
Law by removing a portion of the existing language and replacing it
with language that is analogous to the personal liability provisions
found in Tax Law 685 (g).

 EXISTING LAW :
Section 1131(1) appears on its face to impose absolute liability for
unpaid sales taxes on all members of an LLC and on all limited

partners of a limited partnership, without regard to whether the
member or limited partner had an active role or significant
involvement in the financial affairs or management of the business.

 JUSTIFICATION :
As set forth above, Section 1131(1) of the Tax Law imposes absolute
liability for unpaid sales taxes on all members of an LLC and on all
limited partners of a limited partnership, without regard to whether
the member or limited partner had an active role or significant
involvement in the financial affairs or management of the business.
This result is contrary to the "responsible person" concept that has
been followed by state and federal taxing authorities for many years
under New York State Tax law section 685(g) and federal Internal
Revenue Code 6672 as evidenced by its large body of case law. The
absolute liability imposed by section 1131(1) is also in direct
contrast to other provisions of New York law intended to encourage
investment in LLC's and limited partnerships (See Limited Liability
Company Law section 609(a) and New York Partnership law section
121-303).

The existing language of Tax Law 1131(1) that creates personal
liability in passive investors is not just grossly unfair, it could
deter investment in New York State businesses. By enacting this
legislation, Section 1131(1) will conform to the trust fund liability
provisions of New York State Tax Law section 685(g) and Internal
revenue Code section 6672 and the "responsible person" rule will
apply.

This legislation is being introduced at the request of the New York
State Bar Association Tax law Section.

 LEGISLATIVE HISTORY :
Section 1131(1) of the Tax Law was made as part of the creation of New
York's Limited Liability Company Law.

 FISCAL IMPLICATIONS :
Unknown.

 LOCAL FISCAL IMPLICATIONS :
Unknown.
 EFFECTIVE DATE :
This act shall take effect immediately.

2009-S2409A - Bill Text download pdf

                            
                    S T A T E   O F   N E W   Y O R K
________________________________________________________________________

                                 2409--A

                       2009-2010 Regular Sessions

                            I N  S E N A T E

                            February 19, 2009
                               ___________

Introduced by Sens. O. JOHNSON, ALESI -- read twice and ordered printed,
  and  when  printed  to be committed to the Committee on Investigations
  and Government Operations -- recommitted to the Committee on  Investi-
  gations  and  Government  Operations in accordance with Senate Rule 6,
  sec. 8 -- committee discharged, bill  amended,  ordered  reprinted  as
  amended and recommitted to said committee

AN  ACT  to amend the tax law, in relation to the definition of "persons
  required to collect tax" and  "person  required  to  collect  any  tax
  imposed  by  this article" for the purposes of the collection of sales
  and compensating use taxes

  THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND  ASSEM-
BLY, DO ENACT AS FOLLOWS:

  Section 1. Subdivision 1 of section 1131 of the tax law, as amended by
chapter 576 of the laws of 1994, is amended to read as follows:
  (1)  "Persons  required to collect tax" or "person required to collect
any tax imposed by this article" shall include: every vendor of tangible
personal property or services; every recipient of amusement charges; and
every operator of a hotel. Said terms shall also  include  any  officer,
director or employee of a corporation or of a dissolved corporation, any
employee  of a partnership, any employee or manager of a limited liabil-
ity company, or any employee of an individual proprietorship who as such
officer, director, employee or manager is under a duty to act  for  such
corporation,   partnership,  limited  liability  company  or  individual
proprietorship in complying with any requirement of this  article[;  and
any  member  of  a partnership or limited liability company].  Provided,
however, that any person who is a vendor solely by reason of clause  (D)
or  (E)  of subparagraph (i) of paragraph [(8)] EIGHT of subdivision (b)
of section eleven hundred one OF THIS ARTICLE shall  not  be  a  "person
required  to  collect any tax imposed by this article" until twenty days
after the date by which such person is required to file a certificate of
registration pursuant to section  eleven  hundred  thirty-four  OF  THIS
PART.
  S 2. This act shall take effect immediately.

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets

                      [ ] is old law to be omitted.
                                                           LBD09020-03-0

co-Sponsors

2009-S2409B (ACTIVE) - Details

Current Committee:: Senate Investigations And Government Operations
Law Section:: Tax Law
Laws Affected:: Amd §1131, Tax L
Versions Introduced in 2011-2012 Legislative Session:: S3520

2009-S2409B (ACTIVE) - Summary

2009-S2409B (ACTIVE) - Sponsor Memo

                                BILL NUMBER:S2409B

TITLE OF BILL:
An act to amend the tax law, in relation to the definition of "persons
required to collect tax" and "person required to collect any tax imposed
by this article" for the purposes of the collection of sales and compen-
sating use taxes

PURPOSE:
To amend section 1131 (1) of the New York State Tax Law so that a
passive member of a partnership or limited liability company be relieved
of personal liability for any unpaid sales taxes so that this section of
law will conform to the liability provisions of Tax Law 685(g).

SUMMARY OF PROVISIONS:
Section 1 of the bill amends subdivision 1 of section 1131 of the Tax
Law by removing a portion of the existing language and replacing it with
language that is analogous to the personal liability provisions found in
Tax Law 685 (g).

EXISTING LAW:
Section 1131 (1) appears on its face to impose absolute liability for
unpaid sales taxes on all members of an LLC and on all limited partners
of a limited partnership, without regard to whether the member or limit-
ed partner had an active role or significant involvement in the finan-
cial affairs or management of the business.

JUSTIFICATION:
As set forth above, Section 1131 (1) of the Tax Law imposes absolute
liability for unpaid sales taxes on all members of an LLC and on all
limited partners of a limited partnership, without regard to whether the
member or limited partner had an active role or significant involvement
in the financial affairs or management of the business.  This result is
contrary to the "responsible person" concept that has been followed by
state and federal taxing authorities for many years under New York State
Tax law section 685(g) and federal Internal Revenue Code 6672 as
evidenced by its large body of case law. The absolute liability imposed
by section 1131 (1) is also in direct contrast to other provisions of
New York law intended to encourage investment in LLC's and limited part-
nerships (See Limited Liability Company Law section 609(a) and New York
Partnership law section 121-303).

The existing language of Tax Law 1131 (1) that creates personal liabil-
ity in passive investors is not just grossly unfair, it could deter
investment in New York State businesses. By enacting this legislation,
Section 1131 (1) will conform to the trust fund liability provisions of
New York State Tax Law section 685(g) and Internal Revenue Code section
6672 and the "responsible person" rule will apply.

This legislation is being introduced at the request of the New York
State Bar Association Tax law Section.

LEGISLATIVE HISTORY:
Section 1131 (1) of the Tax Law was made as part of the creation of New
York's Limited Liability Company Law.

FISCAL IMPLICATIONS:
Unknown.

LOCAL FISCAL IMPLICATIONS:
Unknown.

EFFECTIVE DATE:
This act shall take effect immediately.

2009-S2409B (ACTIVE) - Bill Text download pdf

                            
                    S T A T E   O F   N E W   Y O R K
________________________________________________________________________

                                 2409--B

                       2009-2010 Regular Sessions

                            I N  S E N A T E

                            February 19, 2009
                               ___________

Introduced by Sens. O. JOHNSON, ALESI -- read twice and ordered printed,
  and  when  printed  to be committed to the Committee on Investigations
  and Government Operations -- recommitted to the Committee on  Investi-
  gations  and  Government  Operations in accordance with Senate Rule 6,
  sec. 8 -- committee discharged, bill  amended,  ordered  reprinted  as
  amended  and  recommitted  to  said committee -- committee discharged,
  bill amended, ordered reprinted as amended  and  recommitted  to  said
  committee

AN  ACT  to amend the tax law, in relation to the definition of "persons
  required to collect tax" and  "person  required  to  collect  any  tax
  imposed  by  this article" for the purposes of the collection of sales
  and compensating use taxes

  THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND  ASSEM-
BLY, DO ENACT AS FOLLOWS:

  Section 1. Subdivision 1 of section 1131 of the tax law, as amended by
chapter 576 of the laws of 1994, is amended to read as follows:
  (1)  "Persons  required to collect tax" or "person required to collect
any tax imposed by this article" shall include: every vendor of tangible
personal property or services; every recipient of amusement charges; and
every operator of a hotel. Said terms shall also include  any  [officer,
director or employee of a corporation or of a dissolved corporation, any
employee  of a partnership, any employee or manager of a limited liabil-
ity company, or any employee of an individual proprietorship who as such
officer, director, employee or manager is under a duty to act  for  such
corporation,   partnership,  limited  liability  company  or  individual
proprietorship in complying with any requirement of this  article[;  and
any  member  of  a  partnership  or  limited  liability  company] PERSON
REQUIRED TO COLLECT, TRUTHFULLY  ACCOUNT  FOR,  AND  PAY  OVER  THE  TAX
IMPOSED  BY  THIS  ARTICLE  WHO  WILLFULLY  FAILS TO COLLECT SUCH TAX OR
TRUTHFULLY ACCOUNT FOR AND PAY OVER SUCH TAX OR  WILLFULLY  ATTEMPTS  IN
ANY MANNER TO EVADE OR DEFEAT THE TAX OR THE PAYMENT THEREOF.  Provided,

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
                                                           LBD09020-05-0

S. 2409--B                          2

however,  that any person who is a vendor solely by reason of clause (D)
or (E) of subparagraph (i) of paragraph [(8)] EIGHT of  subdivision  (b)
of  section  eleven  hundred  one OF THIS ARTICLE shall not be a "person
required  to  collect any tax imposed by this article" until twenty days
after the date by which such person is required to file a certificate of
registration pursuant to section  eleven  hundred  thirty-four  OF  THIS
PART.
  S  2.  This act shall take effect immediately and apply to any taxable
sales occupancy or admission to, or the use of facilities of, a place of
amusement occurring in any sales tax  period  that  is  still  open  for
assessment or refund under the tax law.

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Senate Bill S2409

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Sponsored By

Owen H. Johnson

Archive: Last Bill Status - In Senate Committee Investigations And Government Operations Committee

Bill Amendments

2009-S2409 - Details

2009-S2409 - Summary

2009-S2409 - Sponsor Memo

2009-S2409 - Bill Text download pdf

co-Sponsors

James S. Alesi

2009-S2409A - Details

2009-S2409A - Summary

2009-S2409A - Sponsor Memo

2009-S2409A - Bill Text download pdf

co-Sponsors

James S. Alesi

2009-S2409B (ACTIVE) - Details

2009-S2409B (ACTIVE) - Summary

2009-S2409B (ACTIVE) - Sponsor Memo

2009-S2409B (ACTIVE) - Bill Text download pdf

Comments