senate Bill S2438

2011-2012 Legislative Session

Holds a person who willfully fails to collect, account for, and pay tax liable

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Archive: Last Bill Status - In Committee


  • Introduced
  • In Committee
  • On Floor Calendar
    • Passed Senate
    • Passed Assembly
  • Delivered to Governor
  • Signed/Vetoed by Governor

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Actions

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Assembly Actions - Lowercase
Senate Actions - UPPERCASE
Jan 04, 2012 referred to investigations and government operations
Jun 24, 2011 recommitted to rules
Jun 15, 2011 ordered to third reading cal.1273
committee discharged and committed to rules
Jan 21, 2011 referred to investigations and government operations

S2438 - Bill Details

Current Committee:
Law Section:
Tax Law
Laws Affected:
Amd ยง1131, Tax L
Versions Introduced in 2009-2010 Legislative Session:
S7922

S2438 - Bill Texts

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Holds a person who willfully fails to collect, account for, and pay tax liable; defines "passive investor" to mean an investor who does not play an active role in the business.

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BILL NUMBER:S2438

TITLE OF BILL:
An act
to amend the tax law, in relation to the failure of a responsible person
to collect and pay over withholding tax

PURPOSE:
To eliminate a disparity in the collection of trust fund
taxes for which there is no known policy or legislative basis.

SUMMARY OF PROVISIONS:
Section 1131 of the tax law is amended to add a
new subdivision (1) dealing with those people who are not responsible
for payment of sales tax and therefore exempting them from such
unpaid sales tax liability.

EXISTING LAW:
None.

JUSTIFICATION:
As currently written, 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.

This amendment to the NYS Tax Law, section 1133, liability for the
tax, will allow the responsible person concept to be applied
uniformly to the determination of who is responsible for unpaid trust
fund taxes owed by a business, without regard to the type of tax
(sales or withholding tax) or the form of the business entity.

Section 121-303 of the NY Partnership Law similarly insulates limited
partners from the debts of a partnership. This change would eliminate
a disparity in the collection of trust fund taxes for which there is
no known policy or legislative basis.

If not corrected, Section 1131 (1) exposes mere passive investors in
the LLCs and limited partnerships to personal liability for unpaid
sales taxes of a business.

LEGISLATIVE HISTORY:
S.7922 of 2010 - Referred to Investigations & Government Operations

FISCAL IMPLICATIONS:
None.

EFFECTIVE DATE:
Immediately.

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

                                  2438

                       2011-2012 Regular Sessions

                            I N  S E N A T E

                            January 21, 2011
                               ___________

Introduced  by  Sen.  ALESI  -- read twice and ordered printed, and when
  printed to be committed to the Committee on Investigations and Govern-
  ment Operations

AN ACT to amend the tax law, in relation to the failure of a responsible
  person to collect and pay over withholding tax

  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 EXCEPT, THOSE
PASSIVE INVESTORS, AS DEFINED, ARE EXEMPT.   FOR THE  PURPOSES  OF  THIS
SUBDIVISION, THE TERM "PASSIVE INVESTOR" SHALL MEAN AN INVESTOR WHO DOES
NOT  PLAY  AN  ACTIVE ROLE IN THE BUSINESS.  Provided, however, that any
person who is a vendor solely by reason of clause (D) or (E) of subpara-
graph (i) of paragraph (8) of subdivision (b) of section eleven  hundred
one  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 elev-
en 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.
                                                           LBD08250-01-1

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