Table of Contents
3. Sales Taxes. A sales tax is a tax collected from a customer by a seller of goods or services. Index
3.1. Sales Taxes are Trust Funds. In Texas, sales taxes are classified as "trust fund" taxes. The taxes are "trust fund" taxes because the employer is obligated to collect the tax from the customer and hold the funds in trust for payment to the Texas Comptroller’s office. Index
3.2. Sales Taxes Not Dischargeable. Trust fund taxes can not discharged in a Chapter 7 or 13 case, regardless of the age of the tax. In a Chapter 13 case, the bankruptcy plan must offer to pay 100 percent of all trust fund taxes owed, plus all accrued interest and penalties due through the date the case was filed. You can never escape from paying trust fund taxes by filing for bankruptcy, regardless of whether the case is filed under Chapter 7 or 13. Index
3.3. Personal Liability for Non-Payment. An individual is personally liable for nonpayment of a sales tax if he: Index
(a)(1) controls or supervises the collection of the tax from a customer; or
(2) supervises the accounting and payment of the tax to the state; and
(b) willfully fails to pay the funds to the state.
Any owner or employee of a business who either collects or supervises the collection of the tax, or who is responsible for paying the bills, will be personally liable for the tax if they are not paid.
Example #3.1. Bill and Sandy are both owners of Bill’s Widgets, Inc., a Texas corporation engaged in the retail sale of widgets. Sandy, the President, is responsible for selling the widgets and pays all of the bills. Bill is Vice-President. He is also a lawyer, operates a law firm, and does not participate to any significant degree in Bill’s Widgets. Bill does not write any checks against the Bill’s Widgets corporate bank account. Bill’s Widgets suffers slow widget sales. The business only generates enough income to pay either employee salaries or state sales tax, but not both. Sandy decides to pay her loyal employees instead of the state sales tax. Bill’s Widgets goes out of business. Bill and Sandy are both forced to file for personal bankruptcy. Bill is not personally liable for any of the sales taxes since he did not control nor supervise the collection or payment of the tax. Sandy is personally liable since she controlled and supervised the collection and payment of the tax. Sandy can not discharge the sales tax debt in a Chapter 7 case. In a Chapter 13 case, Sandy's bankruptcy plan must offer to pay 100 percent of all sales taxes due, plus all accrued interest and penalties due through the date the case is filed, unless the Texas Comptroller agrees to accept less than full payment (an unlikely result). Index