Cruz v. Testa
| Decision Date | 19 August 2015 |
| Docket Number | No. 2014–0513.,2014–0513. |
| Citation | 2015 Ohio 3292,41 N.E.3d 1213,144 Ohio St.3d 221 |
| Parties | CRUZ, Appellant, v. TESTA, Tax Commr., Appellee. |
| Court | Ohio Supreme Court |
John Wood, for appellant.
Michael DeWine, Attorney General, and David D. Ebersole and Barton A. Hubbard, Assistant Attorneys General, for appellee.
{¶ 1} In this appeal, appellant, Susan C. Cruz, contests 27 assessments of delinquent sales tax that, when added to preassessment interest, penalties, and additional charges, amounted to over $599,000. Cruz's liability derives from previous assessments issued against Cruz–Samsa Corporation, a pet-store business of which Cruz was co-owner and an officer. We confront a jurisdictional issue and an issue on the merits.
{¶ 2} With regard to the jurisdictional issue, appellee, the tax commissioner, argues that this appeal must be dismissed on the grounds that Cruz failed to set forth an error, as required by R.C. 5717.04, that would confer jurisdiction over the appeal. We disagree, and we therefore deny the motion to dismiss.
{¶ 3} On the merits, Cruz argues that she may contest the validity of the service of the assessments against the corporation as a defense against her derivative liability. We agree with this contention, and our review of the record demonstrates completed service of seven of the 27 assessments against the corporation. We therefore affirm the BTA's decision to uphold the seven assessments as to which completed service has been shown.
{¶ 4} As to the other 20 assessments, we conclude that additional fact-finding is necessary. We therefore vacate the BTA's decision with regard to those 20 assessments and remand the cause with instructions that the BTA take additional evidence and determine whether service of those 20 assessments was perfected on the corporation.
The assessments against the corporation and against Cruz personally
{¶ 5} Before the court are 27 assessments against Susan C. Cruz, issued pursuant to R.C. 5739.33, as a person who is responsible for the sales-tax obligation of Cruz–Samsa Corporation, which did business as a Petland store in Cleveland Heights. The periods at issue extend from late 2007 through the first half of 2010. As a retail vendor, Cruz–Samsa Corporation applied in November 2005 for a vendor's license under the sales-tax law, with a view to making sales beginning January 20, 2006. R.C. 5739.17.
{¶ 6} The application identified Susan Cruz as president and Mark Samsa as vice president and gave four addresses as follows:
Cruz was the majority shareholder of the corporation.
{¶ 7} The record indicates that the tax commissioner issued 27 assessments against the corporation. It is clear from the record that seven of the assessments were successfully delivered by certified mail to the headquarters address. Because the assessment notices are not in the record, the dates they were issued are not clearly established. But the evidence relating to the seven notices that were successfully delivered by certified mail show mailing dates ranging from July 11, 2008, to October 9, 2009. The evidence also shows the attempted service of all 27 assessments on Cruz–Samsa Corporation, using either the headquarters or the business-location address.
{¶ 8} The 27 assessments are for the following periods: one assessment for October 2007, one assessment for December 2007, one assessment for each of the 12 months of 2008, one assessment for each of the 12 months of 2009, and a single assessment covering the first six months of 2010.
{¶ 9} Although the record does not contain the assessment notices against the corporation, the tax commissioner did certify as part of the statutory transcript printouts from the tax department's "Proof of Delivery" computerized system. Those printouts indicate successful certified-mail delivery of seven of the 27 assessments, with the other 20 marked either "unclaimed," "returned," "refused," or "NoFinlEvnt." Two addresses were used in mailing the assessment notices: the 2504 Lee Road address, which was listed on the vendor's-license application as the corporate headquarters address; and the 2255 Lee Road address, which was listed on the vendor's-license application as the place of retail business for the corporation. Additionally, both Cruz's appointment as statutory agent for Cruz–Samsa Corporation and her joint federal income-tax return for 2006 give 2504 Lee Road as her address.
{¶ 10} During March 2012, the tax commissioner issued the 27 assessments against Susan Cruz personally at the 2504 Lee Road address; according to the accompanying cover letters, the assessments against Cruz were originally sent by certified mail but in each case the tax commissioner followed up with ordinary mail when the certified mail was unsuccessful. The cover letters sent by ordinary mail are dated May 2012.
{¶ 11} On July 12, 2012, Cruz filed her petitions for reassessment, specifying two bases for contesting the assessments: first, Cruz was "not a party responsible for filing returns for, or paying sales tax" for the corporation; second, "[t]here was no valid assessment against the corporation for failure of service."
{¶ 12} In an accompanying memorandum, Cruz explained that she was not a proper person to assess because she did not control or supervise the fiscal function relating to the filing of sales-tax returns; indeed, that function belonged to the corporation's vice president and minority shareholder, Mark Samsa. As for service, the memorandum explicitly argued that because the corporation was never served with an assessment, Cruz's own liability was precluded.
{¶ 13} Attached to the memorandum was Cruz's affidavit, in which she testified that she is the "former president and majority shareholder of Cruz–Samsa Corporation dba Petland of the Heights from 2006 through 2009"; that she was not an employee and drew no wages; and that she had no responsibilities relating to the corporation's tax compliance. According to the affidavit, Mark Samsa, the vice president and minority shareholder "was originally responsible for maintaining the corporate accounts and filing and paying the taxes of the corporation." Subsequently, "on or before December 31, 2007," according to the affidavit, Samsa resigned his corporate responsibilities. The affidavit recites Samsa's assertion that he had trained "another person" in keeping the accounts and submitting sales-tax returns, but the affidavit asserts that that other person was not Cruz.
{¶ 14} Finally, the affidavit makes the following two averments concerning the service of the corporate assessments:
The tax commissioner's determination and the BTA's decision
{¶ 15} The tax commissioner issued his final determination on the petitions for reassessment on December 28, 2012. He found that as 66 percent owner of the company and as corporate president with the power to hire and fire, Cruz "had the authority to control fiscal responsibilities" of the corporation. Citing Spithogianis v. Limbach, 53 Ohio St.3d 55, 559 N.E.2d 449 (1990), the determination recites that " R.C. 5739.33 does not permit officers, otherwise responsible for fiscal responsibilities, to escape liability by delegating those duties to others."
{¶ 16} Turning to the service issue, the tax commissioner held that a challenge to the service on the corporation was barred by Rowland v. Collins, 48 Ohio St.2d 311, 358 N.E.2d 582 (1976).
{¶ 17} Cruz appealed to the BTA, asserting both issues in her notice of appeal. The BTA held a hearing on February 3, 2014, at which counsel representing Cruz and the tax commissioner appeared and presented arguments. The BTA issued its decision on March 7, 2014, affirming the commissioner's determination upholding the assessments against Cruz. As for the service issue (which is the only issue on appeal to this court), the BTA disposed of it in a footnote reading as follows:
[Cruz] also asserted in her petitions that the underlying sales tax assessments against Cruz–Samsa Corp. were invalid due to lack of proper service on the corporation. In her memorandum in support of her petitions, she argued that service on the minority shareholder of the corporation (Mark Samsa) was improper, because she was the statutory agent for the corporation. The commissioner rejected the argument as not being properly raised; instead, he asserted that such argument should have been made in a proceeding challenging the underlying assessments themselves. We agree. Moreover, we find that service on Mr. Samsa was sufficient, as it was "reasonably calculated to give notice of the assessment and allow the taxpayer to present his objections."
(Citation omitted.) BTA No. 2013–1010, 2014 Ohio Tax LEXIS 1463, 3 (Mar. 7, 2014), fn. 1.
{¶ 18} The sixth paragraph of R.C. 5717.04 requires that a notice of appeal from a BTA decision to a court "set forth the decision of the board appealed from and the errors therein complained of ." (Emphasis added.) The requirement that the errors be set forth in the notice of appeal is a jurisdictional prerequisite to the court's power to grant relief on a particular basis. See Global Knowledge Training,...
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