Keith v. Department of Treasury, Docket No. 87675

• Decision Date: 05 February 1988
• Docket Number: Docket No. 87675
• Citation: 418 N.W.2d 691,165 Mich.App. 105
• Parties: Lee G. KEITH, Petitioner-Appellant, v. DEPARTMENT OF TREASURY, Respondent-Appellee. 165 Mich.App. 105, 418 N.W.2d 691
• Court: Court of Appeal of Michigan — District of US

Page 691

418 N.W.2d 691

Lee G. KEITH, Petitioner-Appellant, v. DEPARTMENT OF TREASURY, Respondent-Appellee.

Docket No. 87675.

165 Mich.App. 105, 418 N.W.2d 691

Court of Appeals of Michigan.

Submitted Oct. 3, 1986.

Decided Dec. 9, 1987.

Released for Publication Feb. 5, 1988.

[165 MICHAPP 106] Hill, Lewis, Adams, Goodrich & Tait by Jimm F. White and Charles H. Polzin, Birmingham, for petitioner-appellant.

Frank J. Kelley, Atty. Gen., Louis J. Caruso, Solicitor General, and E. David Brockman [165 MICHAPP 107] and Shirley L. Palardy, Asst. Attys. Gen., for respondent-appellee.

Before BEASLEY, P.J., and J.H. GILLIS and DODGE, ^* JJ.

PER CURIAM.

Petitioner, Lee G. Keith, appeals as of right from a Michigan Tax Tribunal decision upholding a sales tax deficiency assessment against Keith, the former vice-president, secretary and general sales manager of Metro GMC Truck Center, Inc., a defunct corporation, for the tax periods of December, 1981, March, 1982, and the first sixteen days of April, 1982.

This Court's review of the Tax Tribunal's decision is limited to determining whether the decision is authorized by law and whether it is supported by competent, material, and substantial evidence on the whole record. Peterson v. Dep't of Treasury, 145 Mich.App. 445, 449, 377 N.W.2d 887 (1985); MCI Telecommunications Corp. v. Dep't of Treasury, 136 Mich.App. 28, 30, 355 N.W.2d 627 (1984), lv. den. 422 Mich. 883 (1985); Const.1963, art. 6, Sec. 28. "Substantial evidence" must be more than a scintilla of evidence, though it may be substantially less than a preponderance of the evidence necessary in most civil cases. Mid America Management Corp. v. Dep't of Treasury, 153 Mich.App. 446, 460, 395 N.W.2d 702 (1986).

Petitioner first argues that the Tax Tribunal erred in finding that he was a responsible corporate officer within the meaning of M.C.L. Sec. 205.65(2); M.S.A. Sec. 7.536(2), and thus personally liable for Metro's unpaid sales tax for the periods in question. M.C.L. Sec. 205.65(2); M.S.A. Sec. 7.536(2) provides in pertinent part:

[165 MICHAPP 108] "If a corporation licensed under this act fails for any reason to file the required returns or to pay the tax due, any of its officers having control, or supervision of, or charged with the responsibility for making such returns and payments shall be personally liable for such failure. The dissolution of a corporation shall not discharge an officer's liability for a prior failure of the corporation to make a return or remit the tax due."

Our Supreme Court has characterized the above-quoted statutory provision as imposing a penalty on corporate officers for noncompliance with the General Sales Tax Act, M.C.L. Sec. 205.51 et seq.; M.S.A. Sec. 7.521 et seq. Detroit Hilton Limited Partnership v. Dep't of Treasury, 422 Mich. 422, 429, 373 N.W.2d 586 (1985). Tax has been defined in the act to include tax, interest, and penalties levied under the act. M.C.L. Sec. 205.51(1)(l ); M.S.A. Sec. 7.521(1)(l ). In order to hold an individual personally liable for a corporation's tax liability under the statute, the Department of Treasury must show that the individual is an officer of the corporation and either (1) that the officer has control over the preparing of the corporation's tax returns and the payment of taxes; or (2) that the officer supervises the preparing of the corporation's tax returns and payment of taxes; or (3) that the officer is charged with the responsibility of preparing the corporation's tax returns and payment of taxes. Peterson, supra, 145 Mich.App. p. 450, 377 N.W.2d 887.

In the instant case, it is undisputed that Keith was an officer of Metro. Keith argues that he was not responsible for preparing sales tax returns and paying the tax. However, there was ample evidence to support the Tax Tribunal's determination that Keith was a responsible officer within the meaning of the statute. Keith was listed on Metro's application for registration with the Department of Treasury as the officer in control of or [165 MICHAPP 109] charged with the responsibility of preparing Michigan tax returns. Keith participated in business decisions, attended meetings, and was kept informed with regard to Metro's financial problems. Keith would also provide signatory approval for sales tax remittances when Edwin Garvin, Metro's president and treasurer, was not available. The Tax Tribunal did not err in finding that Keith, as a responsible officer of the corporation, was personally liable for Metro's unpaid sales tax liability.

Next, Keith argues that the Tax Tribunal erred in determining that Keith, as a matter of law, was not entitled to contest the amount of the sales tax liability. In the instant case, the Tax Tribunal ruled that petitioner was not able to contest the amount of the sales tax liability because Metro had failed to contest the amount of the assessment pursuant to M.C.L. Sec. 205.22; M.S.A. Sec. 7.657(22). Metro's failure to contest the amount of the assessment resulted in the assessment's becoming final upon the expiration of the appeal period.

At issue in this case is whether Metro and Keith received proper notice of the final assessment. Pursuant to M.C.L. Sec. 205.24; M.S.A. Sec. 7.657(24), the Department of Treasury is obligated to give notice of a deficiency assessment to a taxpayer who does not file a sales tax return. Statutory notice provisions are designed to provide due process of law, the purpose being to provide the taxpayer with notice that a deficiency assessment has been levied for certain taxes and to afford the taxpayer an opportunity to contest it. A defect in formal notice does not violate due process if notice was in fact given. Auer v. Dep't of Treasury, 137 Mich.App. 353, 357, 357 N.W.2d 696 (1984). The due process test concerning notice is whether the means chosen to serve notice are reasonably calculated to reach the party, and not whether notice is actually received. [165 MICHAPP 110] Krueger v. Williams, 410 Mich. 144, 300 N.W.2d 910 (1981).

Keith's liability for Metro's unpaid sales tax liability arises as a result of Metro's failure to file the required tax return or to pay the tax due. M.C.L. Sec. 205.65(2); M.S.A. Sec. 7.536(2). A corporate officer's tax liability under the statute is clearly derivative in nature. Furthermore, because only those corporate officers who are responsible for the preparing of sales tax returns and the payment of taxes may be held...