Nusseibeh v. Zaino

• Decision Date: 12 March 2003
• Docket Number: No. 2002-0460.,2002-0460.
• Parties: NUSSEIBEH, Appellant, v. ZAINO, Tax Commr., Appellee.
• Court: Ohio Supreme Court

Page 93

784 N.E.2d 93

98 Ohio St.3d 292

2003 Ohio 855

NUSSEIBEH, Appellant, v. ZAINO, Tax Commr., Appellee.

No. 2002-0460.

Supreme Court of Ohio.

Submitted February 12, 2003.

Decided March 12, 2003.

Raed Nusseibeh, pro se.

Jim Petro, Attorney General, and Barbara L. Barber, Assistant Attorney General, for appellee.

PER CURIAM.

{¶ 1} This case concerns a derivative sales tax assessment made against appellant, Raed Nusseibeh ("Nusseibeh"), as the president, sole officer, and sole shareholder of Nusseibeh, Inc.

{¶ 2} Nusseibeh formed Nusseibeh, Inc. in 1993 to purchase a grocery business known as Woodhill Shoprite. While Nusseibeh, Inc. operated the business, it obtained a vendor's license, had the liquor permit transferred to it, and became a licensed agent for Ohio lottery sales.

{¶ 3} In October 1995, Nusseibeh, Inc. entered into an agreement to sell the Woodhill Shoprite business to 664 Market Company, Inc. One of the terms of the agreement provided for a separate management contract to be in effect starting on the date the purchaser took possession, until the close of business on the day approval of the liquor permit transfer was received. During the term of the management agreement, the business was to be managed by 664 Market Company, Inc. and Anthony Pendleton on behalf of Nusseibeh, Inc. Under paragraph six of the management agreement, Nusseibeh, Inc. agreed "to file all tax returns during the term of this Agreement."

{¶ 4} At the same time the sale and management agreements were entered into, Nusseibeh, Inc. leased the premises occupied by Woodhill Shoprite to Anthony Pendleton for 36 months at a rental of $7,500 per month.

{¶ 5} In September 1994 and 1995, prior to the sale agreement, Nusseibeh signed applications for renewal of Nusseibeh, Inc.'s liquor permit, as president of Nusseibeh, Inc. In September 1996 and 1997, after the sale agreement was signed, and while the business was being operated under the management agreement, Nusseibeh continued to sign applications for renewal of the liquor permit as president of Nusseibeh, Inc. When he filed the applications for renewal of the liquor permit for 1996 and 1997, Nusseibeh affirmed that no one other than Nusseibeh, Inc. had any legal or beneficial interest in the permit business. The liquor permit was never transferred from Nusseibeh, Inc. to 664 Market Company, Inc.

{¶ 6} While the business was being operated under the management agreement, sales tax returns were made using Nusseibeh, Inc.'s vendor's license through March 1997. Nusseibeh, Inc.'s vendor's license was cancelled in 1998. Nusseibeh was listed on the vendor's license application as the president and secretary/treasurer of Nusseibeh, Inc. The Ohio lottery sales license obtained by Nusseibeh, Inc. was used by the business until it was cancelled in August 1997, for failure to make prompt and accurate payments to the Lottery Commission.

{¶ 7} In November 1997, the Tax Commissioner made a sales tax assessment against Nusseibeh, Inc. for the period January 1, 1994, through March 31, 1997. The corporation did not contest the assessment. After the assessment against Nusseibeh, Inc. was not paid, a derivative assessment was made against Nusseibeh personally. Nusseibeh filed a petition for reassessment, which was denied by the commissioner. Nusseibeh filed a notice of appeal with the Board of Tax Appeals ("BTA"). At the hearing before the BTA, Nusseibeh testified that during the time period involved he was running other businesses and he never personally supervised any of the day-to-day operations of the Woodhill Shoprite business.

{¶ 8} After reviewing the testimony and evidence presented, the BTA affirmed the assessment, finding that Nusseibeh had not met his burden to prove error on the part of the Tax Commissioner. Therefore, the BTA found that Nusseibeh as the sole corporate officer and sole shareholder of Nusseibeh, Inc. was derivatively liable for the sales tax assessed against Nusseibeh, Inc. Nusseibeh filed a motion for reconsideration, which was denied by the BTA.

{¶ 9} This cause is now before the court as an appeal as of right.

{¶ 10} The question raised in this case is whether Nusseibeh, as the sole corporate officer and sole shareholder of Nusseibeh, Inc., is derivatively liable for the sales tax assessment made against Nusseibeh, Inc. Nusseibeh contends that he is not liable because the Tax Commissioner did not prove that he did not sell his business. Nusseibeh misunderstands the role of the hearing before the BTA. At the hearing before the BTA, the burden was on Nusseibeh to show that the Tax Commissioner's assessment was in error. In Federated Dept. Stores, Inc. v. Lindley (1983), 5 Ohio St.3d 213, 215, 5 OBR 455, 450 N.E.2d 687, we stated that "when an assessment is contested, the taxpayer has the burden `* * * to show in what manner and to what extent * * *' the commissioner's investigation and audit, and the findings and assessments based thereon, were faulty and incorrect." (Ellipses sic.) Id., quoting Midwest Transfer Co. v. Porterfield (1968), 13 Ohio St.2d 138, 141, 42 O.O.2d 365, 235 N.E.2d 511. Thus, the Tax Commissioner's findings are presumptively valid, absent a demonstration that those findings...