San Francisco Tax Preparation / CPA: CA – CEO was personally liable for clothing store’s unpaid sales tax, interest, and penalties

The CEO of a clothing store was personally liable for unpaid sales tax, applicable and accrued interest, and penalties.

California Law
California law provides that a person is personally liable for the unpaid tax, accrued interest, and penalties owed by a corporation, if:

the corporation’s business has been terminated, dissolved, or abandoned;

the corporation collected sales tax reimbursement on its sales of tangible personal property and failed to remit that tax reimbursement to the CDTFA when due;

the person had control or supervision of, or was charged with the responsibility for, the filing of returns or the payment of tax, or had a duty to act for the corporation in complying with the Sales and Use Tax Law; and

the person willfully failed to pay taxes due from the corporation or willfully failed to cause such taxes to be paid.

The Taxpayer’s Arguments
The taxpayer argued that she was a housewife that did not participate in any daily activities or sales or use tax matters for the clothing store, that she was a silent partner, that there was a manager for the store, and a bookkeeper who dealt with the books and records.

Findings of Office of Tax Appeals
The Office of Tax Appeals noted that:

the taxpayer submitted a Notice of Closeout form to the California Department of Tax and Fee Administration (CDTFA), stating that the business closed;

the store claimed deductions on its tax returns for sales tax reimbursement, sales tax reimbursement was included or added to the selling price according to forms that were filed, and the store’s representative and bookkeeper confirmed that sales tax reimbursement was included in sales on the sales worksheets;

the evidence showed that the taxpayer was responsible for the clothing store’s sales and use tax matters, including filing and paying tax for the entire liability period; and

the taxpayer’s actions established that she actually knew or deliberately avoided knowing that a tax return was filed without remittance and had actual knowledge that the taxes were due but not being paid. In addition, the taxpayer was the clothing store’s owner, president, sole officer, and responsible person for the liability periods, and she had the ability to pay the taxes at issue but chose not to do so.

As a result, the taxpayer was personally liable for the amounts at issue.

Z. Sultana, California Office of Tax Appeals, 2026-OTA-204P, May 2026