Personal liability for retail sales tax collected by corporations

State law designates collected retail sales tax as funds held in trust for the state. Any person who controls trust funds for a corporation and willfully fails to turn those funds over to the state can be held personally liable.

Who is liable?

Any number of people in a corporation may be held liable. This includes any person responsible for unpaid collected retail sales tax, the person authorizing payment of other liabilities before payment of the taxes or any corporate officer or director who willfully pays or directs others to pay other obligations before remitting the retail sales tax.

What establishes the liability?

To establish personal liability, the following requirements must be met:

  1. The liability to pay the tax must be the corporation's.
  2. The corporation must be terminated, be abandoned or dissolved.
  3. The person willfully failed to pay or directed someone else to not pay the collected retail sales tax.
  4. The person either:
    • Had control or supervision over collected retail sales tax, or
    • Was responsible for reporting or remitting the retail sales tax.
  5. No reasonable means of collection from the corporation is available.

What taxes?

Persons can only be held liable for the retail sales tax collected when they had direct control over the funds.

This does not relieve the corporation of the liability or otherwise prevent the department from collecting as outlined in the law.

Can this liability be appealed?

Yes. Persons who are assessed individual liability may appeal the assessment by following the guidelines printed in Washington Administrative Code (WAC) 458-20-100.

Note: In sole proprietorships and partnerships, the owners, partners, and their spouses are individually liable for all of the taxes, including the B&O tax and both collected or uncollected retail sales tax.


Revised Code of Washington (RCW) 82.32.145
Washington Administrative Code (WAC) 458-20-217