DeWitt Law successfully obtained reversal of a proposed $453,220.13 Tennessee personal liability assessment issued against a restaurant co-owner. The Tennessee Department of Revenue initially alleged that our client was personally liable for sales tax collected by the business but not remitted to the State.

After an informal taxpayer conference, the Department ruled in our client’s favor and abated the personal liability assessment in full. The hearing officer found that although our client was a 50% owner and was involved in restaurant operations, he did not willfully divert collected sales tax, because he lacked the necessary knowledge that sales tax had not been remitted during the periods covered by the proposed assessment.

The issue

The Department issued a Personal Assessment Letter asserting that our client was personally liable under Tenn. Code Ann. § 67-1-1443 for sales and use taxes allegedly collected by the restaurant but not paid over to the State. The proposed assessment totaled $453,220.13, including penalties and interest.

Our client’s position

We challenged the assessment on two grounds:

  1. Our client did not know taxes were owed and therefore did not act willfully; and
  2. The proposed assessment was also challenged as time-barred under Tennessee’s statute of limitations.

Our client also submitted a sworn affidavit and provided testimony at the informal conference.

The Result

The Department agreed with our client’s core argument and held that he did not act willfully within the meaning of Tenn. Code Ann. § 67-1-1443. The hearing officer found that the division of labor between operations and financial responsibilities was clear, and that our client lacked the requisite knowledge that sales tax was unremitted. Because the Department found no willfulness, it concluded that he could not be held personally liable for the company’s delinquent tax liabilities for the periods at issue and abated the assessment.

Why This Matters

Tennessee can pursue owners, officers, and other responsible persons individually for unremitted trust fund taxes like sales tax. But the statute requires more than business ownership alone. In this case, the Department recognized that personal liability depends on informed, willful participation in diverting collected taxes, not simply involvement in day-to-day operations.

Need Help with a Tennessee Personal Liability Assessment?

If you have received a Tennessee personal assessment letter for sales tax, trust fund taxes, or other business tax liabilities, DeWitt Law can help you challenge the assessment and protect you from personal exposure.