Andrew Winton

15-32

On January 28, 2010, the Department assessed the Taxpayer for withholding tax, penalty and interest for the tax periods from November 2008 through March 2009.  On February 2, 2010, the Taxpayer filed a protest of the assessment.  On February 26, 2007, the Taxpayer filed to register a limited liability company (LLC) in the state of Texas.  The LLC was organized to engage in the restaurant business.  The Taxpayer filed as the registered agent and manager of the LLC.  The Taxpayer filed the LLC on behalf of his son-in-law, who actually owned and operated the restaurant under the LLC, but was unable to register the LLC in Texas because he was not a US citizen.  The son-in-law opened and operated his restaurant in New Mexico with a business partner.  The LLC registered in New Mexico as a foreign LLC on June 26, 2007.  The registration listed the Taxpayer as the registered agent, and the Taxpayer, his son-in-law, and the son-in-law’s business partner as officers.  The LLC registered with the Department for gross receipts taxes on July 27, 2007.  The application for the business tax identification number identified the Taxpayer as one of the managers of the LLC, as well as listing the son-in-law, business partner, and two other businesses in various roles.  The son-in-law’s business partner signed the application.  From November 2008 through March 2009, the LLC filed its withholding tax, but failed to pay the amounts due.  The LLC’s registration in Texas was amended on April 1, 2009.  The Taxpayer was removed from the registration and the son-in-law was listed as the agent and manager.  The Taxpayer testified that he was aware that his son-in-law was running the restaurant, but was unaware of any business or tax registrations in New Mexico and had not consented to the use of his information on any such registrations.  The Taxpayer did not work for the restaurant or LLC, was not paid by them, did not deal with their finances, was not authorized on their accounts, did not have any control over their employees or wages, and did not participate in any aspects of their business.  Employers who are required to deduct and withhold income tax from their employees’ wages, and those withholders are liable for amounts required to be deducted and withheld.  Generally, members and managers of an LLC are protected from the debts of any LLC, but withholding tax under New Mexico law is one of the exceptions.  However, based on the testimony of the Taxpayer, the Hearing Officer found that the Taxpayer is not the party liable for the withholding tax, penalty or interest owed by the LLC. The Taxpayer’s protest was granted.