Tennessee law provides several ways in which a person or business may be held responsible for certain tax debts of a business. Two of the most common scenarios are personal responsibility and successor responsibility. These are described briefly below and discussed in several other articles.
Taxes such as sales taxes, which are collected by a third party on behalf of the taxing entity, are commonly referred to as “trust fund taxes.” This term reflects that sales taxes are collected from customers and then held in trust for the State until they are remitted. When a responsible person fails to ensure that these taxes are remitted to the State, the State may pursue that person individually for the liability.
In short, individuals required to collect, account for, or pay over certain taxes may be personally responsible for those taxes.
The purchaser of a business or stock of goods must withhold a sufficient amount of the purchase price to cover the seller’s unpaid sales taxes unless the seller gives the purchaser a receipt from the Department showing the taxes due have been paid, or a certificate from the Department or a seller’s affidavit stating no taxes were due.