Here at Noonan’s Notes world headquarters, we don’t write about every case that comes out of the Division of Tax Appeals, but every once in a while, a case comes out that is notable in some way where we think it’s worth a discussion. Often, these are cases where we disagree with the judge’s reasoning, but over the last couple of weeks, we saw two taxpayer victories that we wanted to highlight because the facts of each of them were a bit unusual. In both Determinations, the tax forms filed with the Tax Department that listed the Petitioner’s names as responsible persons were determined to be insufficient to hold the Petitioners as responsible persons when considered with the other facts in each of the cases, which seems like reason enough to take a closer look at these two cases.
Matter of Eckholdt, ALJ Determination, DTA No. 850007 (May 1, 2025)
Petitioner was a coffee enthusiast, and he had no experience in business ownership or the hospitality industry, but he decided to help one of his friends start a café in Brooklyn called Lazy Ibis. Petitioner’s assistance was limited to reviewing the commercial lease for the café, loaning his laptop to his friend, helping with website development, conducting a physical inspection of the space, and allowing his friend to use his personal residence as the mailing address for the business because this friend was worried about retribution from his current employer who was also his landlord. Petitioner was not a member of the of limited liability company that operated the business, and his name did not appear anywhere in the operating agreement. Nor did Petitioner’s name appear on the lease for the commercial space.
The DTF-17, Application to Register for a Sales Tax Certificate, listed the name of Petitioner as the treasurer as well as his social security number, but did not include his signature. It also listed Petitioner’s mailing address as the address of the company. The DTF-17-ATT, Schedule of Business Locations, also listed Petitioner’s name under the “Signature of Responsible Person” and identified him as treasurer, but again lacked a signature. An NYS-45 WEB was submitted on September 3, 2013, and it was submitted by “HAFTANECKHOLDT.” The Division issued a certificate of authority to Lazy Ibis at Petitioner’s address in his friend’s name. The “Business Contact Information” form also listed Petitioner’s name as the person submitting the form. After the café eventually opened, Petitioner only visited a few times before he moved out of Brooklyn.
On June 19, 2019, the Division mailed a delinquency letter to Petitioner. Petitioner called the Division and informed the person that he spoke with that he did not file any sales tax
returns and that he would contact the owner of Lazy Ibis. He also sent a letter indicating that he was not a responsible person for Lazy Ibis. After concluding the audit, the Division issued a Notice of Determination to Petitioner, assessing him as a responsible person for unremitted sales tax. The Notice was sustained at BCMS.
At the hearing, the Division submitted the DTF-17, DTF-17-ATT, NYS-45 WEB, and the BCI form, along with a printout of an “Entity Information” webpage for Lazy Ibis from the New York State Department of State, Division of Corporations, which listed Petitioner and his Brooklyn address as the DOS process address. Petitioner submitted the operating agreement, commercial lease, certificate of authority, a sworn affidavit regarding his lack of involvement, and the testimony of Petitioner and another member (not his original friend) of Lazy Ibis, who both testified to Petitioner’s lack of involvement in the operations of the business. Petitioner also testified that he did not prepare or file the DTF-17 or NYS-45 WEB, and was unsure how his social security number was obtained.
Judge Chu-Fong determined that Petitioner was not a member of Lazy Ibis, so he was not subject to per se liability, but that he had to overcome the presumption of correctness of the Notice, which he did successfully. The Division only introduced the DTF-17, DTF-17-ATT, NYS-45 WEB, and no other evidence that Petitioner was an employee or a manager of Lazy Ibis. The Judge found Petitioner’s testimony credible, where he claimed that he did not file any of those forms and that his SSN was used without his authorization. This was further supported by the lack of Petitioner’s signature on the forms. The Judge also found the testimony of the member of Lazy Ibis persuasive and consistent with the other documentary evidence submitted by Petitioner (the operating agreement and commercial lease) as to the absence of his authority. Although the Judge conceded Petitioner helped his friend start Lazy Ibis by providing advice, reviewing documents, and allowing him to use his laptop and mailing address, this was not enough to establish that Petitioner was an employee or a manager of Lazy Ibis. Therefore, it did not rise to the level for Petitioner to be held responsible for the business’s sales tax obligation; the Judge cancelled the assessment.
Where taxpayers’ names are listed on the relevant tax forms as responsible persons, even without signatures, we often see taxpayers lose in contesting assessments. Judge Chu-Fong clearly listened to and reviewed all of the evi71dence presented at the hearing before making his decision here. It’s always good to see a taxpayer being able to overcome the presumption of correctness even after a loss as BCMS.
Matter of Naranjo, ALJ Determination, DTA No. 830759 (May 1, 2025)
Petitioner was assessed as a responsible person for both withholding tax and sales tax for Yankee Carting Corp (“YCC”); petitioner was also assessed as a responsible person for withholding tax for Gladiators Contracting Corp (“GCC”). Petitioner failed to appeal several of the Notices of Deficiency in a timely manner, but there were five Notices that were determined to be timely filed.
Two of the Notices asserted a penalty equal to the withholding tax that was not paid by GCC for the periods that ended December 31, 2012, and March 21, 2013. Each of the relevant form NYS-45s appeared to be signed by Petitioner as president of GCC. Two additional Notices asserted a penalty equal to the withholding tax that was not paid by YCC for the periods ending on March 31, 2014, and June 30, 2014. The form NYS-45 for the period ending on March 31, 2014, appeared to be signed by Petitioner as president of YCC. The form NYS-45, for the period ending on June 30, 2014, only had Petitioner’s name printed on the signature line, but again listed his title as president. The last notice at issue was a Notice of Estimated Determination, as no sales tax return was filed by YCC for the period of March 1, 2013, to May 31, 2013.
The dates of these periods are important. Petitioner was arrested on March 14, 2014. Shortly thereafter, a criminal judgment was entered against him on April 23, 2014, and he was in prison until August 23, 2019. Thus, Petitioner was in jail for most of the periods during which YCC would have filed the NYS-45s that showed Petitioner’s name. Who could have predicted his jail sentence would be a ticket to a win in his sales tax case!
Judge Baldwin concluded that there was no evidence in the record to conclude that Petitioner was a responsible person of GCC or YCC for withholding tax purposes. Only the four form NYS-45s, one of which was allegedly signed while Petitioner was in jail, were in the record. That said, Judge Baldwin could have decided that the Notices related to GCC should be sustained because they were for periods during which Petitioner was not in jail. But instead, the Judge called the credibility of all the returns into question because some of the returns were allegedly signed while Petitioner was in jail. Since the Division only had the returns in the record to support its position that Petitioner was a responsible person, and they were called into question, the Judge determined there was no evidence that Petitioner was active in the management of day-to-day affairs of GCC and YCC, or that he exercised control over daily bank accounts and disbursement records or that he even had check signing authority.
With respect to the sales tax assessment, the Judge concluded there was no evidence to conclude Petitioner was a responsible person for sales tax purposes for YCC. The period at issue did not overlap with the assessments for withholding purposes for YCC, but it did overlap in part with the period for GCC, but this alone was not sufficient.
This is the type of case where we typically see taxpayers lose. Generally, providing signed returns is enough to conclude that the taxpayer is a responsible person. But it’s good to see that Judge Baldwin took a closer look at this one, where the taxpayer was pro se, and came to what we think is the right conclusion here.
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