Pub. 6 2011-2012 Issue 6

March/April 2012 15 Extraordinary Service for Extraordinary Members. Once everyone is aware of all the liabilities and relative rights, the department can work with the bank and other creditors in a joint effort to limit everyone’s loss exposure as much as possible and allow the sale to take place. “Statutory Responsibilities for Collecting, Reporting, and Remitting Sales Taxes and Income Tax Withholding” be- gins by describing trust fund taxes and recommending that amounts collected from customers for sales tax or deducted from employees for withholding be kept in a separate bank account and never used for business operations. This guide further directs that these taxes cannot be used for any other purpose. This separate bank account only should hold trust fund taxes, even though the business also may owe income taxes, use taxes, property taxes, or any number of other taxes on its own accord. Many businesses, of course, don’t do this. What the de- partment often finds is that when businesses suffer financial stress, they treat trust fund taxes like any other obligation of the business, despite their unique status. Tax Liens The law governing establishment and enforcement of state tax liens is governed by the Uniform State Tax Lien Registration and Enforcement Act. [Neb. Rev. Stat. §§ 77- 3901 through 77-3908] If any person liable to pay any tax neglects or refuses to pay after a demand, the tax and any associated interest or penalties establish a lien in favor of Nebraska upon all property and rights owned by the taxpayer or acquired later prior to expiration of the lien. [Neb. Rev. Stat. § 77-3904] Under the procedures of the department, the Demand for Payment, which triggers this statutory lien, is issued after the assessment of the tax is final, meaning any protest or appeal period has expired and the amount in the demand is no longer open to adjustment. This lien will expire after three years unless recorded. Usually, the department does not record liens immediately. The threat of recording a lien can often provide leverage that causes the taxpayer to pay the taxes owed or reach a payment agreement. Once the lien is recorded, it does not expire for 10 years and may be renewed thereafter for subsequent 10- year periods. The priority of the lien is based upon the date recorded, except with regard to the IRS, in which case, the priority of the state tax lien is established based on the date the tax was assessed. A state tax lien may be enforced by the department by garnishing wages, levying bank accounts, or seizing and sell- ing property of the taxpayer. [Neb. Rev. Stat. § 77-3906] It is important to point out that these measures can be pursued regardless of whether or not the state tax lien is recorded. Often these collection actions are the best collection tool avail- able after the business has closed and tax liability remains, but not always. Successor Liability Successor liability is a collection method available to the department in some circumstances that may be a trap for the unwary. Neb. Rev. Stat. § 77-2707 provides that “[i]f any person liable for any sales or use tax under the provisions of the Nebraska Revenue Act of 1967 sells out his business or stock of goods or quits the business, his successor or assign shall withhold sufficient of the purchase price to cover such amount until the former owner produces a receipt from the Tax Commissioner showing that it has been paid or a Q Business Failures — continued on page 16