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How serious is a lien related to “trust fund taxes?”

A recent news headline suggested Ivanka Trump had been hit with a tax lien for non-payment of taxes. This was misleading.

With some investigative work, Forbes unwound who the lien was actually filed against. In January, the New York State Department of State Tax Warrant Notice System filed a tax warrant against Madison Avenue Diamonds LLC T/A Ivanka Trump Fine Jewelry. This company is actually owned by a separate party who is allowed to use the Ivanka Trump brand through a licensing agreement. The approximate $5,000 tax warrant related to unpaid sales taxes.

Fiduciary nature of sales tax collection

Retailers and restaurants collect sales taxes from customers at the point of sale – whether online or at a register in a store. Then they forward the taxes to a state taxing authority. In our December post, we wrote about avoiding Massachusetts Department of Revenue sales tax audits.

Sales taxes are treated similar to other trust fund taxes like Social Security and Medicare withholdings. It’s extremely hard to negotiate on the amount owed and these taxes are not dischargeable in bankruptcy. Even after a company dissolves a tax liability may even transfer personally to an owner of officer.

Organized in 2005 with the New York Department of State, Madison Avenue Diamonds, LLC, preceded the Ivanka Trump Fine Jewelry collection, which launched in 2007. This licensee company had gotten into similar trouble in 2014 and 2015. Those liens were marked as satisfied in November of 2015.

For business owners, sales tax collection and remittance to the state DOR must be carefully conducted. Before the Massachusetts DOR asks questions make sure that you are complying with state regulations by speaking with a tax attorney.

 

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