Laws, Regulations & Annotations
Business Taxes Law Guide – Revision 2016
Sales and Use Tax Annotations
170.0000 COLLECTION OF TAX BY BOARD
(a) IN GENERAL
170.0007.055 Discharge in Chapter 13 Bankruptcy. The owners of a retail store filed a Chapter 13 bankruptcy petition. The Board did not file a pre-petition claim because the amount the taxpayer owed on their sales tax account was under the Board's threshold for filing a claim. After the petition date, the taxpayer filed two quarters of sales and use tax returns without payment. The taxpayer then operated the business for an additional three quarters and did not file any tax returns for these periods, whereupon the taxpayer ceased business operations. The Board issued determinations for the delinquent tax returns and liens were issued. The attorney for the taxpayer protested the lien filings noting that the taxpayer filed a Chapter 13 bankruptcy petition. The Board released the liens and filed an Expense of Administration Claim with the court. Subsequently, the Board received a check for 10 percent of the amount of its claim and four months later the debtor received a discharge from bankruptcy.
Under 11 U.S.C. section 1328(a), when a discharge in a Chapter 13 case is granted it discharges the debtor from all debts provided for by the plan. This includes pre-petition debts and post-petition debts to the extent the plan provides for their payment. In the case above, the Board brought its claim within the plan provisions for payment as an administrative claim when it filed an Expense of Administration Claim with the court. An allowed expense of administration claim must be paid in full pursuant to 11 U.S.C. sections 507(a)(1) and 1322(a)(2). However, unless the bankruptcy court allows a claim as an expense of administration claim pursuant to a motion brought under 11 U.S.C. section 503(b), a bankruptcy trustee may unilaterally treat the Board's claim as a general unsecured claim. Since the Board did not refer the claim to the Attorney General for the filing of such a motion and the debtor received a discharge from the court after the trustee paid a portion of the Board's claim which he treated as a general unsecured claim, the Board cannot pursue further collection action on any remaining post-petition liability. 12/31/02. (2003–3).