SUPREME COURT OF ARIZONA 

En Banc 

THE ARIZONA DEPARTMENT OF ) Arizona Supreme Court 

REVENUE, ) No. CV-07-0288-PR 

 ) 

 Plaintiff-Appellee, ) Court of Appeals 

 ) Division One 

 v. ) No. 1 CA-TX 06-0006 

 ) 

ACTION MARINE, INC., an Arizona ) Arizona Tax Court 

corporation; MELVIN G. RANDALL ) No. TX2004-000656 

and MARTHA RANDALL, husband and ) 

wife; M. DANIEL RANDALL and LISA ) 

RANDALL, husband and wife; JOHN ) 

D. RANDALL and BELINDA RANDALL, ) O P I N I O N 

husband and wife, ) 

 ) 

 Defendants-Appellants. ) 

_________________________________ ) 

Appeal from the Arizona Tax Court 

The Honorable Mark W. Armstrong, Judge (Retired) 

VACATED AND REMANDED 

________________________________________________________________ 

Opinion of the Court of Appeals, Division One 

215 Ariz. 584, 161 P.3d 1248 (2007) 

VACATED 

________________________________________________________________ 

TERRY GODDARD, ARIZONA ATTORNEY GENERAL Phoenix 

 By Anthony S. Vitagliano, Chief Counsel 

 Tax, Bankruptcy & Collections Section 

 Paula S. Bickett, Chief Counsel, 

 Civil Appeals Section 

Attorneys for Arizona Department of Revenue 

TROMPETER, SCHIFFMAN, PETROVITS, FRIEDMAN, 

& HULSE, L.L.P. Phoenix 

 By Jack B. Schiffman 

Attorneys for Action Marine Inc., Melvin G. Randall, 

Martha Randall, M. Daniel Randall, Lisa Randall, 

John D. Randall, and Belinda Randall 

________________________________________________________________ 
- 2 - 

B E R C H, Vice Chief Justice 

¶1 We have been asked to decide whether a corporate 

officer or director may be held personally liable under Arizona 

Revised Statutes (“A.R.S.”) section 42-5028 (2006) for failing 

to remit to the Arizona Department of Revenue money collected 

from the corporation’s customers to pay transaction privilege 

taxes. We hold that § 42-5028 provides for such personal 

liability. 

I. FACTS AND PROCEDURAL HISTORY 

¶2 Melvin, John, and Daniel Randall were shareholders and 

directors of Action Marine, Inc., an Arizona corporation that 

sold boats and other marine products. John and Daniel were also 

officers of Action Marine. In July 2002, Action Marine filed 

for reorganization under Chapter 11 of the Bankruptcy Code. 

Five months later, the bankruptcy court converted the case to 

one for liquidation under Chapter 7 and ordered Action Marine to 

file post-petition transaction privilege tax (“TPT”) returns for 

June through November 2002. 

¶3 The returns showed that during that period, Action 

Marine’s gross receipts totaled $812,294.00, resulting in a TPT 

liability of $51,174.52. In October 2004, the Arizona 

Department of Revenue (“ADOR”) filed a complaint in the tax 

court seeking to recover unpaid TPTs, penalties, interest, and 

costs pursuant to A.R.S. § 42-5028. ADOR and the Randalls each 
- 3 - 

moved for summary judgment. The tax court granted ADOR’s 

motion, holding the Randalls personally liable for unpaid TPTs, 

penalties, interest, and costs. 

¶4 The court of appeals reversed, reasoning that 

corporate officers cannot be personally liable because such 

officers are not listed as “persons” in A.R.S. § 42-5001(8) 

(2006) and no other statute imposes a duty to remit the 

corporation’s TPTs. Ariz. Dep’t of Revenue v. Action Marine, 

Inc., 215 Ariz. 584, 587, ¶ 16, 161 P.3d 1248, 1251 (App. 2007). 

¶5 We granted ADOR’s petition for review because this 

case presents an issue of statewide importance, see ARCAP 

23(c)(3), and ADOR has averred that resolution of this issue may 

affect many cases, both pending and planned. We have 

jurisdiction pursuant to Article 6, Section 5(3) of the Arizona 

Constitution and A.R.S. § 12-120.24 (2003). 

II. DISCUSSION 

¶6 “The transaction privilege tax . . . is an excise tax 

on the privilege or right to engage in an occupation or business 

in the State of Arizona.” Ariz. Dep’t of Revenue v. Mountain 

States Tel. & Tel. Co., 113 Ariz. 467, 468, 556 P.2d 1129, 1130 

(1976). The TPT is not a sales tax, Ariz. State Tax Comm’n v. 

Garrett Corp., 79 Ariz. 389, 391, 291 P.2d 208, 209 (1955), but 

rather is a tax on the gross receipts of a person or entity 

engaged in business activities. A.R.S. § 42-5008 (2006). 
- 4 - 

¶7 The liability for TPT falls on the taxpayer, not on 

the taxpayer’s customers. A.R.S. § 42-5024 (2006). Taxpayers 

may pay the TPT themselves or charge customers a separately 

itemized amount to cover TPTs. See A.R.S. § 42-5002(A)(1) 

(2006). If the taxpayer chooses to impose a separate charge, it 

must remit all money collected to ADOR, even if it collects more 

than the taxpayer owes for TPTs. Id.; Garrett, 79 Ariz. at 392-

93, 291 P.2d at 210.

¶8 The TPT is not technically a trust tax because 

taxpayers are not required to collect TPT from customers or hold 

the money in a trust account for the state. See Joseph 

DiGiuseppe, What Every Tax Practitioner Needs to Know About 

Trust Fund Taxes and Responsible Person Liability in Bankruptcy, 

17 Prac. Tax Law. 7, 8 (2002). When, however, the taxpayer 

elects to separately charge customers a “tax” to cover the TPT, 

§ 42-5002(A)(1) operates to achieve a similar result by 

requiring that any amounts so charged be fully remitted to the 

state. These collected “taxes” do not belong to and are not for 

the use of the taxpayer. See DiGiuseppe, supra, at 10-11 

(noting that trust fund taxes are not the property of the 

retailer and are not dischargeable in bankruptcy); Marvin A. 

Kirsner, Richard S. Miller & David Neier, Officers’ and 

Directors’ Nightmare: Being Held Personally Liable for Debtor 

Company’s Unpaid Taxes, N.Y.L.J., Aug. 27, 2001, at 7 & n.7 
- 5 - 

(noting that charges for taxes should be considered the 

“property of the taxing authority”). 

A. Liability Under A.R.S. § 42-5028

¶9 The question before us is whether corporate officers 

or directors may be held personally liable if the corporationtaxpayer fails to remit to ADOR the additional amount charged to 

customers to cover TPT liability. The resolution of the issue 

turns on A.R.S. § 42-5028, which provides as follows: 

A person who fails to remit any additional charge

made to cover the [TPT] or truthfully account for and 

pay over any such amount is, in addition to other 

penalties provided by law, personally liable for the 

total amount of the additional charge so made and not 

accounted for or paid over. 

(Emphases added.) The parties dispute the meanings of “person” 

and “additional charge” as those terms are used in this statute.

¶10 We review the interpretation of statutory provisions 

de novo. State ex rel. Ariz. Dep’t of Revenue v. Capitol 

Castings, Inc., 207 Ariz. 445, 447, ¶ 9, 88 P.3d 159, 161 

(2004). Our primary goal is to “discern and give effect to 

legislative intent.” Id. (quoting People’s Choice TV Corp. v. 

City of Tucson, 202 Ariz. 401, 403, ¶ 7, 46 P.3d 412, 414 

(2002)). “We ‘construe the statute as a whole, and consider its 

context, language, subject matter, historical background, 

effects and consequences, [and] its spirit and purpose.’” Id.

(quoting People’s Choice, 202 Ariz. at 403, ¶ 7, 46 P.3d at 
- 6 - 

414). We construe related statutes together, State ex rel. 

Larson v. Farley, 106 Ariz. 119, 122, 471 P.2d 731, 734 (1970), 

and avoid interpretations that render statutory provisions 

meaningless, unnecessary, or duplicative, see, e.g., Kriz v. 

Buckeye Petroleum Co., 145 Ariz. 374, 379, 701 P.2d 1182, 1187 

(1985). 

1. Meaning of “Person” in A.R.S. § 42-5028

¶11 The TPT statutory scheme defines both “person” and 

“taxpayer.” Unless the context otherwise requires, the term 

“person” “includes an individual . . . [or] corporation,” A.R.S. 

§ 42-5001(8), and “taxpayer” “means any person who is liable for 

any tax which is imposed by this article,” id. § 42-5001(18). 

ADOR maintains that the legislature intended “person” in § 42-

5028 to include corporate officers or directors as well as the 

taxpayer, while the Randalls assert that “person” means only the 

taxpayer-entity. 

¶12 For several reasons, we agree with ADOR. As a textual 

matter, although the statutory definition of “person” does not 

explicitly include corporate officers or directors, the 

definition is certainly broad enough to encompass the 

individuals who hold such offices. Moreover, had the 

legislature meant to limit liability under § 42-5028 to the 

taxpayer-entity, as the Randalls and court of appeals maintain, 

it likely would not have said “person,” but would have used the 
- 7 - 

term “taxpayer,” as it did, for example, in A.R.S. § 42-5024, a 

related TPT statute.1

¶13 Several aspects of the statutory scheme also suggest 

that, by using the term “person” in § 42-5028, the legislature 

meant to include persons in addition to the taxpayer. Even 

before the legislature enacted § 42-5028, other statutes already 

made TPT the “personal debt of the taxpayer,” A.R.S. § 42-5024, 

and required taxpayers “who impose[d] an added charge to cover 

the [TPT]” to remit to ADOR all of “the amount so collected,” 

A.R.S. § 42-5002(A)(1). 

¶14 For at least twenty-five years before § 42-5028 was 

enacted in 1980, these two statutes, §§ 42-5002(A)(1) and 42-

5024, worked in tandem to obligate the taxpayer to pay TPT, 

interest, and penalties, and to remit to ADOR all amounts 

collected from customers to cover TPT liability. See 1935 Ariz. 

Sess. Laws, ch. 77, § 18(b) (Reg. Sess.) (enacting the current 

substantive version of A.R.S. § 42-5024); 1954 Ariz. Sess. Laws, 

ch. 136, § 1 (2d Reg. Sess.) (enacting the current substantive 

version of A.R.S. § 42-5002(A)(1)); 1980 Ariz. Sess. Laws, ch. 

220, § 8 (2d Reg. Sess.) (enacting the current version of A.R.S. 

§ 42-5028). Therefore, reading the word “person” in § 42-5028 

to mean only “taxpayer” would duplicate liability already 

 

1

 The legislative history for A.R.S. § 42-1336, the original 

section number for A.R.S. § 42-5028, provides little guidance on 

the meaning of the word “person.” 
- 8 - 

imposed on the taxpayer by §§ 42-5002(A)(1) and 42-5024. We 

generally construe statutes to avoid rendering provisions 

duplicative. See City of Tucson v. Clear Channel Outdoor, Inc., 

209 Ariz. 544, 552, ¶ 31, 105 P.3d 1163, 1171 (2005). Because 

taxpayers were already liable for TPT, interest, and penalties 

before 1980, the legislature must have intended to impose some 

different or additional obligation when it enacted § 42-5028. 

¶15 The legislature’s enactment of A.R.S. § 43-435 (2006) 

in the same bill in which it enacted § 42-5028 also suggests 

that the legislature intended “person” to include others in 

addition to the “taxpayer.” 1980 Ariz. Sess. Laws, ch. 220, 

§ 18 (2d Reg. Sess.). Section 43-435 imposes personal liability 

on persons required to withhold income tax who fail to collect 

or remit the taxes: 

Any person required to collect, truthfully 

account for and pay over any [withholding] tax imposed 

by this title who fails to do so is, in addition to 

other penalties provided by law, personally liable for 

the total amount of the tax not collected or accounted 

for and paid over. 

A.R.S. § 43-435. 

¶16 Before § 43-435 was enacted in 1980, two sections of 

the 1978 income tax code made the employer responsible for 

remitting to ADOR withholding taxes “required to be deducted and 

withheld,” see A.R.S. §§ 43-414, -415 (2006), just as §§ 42-5008 

and 42-5024 did for TPTs. The enactment of § 43-435 extended 
- 9 - 

liability beyond the employer; it made any “person required to 

collect, . . . account for and pay over” income taxes to ADOR 

personally liable. The concurrent enactment of §§ 42-5028 and 

43-435 indicates that the legislature similarly intended the 

word “person” in § 42-5028 to extend personal liability to 

persons other than the taxpayer.2

¶17 Moreover, interpreting “person” to include corporate 

officers or directors assuages concerns that such persons might 

abuse the privilege of limited liability protection by 

collecting money from customers under the guise of a stateimposed tax, using such monies for other purposes, forcing the 

taxpayer into bankruptcy, and later claiming limited liability 

protection. Cf. Garrett, 79 Ariz. at 392-93, 291 P.2d at 210 

(noting legislature’s intent to preclude taxpayers from 

profiting by collecting money under the guise of a tax). It 

also encourages those charged with remitting separately 

collected TPT funds to remit them promptly to ADOR. 

¶18 Finally, we note that of the states that have a sales, 

transaction privilege, or similar tax, a supermajority 

statutorily imposes personal liability on corporate officers.3

 

 

2

 ADOR has been pursuing withheld taxes from corporate 

officers and directors under this interpretation of § 43-435. 

3 E.g., Ark. Code Ann. § 26-18-501 (1997); Cal. Rev. & Tax. 

Code § 6829(a) (1998); Colo. Rev. Stat. § 39-21-116.5 (2007); 

Conn. Gen. Stat. § 12-414a (2000); Del. Code Ann. tit. 30, 
- 10 - 

While including corporate officers within the definition of 

“person” in § 42-5001(8) would have unmistakably established our 

legislature’s intent and forestalled this lawsuit,4

 we conclude 

that by enacting § 42-5028, the legislature meant to bring 

Arizona within the national trend of imposing personal liability 

on those individuals who fail to remit such taxes. 

¶19 Nonetheless, the Randalls argue and the court of 

appeals held that “person” does not include corporate officers 

or directors because no statute imposes a duty on them to remit 

TPTs. See Action Marine, 215 Ariz. at 587, ¶ 16, 161 P.3d at 

1251. As support for this position, the court of appeals relied 

 

§ 535(e) (1997); Fla. Stat. § 213.29 (2005); Ga. Code Ann. § 48-

2-52 (1999); Idaho Code Ann. § 63-3627 (2007); 35 Ill. Comp. 

Stat. 735/3-7(a) (1996); Ind. Code § 6-2.5-9-3 (2003); Iowa Code 

§ 421.26 (2006); Kan. Stat. Ann. § 79-3643 (1997); Ky. Rev. 

Stat. Ann. § 139.185 (2006); Me. Rev. Stat. Ann. tit. 36, § 177 

(1990); Md. Code Ann., Tax-Gen. § 11-601(d) (2004); 830 Mass. 

Code Regs. 62C.31A.1 (2008); Mich. Comp. Laws § 205.27a(5) 

(2001); Minn. Stat. § 270C.56 (2007); Miss. Code Ann. § 27-65-55 

(2005); Mo. Rev. Stat. § 144.157 (2006); Mont. Code Ann. § 15-

68-811 (2007); Nev. Rev. Stat. § 360.297 (2007); N.J. Stat. Ann. 

§§ 54:32B-2(w) & 54:32B-14(a) (2002); N.Y. Tax Law § 1133 

(2004); N.D. Cent. Code § 57-39.2-15.2 (2005); Ohio Rev. Code 

Ann. § 5739.33 (2007); Okla. Stat. tit. 68, § 1361(A) (2001); 72 

Pa. Cons. Stat. §§ 7201(e) & 7237(b) (2000); R.I. Gen. Laws § 

44-19-35 (2005); S.D. Codified Laws § 10-45-55 (2004); Vt. Stat. 

Ann. tit. 32, § 9703(a) (2001); W. Va. Code § 11-15-17 (2005); 

Wis. Stat. § 77.60(9) (2004). 

4 Some states impose liability on officers directly, e.g., 

Ga. Code Ann. § 48-2-52, while others impose liability on “any 

officer, member, manager, partner, or other person,” Cal. Rev. & 

Tax. Code § 6829(a). In addition, some states impose liability 

on persons, but define “person” to expressly include officers. 

E.g., Wis. Stat. § 77.60(9). 
- 11 - 

on State v. Angelo, 166 Ariz. 24, 800 P.2d 11 (App. 1990), and 

In re Inselman, 334 B.R. 267 (Bankr. D. Ariz. 2005). 

¶20 In Angelo, the court of appeals addressed whether 

corporate officers could be held criminally liable for failing 

to file a corporation’s TPT returns. 166 Ariz. at 25, 800 P.2d 

at 12. The court declined to impose criminal liability because 

no statute imposed a duty on corporate officers to file such 

returns. Id. at 27-28, 800 P.2d at 14-15. The court 

recognized, however, that “disregarding [the] corporate form 

might conceivably be appropriate in the context of civil tax 

liability.” Id. In Inselman, the bankruptcy court denied 

ADOR’s claim against a debtor who was the managing member of a 

limited liability company that failed to pay its TPTs. 334 B.R. 

at 268, 271. Relying on the reasoning in Angelo, the bankruptcy 

judge found no personal liability because the TPT statutory 

scheme does not impose a statutory duty on anyone other than the 

taxpayer to pay the company’s TPT. Id. at 270-71. 

¶21 Angelo decided whether criminal liability could be 

imposed for failure to file returns, an issue not before us, and 

we decline to follow Inselman. For purposes of imposing 

personal civil liability, the issue is not whether corporate 

officers or directors have a statutory duty to file the 

corporation’s tax returns or pay the taxpayer’s TPT, but whether 

those persons who have assumed a duty to remit monies collected 
- 12 - 

to cover the taxpayer’s TPT may be civilly liable for failing to 

remit them. The statutes permit corporate officers or directors 

to make the business decision to either pay the tax directly 

from the taxpayer’s funds or collect it from customers under the 

guise of a “tax.” See Garrett, 79 Ariz. at 392-93, 291 P.2d at 

210. In the latter case, an officer or director who holds, 

maintains control over, or has responsibility for the money 

collected separately as TPT assumes a duty to remit that is not 

otherwise statutorily imposed. Such persons must accept both 

the benefits and burdens of the decision to charge separately 

for TPTs. The benefit of collecting the money from customers as 

“tax” (money in hand) must be taken with the burden (exposure to 

statutorily imposed personal liability for failing to remit the 

money so collected). A.R.S. §§ 42-5002(A)(1), -5028. Section 

42-5028 applies only after corporate officers or directors elect 

to collect a separate TPT charge and then fail to remit the 

money collected. The court of appeals erred in concluding that 

the duty to remit must be statutorily imposed before civil 

liability can be enforced. 

2. Meaning of “Additional Charge” in A.R.S. § 42-5028

¶22 Having concluded that “person” under § 42-5028 may 

include corporate officers or directors, we must determine the 

meaning of the phrase “additional charge.” The Randalls argue 

that “additional charge” in § 42-5028 means only the amount 
- 13 - 

collected from customers that exceeds the taxpayer’s TPT 

liability for a particular transaction. We disagree. 

¶23 Section 42-5028 provides that a “person who fails to 

remit any additional charge made to cover the [TPT] . . . [is] 

personally liable for the total amount of the additional charge

so made” and not remitted (emphases added). The term 

“additional charge” is defined by the text of the statute 

itself. The statute provides that the “additional charge” is 

that charge “made to cover the tax.” If “additional charge” 

referred only to any amount that exceeds the TPT owed, as the 

Randalls maintain, the charge would not be “made to cover the 

[TPT]” because the TPT would have already been “covered.” See 

State Tax Comm’n v. Quebedeaux Chevrolet, 71 Ariz. 280, 288, 226 

P.2d 549, 554 (1951) (quoting with approval case recognizing 

that “additional charge” refers to the entire amount collected 

from customers). 

¶24 The Randalls counter that Arizona Department of 

Revenue v. Canyoneers, Inc., 200 Ariz. 139, 143, ¶¶ 14-15, 23 

P.3d 684, 688 (App. 2001), has determined that “additional 

charge” means only amounts in excess of the effective TPT for a 

given transaction. Canyoneers, however, decided a different 

issue. The court in Canyoneers decided whether under A.R.S. § 

42-1118(A) (2006) a taxpayer was entitled to a refund of TPT 

mistakenly paid to ADOR when the underlying business activity 
- 14 - 

was not subject to the TPT. Id. at 140-41, ¶¶ 1-4, 23 P.3d at 

685-86. The court decided only that a taxpayer entitled to a 

refund of TPT that was never owed to ADOR was not also entitled 

to a refund of any amount that exceeded the effective TPT for 

any transaction. Id. at 143, ¶¶ 14-15, 23 P.3d at 688. The 

court sought to prevent companies from adding an extra profit to 

its sales under the guise of a compulsory tax. Id. ¶ 15 n.3. 

Because Canyoneers is not on point, its passing “see” reference 

to § 42-5028 provides no guidance. We conclude that the term 

“additional charge” in § 42-5028 means the entire amount charged 

to customers to cover the taxpayer’s TPT liability.5

3. Response to the Dissent

¶25 Our dissenting colleagues propose that § 42-5028 

imposes an additional penalty on the taxpayer over and above the 

liability for the TPT, interest, and penalties imposed under 

§ 42-5024.6

 This interpretation assumes that only the taxpayer 

“who ‘imposes’ the additional charge” under § 42-5002(A) may be 

 

5

 We also reject the Randalls’ argument that “added charge,” 

as that term is used in A.R.S. § 42-5002(A)(1), means something 

different from “additional charge,” the term used in § 42-5028. 

Both derive from the base verb “add” and both refer to charges 

to customers to cover taxes — up to and exceeding the statutory 

rate. 

6

 No party has advanced this interpretation in this court. 

It presents a third potential meaning of A.R.S. § 42-5028. If 

the legislature intended a construction that differs from that 

set forth in this opinion, it is of course free to amend the 

statute. 
- 15 - 

held responsible to the state. Dissent at ¶ 37. Although this 

is a plausible interpretation, we simply disagree that it is the 

intended one. 

¶26 Section 42-5002(A) requires the “person who imposes an 

added charge to cover the tax” to remit the money collected to 

ADOR. That person is likely to be the taxpayer. But § 42-5028, 

the section at issue, imposes liability on “a person who fails 

to remit any additional charge made to cover the tax.” While 

such a person may be the taxpayer, it need not always be. It 

could an accountant, corporate officer, or other person charged 

with remitting the added charge to the taxing authority. See

DiGiuseppe, supra ¶ 8, at 10 (defining responsible parties 

generally to be those who exercise a degree of control and 

influence over the finances and disbursements of a corporation). 

¶27 As our dissenting colleagues acknowledge, the 

majority’s interpretation has the “practical virtue of 

encouraging corporate officers and directors to be vigilant in 

assuring that additional charges are remitted [to ADOR] and not 

spent to discharge other corporate debt.” Dissent at ¶ 40; see 

also Kirsner et al., supra ¶ 8, at 7 (noting that to protect 

officers and directors from such personal liability for 

unremitted charges, they should “have the debtor pay the 

taxes”); cf. Kelly v. Lethert, 362 F.2d 629, 635 (8th Cir. 1966) 

(concluding that the amount collected may be recovered only 
- 16 - 

once, either from the taxpayer as tax or from the responsible 

person as a penalty). We conclude that this is what the 

legislature intended. 

B. Remand 

¶28 We conclude that “person” under § 42-5028 may include 

corporate officers or directors who fail to remit an “additional 

charge.” In this case, the tax court held the Randalls 

personally liable for Action Marine’s unpaid TPTs, penalties, 

interest, and costs, purportedly under the authority of A.R.S. 

§ 42-5028. Because § 42-5028 does not provide for interest, 

costs, or penalties (other than the additional charge itself), 

it appears that the court erred by conflating the taxpayer’s 

liability for TPT (and accompanying penalties and interest that 

may be assessed against the taxpayer) and the non-derivative 

personal liability for the “additional charge” imposable on 

“persons” under § 42-5028.7

 Because the record does not show 

whether Action Marine separately charged its customers an 

additional charge, we remand to determine whether it did, and if 

so, which of the Randalls, if any, may be liable under § 42-

5028. 

 

7

 ADOR’s inclusion of Action Marine in its original complaint 

and its claim for penalties and interest indicates its intent to 

impose derivative liability on the Randalls. Indeed, the 

complaint sought the exact sum from the Randalls that it sought 

from Action Marine. The parties also referred to the Randalls’ 

liability as derivative during arguments before the tax court. 
- 17 - 

¶29 For the remand, we note that a “person” liable under § 

42-5028 must have a duty to remit the taxes. E.g., Inselman,

334 B.R. at 271 (expressing concern about imposing liability for 

taxes too broadly). Other jurisdictions require the officer, 

director, or responsible person to have had control over, 

responsibility for, or supervision of the money collected to pay 

the tax. E.g., Cal. Rev. & Tax. Code § 6829(a); 35 Ill. Comp. 

Stat. 735/3-7(a); Minn. Stat. § 297A.61(2)(c); Mo. Rev. Stat. § 

144.157(3); Ohio Rev. Code Ann. § 5739.33; see also N.J. Stat. 

Ann. § 54:32B-2(w) (2007) (including any officer who is under a 

duty to act); Purcell v. United States, 1 F.3d 932, 937 (9th 

Cir. 1993) (finding that a person responsible under 26 U.S.C. § 

6672 for collecting and remitting income tax withholding was one 

who “‘had the final word as to what bills should or should not 

be paid’ if such individual had the authority required to 

exercise significant control over the corporation’s financial 

affairs, regardless of whether he exercised such control in 

fact”). Such tests assist in determining whether the person was 

responsible for remitting or had assumed a duty to remit monies 

collected to pay TPTs. 

III. ATTORNEYS’ FEES 

¶30 The Randalls requested their attorneys’ fees pursuant 

to A.R.S. § 12-348. Because they have not prevailed, we deny 

the request. 
- 18 - 

IV. CONCLUSION

¶31 For the foregoing reasons, we vacate the opinion of 

the court of appeals and the judgment of the tax court. We 

remand this case for further proceedings consistent with this 

opinion. 

 _______________________________________ 

 Rebecca White Berch, Vice Chief Justice 

CONCURRING: 

_______________________________________ 

Ruth V. McGregor, Chief Justice 

_______________________________________ 

Michael D. Ryan, Justice 

H U R W I T Z, Justice, dissenting 

¶32 The Court today holds that A.R.S. § 42-5028 imposes 

personal liability on officers and directors of a corporation 

that fails to remit additional charges collected from customers 

to cover corporate liability for the transaction privilege tax 

(“TPT”). This is a plausible reading of the statutory scheme 

and has much to commend it as a matter of public policy. 
- 19 - 

¶33 This interpretation, however, is not inexorably 

compelled by the text of the relevant statutes. Indeed, three 

judges of the court of appeals and an experienced Arizona 

bankruptcy judge have arrived at precisely the opposite 

conclusion. See Ariz. Dep’t of Revenue v. Action Marine, Inc., 

215 Ariz. 584, 161 P.3d 1248 (App. 2007); In re Inselman, 334 

B.R. 267 (Bankr. D. Ariz. 2005). The problem, as is so often 

the case, arises from a statutory scheme whose language is less 

than pellucid and whose history is at best unilluminating. 

Recognizing that this is a close case, I believe that the court 

of appeals has the better reading of the statute. 

¶34 The majority correctly describes the basic legislative 

scheme, and I need not belabor its details here. There is no 

question that the taxpayer, not its customers, is responsible 

for paying the TPT under A.R.S. § 42-5014. Under § 42-5024, the 

tax “and all increases, interest and penalties thereon” become a 

“personal debt of the taxpayer” and may be collected by 

appropriate legal action under § 42-1114. By enacting § 42-

5024, the legislature seemed to recognize that a taxpayer’s 

failure to perform his statutory duty of remitting the TPT under 

§ 42-5014 did not itself create an actionable liability to the 

state. Otherwise, § 42-5024 would be surplusage. 

¶35 In the real world, of course, taxes imposed on 

businesses are passed on to their customers. Recognizing as 
- 20 - 

much, the legislature provided in § 42-5002(A)(1) that “[a] 

person who imposes an added charge to cover the tax levied by 

this article or which is identified as being imposed to cover 

transaction privilege tax shall not remit less than the amount 

so collected to [ADOR].” Section 42-5002(A)(1), to be sure, 

refers to a “person who imposes an added charge,” not simply to 

a taxpayer. But when the relevant transaction is one between a 

business and its customer, it can only be the business that 

imposes the charge, so the word “person” in § 42-5002(A)(1) can 

refer only to the putative taxpayer – whether a corporation, 

individual, or other entity.8

¶36 Section 42-5028, the centerpiece of controversy in 

this case, provides that 

A person who fails to remit any additional charge made 

to cover the tax or truthfully account for and pay 

over any such amount is, in addition to other 

penalties provided by law, personally liable for the 

 

8

 Before 1992, the statute now codified at § 42-5002(A)(1) 

read: “In no event shall the person upon whom the tax is 

imposed, when an added charge is made to cover the 

[TPT] . . . remit less than the amount so collected to [ADOR].” 

A.R.S. § 42-1302(A)(1) (1991) (emphasis added). The 1992 

amendment required any “person who imposes an added charge” to 

remit the amounts collected. 1992 Ariz. Sess. Laws, ch. 173, 

§ 1 (2d Reg. Sess.) The current version of the statute thus has 

the salutary effect of requiring remission of the added charge 

even if it later turns out there was no TPT liability. The 

putative taxpayer unsure of liability for the tax thus protects 

itself against a penalty by remitting the added charge and can 

then seek refund of the amounts remitted to ADOR. See Ariz. 

Dep’t of Revenue v. Canyoneers, Inc., 200 Ariz. 139, 23 P.3d 684 

(App. 2001). 
- 21 - 

total amount of the additional charge so made and not 

accounted for or paid over. 

The majority concludes that the use of the word “person” in this 

statute means that personal liability is imposed on any 

corporate officer or director who, as a matter of fact, fails to 

engage in remission, payment over, or truthful accounting of the 

additional charge. But the Court fails to identify whence the 

obligation of such a “person” to pay the additional charge to 

ADOR arises. Indeed, the only statute dealing with the 

obligation to remit the additional charge is § 42-5002(A)(1). 

And, as I have noted above, § 42-5002(A)(1) cannot be reasonably 

read as imposing the duty to remit additional charges on anyone 

other than the person or entity that imposes the charges. 

¶37 Section 42-5028 also states that the relevant personal 

liability is “in addition to other penalties provided by law.” 

(Emphasis added.) The use of the term “other penalties” 

strongly suggests that § 42-5028 is a penalty provision, 

authorizing personal liability on someone who imposes an added 

charge but fails to turn it all over. This penalty is entirely 

separate from the tax liability for the TPT imposed by §§ 42-

5014 and -5024. Thus, § 42-5028 is not simply surplusage if 

read as limited to imposing an additional penalty on the 

taxpayer to the extent he has collected additional charges but 

not paid them over. Indeed, if § 42-5024 was needed to impose 
- 22 - 

personal liability on a taxpayer who failed to perform his duty 

under § 42-5014 to remit the TPT, it logically follows that a 

statute other than § 42-5002(A)(1) also was needed to impose 

personal liability on a taxpayer who failed to perform his 

statutory duty to remit added charges. That statute is § 42-

5028. The Court rejects this reading of § 42-5028 because the 

term “person” is broadly defined in Title 42 to include all 

manner of individuals and entities, see A.R.S. § 42-5001(8), 

while “taxpayer” is limited to a person “who is liable for any 

tax,” see id. § 42-5001(18). But the critical point is that 

only a “person” who “imposes” the additional charge is required 

to remit it under § 42-5002(A)(1). Thus, the only “person” who 

can fail to remit (or pay over, or truthfully account for) the 

additional charge is one who collected it. In this case, that 

person can only be Action Marine.9

¶38 Indeed, if we read § 42-5002(A)(1) differently, we 

create a statutory anomaly. As the Court notes, the statutory 

duty to remit TPT falls solely on the corporate taxpayer, not 

its officers and directors. Op. ¶ 21. It is difficult to 

understand how, simply by use of the generic word “person,” 

 

9

 It is of course possible for a “person” to impose the 

additional charge, yet not be a taxpayer – i.e., one liable for 

the tax. See Canyoneers, 200 Ariz. 139, 23 P.3d 684. Section 

42-5028 thus would impose a penalty on such a person, even if 

not a taxpayer. 
- 23 - 

§ 42-5002(A)(1) creates a general duty on the part of such 

officers and directors to remit additional charges imposed to 

cover the TPT.10

¶39 Nor do I find A.R.S. § 43-435 helpful to ADOR. That 

statute imposes liability only on those “required to collect, 

truthfully account for and pay over” withholding tax.11 Thus, if 

 

10 As the majority notes, other states impose personal 

liability on corporate officers for the corporation’s unpaid 

taxes. Op. ¶ 18 n.3. As the majority also notes, however, 

these states do so on the basis of statutes which, unlike A.R.S. 

§ 42-5028, expressly provide for such personal liability. Op. 

¶ 18 n.4. Any “national trend” is therefore of little utility 

in interpreting the relevant Arizona statutes. 

11 Employers who withhold income tax from their employees must 

hold the funds in trust for the state. A.R.S. § 43-415. The 

employee is the taxpayer, and the employer collects the tax on 

behalf of the state. See A.R.S. §§ 43-401, 43-431. Section 43-

435 thus deals with the liability of those who improperly handle 

trust funds. 

As the majority notes, the TPT is not a trust fund tax 

because the customer bears no tax liability but is instead an 

excise tax on the entity engaged in business activity. Op. 

¶¶ 6-7. See Joseph DiGiuseppe, What Every Tax Practitioner 

Needs to Know About Trust Fund Taxes & Responsible Person 

Liability in Bankruptcy, 17 Prac. Tax Law. 7, 14-15 (2002) 

(noting that the critical distinction between a trust fund tax 

and an excise tax turns on whether the ultimate tax liability 

belongs to the collecting entity or the person from whom the 

funds have been taken). Our previous decisions have attempted 

to maintain this distinction. See, e.g., Ariz. State Tax Comm’n 

v. Garrett Corp., 79 Ariz. 389, 392-93, 291 P.2d 208, 210 

(1955). Today’s opinion unnecessarily blurs this previously 

bright line by characterizing § 42-5028 as involving a trustlike tax. Op. ¶ 8. 

Another article cited by the majority operates from the 

mistaken assumption that the TPT is a trust fund tax. Marvin A. 

Kirsner, Richard S. Miller, & David Neier, Officers’ & 
- 24 - 

we were to read § 43-435 in pari materia with § 42-5028, we 

would impose personal liability only on those otherwise required 

by law to remit, account for or pay over – the “person” who 

“imposed” the added charge, in this case, Action Marine.12 

¶40 The Court’s reading of § 42-5028 has the practical 

virtue of encouraging corporate officers and directors to be 

vigilant in assuring that additional charges are remitted and 

not spent to discharge other corporate debt. Indeed, it is 

difficult to excuse the Randalls’ failure to safeguard funds 

which were taken from Action Marine’s customers on the 

representation (either express or implied) that they were needed 

to pay the TPT. But before we in effect pierce the corporate 

veil and impose substantial liability on these individuals in 

the name of good public policy, I would require that the 

legislature more clearly enunciate its direction that we do so. 

 

Directors’ Nightmare: Being Held Personally Liable for Debtor 

Company’s Unpaid Taxes, N.Y.L.J., Aug. 27, 2001, at 7, 7 & n.7. 

The article’s conclusion that directors of the taxpayer are 

personally liable for unpaid TPT is therefore flawed. 

12 It is conceivable that the Randalls had a duty to Action 

Marine to remit the additional charges. But I am loath to read 

a tax penalty statute as enforcing a duty owed to a private 

corporation, as opposed to the state. If the legislature meant 

to reach such a sweeping result, it could have said so 

expressly. Cf. 26 U.S.C. § 6671(b) (defining “person” to 

include corporate officers and employees “under a duty” to 

perform a relevant act); 26 U.S.C. § 6672(a) (imposing personal 

liability on persons “required to collect, truthfully account 

for, and pay over” federal withholding tax). 
- 25 - 

The current statutory scheme does not so specify. I would 

affirm the opinion below, and therefore respectfully dissent.13

 __________________________________ 

 Andrew D. Hurwitz, Justice 

CONCURRING: 

_______________________________________ 

W. Scott Bales, Justice 

 

13 I agree with the Court’s conclusion that the “additional 

charge” referred to in A.R.S. § 42-5028 is the entire amount 

charged to the customer to cover putative TPT liability. Op. 

¶ 24.