Deconstructing the CDTFA Responsible Person Questionnaire: A Critical Tool in Dual Determination Cases

When a California business with unpaid sales and use tax liability closes its doors, the California Department of Tax and Fee Administration (CDTFA) may begin a process to hold the company’s owners, officers, or other key individuals personally liable for the debt. This action, known as a dual determination, is the state’s method for piercing the corporate veil and collecting business taxes from personal assets. A pivotal and often underestimated step in this process is the CDTFA’s use of the “Responsible Person Questionnaire.”

This document is far more than a simple survey; it is a formal investigative tool designed to gather the specific facts and admissions the CDTFA needs to build a legal case against an individual. Understanding the purpose, structure, and implications of this questionnaire is critical for any person who receives one.

The Investigation and the Role of the Questionnaire

Before the CDTFA can issue a dual determination, it must conduct an investigation to establish that an individual meets the two primary legal tests for personal liability under California Revenue and Taxation Code (RTC) § 6829 and Regulation 1702.5: that they were a “responsible person” and that their failure to remit the taxes was “willful.”

The investigation typically begins after a business has terminated, dissolved, or abandoned its operations with an outstanding tax liability. CDTFA investigators will first review internal records, such as tax returns, and public records from the Secretary of State to identify potential targets like officers, directors, partners, and managers.

Once these individuals are identified, the CDTFA will reach out to them to request information, documents like bank statements and cancelled checks, and, crucially, the completion of the Responsible Person Questionnaire. This questionnaire is the agency’s primary method for obtaining direct admissions from the target that can be used to satisfy the legal requirements for personal liability.

Analyzing the Questions: Building the CDTFA’s Case

Each question on the Responsible Person Questionnaire is strategically crafted to elicit information that maps directly to the legal elements the CDTFA must prove. The questions are not random; they are a roadmap to building a case for personal liability.

Questions Establishing Preconditions for Liability:

The first questions on the form are designed to confirm the basic prerequisites for a dual determination case.

• “Was sales tax reimbursement (‘sales tax’) collected from customers?” This question, with its follow-ups on whether the tax was itemized or included in the price, directly addresses the core requirement of RTC § 6829. Personal liability for unremitted sales tax only applies if the business actually collected the tax from its customers.
• “Did the business use tangible personal property and fail to pay the use tax?” This question addresses the parallel liability for unpaid use tax, another condition for a dual determination.

Questions Establishing “Responsible Person” Status:

A significant portion of the questionnaire is dedicated to proving the individual had the requisite authority and control to be deemed a “responsible person.” Under Regulation 1702.5, a responsible person is anyone with “control or supervision of, or who is charged with the responsibility for, the filing of returns or the payment of tax”. Merely holding a title is not enough; the CDTFA must prove functional authority.

• “How were you associated with the business? (e.g., officer, member, partner)? Please provide your job title, the dates of your employment or association, and a brief statement of your duties and responsibilities.” This is a direct inquiry into the individual’s role and functional duties, seeking admissions of control over financial matters.
• “If known, list the name(s) of person(s) authorized to sign business checks.” Check-signing authority is a classic indicator of financial control and is a key factor the CDTFA uses to establish responsibility.
• “If known, provide the name, title, address, and telephone number of any person who had any responsibility for the business’ sales and use tax compliance…” This question helps the CDTFA create an organizational chart of financial authority, identifying all potential targets and understanding the hierarchy of decision-making.
• “If known, provide the name, title, address and telephone number of any person that prepares or possesses tax returns, sales records, invoices, journals and other financial records of the business.” Control over financial records is another strong indicator of a person’s responsibility for tax compliance.

Questions Establishing “Willfulness”:

Even if someone is a responsible person, the CDTFA must also prove their failure to pay was “willful.” Willfulness is defined as a “voluntary, conscious and intentional course of action” and does not require a bad motive. The questionnaire seeks to establish this through several targeted questions.

• “If known, provide the name, address and telephone number of any supplier, customer, landlord, and/or other person(s) who may have received payment from the business…” This question is a direct attempt to prove the third element of the willfulness test: that the responsible person, with knowledge of the tax debt, had the ability to pay but consciously chose to use available funds to pay other creditors instead of the state. By identifying other paid creditors, the CDTFA can subpoena bank records to show that funds were available but were directed elsewhere.
• The questions about check-signing authority and responsibility for tax compliance also contribute to proving willfulness by establishing who had the knowledge of the unpaid tax and the authority to direct payment.

The Critical Importance of a Strategic Response

Receiving a Responsible Person Questionnaire is a clear signal that you are under investigation and at risk of personal assessment. How you respond is of paramount importance.

• Do Not Ignore It: Ignoring the questionnaire will not make the problem disappear. The CDTFA will proceed with its investigation and may make an assessment based on the information it has, which could be incomplete or inaccurate.
• Understand the Stakes: This is not a neutral request for information. It is a legal document designed to build a case against you. Your answers can be used as admissions to satisfy the legal tests for personal liability.
• Seek Immediate Legal Counsel: The most prudent course of action upon receiving a Responsible Person Questionnaire is to immediately contact a tax attorney experienced in handling CDTFA dual determination cases. An attorney can analyze your specific situation, advise you on your rights and potential defenses, and handle all communications with the CDTFA. Filling out the form without legal guidance is a significant risk that can severely compromise your ability to defend against a personal assessment.

In summary, the Responsible Person Questionnaire is a formidable tool in the CDTFA’s arsenal. It is designed to methodically extract the information needed to hold an individual personally liable for a defunct business’s tax debts. Recognizing the questionnaire for what it is—a critical step in a legal investigation—and responding with caution and professional guidance is essential to protecting your personal financial future.