Wholesalers

Responsible Person Liability for Importers, Wholesalers, and Distributors

When your company falls behind on tax compliance, the CDTFA can hold you personally liable.

California importers, wholesalers, and distributors operate in a complex tax environment. Every transaction—whether across state lines or within California—comes with potential exposure under the California Department of Tax and Fee Administration (CDTFA). When sales or use taxes go unpaid, or when resale certificates are misused, the CDTFA often shifts the focus away from the company itself and onto the individuals behind it through Responsible Person Liability.

If you’ve received a CDTFA Dual Determination Notice or Responsible Person Letter, it means the state believes you personally participated in—or failed to prevent—tax reporting or remittance errors.

How Responsible Person Liability Works

When a business fails to pay sales or use tax, the CDTFA investigates who had authority over financial and tax-related decisions. In the wholesale and distribution sectors, this typically includes CFOs, operations directors, controllers, compliance officers, and managing members. The CDTFA doesn’t need to prove intent or fraud—only that you had the power to pay but didn’t ensure payment occurred. Once labeled “responsible,” you can be personally assessed for the entire tax debt, along with penalties and interest.

Why Importers, Wholesalers, and Distributors Are Targeted

These businesses face heightened scrutiny due to their volume of transactions, supplier relationships, and cross-border sales. The CDTFA focuses enforcement on:

• Use tax compliance – Unpaid tax on items purchased out of state or withdrawn from inventory for in-state use.
• Resale certificate misuse – Improper use or acceptance of resale certificates, especially in drop-shipment scenarios.
• Underreported shipments – Discrepancies between purchase orders, bills of lading, and sales reports.
• Multi-jurisdictional sales – Selling into California without collecting or remitting sales tax.

Even when the company is dissolved or reorganized, the CDTFA may still pursue individuals who were in control during the period of noncompliance.

Common Scenarios That Lead to Personal Liability

• The company failed to collect or remit sales tax on shipments to California customers.
• Out-of-state purchases were used in California without reporting use tax.
• Resale certificates were issued or accepted improperly.
• Sales data was inconsistent between warehouse, accounting, and tax filings.
• The business was audited, assessed, and could not pay, prompting individual determinations.

How to Protect Yourself

1. Respond immediately. CDTFA notices are time-sensitive and missing deadlines can make the assessment final.
2. Gather documentation. Prove your actual role in financial decision-making and compliance oversight.
3. Audit your records. Regular internal reviews of resale certificates and shipping documentation can prevent exposure.
4. Get experienced legal help. Responsible person cases in this sector are highly technical and require understanding of both tax law and logistics operations.

Defending California Importers, Wholesalers, and Distributors

Attorney Steve Baghoomian has over a decade of experience defending California business leaders from CDTFA assessments and personal liability claims. He understands how complex supply chains, resale certificates, and use tax rules create traps for even the most diligent operators.

His goal is straightforward: to prevent the state from converting a company’s compliance mistake into a personal financial burden. Whether through administrative appeals, settlement negotiations, or judicial review, Steve ensures his clients are protected from overreaching CDTFA enforcement.

If you’ve received a CDTFA notice or believe your company’s tax issues could become your personal problem, contact Baghoomian Law today for a confidential consultation. The state may see you as responsible—but you don’t have to accept that without a fight.