Apr 27, 2007

On the Unlimited Resources of the State

Years ago I owned a group of retail businesses, and I reached a point in the late 1990s where I could no longer justify pouring any more of my money (or my partner's) into what was becoming a fiscal sinkhole. We decided to dump the business after the franchisor wanted an unrealistic amount of money in franchise renewals and back royalties.

Live and learn, right?

Almost a decade goes by, and I had all but forgotten about my years as an entrepreneur. In the mail a few weeks ago came notice that I was being sued by the state for withholding taxes it claims my business owed from 1995 (most states - plus the federal government - retain the right to pursue officers of corporations for unpaid taxes).

Yes, that 1995. The one that ended twelve years ago.

Now, I paid my state withholding taxes as due, and we used payroll processing firms to keep track of taxes. Moreover, the amount of money we owed every month was hardly worth trying to screw the state out of, even if I were of such a mindset, which I was not.

Luckily for me, the state is suing everyone who ever had anything to do with the business: me (as former owner), the franchisor (who took over the retail outlets) and even the new owners, who never had anything to do with the disputed taxes.

Being fairly bright, and knowing at least how to follow "how-to" guides on legal pleadings, I answered the claim pro se. Lo and behold, the deep-pocketed franchisor's attorney called me the other day and offered to strike a deal on the $15,000 the state claims it is owed ($8,000 in "unpaid" taxes, and another $7,000 in interest, penalties, and other forms of governmental extortion).

For a mere $2,000 on my part (and contributions from the other parties), said barrister thinks he can convince the state to take a deal. Now, another factor in my favor is that I took the graduate student vow of poverty a couple of years ago, so even if the state were successful in its dubious claim, they would be waiting a long time to squeeze any nickels out of me.

So now I must decide what my time is worth. I could very well continue to represent myself and force the state to prove I owe them anything, but I run the risk of running up against a judge that will sympathize with the state's poor case (they have yet to even demonstrate the means by which they determined monies were owed, and are resting solely on a default judgment against the defunct corporation).

Or I could try to negotiate that number down, and hold out for some sort of indemnity from the state ("We agree that all state taxes are paid from Corporation X, and indemnify historymike from further harassment," etc.)

But part of me wants to fight this thing forever, because I know that I paid all of the corporate taxes in a timely fashion to the state, and it pisses me off that a bunch of bureaucrats with unlimited resources can hound an ex-business owner twelve years after the fact.


HumboldtsClio said...

I guess they need the money any way they can get it. Odd that they always screw the little guy.

Valbee said...

I'm all for fighting it. But that might have something to do with the fact that my son had a message left on our machine yesterday from an attorney in Bloomington, IL who is acting on behalf of State Farm regarding an accident my son was involved in earlier this year. There's only one problem. He wasn't involved in an accident earlier this year - or ever. We haven't called them back yet, but the whole thing just pisses me off. With a little more thorough research, they should be able to figure it out, but it's easier just to scare the hell out of the poor kid instead. And I know this has nothing do with states and corporations and taxes, but it's been a really. bad. day. :) So, I apologize.

And, yeah, Fight The Man, Mike!

Hooda Thunkit said...


You're not the type to take the easy way out and you already know you're going to set things right rather than take the easy way out.

I'd wish you luck, but your persecutors are the one that will need the luck ;-)

Let the games begin!