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advocacy community education
8
O
n April 19, 2011, the Connecticut
Supreme Court upheld the ruling
of the Tax Session of the
Superior Court that summary tapes from
cash registers, commonly referred to as
"Z tapes," were not equivalent to cash
register tapes and therefore were not
sufficient to meet the taxpayer's burden
of maintaining records as required under
the Connecticut regulations. In addition,
the court ignored the issue of whether
the invalid jeopardy assessment was
void, determined that a request for a dis-
charge of the tax lien had not been
specifically requested, and then declined
to broach the jeopardy assessment issue.
The Case
The taxpayer, who owns and operates
a nightclub, was audited for sales tax
for October 1, 1999 through March 31,
2005. The auditor, after the initial con-
ference in December 2001, did not
return for more than three years and
then, in 2005, requested the taxpayer
sign consent to extend the statute of
limitations. When the taxpayer refused
to sign the extension, the Department
of Revenue Services (DRS) concluded
the audit, used a 2001 error rate calcu-
lated without relying on the taxpayer's
records, issued a jeopardy assess-
ment, and filed liens against his busi-
ness properties, treating him as if he
would abscond without paying the tax.
The DRS typically furnishes the tax-
payer a period of 60 days to file an
appeal and, after concluding the
appeal, may then file a lien and take
collection action to recover the tax.
Here, the commissioner's use of the
jeopardy assessment allowed the DRS
to accelerate collection of the
assessed tax by filing a lien, issuing a
tax warrant, and sending a state mar-
shal to demand full payment of almost
$280,000 immediately.
Connecticut Supreme
Court Upholds Business
Recordkeeping
Requirements,
Punts on Issue of Illegal
Jeopardy Assessment
By Robert J. Percy, Esq. and Eric L. Green, Esq.
[Editor's Note: Article co-author Robert J. Percy, Esq. served as trial counsel in the Yvon J. Alexandre v. Commissioner
of Revenue Services case cited in the following article. A previous article on this case, Recent Connecticut Case
Raises the Bar for Small Business Recordkeeping Requirements by Eric L. Green, Esq. and Robert J. Percy, Esq.,
appeared in the May/June 2009 issue of Connecticut CPA. That article is available at www.cscpa.org/ztapes.]