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Business Taxes Law Guide—Revision 2024
Sales and Use Tax Annotations
A B C D E F G H I J L M N O P R S T U V W X
C
170.0000 Collection of Tax by Board
Annotation 170.0305
(a) In General
170.0305 Codebtor Stay. A memorandum was received which stated that 11 U. S. C. section 1301(a) appears to exempt the "stays" of action against codebtor from any "… individual (who) becomes liable on or secured such debt in the ordinary course of such individual's business … "
11 U. S. C. section 1301 imposes the stay on the collection of a "consumer debt" from a codebtor of a Chapter 13 debtor. Business tax liability is not a "consumer debt." However, the ability of the Board to collect the partnership liability from a codebtor partner does not mean that the Board may collect that liability from property in the bankruptcy estate of the debtor. The automatic stay pertaining to the debtor prohibits the Board from taking "any action to obtain possession of property of the estate or of property from the estate or to exercise control over property of the estate." (11 U. S. C. section 362(a)(3).) The property of the debtor estate contains all of the assets of a business even if the debtor has only an 80% interest in the partnership. See U. S. C. section 541(a)(1). If the codebtor is paid a salary by the business (in addition to any profits due him), his salary may presently be garnished for the partnership liability. However, the "automatic stay" in effect for the debtor's bankruptcy action prevents any creditor (including the Board) from taking any collection action (including the installation of a keeper) against the business for pre-petition liabilities. If the Board can discover any assets of the codebtor which are not partnership assets forming part of the debtor's bankruptcy estate, those assets are not subject to a "stay" and may be levied upon. 6/4/93.