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Chris T., JD
Chris T., JD, Attorney
Category: Legal
Satisfied Customers: 3745
Experience:  Experienced in both state and federal court.
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Our former employee used our business name for personal purchases

Resolved Question:

Our former employee used our business name for personal purchases in order to evade sales taxes.
We've been contacted by number of business who the purchases have been made from to submit resale certificate, and if not, they threatened to initiate the collection efforts to collect the sales taxes due.
What are our options here?
Can we bring a law suit against the former employee who used our company name without our consent?
Thank you
Submitted: 11 months ago.
Category: Legal
Expert:  Chris T., JD replied 11 months ago.

Chris T., JD :

Good evening. I'd be glad to assist you with your question.

Chris T., JD :

Did they make the purchases using company funds?

Chris T., JD :

Was the company harmed in any way?

Customer:

No, their own

Customer:

We 've been contacted by few vendors. who the purchases were made from, asking to submit resale certificate.

Chris T., JD :

The most relevant question here would be, even if you could sue, if there would be any damages. If there aren't any damages, then whether there is a cause of action is somewhat irrelevant.

Customer:

The thing is, we can't submit those, as the nature of purchases was not related to what our company does

Chris T., JD :

OK. Does that somehow damage you or your business relationships?

Customer:

Well, since the invoices went out to our company's name, the vendors are asking for the sales taxes to be paid

Chris T., JD :

OK. Will the employee reimburse you for that?

Customer:

There were over 100K purchases made in our name

Customer:

No, they won't

Chris T., JD :

So, you are looking at a few thousand dollars in damages, correct?

Customer:

The purchases were, with no sales taxes added.

Customer:

So, I figure, 8.875% are due in sales taxes on that amount

Chris T., JD :

I assume the employee paid for the purchases, correct?

Customer:

Yes, she did.

Customer:

All of it was related to her personal home improvement/construction

Chris T., JD :

You have two options - to refuse to pay the sales tax since they were not purchases made by your company (that could come down to a question of whether your employee had the apparent authority to make the purchases), or you can pay the sales tax and sue the employee for reimbursement.

Chris T., JD :

You could sue them for a number of things, which include misappropriation of your trademark and possible breach of contract (depending on how their employment contract was worded, if they had one).

Customer:

I see. I already asked the vendors to change the name in their system to that former employee's name, since no funds were transferred/paid from our company to theirs. Also, I assume it was their business decision not to ask for the resale certificate at the time of purchase.

Chris T., JD :

It was, and to some extent, they assume that risk by not doing their due diligence.

Customer:

Isn't it identity theft?

Chris T., JD :

Not unless they used the identity of a person.

Customer:

So, the corporate name is XXXXX XXXXX into that category.

Chris T., JD :

No, like I said, you may have a misappropriation of a trademark, which is in many ways the corporate equivalent of identity theft.

Customer:

If they proceed with the collection efforts, what would our options be?

Chris T., JD :

They would have to sue you, and you would defend by saying that the company did not make the purchase. Further, you could sue the employee for indemnification.

Chris T., JD :

You would bring the employee in under indemnification if you were sued.

Customer:

I understand. So, for now, we shouldn't take any steps, except those we 've already taken, right?

Chris T., JD :

Correct.

Customer:

Do we need to inform the former employee? And in what form?

Chris T., JD :

If you are sued or have to bring suit against the employee, you will have to inform them. Otherwise, I don't see a legal reason to inform them.

Customer:

OK, thank you very much.

Chris T., JD :

Glad to help!

Chris T., JD :

If I can't do anything else for you, please remember to "rate" my answer before you go. Good luck!

Customer:

Very much so! Have a good night!

Chris T., JD :

You too!

Chris T., JD, Attorney
Category: Legal
Satisfied Customers: 3745
Experience: Experienced in both state and federal court.
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