Few business seizures result in liquidations

Rick Wagner • Oct 13, 2007 at 12:00 AM

The Tennessee Department of Revenue locked the door of Planet Sun in Kingsport in September after the business failed to pay sales taxes to the state. The business has since paid its debt and reopened. David Grace photo.


KINGSPORT — Tennessee authorities padlocked a local tanning salon late last month for non-payment of sales taxes, seizing the business property.

But the salon paid off its tax debt and is back in business, which is what a state Department of Revenue spokeswoman said usually happens before a public auction of seized assets is held.

The department closed the Kingsport location of Planet Sun, 1165 N Eastman Road, Sept. 24, but the store reopened Saturday, Oct. 6, after an overdue sales tax debt was repaid.

A spokeswoman for the department said that few seizures result in liquidations.

“I’m going to satisfy the debt with the Department of Revenue,” Ken Day, ex-husband of owner Kim Day, said the day before the business reopened.

The state seized the property of the business for non-payment of sales taxes, according to a notice in the window of the store and Ken Day. It is in a strip mall that formerly housed Goody’s, a shopping center also once home to Rose’s Department Store.

Salon patrons concerned

Customers had feared the closure would leave them with lighter wallets and paler skin.

“I’ve got 15 visits,” a woman who declined to be identified said Sept. 25, the day after the business was padlocked. “I was going today. They were always busy.”

The woman said the visits cost her about $2.50 each and she didn’t have much hope in recouping her loss.

However, the salon is reopened.

In addition, Ken Day said customers could use their packages at either the Kingsport salon or the one in Bristol, Tenn., also owned by his ex-wife. A spokeswoman for the Planet Sun Express in Piney Flats said it was under different ownership and would not accept packages purchased from the Kingsport and Bristol stores.

A Johnson City Planet Sun store owned by Kim Day closed in the spring.

“We will honor everybody’s packages and give them some credit if they’ve lost time” in packages that offered unlimited visits for a month, Ken Day said.

“I’m going to step back into it and help her out,” Ken Day said. “Kim will still be the owner.”

However, the store has a sign indicating the business is under new ownership, and he said his ex-wife would be a silent partner of sorts.

Ken Day said most if not all of the same employees are back, adding that Kim Day simply had a lot of financial obligations and got behind after the divorce.

A call to the local Department of Revenue office in Johnson City, whose contact information on a sign at the closed business, was referred to the Nashville-based spokeswoman. She said she could not provide that information or any other details of the tax woes of the business.

Aside from the woman interviewed Sept. 25, another Planet Sun customer with unused tanning visits e-mailed the Times-News Sept. 25, but she could not be reached for comment afterward.

“That is unfortunate. They really would have to take that up with the business owner,” Sara Jo Houghland, Nashville-based spokeswoman for the Tennessee Department of Revenue, said of customers owed services from a seized business.

“We can’t really discuss the specifics of any specific case, but tax seizures are usually the result of not paying tax revenues to the state,” Houghland said. “We give plenty of opportunities to pay and several notices.”

Pay or face consequences

A Tennessee business that doesn’t pay due sales and use taxes to the state first receives a notice by letter.

If no response comes in 25 days, Houghland said the case is sent to a call center, which may contact taxpayers for another 20 days.

In addition to owing the tax bill, businesses that fail to pay their tax on time have a penalty for non-payment of 5 percent a month up to a maximum of 25 percent.

“A lien may be placed on the property at any time during the process,” Houghland said.

However, she also emphasized that a payment schedule can be arranged. Ken Day said revenue officials offered that for Planet Sun but the interest rate was simply too high to be feasible.

Houghland said that under a payment plan, the collection actions are frozen and the business is allowed to reopen provided the business keeps its current taxes due up to date and makes payments on back taxes. The interest rate charged, she explained, is 14.25 percent.

Ken Day said it simply made good sense to get the taxes up to date since the worth of the equipment in the salon far exceeded the owed taxes.

If the state receives no response to the calls or letter, the case goes to an enforcement officer for collection proceedings.

“The enforcement officer generates a written demand for payment,” Houghland said.

The delinquent taxpayer has 10 days to respond. And 90 days after the initial notice, the state may seize the property, Houghland said.

A tax sale at public auction eventually follows if the debt is not otherwise satisfied.

“If the business assets are seized, it’s been given every opportunity to pay the liability or arrange payment plan,” Houghland said. “Seizures are our last resort.”

Houghland said about 300 to 400 businesses in Tennessee are padlocked each year for non-payment of taxes but “very few” result in liquidation auctions.

In 2006, the department held four liquidation auctions. So far in 2007, the department has held seven such auctions.

“If the seizure sale outstrips the debt, taxpayers are notified and can request a refund,” Houghland said.

However, if the seizure sale fails to satisfy the debt “additional collection efforts are pursued,” including the state going after other assets and placing a lien against future earnings.

The money goes to state and local coffers.

Houghland said that generally in the case of chains, all locations were affected by a seizure, not just the one that owed the money, although the Bristol location, 1742-A Edgemont Ave., remained opened during the temporary closure of the Kingsport store..

“They all would be affected,” Houghland said.

Recommended for You

    Kingsport Times News Videos