George W. Donald, 46, was charged with two felony counts of failing to pay over state withholding taxes that were withheld from his employees’ wages during the years 2006 and 2007. Donald was also charged with five felony counts of failing to pay over rental use taxes collected from customers of his construction equipment rental business, Delaware Rental, during the years 2006 through 2010. Taxes total more than $30,000. Investigators say that Donald operated Delaware Rental and, as part of his duties, he was responsible for remitting withholding taxes and rental use taxes owed by the business to the Division of Revenue.
Payroll taxes are part of an employee’s wages which are retained by the employer for the sole purpose of remitting them to the state for application against the employees’ personal state tax liabilities as calculated on their tax returns. During the period in which the money has been withheld from employees but not yet remitted to the government the funds are considered held in trust. They never belong to the employer. Similarly rental use taxes are collected from customers as an agent for the State but never belong to the collecting entity. (The rental of tangible personal property within Delaware is subject to a rental use tax at the rate of 2.07%.)
Instead of paying over these taxes to the state, Donald transferred a significant amount of corporate funds into a separate business he controlled. It is illegal to use withholding and trust-fund taxes for any purpose other than payment to the government. The seven felony counts each carry a maximum penalty of five years in prison, and such fines and penalties as the court deems appropriate. Donald awaits arraignment and trial date in Superior Court in Wilmington.