BEFORE THE STATE BOARD OF EQUALIZATION
FOR THE STATE OF WYOMING
IN THE MATTER OF THE APPEAL OF )
ROBERT C. SAMUEL FROM A SALES )
AND USE TAX AUDIT ASSESSMENT BY ) Docket No. 2001-84
THE EXCISE DIVISION OF THE )
DEPARTMENT OF REVENUE )
FINDINGS OF FACT
CONCLUSIONS OF LAW
DECISION AND ORDER
Robert C. Samuel (Petitioner), by Anthony T. Wendtland, of Davis & Cannon.
Department of Revenue (Department), by Cathleen D. Parker, Assistant Attorney General.
The matter came before the State Board of Equalization (Board) on a Case Notice filed March 26, 2001, on behalf of Petitioner who was assessed excise taxes and interest by the Department. An order setting the matter for hearing was entered on June 26, 2001. On October 15, 2001, the parties filed a Stipulation of Facts and a Joint Motion for Vacation of Hearing Setting and Briefing Schedule for Submission of Case on Briefs. The Board entered an Order Vacating Hearing and Converting Case to Expedited Docket and Briefing Order on October 23, 2001. The matter was considered on briefs by the Board consisting of Edmund J. Schmidt, Chairman, Roberta A. Coates, Vice-Chairman, and Sylvia Lee Hackl, Board Member.
The issue is whether Wyoming Statute Section 39-15-110(b) acts as a statute of limitation to prevent the Department from assessing and collecting use tax?
The Board is required to “[d]ecide all questions that may arise with reference to the construction of any statute affecting the assessment, levy and collection of taxes, in accordance with the rules, regulations, orders and instructions prescribed by the Department.” Wyo. Stat. §39-11-102.1(c)(iv). The rules of practice and procedure for appeals before the Board involving tax matters contemplate appeals from final administrative decisions of the Department. Rules, Wyoming State Board of Equalization, Chapter 2, §2. The rules require appeals to be filed with the Board within thirty (30) days of any administrative decision. Rules, Wyoming State Board of Equalization, Chapter 2, §5.
Petitioner timely filed his appeal. The Board is required to decide all issues relating to this appeal and give a written decision, citing findings of fact and conclusions of law following a hearing. Rules, Wyoming State Board of Equalization, Chapter 2, §34. Upon application of any person adversely affected, the Board is mandated to review final Department actions concerning state excise taxes, and "[h]old hearings after due notice in the manner and form provided in the Wyoming Administrative Procedure Act and its own rules and regulations of practice and procedure." Wyo. Stat. § 39-11-102.1(c)(viii), Wyo. Stat. §§ 16-3-101 through 16-3-115.
Petitioner purchased logs for a home from a Montana supplier. The logs were delivered to Petitioner’s ranch in Washakie County, Wyoming between February 1995 and January 1997. Petitioner did not report his purchases or pay excise tax to the Department. Petitioner then had a contractor build a home from the logs. Beginning in October 2000, Petitioner was audited by the Wyoming Department of Audit (DOA) for the period covering January 1, 1995, through March 31, 1997. The preliminary audit findings alleged Petitioner underpaid sales and use tax related to the purchase of the logs in the amount of $9,091.31, plus interest.
By letter dated March 14, 2001, and after considering further and final information from the DOA, the Department assessed Petitioner a tax deficiency of $9,064.63 and interest in the amount of $396.69. No penalty was assessed. Petitioner remitted a tax payment to the Department in the amount of $9,416.32. [State Board Record, Case Notice p. 2 and March 14, 2001 letter from Noble].
Petitioner timely appealed from the final administrative decision of the Department. Petitioner asserts that the assessment was incorrect for the reason that it was more than three years past the date the taxes should have been paid, and therefore the Department was barred by Wyoming Statute Section 39-15-110(b) from collecting any tax.
The Department argues Wyoming Statute Section 39-15-110(b) does not act as a statute of limitation, is not a bar to the collection of the taxes and interest when a taxpayer fails to report and a subsequent audit discovers the failure to report and pay taxes.
FINDINGS OF FACT
1. Petitioner purchased logs from Custom Log Homes in Montana. Petitioner hired a contractor to build a home from the logs. Petitioner paid $226,615.99 for the logs during the time frame of February, 1995, through January of 1997. When the logs were shipped to Wyoming no excise tax was paid. Petitioner did not report the purchase of the logs to the Department. [Wyoming Department of Revenue Record, Exhibit A-13, Brief of Petitioner, p. 8, Joint Stipulation of Facts, Paragraph 10]. The failure to report and pay the tax was due to the neglect or intentional disregard of the Petitioner.
2. There was no contact by the Department to Petitioner concerning excise tax until October 5, 2000. On October 5, 2000, the DOA sent a letter to Petitioner requesting information about the sales or use tax paid on a log home package. [Joint Stipulation of Facts, Paragraphs 1, 10]. The Department discovered a home had been built but no excise tax had been paid for the materials by reviewing the land use permits of Washakie County, Wyoming. [Wyoming Department of Revenue Record, Exhibit A-12].
3. Petitioner provided the information requested by the DOA. On January 18, 2001, the DOA issued a letter stating Petitioner owed $9,091.31 in tax, and penalty and interest could be added to the amount. [Joint Stipulation of Facts, Paragraph 2]. The Department sought a tax amount by assessing tax on each transaction as of the date Petitioner wrote checks for the logs. [Joint Stipulation of Facts, Paragraph 8]. The DOA issued its final decision letter dated March 8, 2001, identifying a tax deficiency of $9,064.63 and interest. No penalty was assessed. [Joint Stipulation of Facts, Paragraphs 4].
4. On March 14, 2001, the Department issued a demand letter to the Petitioner outlining that Petitioner should have paid $9,064.33 in taxes and not assessing a penalty but claiming interest in the amount of $369.69. The Petitioner paid $9,436.28. Thus, $25.04 remained outstanding. [Wyoming Department of Revenue Record, Exhibit A-1, Board Record].
5. Petitioner paid the taxes under protest and filed a letter of appeal with the Board on March 26, 2001. [Wyoming Department of Revenue Record, Exhibit A-3, Board Record].
6. Any Discussion above or Conclusion of Law below which includes a finding of fact may also be considered a Finding of Fact and, therefore, is incorporated herein by this reference.
CONCLUSIONS OF LAW
7. The letter of appeal by Petitioner was timely filed and the Board has jurisdiction to determine this matter.
8. The initial determination that must be made is whether Petitioner should have paid excise tax on the purchase of the logs for the construction of his home. This question was answered In the Matter of the Appeal of Joseph A. Sorge, 1999 WL 370031, Docket No. 97-348 (May 28, 1999). The Board held the purchase of logs from a Montana manufacturer, and the taking of possession of these logs in Wyoming created a liability on the part of the purchaser for the payment of a use tax. Thus, in this case, Petitioner is responsible for the payment of use tax pursuant to Wyoming Statute Section 39-16-103. It is undisputed the amount of tax due is $9,064.63. It should be noted the arguments by the parties infer the excise tax in question is a sales tax. Any tax due under the facts in this case is a use tax and as such this decision will reference the use tax statutes.
9. The taxable event occurs when the Petitioner used the tangible personal property, the logs, in Wyoming. Wyo. Stat. § 39-16-103. The tax becomes due when the transaction occurs for the purchase of the tangible, personal property. [Joint Stipulation of Facts, Paragraphs 7]. As found by the court in Morrison-Knudson Co., Inc. v. State Board of Equalization, 58 Wyo. 500, 135 P.2d 927, 938 (Wyo. 1943), “[n]o notice or hearing was necessary to make the appellants liable for the taxes actually due under the statute.”
10. Next, it is important to determine the responsibilities of the parties according to the statutes and case law. The taxpayer has to maintain records for three years including invoices and books showing all merchandise purchased. Wyo. Stat. § 39-16-110. The taxpayer has the duty to file a timely return and to remit all taxes due. If he does not he may have a tax lien placed on his property. Wyo. Stat. § 39-16-103(c)(ii), (vi), (viii). The taxpayer must file the return and remit all taxes on the last day of the month for purchases made in the preceding month. Wyo. Stat. § 39-16-107(a)(ii), (b)(i). Furthermore, the taxpayer does not need notice and demand for payment of the taxes for the returns and taxes to be due. Morrison-Knudson, Co., Inc. v. State Board or Equalization, 58 Wyo. 500, 135 P.2d 927, 938 (Wyo. 1943).
The Department may enforce tax payment using various procedures. The Department may compute taxes using the best information available. This is permitted if the taxpayer does not maintain the required records, the tax liability is not extinguished. The Department may charge interest, assess penalties, bring court actions, ask for misdemeanor prosecution, impose tax liens and conduct a tax sale to enforce a tax obligation. Wyo. Stat. § 39-16-108.
11. The statute at issue is Wyoming Statute Section 39-16-108 which is entitled “Enforcement.” The first section of this statute gives the Department the authority to assess based on best information available. The second section deals with the computation of interest on past due taxes. The fourth section deals with liens and the fifth section outlines the procedure for tax sales. The section at issue in this case is the third section:
Penalties. The following shall apply:
(vii) The department may bring an action to recover any delinquent taxes, penalty or interest in any appropriate court within three (3) years following the delinquency. In the case of an assessment created by an audit, the delinquency period is deemed to start thirty (30) days after the date the assessment letter is sent. Any tax penalty and interest related to the audit assessment shall be calculated from the filing period during which the deficiency occurred. In any such action a certificate by the department is prima facie evidence of the amount due...
Wyo. Stat. §39-16-108(c).
This statute has remained the same through the time frame of this case, from the time the logs were purchased by the Petitioner through the demand for the payment of the taxes by the Department.
12. The Wyoming Constitution provides in Article 3, Section 40:
No obligation or liability of any person, association or corporation held or owned by the state or an municipal corporation therein shall ever be exchanged, transferred, remitted, released, postponed or in any way diminished except as may be prescribed by the legislature. The liability or obligation shall not be extinguished except by payment into the proper treasury or as may otherwise be prescribed by the legislature in cases where the obligation or liability is not collectible.
This is instructive because this case does not deal with the obligation to pay the tax but with a manner to avoid paying the tax.
13. Petitioner asserts that Wyoming Statute §39-16-108(c)(vii) acts as a statute of limitations that prohibits the State of Wyoming from collecting the use tax due. As a general rule, the State is immune from the application of a statute of limitations in the absence of some express statutory pronouncement. As enunciated in Laramie County School District #1 v. Muir, 808 P. 2d 797, 800, 801 (Wyo. 1991):
The rule finds its genesis in the common law principle “nullum tempus occurrit regi” or “time does not run against the king. ...In cases decided since Thompson, the federal government has been held not subject to any standards found in state statutes of limitations. This principle has also been applied generally whenever a state brought an action in its sovereign capacity and the defendant interposed the statute of limitations. ... We will, in that light, recognize the rule of state immunity from statutes of limitations in Wyoming, in the absence of some express statutory pronouncement. We hold this to be the appropriate and sound principle of common law.
14. In deciding this case the Board must decide if Wyoming Statute Section 39-16-108 (c)(vii) is a statute of limitations against collecting tax when the taxpayer does not report the purchase. Based on the analysis set forth below, the Board concludes it is not.
15. The first step in interpreting a statute is to determine whether it is clear or ambiguous. If the wording is such that reasonable persons are able to agree as to its meaning it is clear and unambiguous. If it is clear the plain language is given effect. Petroleum Inc. v. State Board of Equalization, 983 P.2d 1237, 1240 (Wyo. 1999). In this case, both parties argue the statute is clear and unambiguous but with opposite results. “When a word or phrase in a statute is susceptible of more than one meaning it must be considered ambiguous.” State Board of Equalization v. Tenneco Oil Company, 694 P.2d 97,99 (Wyo. 1985). Therefore, the statute is ambiguous and we must resort to statutory interpretation.
16. When a statute is ambiguous rules of statutory construction guide interpretation to discern legislative intent. The courts generally defer to the construction placed on a statute by the agency that is charged with its execution, provided, however, the agency’s construction does not conflict with the legislature’s intent. Petroleum Inc. v. State Board of Equalization, 983 P.2d 1237, 1240 (Wyo. 1999). The Department is the agency charged with the execution of Wyoming Statute Section 39-16-108(c). The Department has interpreted the statute to require if the tax is owed as a result of an audit assessment the deficiency does not run until thirty days after the assessment letter is sent. There has been no logical reason presented to demonstrate the Department’s interpretation is not in accord with legislative intent. In fact, if the statute were interpreted differently there would be no reason for the sentence in the statute that reads, “In the case of an assessment created by an audit, the delinquency period is deemed to start thirty (30) days after the date the assessment letter is sent.” Wyo. Stat. § 39-16-108(c)(vii).
17. When interpreting statutes, courts look to the object and the purpose the legislature intended to accomplish. Petroleum Inc. v. State Board of Equalization, 983 P.2d 1237, 1241 (Wyo. 1999); State Board of Equalization v. Tenneco Oil Company, 694 P.2d 97, 100 (Wyo. 1985). The object of this statute was to provide a method and procedures to enforce taxpayer’s obligations to pay taxes. Wyoming Statute Section 39-16-108(c) provides a time certain for the Department to bring an action in court. If the taxpayer timely reports, which this Petitioner did not do, then the time runs from the date of the transaction. However, if the obligation is discovered in an audit, as this obligation was, the time runs from thirty days after the assessment letter.
18. It is true that tax statues, particularly these which are penal in nature, are to be strictly construed. Petroleum Inc. v. State Board of Equalization, 983 P.2d 1237, 1240 (Wyo. 1999). It is also true that, as a general rule, such statutes are to be construed in favor of the taxpayer. However, a statute such as Wyoming Statute Section 39-16-108(c) should not be interpreted so as to reward a taxpayer for failing to comply with the law in the first place. In this case, Petitioner failed to report and pay taxes. Only after the DOA discovered the tax liability could the Department send an assessment letter. The DOA letter was sent on March 8, 2001. Thus, the three year limitation began April 8, 2001. This is the very scenario intended to be remedied by the sentence, “In the case of an assessment created by an audit, the delinquency period is deemed to start thirty (30) days after the date the assessment letter is sent.” Wyo. Stat. § 39-16-108(c)(vii).
The lack of action on the part of the Department was caused by the wrong-doing of the Petitioner by not reporting. The statute does not bar the Department from acting once it has knowledge of a tax liability. To find otherwise would result in an absurd, illogical and unreasonable statute which construction must be avoided. Matter of Cordova, 882 P.2d 880, 883 (Wyo. 1994). If Petitioner had reported to the Department and the Department then failed to take action for three years, the outcome may be different, just as the interest imposition may be different if the taxpayer had filed returns and claimed an exemption as in the case of Morrison Knudson Co. v. State Board of Equalization, 58 Wyo. 500, 135 P.2d 927, 939 (Wyo. 1943).
19. Further support for this conclusion can be found by examining the entire scheme of Wyoming Statute Section 39-16-108. This statute provides many enforcement mechanisms for the Department: tax liens, interest, penalties, tax sales, misdemeanor charges and court action. The only limitation of time is in the penalty section. Wyo. Stat. § 39-16-108(c). The legislature did not limit time for the other enforcement remedies. Therefore, the demand for payment from the Petitioner was not barred because other enforcement actions could have been taken by the Department.
20. Petitioner attempts to buttress his argument that Wyoming Statute Section 39-16-108 is a statute of limitations by pointing to the record-keeping requirement of Wyoming Statute Section 39-16-110, which requires a taxpayer to keep accurate and adequate records of transactions for three years. Petitioner argues that a taxpayer cannot be assessed at any time later than the three-year period during which he must maintain records. This is not correct. The Department does not have to rely only upon a taxpayer’s records to make an assessment. The Department may use the best information available in computing taxes. Wyo. Stat. §39-16-108(a)(i). The issue of a limitation on the collection of taxes was raised by the taxpayer and rejected by the court in Walgreen Co. v. State Board of Equalization, 62 Wyo. 288, 166 P.2d 960, 968 (Wyo. 1946). This is a similar argument to that the taxpayer in the case of Union Pacific Resources Company v. State, 839 P.2d 356,371 (Wyo. 1992). The court did not find record keeping requirements to limit the States ability to collect severance and ad-valorem taxes.
We find Walgreen, 62 Wyo. 288, 166 P.2d 960 again dispositive in lack of discernible legislative intent to go beyond the explicit statutory language to release the obligation to the public instrumentality as a debt due to the government or to provide a tax moratorium.
21. Petitioner also argues that because a taxpayer may not receive a refund or credit after three years, pursuant to Wyoming Statute Section 39-16-110(b), therefore he cannot be assessed after three years has lapsed. Again, there is no express statement of legislative intent that Wyoming Statute Section 39-16-110(b) acts as a statute of limitations on the Department’s authority to assess and collect an obligation owed to the state. Petitioner cites no case law to support this position and we will not find a limit unless the legislature specifically imposes one.
22. This Board has repeatedly held, consistent with decisions of the Wyoming Supreme Court, that "the Department cannot waive the statutorily prescribed interest." In the Matter of the Appeal of Rebecca Painter, M.D., 1998 WL 727617 (Wyo. St. Bd. Eq.), ¶ 14; In the Matter of the Appeal of Mark VII Equipment, Inc., 1998 WL 749154 (Wyo. St. Bd. Eq.), ¶ 15 and cases cited therein; Morrison-Knudson Co. v. State Board of Equalization, 58 Wyo. 500, 135 P.2d 927, 936 (1943). This was indeed the rule under the original excise tax statutes. In 1999, however, the Legislature enacted amendments to the statutes, specifically permitting the Department to waive or credit both interest and penalties. 1999 Wyo. Sess. Laws Ch. 58. Section 39-16-108(b)(ii) of the Wyoming Statutes now provides, "The department may credit or waive interest imposed by this subsection as part of a settlement or for any other good cause."
The Department did not find good cause to waive interest. Given the facts of this case, good cause to waive interest does not exist. It is not good cause for a taxpayer to fail to report and pay taxes. Only, after the Department of Audit discovered the tax deficiency by extraordinary efforts did the Petitioner agree to pay taxes. The Peitioner's actions do not demonstrate good cause.
THIS SPACE INTENTIONALLY LEFT BLANK
IT IS THEREFORE HEREBY ORDERED:
A. The assessment of use tax on the invoices for purchase of tangible personal property is affirmed.
2. The assessment of interest is affirmed.
Pursuant to Wyoming Statute Section 16-3-114, and Rule 12, Wyoming Rules of Appellate Procedure, any person aggrieved or adversely affected in fact by this decision may seek judicial review in the appropriate district court by filing a petition for review within 30 days of the date of this decision.
Dated this 28th day of May, 2002.
Edmund J. Schmidt Chairman
Roberta A. Coates
Sylvia Lee Hackl
Wendy Soto, Executive Secretary