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
APPEARANCES
Robert C. Samuel
(Petitioner), by Anthony T. Wendtland, of Davis & Cannon.
Department of Revenue
(Department), by Cathleen D. Parker, Assistant Attorney General.
DIGEST
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?
JURISDICTION
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.
DISCUSSION
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
ORDER
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.
STATE BOARD OF EQUALIZATION
Edmund J. Schmidt Chairman
Roberta A. Coates
Sylvia Lee Hackl
ATTEST:
Wendy Soto, Executive
Secretary