BEFORE THE STATE BOARD OF EQUALIZATION
FOR THE STATE OF WYOMING
IN THE MATTER OF THE APPEAL OF )
KEN KOSTER FROM A DENIAL OF ) Docket No. 2004-132
REFUND REQUEST BY THE EXCISE )
DIVISION OF THE DEPARTMENT )
OF REVENUE )
FINDINGS OF FACT, CONCLUSIONS OF LAW, DECISION AND ORDER
Ken Koster, Pro Se (Petitioner or Koster).
Ryan T. Schelhaas, Assistant Attorney General, for the Wyoming Department of Revenue, (Department).
The Board shall review final decisions of the Department on application of any interested person adversely affected. Wyo. Stat. Ann. § 39-11-102.1(c). The taxpayer’s appeal must be filed with the Board within thirty days of the Department’s final decision. Rules, Wyoming State Board of Equalization, Chapter 2, § 5(a). Ken Koster timely appealed the final decision of the Department effective September 22, 2004, and the Board has jurisdiction to decide this matter.
The Board, Alan B. Minier, Chairman, Thomas R. Satterfield, Vice Chairman, and Thomas D. Roberts, Board Member, held a hearing on May 31, 2005.
STATEMENT OF THE CASE
Petitioner purchased a 1958 Cessna 175 single engine aircraft from a private seller in Rolla, Missouri. The Department was notified of the purchase by the Federal Aviation Administration (FAA) after the FAA received an aircraft bill of sale and aircraft registration application from Petitioner indicating an Alta, Wyoming, mailing address. The Department then sent Petitioner a notice of sales/use tax liability in the sum of $1,034.43, which Petitioner subsequently paid. Petitioner thereafter requested a refund asserting the aircraft sale occurred in Missouri, and use tax was not due to Wyoming as the aircraft had not been delivered, used, or stored in Wyoming. The Department denied the refund.
We reverse the decision of the Department.
CONTENTIONS AND ISSUES
Petitioner contends the Department’s denial of his request for refund of the $1034.43 he paid in sales/use tax should be reversed because: (a) the aircraft sale occurred in Missouri, not Wyoming; and (b) the aircraft was not delivered in Wyoming, nor has it been used or stored in Wyoming. The Department’s single contention states a mixed question of fact and law - whether the Department correctly and properly denied Petitioner’s request for a refund of sales/use tax paid on his aircraft. The Department does not cite in any of its prehearing pleadings the statute or statutes on which it relies for collection of the tax at issue. We thus address both sales and use tax liability.
FINDINGS OF FACT
1. Petitioner, Ken Koster, in October, 2003, purchased a Cessna 175 single engine aircraft from Michael Hofstetter. Mr. Hofstetter was a car dealer in Rolla, Missouri. [Updated Stipulation of Facts (Stipulation) ¶ 1; Hearing Recording (Recording)].
2. Mr. Koster registered the aircraft with the Federal Aviation Administration using his Alta, Wyoming residence address. [Stipulation ¶ 2].
3. On January 22, 2004, the Department sent Mr. Koster notice that sales/use tax on the aircraft was owed to Wyoming. [Stipulation ¶ 3].
4. On February 15, 2004, Mr. Koster sent a letter to the Department requesting a ruling on whether Wyoming sales or use tax applied to the purchase of his Cessna aircraft. [Stipulation ¶ 4].
5. In April and May, 2004, Mr. Koster made two payments totaling $1,034.43 in sales/use tax to the Department. [Stipulation ¶ 5].
6. On June 17, 2004, the Department responded to Mr. Koster’s February 15, 2004, letter. The Department indicated that in order to substantiate his claim that the aircraft was not subject to use tax, it needed several documents, including copies of Mr. Koster’s flight log, a purchase agreement, and sales/use tax receipt indicating sales/use tax was paid to a state other than Wyoming. [Stipulation ¶ 6].
7. Mr. Koster subsequently requested a refund of the tax paid, which the Department denied. [Stipulation ¶ 7].
8. Mr. Koster had paid Wyoming use tax on two prior aircraft purchases. [Recording].
9. Mr. Koster testified at hearing the Cessna had not been used, stored, or in any way consumed in Wyoming. The aircraft is based and stored in Driggs, Idaho, in a hangar owned by Koster. He testified he flew the aircraft in Idaho for fishing trips with an occasional trip to Las Vegas, Nevada, to visit family. The Cessna aircraft is a single engine and can only be flown under visual flight rules (VFR). [Recording].
10. Mr. Koster testified he purchased and flew the Cessna in Rolla, Missouri in October, 2003. The first use of the Cessna was thus in Missouri. [Recording].
11. Mr. Koster testified a friend flew the Cessna for him from Rolla, Missouri to Driggs, Idaho, with fuel stops in Kansas, Colorado, and Riverton, Wyoming. [Exhibits 113, 114; Recording].
12. Mr. Koster testified he had only a verbal and handshake agreement with the seller, and thus had no written purchase agreement. He paid the seller with a cashier’s check while he was in Missouri. He did have the seller sign an FAA Bill of Sale in Missouri which is similar to a “pink slip” for an automobile. The FAA requires the Bill of Sale remain with an aircraft until the registration is changed with the FAA. [Exhibit 117; Recording].
13. The Department requested Koster’s pilot log when considering the refund request. Mr. Koster testified he has over 28,000 hours of flight time, and holds an Air Transport Pilot (ATP) rating with the FAA. He is thus no longer required to maintain a pilot log. [Exhibit 109; Recording].
14. Mr. Koster did not pay sales tax in Missouri, and has not paid use tax in Idaho. He concedes he probably owes use tax to Idaho based on his argument the Cessna is based in that state. [Recording].
15. The only evidence which the Department offered in support of its assertion of sales or use tax liability is the receipt showing purchase of fuel for the Cessna in Riverton, Wyoming, [Exhibit 114], and the fact the FAA Bill of Sale and Registration indicated an Alta, Wyoming address. [Exhibits 115, 117; Recording].
16. The Department affirmatively acknowledged it had no evidence the Cessna was stored in Wyoming. [Recording].
17. The Department also acknowledged it had no evidence to contradict the sworn testimony of Mr. Koster with regard to purchase, or use, storage or consumption of the Cessna. [Recording].
18. The Department made no effort to contact the seller of the Cessna, Michael Hofstetter. [Recording].
19. The Department made no effort to determine whether there was an airport in Alta, Wyoming. [Recording].
20. We take notice of the fact the Wyoming Official State Highway Map produced by the Wyoming Department of Transportation lists both commercial and local airports in Wyoming. The map does not indicate either type of airport in Alta, Wyoming. The Department presented no evidence that there is a commercial or local airport located in Teton County on the west side of the Teton Range.
21. Any portion of the Conclusions of Law - Principles of Law or the Conclusions of Law - Application of Principles of Law set forth below which includes a finding of fact, may also be considered a Finding of Fact and, therefore, is incorporated herein by reference.
CONCLUSIONS OF LAW: PRINCIPLES OF LAW
22. Upon application of any person adversely affected, the Board must 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. Ann. § 39-11-102.1(c)(viii). The Board must “[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. Ann. § 39-11-102.1(c)(iv).
23. The Board’s Rules provide that:
[T]he petitioner shall have the burden of going forward and the ultimate burden of persuasion, which burden shall be met by a preponderance of the evidence. If petitioner provides sufficient evidence to suggest the Department determination is incorrect, the burden shifts to the Department to defend its action. . . . In proceedings involving the question of whether or not there is a taxable event under Wyoming law, the Petitioner shall have the burden of going forward and the Department shall have the ultimate burden of persuasion.
Rules, Wyoming State Board of Equalization, Chapter 2, § 20.
24. The phrase, “‘preponderance of the evidence,’ has been given various definitions by different courts but, according to McCormick et al. on Evidence 2nd Ed. H.B., s 339, p. 794, the most acceptable meaning seems to be proof which leads the trier of fact to find that the existence of the contested fact is more probable than its non-existence.”
Scherling v. Kilgore, 599 P.2d 1352, 1359 (Wyo. 1979).
25. “Taxable event. The following shall apply:
(i) Except as provided by W. S. 39-15-105, there is levied an excise tax upon:
(A) The sales price of every retail sale of tangible personal property within the state...”
Wyo. Stat. Ann. § 39-15-103(a)(i)(A).
26. “As used in this [State Sales Tax] article:
* * *
(vi) ‘Retail sale’ means any sale, lease or rental for any purpose other than for resale, sublease or subrent;
(vii) ‘Sale’ means any transfer of title or possession in this state for a consideration....
* * *
(ix) ‘Tangible personal property’ means any property not real or intangible....
Wyo. Stat. Ann. § 39-15-101(a)(vi),(vii)(ix).
27. “Unless otherwise explicitly agreed title passes to the buyer at the time and place at which the seller completes his performance with reference to the physical delivery of the goods, despite any reservation of a security interest even though a document of title is to be delivered at a different time or place; . . . .
Wyo. Stat. Ann. § 34.1-2-401(a)(ii)
28. “(a)Taxable event. The following shall apply:
(i)Persons storing, using or consuming tangible personal property are liable for the tax imposed by this article. The liability is not extinguished until the tax has been paid to the state but a receipt given to the person by a registered vendor in accordance with paragraph (c)(i) of this section is sufficient to relieve the purchaser from further liability;
(ii)Tangible personal property sold by any person for delivery in this state is deemed sold for storage, use or consumption herein and is subject to the tax imposed by this article unless the person selling the property has received from the purchaser a signed certificate stating the property was purchased for resale and showing his name and address;
Wyo. Stat. Ann. § 39-16-103(a)(i)(ii).
29. “(i) Use Tax
* * *
(v) Prior Use of Property Purchased Outside Wyoming. The use tax shall not apply to tangible personal property, which is purchased and used in the manner for which it was manufactured or assembled in another state, prior to its use in Wyoming. Application of the tax on motor vehicles is discussed at W.S. 39-15-107(b)(i) and W.S. 39-16-107(b)(ii).”
Rules, Wyoming Department of Revenue, Chapter 2, § 4(i)(v).
CONCLUSIONS OF LAW: APPLICATION OF PRINCIPLES
30. The Board has jurisdiction to hear and decide this matter.
31. The Department apparently argues, in the alternative, Mr. Koster is liable for either sales tax because a “sale” - transfer of title and possession occurred in Wyoming, Conclusions, ¶ 26; or he is liable for use tax because storage, use, or consumption occurred in Wyoming. Conclusions, ¶ 29. The Department failed to fulfill its ultimate burden of persuasion that the transaction in question met the Wyoming statutory standards for a taxable event, and thus for imposition of sales or use tax. Conclusions, ¶ 23. It therefore incorrectly denied Koster’s request for refund. There was, in this matter, no sufficient showing by the Department of any taxable event, be it a sale, or any use, storage or consumption in Wyoming.
32. This Board’s Rules in contested case proceedings in most appeals place upon a petitioner, such as Mr. Koster, the burden of going forward with evidence, and the ultimate burden of persuasion that their position as opposed to that of the Department is correct. This appeal, however, with regard to both sales and use tax liability, is a bit different, as it raises the question whether there is a taxable event in Wyoming under Wyoming law. While the petitioner still has the burden of going forward, the ultimate burden of persuasion in such a proceeding falls upon the Department to show by a preponderance of evidence a taxable event has occurred in this state. Conclusions, ¶ 23.
33. Mr. Koster, as petitioner, more than adequately met his required burden of going forward by presenting both testimony and documentary evidence to call into question the Department’s assertion of a taxable event for either sales or use tax liability occurred in Wyoming.
34. The testimony of Mr. Koster established he purchased the Cessna from an individual in Rolla, Missouri. He had only a verbal and handshake agreement with the seller, thus he had no written purchase agreement indicating terms of sale. He paid for the Cessna with a cashier’s check while in Missouri. Facts, ¶ 12. Title and possession thus transferred in Missouri. Conclusions, ¶ 27.
35. Mr. Koster’s testimony also established a first use for tax purposes in Missouri as he flew the Cessna in Missouri in conjunction with its purchase. He also testified and presented documentary evidence indicating he had the aircraft serviced after purchase in Rolla, Missouri. Facts, ¶ 10. [Exhibit 112].
36. The testimony of Mr. Koster further established the Cessna was stored in Driggs, Idaho in a hanger which he owned. He flies the plane primarily in Idaho with an occasional trip to Las Vegas, Nevada. Facts, ¶ 9.
37. The Department, in response, argues because the Cessna aircraft was fueled once in Riverton, Wyoming while being ferried from Rolla, Missouri, and the FAA Bill of Sale and Registration indicate an Alta, Wyoming address, it is entitled to basically assume a taxable event, for either sales or use tax purposes, occurred in Wyoming, and thus there is tax liability. The Department thus places on Mr. Koster, and others similarly situated, the exact opposite burden which the Board Rules establish when an appeal involves a taxable event. The Department in effect says it can assume a taxable event has occurred based upon very minimal evidence, and force the person being assessed to prove otherwise.
38. The two, maybe three, bits of evidence relied upon by the Department are not adequate to fulfill its ultimate burden of persuasion that a taxable event occurred in Wyoming. The address of an owner on a FAA Bill of Sale and Registration has no probative value on the question of a taxable event. The mere fact a plane owned by a Wyoming resident is fueled once in this state may be evidence of presence of the aircraft on a single occasion, but this slight bit of evidence falls short of fulfilling the Department’s ultimate burden of persuasion.
39. It is also important to note the Department acknowledged at the hearing it had no evidence the Cessna was stored in Wyoming. The Department also made no effort to contact the seller to verify the statements of Mr. Koster when he originally questioned the tax liability. And the Department admitted at the hearing it had no evidence to contradict the sworn testimony of Mr. Koster with regard to the purchase, and use, storage or consumption of the Cessna. Facts, ¶ 17.
40. The Department expended some effort at the hearing to place into evidence the fact Mr. Koster previously paid sales/use tax on the purchase of two other aircraft. The Department, however, presented no evidence as to the circumstances of the prior two purchases, thus we lack any basis to even consider the relevance of the two prior payments. We believe nonetheless it is highly unlikely those two prior purchases would provide any insight into the taxability question at issue. Mr. Koster chose to challenge the sales/use tax assessment at issue in this matter. His failure to do so on two prior occasions is irrelevant.
IT IS THEREFORE ORDERED the Department of Revenue’s denial of the refund request by Ken Koster in the sum of $1,034.43 is reversed.
Pursuant to Wyo. Stat. Ann. § 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 _______ day of August, 2005.
STATE BOARD OF EQUALIZATION
Alan B. Minier, Chairman
Thomas R. Satterfield, Vice-Chairman
Thomas D. Roberts, Board Member
Wendy J. Soto, Executive Secretary