BEFORE THE STATE BOARD OF EQUALIZATION
FOR THE STATE OF WYOMING
IN THE MATTER OF THE APPEAL OF )
MICHAEL T. WELCH FROM A )
DENIAL OF REFUND REQUEST BY THE ) Docket No. 2005-04
EXCISE DIVISION OF THE DEPARTMENT )
OF REVENUE )
FINDINGS OF FACT, CONCLUSIONS OF LAW, AND ORDER
Michael T. Welch, pro se, (Petitioner or Taxpayer).
Cathleen D. Parker, Senior Assistant Attorney General, for the 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). Michael T. Welch timely appealed the final decision of the Department effective January 24, 2005, 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 September 8, 2005.
STATEMENT OF THE CASE
Petitioner leased a 2003 four door, one ton Dodge pickup from Wells Fargo Auto Finance, Inc. of Wells Fargo Bank. Petitioner, in November 2004, decided to pay off the lease and sell the pickup to Mr. John Strohecker of Strohecker Ranches LLC. On December 3, 2004, Petitioner and Mr. Strohecker went to the Natrona County courthouse at which time Mr. Strohecker paid the $1,325.21 sales tax due on the transfer of ownership from the leasing company to Petitioner. On January 4, 2005 when Mr. Strohecker went to the Natrona County courthouse to license the pickup in his name, he was informed there was sales tax due on the sale of the pickup to him from Petitioner. Strohecker contacted Petitioner who came to the courthouse and paid the $1,325.21 sales tax. Petitioner then applied for a refund of sales tax in the sum of $1,325,21. The Department denied the refund request, asserting the pay off of the lease by Petitioner, and the sale of the pickup to Strohecker were two separate taxable transactions. Petitioner then initiated this appeal.
We find for the Department.
Are the pay off of the vehicle lease and the sale of the vehicle to Strohecker two separate taxable events requiring imposition of sales taxes pursuant to Wyo. Stat. Ann. § 39-15-103?
FINDINGS OF FACT
1. In 2003, Petitioner leased a four door, one ton Dodge Pickup through Wells Fargo Auto Finance, Inc. (Wells Fargo). [Exhibit 501, pg.000006; Hearing Recording].
2. In the fall of 2004, Petitioner requested the lease buy out amount from Wells Fargo [Department Record, pg. A-6; Hearing Recording].
3. Petitioner decided to sell the Dodge Pickup to John Strohecker of Strohecker Ranches LLC. [Exhibit 501, pg. 000006; Hearing Recording].
4. Mr. John Strohecker paid the buy out amount of $26,504.21 to Wells Fargo for Petitioner. [Department Record, pg. A-6; Hearing Recording].
5. Petitioner requested Wells Fargo send the title in John Strohecker’s name. Wells Fargo declined. Pursuant to the terms of the lease only Petitioner as lessee could purchase the vehicle from Wells Fargo through buy out. The title application by Wells Fargo showed Petitioner as the purchaser. [Exhibit 501, pg. 000006; Hearing Recording].
6. Wells Fargo sent Petitioner a letter on November 10, 2004, thanking him for the opportunity to do business with them and informing him the lease was paid in full. [Exhibit 501, pg. 000010; Hearing Recording].
7. On December 3, 2004, Petitioner and Strohecker took the paperwork to the Natrona County courthouse. Strohecker paid $1,325.21 in sales tax. The receipt shows the sales tax paid was for the motor vehicle title transfer from Wells Fargo to Petitioner. [Department Record, pg. A-9; Hearing Recording].
8. Mr. Strohecker drove the pickup for thirty days on the Welch title. On January 4, 2005, Strohecker went to the Natrona County courthouse to obtain license plates for the pickup in his name. He was told there was sales tax due to transfer of title from Petitioner to him. [Exhibit 501, pg. 000006; Hearing Recording].
9. Mr. Strohecker contacted Petitioner who came to the Natrona County courthouse. Petitioner was told by an employee of the treasurer’s office if he presented a bill of sale indicating $0.00 payment for the sale to Strohecker, no sales tax would be due. [Hearing Recording].
10. On January 4, 2005, Petitioner presented a notarized bill of sale indicating $0.00 as purchase price. A supervisor in the treasurer’s office refused to accept the bill of sale. [Exhibit 501, pg. 000003; Hearing Recording].
11. Petitioner paid $1,325.21 sales tax on January 4, 2005. The receipt shows the sales tax was paid on the motor vehicle transfer from Michael T. Welch to Strohecker Ranch LLC. The Affidavit of Sale Price is signed by Petitioner. [Exhibit 501, pg. 000005; Hearing Recording].
12. Petitioner filed a claim for refund with the Department on January 4, 2005, for the $1,325.21 sales tax he paid to Natrona County. [Exhibit 501, pg. 000002; Hearing Recording].
13. The Department denied the request for refund on January 20, 2005. The Department stated a review of the lease showed Petitioner was the only party able to buy out the lease, and the lease buy out was a taxable event. The vehicle sale to Strohecker Ranch LLC was also a taxable transaction. Therefore the refund was denied. [Exhibit 500, pg. 000001].
14. On January 24, 2005, Petitioner filed a Notice of Appeal with the State Board of Equalization challenging the sales tax refund denial. [Notice of Appeal].
15. This Board, on September 8, 2005, held a hearing which Petitioner attended and testified under oath. [Hearing Order; Hearing Recording]
16. 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
17. 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)(iv). 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)(viii).
18. The Board’s Rules provide:
Except as specifically provided by law or in this section, the 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. For all cases involving a claim for exemption, the Petitioner shall clearly establish the facts supporting an exemption.
Rules, Wyoming State Board of Equalization, Chapter 2, §20.
19. Except as exempted by statute, the State of Wyoming levies an excise tax upon:
(M) The sales price for motor vehicles…as defined by W.S. 31-1-101….
Wyo. Stat. Ann. § 39-15-103(a)(i).
20. “‘Vehicle’ means a device in, upon or by which any person or property may be transported or drawn upon a highway....” Wyo. Stat. Ann. § 31-1-101(a)(xxvi); Wyo. Stat. Ann. § 31-16-101(a)(xxv). “‘Motor vehicle’ means every vehicle which is self-propelled....” Wyo. Stat. Ann. § 31-1-101(a)(xv).
21. “Sale” means any transfer of title or possession in Wyoming for a consideration. Wyo. Stat. Ann. § 39-15-101(a)(vii).
22. Wyoming Statute Annotated section 31-2-104 pertains to transfer of ownership, provides in part that:
* * *
(c) In the event of a transfer by operation of law of any interest in a vehicle as upon an order in bankruptcy or insolvency, execution sale, repossession upon default in the performance of the terms of a lease or sales contract or otherwise than by voluntary act of the person whose title or interest is transferred, the administrator, receiver, trustee, sheriff, creditor or other representative or successor in interest of the person whose interest is transferred shall forward to the county clerk and application for a certificate of title together with a verified or certified statement of the transfer of interest.
23. Wyoming Statute Annotated section 39-15-103 pertaining to imposition of tax, provides in part that:
* * *
(b) Basis of Tax. The following shall happen:
* * *
(iii) Except for those vehicles specified under W.S. 39-15-107(b)(viii), the tax imposed by this article upon the sale of a motor vehicle, house trailer, trailer coach, trailer or semitrailer purchased as a gift shall be collected from the donee prior to the first registration based upon the fair market value of the gift at the time of the gift.
24. “Upon receipt of an application and payment of fees any county clerk shall, if satisfied that the applicant is the owner of the vehicle for which application for certificate of title is made, issue a certificate of title.... The county clerk shall not deliver a certificate of title issued under this section until presentation of a receipt for payment of sales or use tax pursuant to W.S. 39-15-107(b)....” Wyo. Stat. Ann. § 31-2-103(d).
25. The initial step in arriving at a correct interpretation of a statute is an enquiry respecting the ordinary and obvious meaning of the words employed according to their arrangement and connection. A statute must be construed as a whole in order to ascertain its intent and general purpose and also the meaning of each part. We give effect to every word, clause and sentence and construe all components of a statute in pari materia. Parker Land & Cattle Company v. Wyoming Game and Fish Commission, 845 P.2d 1040, 1042 (Wyo. 1993).
26. To address an apparent ambiguity, we may resort to extrinsic aids to interpretation to confirm plain meaning. Parker Land & Cattle Company v. Wyoming Game and Fish Commission, 845 P.2d 1040, 1043 (Wyo. 1993). We will give deference to the statutory interpretation of an agency charged with administration of a statute, unless that interpretation is clearly erroneous. Parker Land & Cattle Company v. Wyoming Game and Fish Commission, 845 P.2d 1040, 1045 (Wyo. 1993).
27. Section 13 of the Department of Revenue’s Rules addresses the taxation of Motor Vehicles:
(a) Tax Rate for Purchases. The appropriate tax rate on the purchase of a motor vehicle shall be comprised of state sales or use tax and applicable county optional sales or use taxes. The appropriate tax rate shall be determined by the tax rate in effect in the county of the purchaser’s principal residence on the date of the sale.
(b) Tax Rate for Leases. The required sales tax rate for leased motor vehicles will be determined according to the county of the principal residence of the lessee. Any purchase option exercised at the end of the lease agreement is a separate transaction and will be taxed pursuant to Section 13 (a) of these rules.
Rules, Department of Revenue, Chapter 2, § 13 (a), (b).
CONCLUSIONS OF LAW: APPLICATION OF PRINCIPLES OF LAW.
28. The Petitioner’s appeal was filed timely and the Board has jurisdiction to hear this matter.
29. This case highlights the sales tax consequences that result from buying or leasing a motor vehicle. When a person buys a vehicle from a dealer, sales tax is due on the entire transaction, and must be paid before the county clerk issues a title to the purchaser. In a lease transaction, sales tax is paid on the value of the monthly lease payments, and “any purchase option exercised at the end of the lease agreement is a separate transaction” that is taxed as a purchase. Rules, Department of Revenue, Chapter 2, § 13 (a),(b). The lessee of a vehicle therefore avoids the payment of sales tax on the value of the vehicle at the time of the initial transaction, but creates a situation in which sales tax on the remaining value of the vehicle must later be paid when the lessee acquires title from the lessor.
30. Petitioner decided to buy out his vehicle lease, and sell the vehicle through a transaction in which the vehicle purchaser in this matter, Strohecker, paid the buy out amount directly to the leasing company. The intent of the parties to the vehicle sale transaction was to have the title to the leased vehicle transfer directly from the leasing company, Wells Fargo, to the purchaser, Strohecker, thus skipping Petitioner, the vehicle lessee, in the transfer of title.
31. The problem with this scenario arises because the vehicle lease provides only the vehicle lessee, Petitioner, may exercise the buy out and purchase the leased vehicle. The leasing company, Wells Fargo Bank was contractually bound to sell the vehicle only to Petitioner as lessee, not to the purchaser, Strohecker.
32. This contractual limitation created a situation in which the Petitioner could not avoid paying sales tax when Wells Fargo transferred title to him. The contractual limitation makes applicable the first sentence of Wyo. Stat. Ann. § 31-2-104 (c). By operation of law under the statute, as a result of the terms of the vehicle lease limiting buy out to the lessee, Petitioner, the lessor could only transfer title to Petitioner. Wells Fargo could not transfer directly to Strohecker, the ultimate purchaser of the vehicle from Petitioner, even though Strohecker provided the funds for the buy out.
33. The transfer of title from Wells Fargo to Petitioner is statutorily defined as a sale, and a taxable event, thus sales tax is due. The first sales tax payment on December 4, 2004, satisfied this tax liability.
34. After the lease buy out, the title to the vehicle was held by Petitioner. His transfer of title to Strohecker was also a taxable event with a sales price greater than $0.00 on at least one, and possibly two separate events.
35. At the hearing Petitioner acknowledged that Strohecker in effect loaned Petitioner the funds to complete the vehicle lease buy out. However, the title to the vehicle was transferred to Petitioner, not Strohecker as intended by the verbal agreement between Strohecker and Petitioner. Petitioner was thus indebted to Strohecker in the amount of the buy out which Strohecker advanced to Petitioner. The transfer by Petitioner of the title to the vehicle to Strohecker cancelled Petitioner’s debt to Strohecker. This cancellation of the debt was good and sufficient consideration equal to the buy out amount. In the Matter of the Estate of Della F. Bishop, 209 Cal. App. 2d 48, 25Cal Rptr. 763 (1962) (Valuable consideration not limited to payment of money - may consist of cancellation of debt;) see also Hammel v. Ruby, 487 N.E.2d 409 (Ill.1985). Title transferred from Petitioner to Strohecker for a consideration. See: Wyo. Stat. Ann. § 39-15-101(a)(vii). The buy out amount, as consideration for cancellation of the debt, is properly viewed as the sales price upon which sales tax was again calculated.
36. An inventive refund claimant might assert the transfer of title from Petitioner to Strohecker was a gift for which there was no consideration, thus there would not be a statutorily defined sale and no sales tax would be due. However, such an argument overlooks the provisions of Wyo. Stat. Ann. § 39-15-103(b)(iii). The vehicle purchaser, Strohecker, would be considered the donee and obligated for the fair market value of the amount of the lease buy out. Strohecker as donee would thus be liable for the sales tax calculated on the fair market value of the “gift”.
37. The Department properly concluded that the transactions in question met the Wyoming statutory standards for imposition of sales tax. The tax is imposed when a sale occurs and when there is a transfer of title or possession in Wyoming for consideration.
38. In this case the transfer of the title from Wells Fargo to Petitioner was a taxable event and the transfer of title from Petitioner to Strohecker was a second, separate taxable event. Petitioner had the burden of going forward and the ultimate burden of persuasion in this case. Petitioner failed to meet its burden of persuasion.
IT IS THEREFORE HEREBY ORDERED: The Department’s decision to deny Petitioner’s request for a refund is affirmed.
Pursuant to Wyo. Stat. Ann. § 16-3-144 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 October, 2005.
STATE BOARD OF EQUALIZATION
Alan B. Minier, Chairman
Thomas R. Satterfield, Vice-Chairman
Thomas D. Roberts, Board Member
Wendy J. Soto, Executive Secretary