ADMINISTRATIVE DECISION

Transcription

1 STATE OF ARKANSAS DEPARTMENT OF FINANCE & ADMINISTRATION OFFICEOFHEARINGS&APPEALS ADMINISTRATIVE DECISION GROSS RECEIPTS TAXASSESMENT DOCKET NO.: ACCOUNT NO.: ) JESSICA DUNCAN, ADMINISTRATIVE IA W JUDGE APPEARANCES This case is before the Office of Hearings and Appeals upon a written protest dated September 9, 2015, signed by, on behalf of herself and ("Taxpayers"). The Taxpayers protested an assessment of Gross Receipts Tax ("sales tax") resulting from an audit conducted by Barbara Montgomery, DFA Service Representative, for the Department of Finance and Administration ("Department"). The Letter Identification Number is At the request of the Taxpayers, this case was taken under consideration of written documents submitted by the parties. A briefing schedule was mailed to the parties on September 28, The Department was represented by David Parker, Attorney at Law, Office of Revenue Legal Counsel. The Department filed an Opening Brief on September 29, 2015 and a Reply Brief on October 21, The Taxpayers did not file a Response Brief. This matter was submitted for decision on December 16, The reflected amount included tax - ), penalty - ), and interest illllll),

2 ISSUE Whether the assessment of Gross Receipts Tax issued against the Taxpayers should be sustained? Yes, in part. FINDINGS OF FACT/CONTENTIONS OF THE PARTIES The Department s Opening Brief provides, in pertinent part, the following: On June 15, 2015, ( Taxpayer ) registered her recently purchased vehicle, a ( ; LPN: ) with the Arkansas Department of Finance and Administration ( DFA ). Taxpayer reported that she purchased the vehicle on June 14, 2015, for $2,000, from ( Seller ). See Exhibit A. Taxpayer provided a bill of sale (back of vehicle title) indicating the same ($2,000, June 14, 2015). See Exhibit B. Because the purchase was below the $4,000 exemption, no taxes were due, only title/registration fees of $21.75, which were paid at that time. Meanwhile, on March 9, 2015, Seller registered a new vehicle, claiming to have sold the same on February 15, 2015, for $4,000, claiming the $4,000 tax credit on the purchase of his new vehicle. Seller furnished a bill of sale (back of vehicle title) indicating the same ($4,000, February 15, 2015). See Exhibit C. Taxes and fees were paid by Seller at that time. Because of the discrepancy on the date of sale and the price, additional information was requested from both Taxpayer and Seller. Seller submitted a letter on August 22, 2015 stating the following: Dear Sir I did sell for $4,000 to a on Feb. 15, 2015, at which time I tagged a. The Rev office took the bill of sale. I think it was a copy of the back of the title of the showing $4,000. I can t find a copy of it. The man pd $2,000 cash and paid the rest in approx. [sic] 3 wks. Do not have the paperwork either. I gave him a signed title at that time. See Exhibit D. 2

3 Taxpayer ( ) submitted a letter on August 31, 2015 stating the following: This was a gift from my husband. I did not know about the down payment. This was also in a transmission shop being worked on for a time. When I sold my ; I had tags transferred to this. The mistake was unintentional. Attached to the letter was a hand-written bill of sale that stated: Sold to Seller (signed) Buyer (signed) $2,000 down and remainder in payments Totaling $4,000 See Exhibit E. Upon review by the Department, the Taxpayers were assessed tax, interest and penalty on the purchase price of $4, The Taxpayers protested the assessment and stated on the protest form that the mistake was unintentional and the following: We initially purchased the in Feb 2015 but did not receive the title until the last payment was made and also the transmission shop had to be paid. I sold my in May 2015 for $4,200. I should receive a tax credit. I used the money to pay for the repairs and transferring of tag. When I did this in May I did not know about the down payment my husband made. CONCLUSIONS OF LAW Standard of Proof follows: Ark. Code Ann (c) (Supp. 2015) provides, in pertinent part, as 3

4 The burden of proof applied to matters of fact and evidence, whether placed on the taxpayer or the state in controversies regarding the application of a state tax law shall be by preponderance of the evidence. A preponderance of the evidence means the greater weight of the evidence. Chandler v. Baker, 16 Ark. App. 253, 700 S.W.2d 378 (1985). In Edmisten v. Bull Shoals Landing, 2014 Ark. 89, at 12-13, 432 S.W.3d 25, 33, the Arkansas Supreme Court explained: A preponderance of the evidence is not necessarily established by the greater number of witnesses testifying to a fact but by evidence that has the most convincing force; superior evidentiary weight that, though not sufficient to free the mind wholly from all reasonable doubt, is still sufficient to incline a fair and impartial mind to one side of the issue rather than the other. The Department bears the burden of proving that the tax law applies to an item or service sought to be taxed, and a taxpayer bears the burden of proving entitlement to a tax exemption, deduction, or credit. Ark. Code Ann (d) (Supp. 2015). Statutes imposing a tax or providing a tax exemption, deduction, or credit must be reasonably and strictly construed in limitation of their application, giving the words their plain and ordinary meaning. Ark. Code Ann (a), (b), and (e) (Supp. 2015). If a well-founded doubt exists with respect to the application of a statute imposing a tax or providing a tax exemption, deduction, or credit, the doubt must be resolved against the application of the tax, exemption, deduction, or credit. Ark. Code Ann (f)(2) (Supp. 2015). Motor Vehicle Sales Tax Arkansas sales tax generally applies to all sales of tangible personal property and certain specifically enumerated services within the State of 4

5 Arkansas. Ark. Code Ann (Repl. 2014). Arkansas Gross Receipts Tax Rule GR 12 (GR-12) provides that all sales of new or used motor vehicles are subject to sales tax unless a specific credit, deduction, or exemption applies. A tax exemption applies to the sale of a motor vehicle if the total gross proceeds for the sale of the motor vehicle are less than $4, Ark. Code Ann (b)(1)(B)(Repl. 2014). In this case, the Taxpayers purchased a for $4, on or about February 13, Because the purchase price provided by the Taxpayers was less than $4,000.00, no sales tax was collected on the purchase at the time of registration. The law required the Taxpayers to pay tax upon the actual purchase price of $4, The Taxpayers contend that they are entitled to a tax credit for the private sale of their in May Arkansas Gross Receipts Tax Rule GR (GR-12.1) addresses the sales tax credit for a private sale of a used motor vehicle and provides, in part, as follows: C. GENERAL INFORMATION 1. If a consumer purchases a vehicle and within forty-five (45) days of the date of purchase, either prior to or after such purchase, sells a different vehicle in lieu of a trade-in, the consumer will be entitled to a credit against the sales or use tax due on his or her newly purchased vehicle. Even if the Taxpayers did sell their in May 2015, at minimum seventy-seven (77) days would have elapsed since the February 13 th purchase date of the and they would not be entitled to the sales tax credit for the private sale. Consequently, the Department correctly assessed sales tax against the Taxpayers. 5

6 Interest and Penalty Interest was properly assessed upon the tax deficiency for the use of the State s tax dollars. Ark. Code Ann (Repl. 2014). The Department assessed a fifty percent (50%) fraud penalty against the Taxpayer pursuant to Ark. Code Ann (5)(A) (Repl. 2014). Ark. Code Ann provides, in part: In addition to the criminal penalties provided by this chapter, if a taxpayer shall fail to comply with certain provisions of this chapter, then the following penalties and additions to tax shall be applicable: 5(A) If any part of any deficiency of any tax required to be shown on a return is determined to be due to fraud, there shall be added to the tax an amount equal to fifty percent (50%) of the deficiency in addition to any interest provided by law. In Arkansas Valley Compress & Warehouse Co. v. Morgan, 217 Ark. 161, 229 S.W.2d 133 (1950), the Arkansas Supreme Court stated that, [f]raud consists of a deceitful practice or willful device resorted to by a person with the intent to deprive another of his right or in some manner to do him an injury. Id. at 164, 229 S.W.2d at 136. In Petzoldt v. Commissioner, 92 T.C. 661 (1989), the U. S. Tax Court stated that fraud is defined as the intentional commission of an act or acts for the specific purpose of evading tax believed to be owing. Id at 698. The U.S. Tax Court further stated: [t]he existence of fraud is a question of fact to be resolved upon consideration of the entire record. Fraud is not to be imputed or presumed, but rather must be established by some independent evidence of fraudulent intent. Id at 699. The Department bore the burden of proving that the assessed penalty should be sustained. The case file contains signed Bills of Sale reflecting two (2) 6

7 different dates and two (2) different purchase prices. The Taxpayers concede that the purchase price of the was $4, and assert that the discrepancy was due to an unintentional mistake. Specifically, the Taxpayers contend that the was a gift for and she was unaware of the $2, down payment made in February, Therefore, the evidence contained in the case file is not sufficiently compelling to support the penalty assessment. Consequently, the Department incorrectly assessed the penalty under Ark. Code Ann (5)(A) (Repl. 2014). DECISION AND ORDER The Gross Receipts Tax Assessment is sustained, in part. The tax and interest portions of the proposed sales tax assessment are sustained. The penalty portion of the proposed sales tax assessment is set aside. The file is to be returned to the appropriate section of the Department for further proceedings in accordance with this Administrative Decision and applicable law. Pursuant to Ark. Code Ann (Supp. 2015), unless the Taxpayers request in writing within twenty (20) days of the mailing of this decision that the Commissioner of Revenues revise the decision of the Administrative Law Judge, this decision shall be effective and become the action of the agency. The revision request may be mailed to the Assistant Commissioner of Revenues - Policy & Legal, P.O. Box 1272, Rm. 2440, Little Rock, Arkansas The Commissioner of Revenues, within twenty (20) days of the mailing of this Administrative Decision, may revise the decision regardless of whether the Taxpayers have requested a revision. The Taxpayers may seek relief from the final decision of the Administrative Law Judge or the Commissioner of Revenues on a final 7

8 assessment of a tax deficiency by following the procedure set forth in Ark. Code Ann (Supp. 2015). DATED: January 21,