IN THE SUPREME COURT OF MISSISSIPPI MISSISSIPPI DEPARTMENT OF REVENUE V. NO CA HOTEL AND RESTAURANT SUPPLY MOTION FOR REHEARING

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1 E-Filed Document Mar :43: CA SCT Pages: 6 IN THE SUPREME COURT OF MISSISSIPPI MISSISSIPPI DEPARTMENT OF REVENUE APPELLANT V. NO CA HOTEL AND RESTAURANT SUPPLY APPELLEE MOTION FOR REHEARING COMES NOW, the Mississippi Department of Revenue, (hereinafter referred to as Department ), the Appellant in the above styled and numbered appeal, and files this its Motion for Rehearing pursuant to M.R.A.P. 40. The Department respectfully submits that the Court has misapprehended the following law and facts: 1. The Court incorrectly found that the taxes at issue were those taxes levied by Miss. Code Ann : In general, Sections and require a business owner to charge and collect 7% sales tax on tangible personal property sold. Section which requires, insofar as practicable, the seller to collect the amount of sales tax from the purchaser at the time of the sale explicitly excludes taxes assessed under Section , which are the taxes at issue in the present case. Mississippi Dep't of Revenue v. Hotel & Rest. Supply, No CA SCT, 2016 WL , at *4 (Miss. Mar. 10, 2016). The sales taxes assessed against Hotel Restaurant were taxes levied by Miss. Code Ann (1), a 7% tax on the gross proceeds of the retail sales from the business of selling any tangible personal property, not the taxes levied by Miss. Code Ann , a 3½% tax on the total contract price or compensation received by a person in the business of contracting. Miss. Code Ann , explicitly levies against and requires the prime contractor to pay a 3½%

2 tax on the total contract price or compensation received 1. The tax levied by Miss. Code Ann is distinct from the tax levied by Miss. Code Ann Under the facts of the case, Hotel Restaurant bore no liability to collect, remit or in any way pay the taxes levied by Miss. Code Ann nor did the Department attempt to assess and collect from Hotel Restaurant the taxes levied by Miss. Code Ann The assessment appealed by Hotel Restaurant to the Mississippi Board of Tax Appeals, that he Mississippi Board of Tax Appeals abated, and that this Court affirmed abatement of is an assessment for 7% taxes under As a person liable for a privilege tax levied and assessed by [Miss. Code Ann (1)], Miss. Code Ann mandated, 2 not excepted 3, that Hotel Restaurant collect the 7% sales tax due by [Hotel Restaurant] from the purchaser at the time the sales price or gross income is collected. The Department respectfully submits that the Court incorrectly found that the Department sought to collect taxes levied under Miss. Code Ann from Hotel Restaurant. Further, the Department submits that the Court incorrectly found that Miss. Code Ann obviated Hotel Restaurant s obligation to collect the 7% sales tax levied on the gross proceeds of the retail sales from the business of selling any tangible personal property. 2. The Court has misapprehended the Mississippi Sales Tax Law in finding that the statutes provide the Department with the authority to assess and collect the 7% sales tax levied by Miss. Code Ann against a taxpayer other than the taxpayer specifically identified by Miss. Code Ann : MDOR can audit the contractor-the person with the best 1 Hotel Restaurant mischaracterizes and the Chancery Court erroneously found that Miss. Code Ann allows for sales to contractors to be taxed at a 3½% contractors tax. (R. at 35, 111) 2 A basic tenet of statutory construction is that shall is mandatory and may is discretionary. Khurana v. Mississippi Dep't of Revenue, 85 So. 3d 851, 854 (Miss. 2012). 3 The Department respectfully submits that the only exception found in Miss. Code Ann releases persons liable for taxes levied by Miss. Code Ann , (3) and from the mandatory requirement of adding the amount of such tax due by him to the sales price or gross income and collect[ing] the amount of the tax due by him from the purchaser at the time the sales price or gross income is collected. 2

3 knowledge about how purchases were used-and have the contractor pay the correct amount. Mississippi Dep't of Revenue v. Hotel & Rest. Supply, No CA SCT, 2016 WL , at *4 (Miss. Mar. 10, 2016)(emphasis added). This Court has previously held that the MDOR may not promulgate rules that alter or amend or negate the effect of a statute and may not overstep [its] authority by creating regulations inconsistent with the controlling statutes. Mississippi Dep't of Revenue v. Mississippi Power Co., 144 So. 3d 155, 162 (Miss. 2014). Furthermore, the Court has held that [t]he function of the Court is not to decide what a statute should provide, but to determine what it does provide. The Court must not broaden or restrict a legislative act. Id. at 162 (internal citations omitted). Based on a plain reading of the Mississippi Sales Tax Law, it is the person engaging or continuing within this state in the business of selling tangible personal property against whom the 7% sales tax is levied, who is charged with the responsibility of collecting and remitting the 7% sales tax and against whom the Department may seek to enforce, by assessment, the collection and remittance of the 7% sales tax. Nothing in the facts of the present case suggest that anyone other than Hotel Restaurant was the person against whom Miss. Code Ann s 7% sales tax was levied, who was charged with the responsibility of collecting and remitting the 7% sales tax or against whom the Department could seek to enforce, by assessment, the collection and remittance of the 7% sales tax. 3. Based on the foregoing misapprehensions of law and facts, the Department respectfully submits that its interpretation of the Mississippi Sales Tax Law, as applicable to the present case and considered in pari materia, is consistent with the unambiguous terms and best reading of the statutes. Applying the correct standard of review, as previously briefed and 3

4 argued, 4 the Department s decision to assess additional sales taxes against Hotel Restaurant for items on which the 7% sales tax was due but not collected and remitted to the Department was supported by substantial evidence, was not arbitrary and capricious, was within the [Department s] power to make, and did not violate [Hotel Restaurant s] statutory or constitutional rights. Equifax, 125 So. 3d at 42. As such, the Department is entitled to a judgment as a matter of law. For the foregoing reasons, the Department requests that this Court withdraw its March 10, 2016 Opinion and render a finding in favor of the Department. RESPECTFULLY SUBMITTED, this the 24 th day of March, In prior arguments, Hotel Restaurant relied on the case of Commonwealth v. Petrotek, LLC, No CA MR, 2015 WL (Ky. Ct. App. June 19, 2015), appeal docketed, No SC (Ky. August 20, 2015) to support its position that the Mississippi Board of Tax Appeals was entitled to deference on appeal under Miss. Code Ann On December 17, 2015, the Supreme Court of Kentucky, consistent with reasoning advanced by the Department in the present case, found that the Kentucky Board of Tax Appeals was not entitled to deference: More importantly, deference is given only to an administrative agency's interpretation of a statute which it administers. Id. at 842, 104 S.Ct. 2778; see also Board of Trustees of Judicial Form Retirement System v. Attorney General of Commonwealth, 132 S.W.3d 770, (Ky.2003) (deference afforded only to administrative agency's construction of a statute that it is charged with implementing ). The statutes in question, those addressing inheritance tax, are not administered by the Kentucky Board of Tax Appeals. The Board is an administrative review agency. KRS (emphasis added). Its limited purpose is to determine appeals of tax rulings, and its decisions in turn are subject to judicial review under KRS Chapter 13B. A reviewing court can reverse such a decision if the Board's decision is in violation of a statute. KRS 13B.150(2)(a). The Board, then, has a limited function as a reviewing tribunal, not as a full administrative agency charged with implementing a portion of the Kentucky Revised Statutes. Instead, the statutes in question are administered by the Department of Revenue. See, e.g., KRS (1) ( The Department of Revenue shall have full supervision of the collection of all taxes due under the provisions of this chapter, including the power to institute suit in this and other states. ); KRS ( The department may make such audits, appraisals, and examinations of records according to KRS to properly supervise the collection of all taxes due under the provisions of this chapter. ). Thus, as noted by the Department, if any deference is to be given, it is to the Department's formal interpretation of a statute that it administers. Estate of Mcvey v. Dep't of Revenue, No SC DG, 2015 WL , at *5-6 (Ky. Dec. 17, 2015). 4

5 MISSISSIPPI DEPARTMENT OF REVENUE /S/ Bridgette T. Thomas BRIDGETTE T. THOMAS DAVID J. CALDWELL LAURA H. CARTER BRIDGETTE T. THOMAS (MSB#101435) DAVID J. CALDWELL (MSB #100800) LAURA H. CARTER (MSB#104096) MISSISSIPPI DEPARTMENT OF REVENUE Post Office Box Jackson, MS Telephone: (601) Facsimile: (601)

6 CERTIFICATE OF SERVICE I, the undersigned, do hereby certify that I have this date filed the foregoing with the Court using the MEC system which sent notification of such filing to the following: Leonard D. Van Slyke, Jr. Taylor B. McNeel BRUNINI, GRANTHAM, GROWER & HEWES, PLLC P.O. Drawer 119 Jackson, Mississippi lvanslyke@brunini.com tmcneel@brunini.com Counsel for Hotel and Restaurant Supply, Appellee And by U.S. Mail, postage pre-paid, to the following non-mec participant: Honorable William Singletary Chancellor, Hinds County Chancery Court PO Box 686 Jackson, MS This the 24 th day of March, /S/ Bridgette T. Thomas BRIDGETTE T. THOMAS 6