STATE OF ARKANSAS DEPARTMENT OF FINANCE & ADMINISTRATION OFFICE OF HEARINGS & APPEALS ADMINISTRATIVE DECISION IN THE MATTER OF LICENSE NO.: DOCKET NO.: 19-209 GROSS RECEIPTS (SALES) TAX REFUND CLAIM DENIAL LETTER ID: AMOUNT DENIED: TODD EVANS, ADMINISTRATIVE LAW JUDGE APPEARANCES This case is before the Office of Hearings and Appeals upon a written protest received March 23, 2018, signed by President ) on behalf of ( Vice, the Taxpayer. The Taxpayer protested a refund claim denial issued by the Department of Finance and Administration ( Department ). A hearing was held in this matter on December 12, 2018, at 10:00 a.m. The Department was represented by Amanda Land, Attorney at Law, Revenue Legal Counsel ( Department s Representative ). Also present on behalf of the Department was Barbara Montgomery, Revenue Supervisor. Both the Department s Representative and the Revenue Supervisor appeared at the hearing by telephone. The Vice President appeared at the hearing by telephone and represented the Taxpayer. 1
ISSUE Whether the Taxpayer demonstrated that it qualified for the motor vehicle tax credit 1 by a preponderance of the evidence. No. PRESENTED FACTS AND ARGUMENTS Prehearing Filings Within her Answer s to Information Request, the Department s Representative provided certain factual allegations and analysis regarding the refund claim denial, stating as follows 2 : On December 29, 2017, ( Taxpayer ) purchased a (the vehicle ) [ Vehicle A ] from. The Bill of Sale reflects that the sales price of the vehicle was. See the Dealership Invoice, attached as Exhibit 1. On December 29, 2017, Taxpayer executed a Retail Installment Contract for the vehicle, financing a total amount of. See Tennessee Vehicle Retail Installment Contract, attached as Exhibit 2. On February 14, 2018, Taxpayer sold a [ Vehicle B ] for. See Bill of Sale, attached as Exhibit 3. Taxpayer registered the vehicle on January 30, 2018, and paid sales tax in the amount of. See Application for Title, attached as Exhibit 4. Taxpayer then filed a Claim for Sales or Use Tax Refund Credit for Sale of Used Vehicle, dated February 14, 2018. See Claim Form, attached as Exhibit 5. The Claim Form states that the form is to be used by persons qualifying under Act 1232 of 1997 as explained on the reverse side of the form. Between the date of the Taxpayer's purchase of the (December 29, 2017) and the date the was sold (February 14, 2018), forty-seven (47) days elapsed. In a letter dated March 19, 2018, Vickie Wainwright, a DFA Service Representative, advised the Taxpayer that the claim for refund of the motor vehicle sales tax had been denied. The reason for the denial of the claim provided was that the vehicle was not purchased within 45 days of selling the old vehicle. See Notice of Claim Disallowance letter, attached as Exhibit 6. 1 The sales tax credit authorized under Ark. Code Ann. 26-52-510(b)(1)(C)(i) (Repl. 2014) shall be referred to as the motor vehicle tax credit in this decision. 2 All exhibits support this rendition of the facts. 2
In its protest, the Taxpayer alleges that it purchased the vehicle on December 30, 2017 - not December 29, 2017 - because that was the date all paperwork was completed. See Protest. attached as Exhibit 7. Based on these facts, the Taxpayer did not sell the within the 45 days required to be able to take the private sales tax credit. Even assuming the Taxpayer's claim that it purchased the vehicle one day later on December 30, 2017, the time elapsed between the sale of the two vehicles was greater than 45 days. Accordingly, the credit refund was effectively disallowed and Taxpayer was properly assessed tax on the full amount of the purchase of the Ford F-150. In her Opening Brief, the Department s Representative asserted that the Taxpayer has failed to prove that it sold Vehicle B within forty-five (45) days of the purchase of Vehicle A. Consequently, she reasoned that the Taxpayer was not entitled to the motor vehicle tax credit and the refund denial should be sustained. Within the Taxpayer s protest, the Vice President provided a timeline of events, stating as follows, in pertinent part: Date of Events 3 December 30, 2017 (vehicle purchased) - February 14, 2018 (Bill of Sale) (including waiting on a duplicate title from in ) December 28, 2017 December 29, 2017 December 30, 2017 Financial credit was acquired to purchase new vehicle/ by went in to sign the paperwork but it was not ready via the dealership completed signing of all paperwork to purchase the (even though the paperwork was pre-dated December 29, 2017 via the dealership) January 22, 2018 decided to sell the (internally) 3 Included with this rendition of events, the Vice President included emails and various other documents that demonstrated the accuracy of this timeline. 3
January 29, 2018 took the to the dealership in to have it checked-out and to obtain a potential buying price February 1, 2018 Listed for sale on multiple external sites (Cars.com/ Craigslist.com / Facebook.com) February 2, 2018 Had a few potential buyers come test drive the for potential purchase (one of which included - who later became the buyer) February 5, 2018 * came to the office (in, AR) and confirmed he would be purchasing the ; we discovered we didn't have the title and needed to get a duplicate copy from in (since we have a branch office in, one of our employees was driving the ) ** Later after left the office, our Office Administrator sent an email to our team in. We discovered the title was from (not ). We then contacted (via phone and email) our Administrative Assistant in our office so she could hand deliver the paperwork in to obtain a duplicate title for the (we provided the application for duplicate certificate of title for vehicle form along with a non-official copy of the title) February 8, 2018 February 13, 2018 February 14, 2018 sent an email asking about the lost title and we explained we had officially applied for a new one The duplicate title officially arrived from the and we communicated the information to (buyer) today signed paperwork with and officially purchased the March 8, 2018 Our Office Administrator contacted Ms. Vickie Wainwright at DFA in Little Rock, AR to inquire about our tax credits. She couldn't confirm but 4
mentioned we could send supporting documentation (which we did - see attached) March 22, 2018 March 23, 2018 We received our Notice of Claim Disallowance for Refund letter Completed the form for protest and sent documentation to Asst. Comm. Policy & Legal Hearing Testimony A. Revenue Supervisor s Testimony The Revenue Supervisor s testimony supported the rendition of facts provided within the Department s Answers to Information Request. She specifically confirmed that Vehicle A s purchase documents were dated December 29, 2017. Even if the vehicle was purchased on December 30, 2017, however, she asserted that forty-six (46) days would have elapsed between the purchase of Vehicle A and the sale of Vehicle B. She reasoned that the Taxpayer still would not qualify for the motor vehicle tax credit even if its proposed purchase date was utilized. B. Vice President s Testimony The Vice President began his testimony explaining that the timeline of events was not in dispute between the parties. Additional paperwork was required from the dealership on December 30, 2017 to complete the sale, but that issue does not affect the outcome of this proceeding. He testified that the attainment of the title for Vehicle B from the took an extended period of time and was outside of the Taxpayer s control. He requested a few days of leniency for the forty-five (45) day time limitation due to the Taxpayer s unique circumstances. 5
After a general discussion of the burdens of proof in tax proceedings, a legal analysis shall follow. CONCLUSIONS OF LAW Standard of Proof follows: Ark. Code Ann. 26-18-313(c) (Supp. 2017) provides, in pertinent part, as 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. 26-18- 313(d) (Supp. 2017). 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. 26-18-313(a), (b), and (e) (Supp. 2017). If a well-founded doubt exists with respect to the application of a statute imposing a tax or providing a tax 6
exemption, deduction, or credit, the doubt must be resolved against the application of the tax, exemption, deduction, or credit. Ark. Code Ann. 26-18- 313(f)(2) (Supp. 2017). Legal Analysis Arkansas sales tax generally applies to entire gross receipts of all sales of tangible personal property (such as motor vehicles) and certain specifically enumerated services within the State of Arkansas. Ark. Code Ann. 26-52-301 (Supp. 2017). For purchases of motor vehicles, the consumer is required to directly pay the accompanying sales tax liability to the Department. Ark. Code Ann. 26-52-510(a)(1) (Repl. 2014). Ark. Code Ann. 26-52-510(b)(1)(C)(i) (Repl. 2014) authorizes a sales tax credit for the private sale of a used motor vehicle and states: When a used motor vehicle, trailer, or semitrailer is sold by a consumer, rather than traded-in as a credit or part payment on the sale of a new or used motor vehicle, trailer, or semitrailer, and the consumer subsequently purchases a new or used vehicle, trailer, or semitrailer of greater value within forty-five (45) days of the sale, the tax levied by this chapter and all other gross receipts taxes levied by the state shall be paid on the net difference between the total consideration for the new or used vehicle, trailer, or semitrailer purchased subsequently and the amount received from the sale of the used vehicle, trailer, or semitrailer sold in lieu of a trade-in. [Emphasis supplied.] See also Arkansas Gross Receipts Tax Rule GR-12.1. A sale is defined as the transfer of either the title or possession, except in the case of a lease or rental for a valuable consideration, of tangible personal property, specified digital products, or a digital code regardless of the manner, method, instrumentality, or device by which the transfer is accomplished. Ark. Code Ann. 26-52-103(26) (Supp. 2017). 7
Under the statutory subdivision, the forty-five (45) day time limitation is mandatory, leaving no discretion for this Office to utilize a different time limitation. The Arkansas Supreme Court has explained that the Arkansas General Assembly is the sole arbiter of policy decisions within Arkansas and it would be inappropriate for an administrative agency or court to refuse to enforce a state law as it reads based on a policy disagreement. Snowden v. JRE Investments, Inc., 2010 Ark. 276, 370 S.W.3d 215. Here, the record shows that the Taxpayer purchased Vehicle A on either December 29, 2017 or December 30, 2017 4 for. The record also establishes that the Taxpayer sold Vehicle B on February 14, 2018. While the Taxpayer explained that the buyer agreed to purchase Vehicle B on February 5, 2018, all documents to convey ownership provide a transfer date of February 14, 2018. Consequently, February 14, 2018, must be utilized as the actual date of the Vehicle B s transfer of ownership or sale date. The Taxpayer has not proven that it sold Vehicle B within forty-five (45) days of Vehicle A s purchase. Consequently, the Taxpayer s motor vehicle tax credit claim was correctly denied. The refund claim denial is sustained. DECISION AND ORDER The refund claim denial is sustained. 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. 26-18-405 (Supp. 2017), unless the Taxpayer requests in writing within twenty 4 For purposes of this analysis, it is not necessary to determine which date is correct purchase date as both dates still result in a denial of the motor vehicle tax credit. Consequently, this decision shall assume but not decide that December 30, 2017 (the date alleged by the Taxpayer) is the appropriate purchase date. 8
(20) days of the mailing of this decision that the Commissioner of Revenues revise the decision of the Administrative Law Judge, this Administrative Decision shall be effective and become the action of the agency. The revision request may be mailed to the Assistant Commissioner of Revenues, P.O. Box 1272, Rm. 2440, Little Rock, Arkansas 72203. A revision request may also be faxed to the Assistant Commissioner of Revenues at (501) 683-1161 or emailed to revision@dfa.arkansas.gov. The Commissioner of Revenues, within twenty (20) days of the mailing of this Administrative Decision, may revise the decision regardless of whether the Taxpayer has requested a revision. Ark. Code Ann. 26-18-406 (Supp. 2017) provides for the judicial appeal of a final decision of an Administrative Law Judge or the Commissioner of Revenues on a final assessment or refund claim denial; however, the constitutionality of that code section is uncertain. 5 DATED: December 18, 2018 5 See Board of Trustees of Univ. of Arkansas v. Andrews, 2018 Ark. 12. 9