Baker Refrigeration Systems, Inc. v. Weiss

• Decision Date: 27 January 2005
• Docket Number: No. 04-598.,04-598.
• Citation: 201 S.W.3d 900
• Parties: BAKER REFRIGERATION SYSTEMS, INC., and Wayne Baker, Appellants, v. Richard A. WEISS, in his Official Capacity as Director of the Arkansas Department of Finance and Administration, Appellee.
• Court: Arkansas Supreme Court

201 S.W.3d 900

BAKER REFRIGERATION SYSTEMS, INC., and Wayne Baker, Appellants, v. Richard A. WEISS, in his Official Capacity as Director of the Arkansas Department of Finance and Administration, Appellee.

No. 04-598.

Supreme Court of Arkansas.

January 27, 2005.

Jack, Lyon & Jones, P.A., by: Eugene G. Sayre, Little Rock, for appellants.

David B. Alexander, Little Rock, for appellee.

DONALD L. CORBIN, Justice.

Appellants Baker Refrigeration Systems, Inc., and Wayne Baker (collectively referred to as "Baker") appeal the order of the Pope County Circuit Court dismissing their complaint against Richard A. Weiss, Director of the Arkansas Department of Finance and Administration ("DF & A"), on the ground that the suit was untimely filed. This appeal and its companion case, Mac v. Weiss, Docket No. 04-461, 360 Ark. 384, 201 S.W.3d 897, 2005 WL 174648, raise an issue of first impression regarding the interpretation of Act 1139 of 1997. Our jurisdiction is thus pursuant to Ark. Sup.Ct. R. 1-2(b)(1). We find no error and affirm.

The record reflects that during the spring and summer of 1994, DF & A conducted a sales-tax audit on Baker for the period of January 1991 through July 1994. On August 26, 1994, DF & A's auditor issued a proposed assessment of $1,120,788.42 in additional sales taxes. Baker protested the audit, pursuant to Ark.Code Ann. § 26-18-404 (1987). A hearing was held before an administrative law judge (ALJ), pursuant to Ark.Code Ann. § 26-18-405 (Supp.1995). On July 25, 1995, the ALJ ruled in favor of DF & A.

Thereafter, in August 1995, Baker formally requested DF & A's Commissioner of Revenues to revise and abate the ALJ's decision, also pursuant to section 26-18-405. In a letter issued on December 24, 1995, the Commissioner granted Baker's request and ordered a re-audit. DF & A's auditors issued a revised audit report on February 27, 1997, this time finding unreported sales taxes in the amount of $3,596,875.06.

Baker again protested the proposed assessment and sought further revision from DF & A. In May 1997, Wayne Baker and his accounting representatives met with Assistant Revenue Commissioner John Theis and DF & A's legal counsel. As a result of the meeting, Theis personally reviewed Baker's case. Eventually, after a number of revisions, on January 15, 1999, DF & A issued its final assessment, which reduced Baker's sales-tax deficiency to $278,366.89.

Baker did not appeal the final assessment under Ark.Code Ann. § 26-18-406(a) (Supp.1999). In fact, Baker took no action at all until July 17 and August 9, 2002, when it made payments to DF & A in the amounts of $3,868.81 and $20,000.00 and noted that these payments were to be applied to four particular taxable periods covered by the assessment. On August 30, 2002, Baker filed with DF & A a verified claim for refund and claims for abatement of sales taxes, pursuant to Ark. Code Ann. § 26-18-507 (Supp.2001), seeking to recover the foregoing amounts on the theory that they were overpayments. DF & A took no formal action on Baker's verified claim.

Baker filed the present suit in circuit court on July 9, 2003, challenging both DF & A's final assessment and its failure to take any action on the verified claim for refund. The complaint also alleged that two of DF & A's employees, Auditor Ralph Mulder and Audit Supervisor John Martin, violated Baker's civil rights by allegedly assessing additional taxes to the corporation based on personal animus.

DF & A filed a motion to dismiss Baker's complaint, arguing that Baker's suit was, in reality, a challenge to the January 15, 1999, final assessment. As such, it was required to comply with the time limitations in section 26-18-406(a)(1), which provided that a taxpayer could seek judicial relief by paying the tax due for any taxable period or periods within one year of the final assessment and then filing suit within one year of the date of the payment. Alternatively, Baker could have posted a bond for double the amount of the entire assessment within thirty days of the issuance and service of the notice and demand for payment, and then filed suit within thirty days of the posting of the bond pursuant to section 26-18-406(a)(2)(A). Because Baker did not follow either procedure in a timely manner, DF & A asserted that its sovereign immunity as a state agency was not waived and that the trial court therefore lacked jurisdiction to hear its claim.

DF & A argued that Baker's suit was not a proper claim for refund under section 26-18-507, as it contended that the remedies available under that section were only applicable to situations where a taxpayer has overpaid the amount of taxes due. It contended further that because Baker had only paid a portion of the amounts due under the final assessment, and had not timely challenged the amount of the final assessment, it had not paid any amount in excess of what was lawfully due. DF & A also argued that Baker's civil-rights claims were time barred because they were not filed within three years of the time that the conduct by Mulder and Martin was alleged to have occurred.

A hearing was held on the motion to dismiss on January 2, 2004. Thereafter, the trial court issued a letter to counsel granting DF & A's motion to dismiss, based on the court's finding that Baker failed to file suit within the applicable time limitations. A formal order was entered on March 18, and a timely notice of appeal was filed by Baker on April 9.

For reversal, Baker argues that the trial court erred in dismissing its suit, because Act 1139 of 1997 had amended sections 26-18-406 and 26-18-507 to allow a taxpayer a third alternative means to challenge a final assessment of additional state taxes. It argues that this amendment allowed them to pursue their suit under the claim-for-refund method provided in section 26-18-507. Baker also argues that the trial court erred in allowing Assistant Revenue Commissioner John Theis to testify as to the legislative intent of Act 1139. Baker does not, however, make any assignment of error regarding the trial court's dismissal of its civil-rights claims.

We note at the outset that we review a trial court's decision in a tax case de novo, but we will not disturb the trial court's findings of fact unless they are clearly erroneous. Barclay v. First Paris Holding Co., 344 Ark. 711, 42 S.W.3d 496 (2001); Pledger v. Troll Book Clubs, Inc., 316 Ark. 195, 871 S.W.2d 389 (1994). We also review issues of statutory construction de novo, as it is for this court to decide what a statute means. Ghegan & Ghegan, Inc. v. Barclay, 345 Ark. 514, 49 S.W.3d 652 (2001); Barclay, 344 Ark. 711, 42 S.W.3d 496. In this respect, we are not bound by the decision of the trial court; however, in the absence of a showing that the trial court erred in its interpretation of the law, that interpretation will be accepted as correct on appeal. Id.

The main thrust of Baker's argument is that the trial court erred in interpreting sections 26-18-406 and 26-18-507, as amended by Act 1139 of 1997. The first rule in considering the meaning and effect of a statute is to construe it just as it reads, giving the words their ordinary and usually accepted meaning in common language. Weiss v. McFadden, 353 Ark. 868, 120 S.W.3d 545 (2003); Mississippi River Transmission Corp. v. Weiss, 347 Ark. 543, 65 S.W.3d 867 (2002). When the language of a statute is plain and unambiguous, there is no need to resort to rules of statutory construction. Id. When the meaning is not clear, we look to the language of the statute, the subject matter, the object to be accomplished, the purpose to be served, the remedy provided, the legislative history, and other appropriate means that shed light on the subject. Id. An additional rule of statutory construction in the area of taxation cases is that when we are reviewing matters involving the levying of taxes, any and all doubts and ambiguities must be resolved in favor of the taxpayer. Id.; Barclay, 344 Ark. 711, 42 S.W.3d 496.

At the time of Baker's suit, section 26-18-406, titled "Judicial relief," provided in pertinent part:

(a) After the issuance and service on the taxpayer of the notice and demand for payment of a deficiency in tax established by an audit determination that is not protested by the taxpayer under § 26-18-403, or a final determination of the hearing officer or the director under § 26-18-405, a taxpayer may seek judicial relief from the final determination by either:

(1) Within one (1) year of the date of the final assessment, paying the entire amount of state tax due, for any taxable period or periods covered by the final assessment and filing suit to recover that amount within one (1) year of the date of the payment. The director may proceed with collection activities, including the filing of a certificate of indebtedness as authorized under § 26-18-701, within thirty (30) days of the issuance of the final assessment for any assessed but unpaid state taxes, penalties, or interest owed by the taxpayer for other taxable periods covered by the final assessment, while the suit for refund is being pursued by the taxpayer for the other taxable periods covered by the final assessment; or

(2)(A) Within thirty (30) days of the issuance and service on the taxpayer of the notice and demand for payment, filing with the director a bond in double the amount of the tax deficiency due and by filing suit within thirty (30) days thereafter to stay the effect of the director's determination.

Under this section, a taxpayer has three means of challenging a final assessment following an audit: (1) make payment of the entire amount assessed within one year from the date of assessment and then file suit challenging the assessment within one year of the date payment is made; (2) make payment on any particular taxable period covered by the assessment within one year of the date of the assessment and then file suit challenging the assessment of that taxable period...