Mclane S., Inc. v. Bridges

• Decision Date: 24 January 2012
• Docket Number: 2011-C-1141.
• Citation: 84 So.3d 479
• Parties: McLANE SOUTHERN, INC. v. Cynthia BRIDGES, Secretary of the Department of Revenue of the State of Louisiana.
• Court: Louisiana Supreme Court

84 So.3d 479

McLANE SOUTHERN, INC. v. Cynthia BRIDGES, Secretary of the Department of Revenue of the State of Louisiana.

No. 2011-C-1141.

Supreme Court of Louisiana

Rehearing Denied March 9, 2012

January 24, 2012

Attorney(s) appearing for the Case

Antonio Charles Ferachi, Robert Frederick Mulhearn, Jr., Shone Therese Pierre, Donald Michael Bowman, Miranda Yvette Conner, for Applicant.

Liskow & Lewis, PLC, New Orleans, George Denegre, Jr., Robert S. Angelico, Dena Lynn Olivier, for Respondent.

VICTORY, J.

We granted this writ application to determine whether a wholesale dealer of smokeless tobacco products is liable for an excise tax pursuant to Louisiana's Tobacco Tax Law, La. R.S. 47:841, et seq. Finding that La. R.S. 47:841 and 47:854 impose an excise tax of 20% on smokeless tobacco products to be paid by the dealer who first sells, uses, consumes, handles or distributes the product in Louisiana, we reverse the judgment of the court of appeal and remand the case to the court of appeal for a determination of all pretermitted issues.

FACTS AND PROCEDURAL HISTORY

McLane Southern, Inc. ("McLane") is a wholesaler of tobacco products located in Mississippi that sells smokeless tobacco to retail establishments in Louisiana. McLane purchases its smokeless tobacco products from U.S. Smokeless Tobacco Brands, Inc. ("UST-Sales"), an affiliate ofthe manufacturer, U.S. Smokeless Tobacco Manufacturing Company ("UST-Manufacturing"). UST-Manufacturing sells the smokeless tobacco to UST-Sales at one price and UST-Sales sells it to McLane at a higher price, which reflects UST-Sales' operating costs, profit margins, and value from its marketing, distribution and advertising efforts. McLane also purchases smokeless tobacco from Conwood Sales Company, L.P., which acquires the product from the manufacturer, Conwood Company, L.P., in an arrangement identical to that of UST-Sales and UST-Manufacturing. In all cases, the sale of the smokeless tobacco to McLane occurs outside of Louisiana-it is shipped to McLane's facility in Mississippi and then McLane brings it into Louisiana for sale to its retail customers.

McLane, as a Louisiana bonded permitted wholesale tobacco dealer for all tobacco products, has filed monthly tax reports and returns for its cigar, cigarette, smoking tobacco and smokeless tobacco sales and distribution activities in Louisiana. It has paid excise taxes on smokeless tobacco products since 2000, the first year that the tax was imposed on smokeless tobacco. In 2006, McLane filed a petition for refund of tobacco tax paid under protest relative to the smokeless tobacco it had sold in Louisiana in October 2006. Pursuant to an Agreement to Abide between the Department of Taxation (the "Department") and McLane. McLane continued to pay the tax under protest and this suit covers McLane's payments under protest for all months following October 2006. Initially, McLane admitted in its petition that it was the wholesale dealer responsible for the payment of the tax, but claimed that the 20% tax rate was to be applied to the price UST-Manufacturing charged UST-Sales for the product, and not, as claimed by the Department, the price UST-Sales charged McLane for the product. Further, McLane claimed that if the tax was based on the price it paid UST-Sales for the product, then it was unconstitutional as violative of the Commerce Clause. Accordingly, McLane sought a refund of the difference. Two years later, in December 2008, McLane amended its petition to assert that it does not owe any excise tax as assessed by the Department because the Tobacco Tax Law does not impose liability for the payment of the tax on smokeless tobacco on any taxpayer, including McLane. McLane then began paying all the tax on smokeless tobacco under protest. As of September 2011, McLane has paid $7,688,825.36 in tax under protest.

After discovery, the parties filed cross-motions for summary judgment contending no genuine issues of material fact existed and the legal issue related to the correct application/interpretation of the Tobacco Tax Law. McLane asserted that (1) no tobacco dealers, including McLane, are liable for the tax on smokeless tobacco; (2) the invoice price upon which the 20% rate is assessed is the price the intermediary seller paid for the product from the manufacturer; (3) if the invoice price is based on the price McLane paid for the product then it is unconstitutional. The Department asserted the opposite in its motion. After a hearing, the district court ruled in favor of the Department and granted its motion for summary judgment that (1) McLane is liable for the tax on smokeless tobacco products, (2) the invoice price is based on the price McLane paid for the product, and (3) basing the invoice price on the price McLane paid for the product is not unconstitutional. The district court dismissed McLane's claim for refund of the taxes paid under protest with prejudice. The First Circuit Court of Appeal reversed, finding that McLane and all other tobacco dealers are not liable for the tobacco tax on smokeless tobacco products under the provisions of the Tobacco TaxLaw. McLane Southern, Inc. v. Bridges, 10-1259 (La.App. 1 Cir. 5/6/11), 64 So.3d 886. The First Circuit held the other issues surrounding the interpretation of the invoice price and the constitutionality of the definition of invoice price were moot given its determination that McLane was not liable for the tax. We granted the Department's writ application to determine whether the Tobacco Tax Law imposes liability on dealers of smokeless tobacco products. McLane Southern, Inc. v. Bridges, 11-1141 (La.9/23/11), 70 So.3d 810.

DISCUSSION

On motions for summary judgment, this Court reviews the record de novo to determine whether there is any genuine issue of material fact in dispute, and whether the movant is entitled to judgment as a matter of law. La. C.C.P. art. 966; Louisiana Safety Ass'n of Timbermen Self-Insurers Fund v. Louisiana Ins. Guar. Ass'n, 09-0023 (La.6/26/09), 17 So.3d 350, 353. There are no material issues of fact in dispute in this record and the sole issue before us is a question of law which seeks the correct interpretation of La. R.S. 47:841 and 47:854.

In 1932, the Legislature enacted the Louisiana Tobacco Tax Law, found in Sections 841-860 of Title 47 of the Revised Statutes. Acts 1932, No. 4. The Tobacco Tax Law was enacted to achieve two general purposes: the imposition of a tax upon the sale and distribution of tobacco products, and the regulation of those persons who engage in the sale and distribution of such products so as to insure collection of the tax. Southland Corp. v. Collector of Revenue for Louisiana, 321 So.2d 501, 502 (La.1975). La. R.S. 47:854 was enacted with the title "Declaration of intent and purpose of Chapter," and provides in relevant part as follows:

It is the intent and purpose of this Chapter to levy an excise tax on all cigars, cigarettes and smoking tobacco, as defined in this Chapter, sold, used, consumed, handled or distributed in this state, except as provided in R.S. 47:855 and to collect same from the dealer who first sells, uses, consumes, handles or distributes the same in the State of Louisiana.

....

Acts 1932, No. 4, § 2. La. R.S. 47:841, entitled "Imposition of tax," provided "[t]here is hereby levied a tax upon the sale, use, consumption, handling, or distribution of all cigars, cigarettes and smoking tobacco, as defined herein, within the state of Louisiana, according to the classification and rates hereinafter set forth: ..." Acts 1932, No. 4, § 8. In 2000, La. R.S. 47:841 was amended to add "smokeless tobacco" to the list of tobacco products to be taxed and to add a paragraph providing the rate at which smokeless tobacco was to be taxed. Acts 2000, No. 32, § 1. Accordingly, effective 2000, La. R.S. 47:841 now reads in pertinent part:

There is hereby levied a tax upon the sale, use, consumption, handling, or distribution of all cigars, cigarettes, and smoking and smokeless tobacco, as defined herein, within the state of Louisiana, according to the classification and rates hereinafter set forth:

....

E. Smokeless tobacco. Upon smokeless tobacco, a tax of twenty percent of the invoice price as defined in this Chapter.

However, La. R.S. 47:854 was never amended to add "smokeless tobacco" to the list of tobacco products upon which it was the legislature's "intent and purpose" to levy the tax.

McLane argues that these statutes fail to impose liability upon any taxpayer to pay the tax levied as to smokeless tobacco because while La. R.S. 47:841 levies the tax on "smokeless" tobacco at the rate of 20%, that section does not specifically identify who must pay the tax. Further, La. R.S. 47:854, the only statute that imposes liability on a specific taxpayer, i.e., the "dealer who first sells, uses, consumes, handles or distributes the same in the State of Louisiana," does not mention "smokeless tobacco."¹ Thus, as a distributor of "smokeless tobacco," McLane argues it is not a "dealer" from which the tax imposed by La. R.S. 47:841 can be collected.

"It is a fundamental principle of statutory interpretation that when a 'law is clear and unambiguous and its application does not lead to absurd consequences, the law shall be applied a written, and no further interpretation may be made in search of the intent of the legislature.'" Harrah's Bossier City Inv. Co., LLC v. Bridges, 09-1916 (La.5/11/10), 41 So.3d 438, 446-447 (citing La. C.C. art. 9). This principle applies to tax statutes. Cleco Evangeline, LLC v. Louisiana Tax Com'n, 01-2162 (La.4/3/02), 813 So.2d 351, 354; Tarver v. E.I. Du Pont De Nemours and Co., 93-1005 (La.3/24/94), 634 So.2d 356, 358. When the law is not clear and unambiguous or its application leads to absurd consequences, we must rely on the secondary rules of statutory interpretation to discern the meaning of the statutes at issue. Id. The fundamental question in all cases of statutory interpretation is legislative intent and...