Hospitality Temps v. District of Columbia

• Decision Date: 24 May 2007
• Docket Number: No. 04-TX-1599.,04-TX-1599.
• Citation: 926 A.2d 131
• Parties: HOSPITALITY TEMPS CORP., Appellant, v. DISTRICT OF COLUMBIA, Appellee.
• Court: D.C. Court of Appeals

926 A.2d 131

HOSPITALITY TEMPS CORP., Appellant, v. DISTRICT OF COLUMBIA, Appellee.

No. 04-TX-1599.

District of Columbia Court of Appeals.

Argued January 23, 2007.

Decided May 24, 2007.

William J. Kenney, Washington, DC, for appellant.

Mary T. Connelly, Assistant Attorney General, Office of the Solicitor General, with whom Robert J. Spagnoletti, Attorney General for the District of Columbia at the time the brief was filed, Todd S. Kim, Solicitor General, Edward E. Schwab, Deputy Solicitor General, were on the brief, for appellee.

Before GLICKMAN, KRAMER, and BLACKBURNE-RIGSBY, Associate Judges.

BLACKBURNE-RIGSBY, Associate Judge:

Appellant, Hospitality Temps Corporation ("HTC"), was issued a Notice of Tax Deficiency by the Office of Tax and Revenue ("OTR") pursuant to D.C.Code §§ 47-2002 and 47-2001 (2001) for failure to collect and pay sales and use tax. OTR denied appellant's motion appealing the tax assessment. Appellant next appealed to the Tax Division of the Superior Court pursuant to D.C.Code §§ 11-1201 and 47-2021(a) (2001). In reviewing the parties' cross-motions for summary judgment, the trial court found that HTC was properly assessed the sales and use tax and granted the District's summary judgment motion.

HTC raises five issues on appeal. First, appellant contends that it does not provide "real property maintenance services" and further, that the hotels it leases¹ its employees to are co-employers, thereby entitling appellant to an exemption. Second, appellant argues that the relevant statutes and regulations are ambiguous and therefore their application to appellant's services is improper. Third, appellant contends that even if its services fall within those covered by the statute, appellant is exempt under the "sale for resale" exemption. Fourth, appellant argues the District of Columbia is equitably estopped from assessing tax liability against it. Fifth, appellant asserts that it has been denied equal protection because not all similarly situated vendors have been assessed a tax liability. We conclude that none of these issues warrant a reversal of the tax court's decision and we affirm.

I.

Hospitality Temps Corporation ("HTC") is a temporary staffing company that employs individuals and then leases these employees to a variety of District of Columbia businesses. Hotels are HTC's primary clients with HTC employees hired to perform a variety of housekeeping services. These services include, but are not limited to: cleaning bathrooms, changing bed linens and making beds, dusting furniture, vacuuming, emptying trash, and restocking bathroom and room supplies.

In 1998, the Office of Tax and Revenue ("OTR") conducted an audit of a major D.C. hotel. This audit uncovered payments from the hotel to HTC for services subject to sales tax. HTC's invoices to the hotel indicated that sales tax was not charged for the sale of its temporary services. As a result, OTR conducted an audit of HTC and discovered that HTC had received payments for real property maintenance services on several occasions. OTR determined that these services were subject to taxation under D.C.Code §§ 47-2002 and 47-2001. OTR found that HTC was in violation because it had not charged sales tax to its clients for these services and had not remitted such sales tax to the District. HTC's tax deficiency was determined to be for the period of May 1, 1995 to March 31, 1998.

As a result of the audit findings, on August 17, 1998, OTR issued a Notice of Tax Deficiency in the amount of $19,960.13 in base tax against HTC for uncollected or unremitted sales tax for the tax deficiency period. This figure was calculated by applying a tax rate of 5.75% to HTC's gross receipts of $347,123.77. See D.C.Code § 47-2002 (setting out the tax rate). On January 5, 1999, after an informal conference between HTC and OTR, OTR issued a revised Notice of Tax Deficiency reducing the deficiency to $3,705.85 in base tax, $2,031.54 in interest, and $926.46 in penalties. The tax period covering the deficiency was also extended from March 31, 1998 to April 30, 1998.

HTC appealed the tax assessment and on August 9, 1999, OTR denied the appeal following a hearing. The hearing officer found that the unambiguous language of the relevant statutes make it clear that HTC is liable for sales and use tax on housekeeping services sold to various hotels in D.C. HTC paid the tax assessment, including the interest and penalties² in December 1999 and January 2000. Subsequently, on February 1, 2000, HTC appealed the OTR hearing officer's decision in the Tax Division of the Superior Court pursuant to D.C.Code §§ 11-1201 and 47-2021(a) (2001). The parties cross-moved for summary judgment following discovery.

The trial court characterized the issue on appeal as whether custodial, janitorial, housekeeping, and cleaning services performed by HTC employees who were leased to various clients, are subject to taxation under D.C.Code § 47-2002 as a "retail sale" and "sale at retail." The trial court found, inter alia, that the services performed by HTC employees fall within the purview of the statute and that HTC was therefore properly assessed the tax. The court denied HTC's summary judgment motion and granted appellee's summary judgment motion on December 1, 2004.

II.

We review decisions in civil tax cases in the same manner as other decisions of the court in civil cases tried without a jury. District of Columbia v. Acme Reporting Co., 530 A.2d 708, 712 (D.C. 1987) (citation omitted); see also D.C.Code § 17-305(a) (2001). We will not set aside the tax court's judgment, except for errors of law, see Riggs v. Aetna Insurance Co., 454 A.2d 818, 820 (D.C.1983), and will not upset the ultimate legal conclusion of the tax court when its outcome necessarily follows from its findings of fact. Acme Reporting Co., supra, 530 A.2d at 712; see also District of Columbia v. Washington Sheraton Corp., 499 A.2d 109, 111 (D.C. 1985); Rock Creek Plaza-Woodner Ltd. P'ship v. District of Columbia, 466 A.2d 857, 859 (D.C.1983); District of Columbia v. Nat'l Bank of Washington, 431 A.2d 1, 3 (D.C.1981).

We conduct an independent review of whether a summary judgment motion was improperly granted, and apply the same standard as the trial judge. Bailey v. District of Columbia, 668 A.2d 817, 819 (D.C.1995). If, viewing the record in the light most favorable to the non-moving party, we conclude that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law, the judgment of the trial court will be affirmed. See Kibunja v. Alturas, L.L.C., 856 A.2d 1120, 1127 (D.C.2004); Lee v. Luigi, Inc., 696 A.2d 1371, 1373 (D.C.1997); see also District of Columbia v. Casino Assocs., 684 A.2d 322, 325 (D.C. 1996) (we defer to "reasonable administrative understandings of uncertain legislative commands" in the taxation context).

"Real Property Maintenance Services" & "Employer-Employee" Exemption

HTC contends that the District of Columbia has adopted an improper interpretation which extends the definition of "real property maintenance services" under D.C.Code §§ 47-2002 and 47-2001 and that such an extended interpretation is an "effort of back door amendment to the Tax Code." The trial court denied appellant's summary judgment motion based primarily on its finding that the custodial, janitorial, housekeeping, and cleaning services performed by HTC employees are taxable as "retail sale," and "sale at retail" services. D.C.Code § 47-2002 provides:

A tax is imposed upon all vendors³ for the privilege of selling at retail certain tangible personal property and for the privilege of selling certain selected services (defined as "retail sale" and "sale at retail" in this chapter).

"Retail sale" and "sale at retail" are defined as "the sale in any quantity or quantities of any tangible personal property or service . . . ." D.C.Code § 47-2001(n)(1) (emphasis added). Included as a term under the definition of "retail sale" and "sale at retail" is the "sale of or charges for the service of real property maintenance and landscaping," which is defined as follows:

For the purposes of this paragraph, the term "real property maintenance" means any activity that keeps the land or the premises of a building clean, orderly, and functional, including the performance of minor adjustments, maintenance, or repairs which include: floor, wall, and ceiling cleaning; pest control; window cleaning; servicing inground and in building swimming pools; exterior building cleaning; parking lot, garage, and recreation area maintenance; exterior and interior trash removal; restroom cleaning and stocking; lighting maintenance; chimney and duct cleaning; and ground maintenance; but does not include; painting, wallpapering, or other services performed as part of construction or major repairs; or services performed under an employee-employer relationship.

D.C.Code § 47-2001(n)(1)(M)(i)(I) (emphasis added). The term "real property maintenance" is further defined in 9 D.C.M.R. § 472 (1998) as "the activities of keeping the land or premises of a building clean, orderly and functional, including performing minor adjustments, maintenance or repairs." Examples of such activities included in the regulation are:

(a) Wall and ceiling cleaning;

(b) Pest control;

(c) Exterior and interior window cleaning;

(d) Floor (hardwood or tile) cleaning;

(e) Restroom cleaning and stocking;

(f) Exterior and interior trash removal;

(g) Maintenance of inground or indoor swimming pools;

(h) Exterior building cleaning;

(i) Chimney and duct cleaning;

(j) Parking lot, garage and recreational area maintenance; and

(k) Ground maintenance

Based on the above statutory framework, the trial court found, inter alia, that the services performed by HTC temporary employees were within the category of "real property maintenance." The trial court found that the language of the statute is unambiguous and clearly leads to the...