Appeal of K-Mart Corp., K-MART

Decision Date08 February 1980
Docket NumberK-MART
PartiesIn the Matter of the Appeal ofCORPORATION from an Order of the Director of Taxation Dated
CourtKansas Supreme Court

Syllabus by the Court

1. It is the duty of this court to raise the question of jurisdiction on its own motion; and where the district court had no jurisdiction, this court does not acquire jurisdiction over the subject matter upon appeal.

2. The right to an appeal in this state is neither a vested nor constitutional right, but is strictly statutory in nature. It may be limited by the legislature to any class or classes of cases, or in any manner, or it may be withdrawn completely.

3. Courts have no inherent appellate jurisdiction over the official acts of administrative officials or boards except where the legislature has made some statutory provision for judicial review.

4. The legislature has full authority to establish procedural prerequisites to the exercise of jurisdiction by the district courts over administrative appeals.

5. In an appeal to the district court under K.S.A. 74-2426, as amended effective April 16, 1980, from an order of the Kansas Board of Tax Appeals, the requirement under 74-2426(b)(1) that a motion for rehearing before the Board must be filed before an appeal can be taken to the district court is jurisdictional and a condition precedent to such an appeal and upon the failure to file a motion for rehearing the district court does not obtain jurisdiction of the appeal.

Benjamin J. Neill, of Hamill, Lentz, Neill & Dwyer, Mission, argued the cause and was on the brief for appellant.

S. Lucky DeFries, of the Dept. of Revenue, Topeka, argued the cause and Alan F. Alderson, Gen. Counsel, Topeka, was with him on the brief for appellee, Kan. Dept. of Revenue.

HOLMES, Justice:

K-Mart Corporation has appealed a decision of the district court which affirmed an order of the Kansas Board of Tax Appeals (BOTA), which had sustained a compensating use tax assessment against the appellant. The tax was assessed under the Kansas Compensating Tax Act (K.S.A. 79-3701, et seq.).

On February 8, 1979, the Director of Taxation, through the Audit Services Bureau of the Kansas Department of Revenue, issued a use tax assessment against K-Mart for $62,457.18, plus interest. K-Mart filed a request for an administrative appeal hearing before the Director of Taxation. Subsequent adjustments and concessions brought the amount in controversy down to $35,432.52, plus interest. A formal hearing before the Director was held on September 27, 1979. On February 8, 1980, the Director issued an order sustaining the assessment. A portion of the original assessment was for unreported purchases of furniture, fixtures, equipment and supplies, as well as lag interest on some late reported purchases. The remainder was for the purchase of newspaper advertising supplements for distribution and use in Kansas as a part of K-Mart's national and regional advertising program. The only assessment K-Mart contests is that for the purchase of the advertising supplements.

Unhappy with the Director's order, K-Mart took an appeal to the BOTA, pursuant to K.S.A.74-2438. The notice of appeal was filed March 7, 1980. A formal hearing was held before the BOTA on May 6, 1980. The BOTA by its order, certified October 31, 1980, sustained the Director's adjusted assessment. From that order, K-Mart brought an appeal to the District Court of Shawnee County. The district court heard the matter on June 16, 1981, and handed down its memorandum decision and order, affirming the decision of the BOTA, on March 3, 1982. K-Mart then appealed to the Court of Appeals and the case was transferred to the Supreme Court pursuant to K.S.A. 20-3018(c).

The dispute concerns the purchase, by K-Mart, of certain advertising circulars for distribution in Kansas. K-Mart, for reasons of economy, high quality impact, and national uniformity of style, purchases the circulars from a print source in Michigan. The printer, pursuant to its contract with K-Mart, then drop-ships the circulars to various newspaper companies throughout the nation as designated by K-Mart. The newspaper companies then, pursuant to a separate agreement with K-Mart, insert the advertising supplements into certain editions of their papers for distribution to their subscribers and other consumers. No sales tax on the supplements is paid by K-Mart to the State of Michigan. Due to the nature of our decision herein, additional factual details are not necessary.

At the outset we are faced with a problem of jurisdiction and a determination of whether the district court and this court ever acquired jurisdiction of the appeal from the BOTA. While no question of jurisdiction was raised by either party in the district court or this court, we have held that:

"It is the duty of this court to raise the question of jurisdiction on its own motion; and where the district court had no jurisdiction, this court does not acquire jurisdiction over the subject matter upon appeal." In re Lakeview Gardens, Inc., 227 Kan. 161, Syl. p 8, 605 P.2d 576 (1980).

K.S.A. 74-2426 (as amended effective April 16, 1980) controls appeals from decisions and orders of the BOTA. Pertinent provisions of the statute provide:

"(a) Whenever the board of tax appeals shall enter its final order on any appeal or in any proceeding under the tax protest, tax grievance, tax exemption statutes or any original proceeding before the board other than the above cases said board shall make written findings of fact forming the basis of such determination and final order and such findings shall be made a part of such final order. The board shall mail a copy of its final order to all parties to the proceeding within ten days following the certification of the order. The appellant or applicant and the county appraiser shall be served by restricted mail.

(b)(1) No appeal shall be taken from a final order of the board unless the aggrieved party shall have first filed a motion for rehearing of that order with the board and the board shall have granted or denied the motion for rehearing, or thirty days shall have lapsed from the filing of that motion with the board, from which it shall be presumed that the board has denied the motion. Any order issued by the board following a rehearing shall become the final order of the board.

(2) Within thirty days following the certification of any final order of the board, on such motion for rehearing, any aggrieved party in such appeal or proceeding may appeal to the district court of the proper county.

....

(4) This statute shall be exclusive in determining appeals taken from all decisions of the board of tax appeals after the effective date of this act and shall exclusively govern the procedure to be followed in taking any appeal from the board of tax appeals from and after such date.

(c)(1) Appeals shall be taken by filing, with the clerk of the district court of the proper county within thirty days of the certification of the board's order to the party, a written notice stating that the party appeals to the district court, and alleging the pertinent facts upon which such appeal is grounded."

As previously indicated, the hearing before the BOTA and all subsequent proceedings took place after April 16, 1980, the effective date of K.S.A. 74-2426, as amended. At the time of oral argument before this court, an inquiry was made of counsel whether a motion for rehearing under K.S.A. 74-2426(b)(1) had been filed by K-Mart. The court was advised no such motion had been filed and as that jurisdictional question had not been previously raised or briefed, counsel were not in a position to argue the issue on the merits. Counsel were then advised to submit authorities and argument on the question of whether the filing of a motion for rehearing under K.S.A. 74-2426(b)(1) is a jurisdictional prerequisite to an appeal to the district court. Those briefs have now been filed.

As might be expected, K-Mart contends that the requirement of filing a motion for rehearing with the BOTA is merely a procedural nicety which is not mandatory and that they have substantially complied with the statute. The Department of Revenue, on the other hand, takes the position that the April, 1980, amendments to the statute set forth a complete procedure for appeals from the BOTA and that the requirement of a motion for rehearing is mandatory and a condition precedent to the filing of an appeal. We agree with the Department of Revenue.

It appears obvious that the April, 1980, amendments to K.S.A. 74-2426 were enacted in direct response to our opinion in In re...

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