Bass v. State

• Decision Date: 30 October 1991
• Docket Number: No. 23216,23216
• Citation: 307 S.C. 113,414 S.E.2d 110
• Court: South Carolina Supreme Court
• Parties: Francis Edwin BASS, Jr.; Marvin L. Jones; James R. Marvin; Wilton A. Hockenberry; Catherine Louise Moyers; John Gilreath; Mildred B. Jenkins; J. Loring Jenkins, Individually and for the Benefit and on Behalf of all others Similarly Situated, Respondents/Appellants, v. The STATE of South Carolina, a Body Politic, and the South Carolina Tax Commission, Appellants/Respondents. . Heard

Page 110

414 S.E.2d 110

307 S.C. 113

Francis Edwin BASS, Jr.; Marvin L. Jones; James R. Marvin Wilton A. Hockenberry; Catherine Louise Moyers; John Gilreath; Mildred B. Jenkins; J. Loring Jenkins Individually and for the Benefit and on Behalf of all others Similarly Situated, Respondents/Appellants, v. The STATE of South Carolina, a Body Politic, and the South Carolina Tax Commission, Appellants/Respondents.

No. 23216.

Supreme Court of South Carolina.

Heard Oct. 30, 1991.

Decided Jan. 27, 1992.

Chief Deputy Atty. Gen. Joe L. Allen, Jr., Deputy Atty. Gen. Ray N. Stevens and Asst. Atty. Gen. Arlene D. Hand, Columbia, for appellants/respondents.

Gene M. Connell, Jr., and Edward T. Kelaher, both of Kelaher, Haar, Bass & Connell, Surfside Beach, for respondents/appellants.

Scott Y. Barnes, of Holmes & Thompson, of Charleston, and William J. Quirk, of USC School of Law, Columbia, for amicus curiae Tax Section of the South Carolina Bar.

PER CURIAM:

This matter is before us on remand from the United States Supreme Court. --- U.S. ----, 111 S.Ct. 2881, 115 L.Ed.2d 1047. In Bass v. State, 302 S.C. 250, 395 S.E.2d 171 (1990) (Bass I ), we held that federal retirees were not entitled to a refund for income taxes paid pursuant to a statute which later was determined by the United States Supreme Court to be unconstitutional. ¹ The federal retirees appealed our decision in Bass I to the United States Supreme Court. The Supreme Court granted the retirees' petition for certiorari, vacated our judgment in Bass I, and remanded the case to this Court for further consideration in light of James B. Beam Distilling Co. v. Georgia, 501 U.S. ----, 111 S.Ct. 2439, 115 L.Ed.2d 481 (1991). This Court then issued an order requiring the parties to brief the following issues:

(1) What is the impact of the Beam decision on this Court's prior decision in this case?;

(2) Whether federal retirees are procedurally barred from recovery because they failed to proceed under the applicable state statute?;

(3) Whether federal retirees were properly certified as a class under state law?; and

(4) Whether there are any other possible procedural bars under state law to federal retirees' recovery?

I. DISCUSSION

A. PROCEDURAL BAR

Initially, we note that our decision to affirm Bass I is based primarily on the adequate and independent state ground that the federal retirees are procedurally barred from recovery because they failed to proceed under the applicable state statute. See Michigan v. Long, 463 U.S. 1032, 103 S.Ct. 3469, 77 L.Ed.2d 1201 (1983) (requiring a plain statement that the state court decision rests upon adequate and independent state grounds). See also Harris v. Reed, 489 U.S. 255, 109 S.Ct. 1038, 103 L.Ed.2d 308 (1989) (a state court may rely on a procedural bar as an independent basis for its disposition of the case).

As we stated in Bass I, the proper refund statutes under which the federal retirees should have proceeded are S.C.Code Ann. §§ 12-47-210 and 12-47-220 (1976). Section 12-47-210 provides, in pertinent part, "[w]hen the State or any county charges or levies any tax whatsoever " which the taxpayer conceives "to be unjust or illegal for any cause," the individual may pay the tax under protest. (emphasis added). Section 12-47-220 then states that "[a]ny person paying any taxes under protest may at any time within thirty days after making such payment, but not afterwards," bring an action for the recovery thereof. (emphasis added). However, instead of proceeding under §§ 12-47-210 and 12-47-220, the federal retirees chose to bring their refund action under S.C.Code Ann. § 12-47-440 (1976). Section 12-47-440 provides that "whenever it shall appear to any taxpayer that any license fee or tax imposed under this Title has been erroneously, improperly or illegally assessed, collected or otherwise paid over to the Commission," the taxpayer can seek a refund "within a period of three years from the date the license fee or tax was due to have been paid." (emphasis added).

The federal retirees contend that our case law supports the theory that a refund of income taxes can be recovered under Section 12-47-440, and that if we now hold that this statute is inapplicable, we would deny the retirees their due process rights. We disagree.

This Court has previously stated that "the exclusive remedy for contesting an alleged erroneous assessment of income taxes [is] by payment under protest of the tax claimed as illegal and a suit at law for recovery of the sum so paid, in accordance with Sections 65-2661 and 65-2662 of the Code." [predecessors of §§ 12-47-210 and 12-47-220]. Perpetual Building & Loan Assoc. v. S.C. Tax Comm'n, 255 S.C. 523, 526-27, 180 S.E.2d 195, 197 (1971). See also City of Columbia v. Glen Falls Ins. Co., 245 S.C. 119, 139 S.E.2d 529 (1964) (the general statutory remedy for recovery of taxes illegally charged or assessed is found in Section 65-2661 et seq. of the 1962 Code of Laws). In fact, this Court has never awarded a taxpayer a refund of income taxes under Section 12-47-440. ²

In every case brought pursuant to Section 12-47-440 (other than the two cases mentioned in footnote 2), the taxpayer was seeking a refund for license-type fees or taxes collected by the Commission. See, e.g., Colonial Stores, Inc. v. S.C. Tax Comm'n, 253 S.C. 14, 168 S.E.2d 774 (1969) (self-redeemer of trading stamps brought action pursuant to Section 65-2684, the predecessor to Section 12-47-440, to recover license type/use taxes paid to the Commission); Dale v. S.C. Tax Comm'n, 276 S.C. 110, 276 S.E.2d 293 (1981) (action to recover documentary stamp tax); Shasta Beverages v. S.C. Tax Comm'n, 280 S.C. 48, 310 S.E.2d 655 (1983) (action to recover soft drinks license taxes); and Duke Power Co. v. S.C. Tax Comm'n, 292 S.C. 64, 354 S.E.2d 902 (1987) (action for a refund of corporate license fees). These cases support our conclusion that Section 12-47-440 is not a general refund statute, but instead, applies only to license type fees or taxes.

In contrast to the lack of authority supporting the retirees' claim that an income tax refund action can be brought pursuant to Section 12-47-440, there are numerous cases in which income tax refunds were sought pursuant to Sections 12-47-210 and 12-47-220, or their predecessor statutes, Sections 65-2661 and 65-2662. For example, see M. Lowenstein Corp. v. S.C. Tax Comm'n, 298 S.C. 93, 378 S.E.2d 272 (Ct.App.1989); Dalton v. S.C. Tax Comm'n, 295 S.C. 174, 367 S.E.2d 459 (Ct.App.1988); Pendarvis v. S.C. Tax Comm'n, 285 S.C. 381, 329 S.E.2d 766 (1985). See also the cases cited in the Annotations following Sections 12-47-210 and 12-47-220.

Our decision in Perpetual, and our prior case law interpreting Section 12-47-440 and Sections 12-47-210 and 12-47-220, clearly demonstrate that this Court has never authorized an income tax refund action pursuant to Section 12-47-440 and always has required an individual seeking an income tax refund to proceed under Sections 12-47-210 and 12-47-220. Thus, contrary to the retirees' assertions, this Court's prior case law could not have misled the retirees into believing that Section 12-47-440 was the appropriate statute under which to proceed, and, in fact, should have notified the retirees that the applicable statutes were Sections 12-47-210 and 12-47-220.

Despite the fact that this Court has never authorized an income tax refund action pursuant to Section 12-47-440, the Tax Commission has issued administrative interpretations stating that Section 12-47-440 applies to income tax refunds. In addition, after the Davis decision was announced, the Tax Commission issued several press releases in which it advised the retirees that they could "protect themselves against the expiration of the three-year statute of limitation" by writing a letter to the Tax Commission or by filing an amended return for the 1985 tax year. The retirees contend that since the Tax Commission has previously interpreted Section 12-47-440 as applying to income taxes, it is estopped from now arguing that Section 12-47-440 does not apply to income taxes. While we agree with the retirees that it is very unfortunate the Tax Commission has instilled false hopes by advising persons that there is a three year statute of limitations for income tax refunds under Sections 12-47-440, we are not bound by the Tax Commission's misinterpretation of Section 12-47-440. Indeed, in light of our prior case law, we are obligated to correct this erroneous interpretation of Section 12-47-440.

The retirees also assert that allowing Section 12-47-440 to be used to refund only certain types of taxes violates the equal protection clause. This argument is meritless. If a statute treats all persons alike under like circumstances and conditions, it cannot be said to deprive anyone of equal protection of the laws. Carter v. Linder, 303 S.C. 119, 399 S.E.2d 423 (1990). Here, all members of the class of taxpayers seeking income tax refunds are treated alike, as they are all bound by the procedural requirements in Sections 12-47-210 and 12-47-220. The equal protection clause does not require a statute authorizing a refund for one type of tax to provide the identical procedural mechanisms which are provided in a separate statute for a different type of tax.

B. EFFECT OF BEAM DECISION

As we noted earlier, our decision rests primarily on an independent and adequate state ground. However, we discuss the effect of the Beam decision on our prior opinion as this was the basis of the remand from the Supreme Court.

The Georgia tax statute at issue in Beam imposed an excise tax on imported liquor at a rate double that imposed on liquor manufactured from Georgia-grown products. In 1984, the Supreme Court, in Bacchus Imports, Ltd. v. Dias, 468 U.S. 263, 104 S.Ct. 3049, 82 L.Ed.2d 200 (1984), held that a similar Hawaii statute violated the Commerce Clause. Thereafter, James B. Beam Distilling Company, a manufacturer of Kentucky...