Daimlerchrysler Ser. North America v. Weiss

• Decision Date: 16 December 2004
• Docket Number: No. 04-284.,04-284.
• Parties: DAIMLERCHRYSLER SERVICES NORTH AMERICA, LLC, Appellant, v. Richard WEISS, Director Department of Finance and Administration and Timothy Leathers, Commissioner of Revenue, Appellees.
• Court: Arkansas Supreme Court

200 S.W.3d 405

DAIMLERCHRYSLER SERVICES NORTH AMERICA, LLC, Appellant, v. Richard WEISS, Director Department of Finance and Administration and Timothy Leathers, Commissioner of Revenue, Appellees.

No. 04-284.

Supreme Court of Arkansas.

December 16, 2004.

Akerman Senterfitt, by: Peter O. Larsen and David E. Otero, Jacksonville; and Mitchell, Williams, Selig, Gates & Woodyard, P.L.L.C., by: John K. Baker, Little Rock, for appellant.

Ronna L. Abshure and Martha G. Hunt, Revenue Legal Counsel, Little Rock, for appellee.

JIM HANNAH, Justice.

Appellant DaimlerChrysler Services North America, LLC ("Chrysler") appeals the order of dismissal of the Pulaski County Circuit Court, Seventeenth Division, wherein the circuit court found that it lacked jurisdiction to award a "bad debt" refund to Chrysler because Chrysler is not a "taxpayer" for the purposes of Ark.Code Ann. § 26-52-309 (Repl.1997), which is commonly known as the "Bad Debt Statute." We find no error and, accordingly, we affirm. This is an appeal required by law to be heard by this court; our jurisdiction is pursuant to Ark. Sup.Ct. R. 1-2(a)(8). See also Ark.Code Ann. § 26-18-406 (Repl.1997).

Facts

Chrysler sold and leased motor vehicles and financed the sale of motor vehicles from motor-vehicle dealerships (collectively referred to as "sellers") to consumer purchasers. In a typical transaction, the consumer purchaser entered into an installment contract for the purchase of a motor vehicle from the seller. The amount financed included the purchase price of the motor vehicle, as well as the gross receipts tax due on the vehicle, which the seller paid to the State. The seller then assigned the installment contract to Chrysler, and Chrysler collected the payments. In return, Chrysler paid the seller the full financed amount. At some point during the period of repayment, the purchaser defaulted on the installment contract. After resorting to available remedies against the purchaser, Chrysler wrote off the uncollectible portion of the debt for federal income tax purposes.

On February 16, 2000, Chrysler filed a claim with appellee Department of Finance and Administration (DF & A) for a refund or deduction of the pro rata portion of gross receipts tax related to bad debts arising out of the sale and financing of motor vehicles in Arkansas. The claim was filed pursuant to the Bad Debt Statute, which allows taxpayers that finance sales transactions a deduction or refund for gross receipt tax that was previously reported and remitted, but is now uncollectible. DF & A determined that Chrysler was not a taxpayer under the Bad Debt Statute and denied Chrysler's claim for a refund.

Pursuant to Ark.Code Ann. § 26-18-406, Chrysler appealed DF & A's decision to the circuit court, and in an order entered on November 13, 2003, the circuit court dismissed the case, holding that Chrysler was not a "taxpayer" for the purposes of the Bad Debt Statute and, as such, Chrysler was not entitled to a deduction. Chrysler's sole point on appeal is that the circuit court erred in finding that it lacked jurisdiction to award a deduction on the ground that Chrysler is not a "taxpayer" for the purposes of the Bad Debt Statute.

Standard of Review

As a general rule, in reviewing the grant of a motion for summary judgment, the appellate court determines if summary judgment was appropriate based on whether the evidence presented in support of summary judgment leaves a material question of fact unanswered. Mack v. Brazil, Adlong, & Winningham, PLC, 357 Ark. 1, 159 S.W.3d 291 (2004). The appellate court views the evidence in the light most favorable to the party against whom the motion was filed, resolving all doubts and inferences against the moving party. Id.

However, the granting of this summary judgment motion was based upon the circuit court's interpretation of the Bad Debt Statute. The question of the correct application and interpretation of an Arkansas statute is a question of law, which this court decides de novo. Cooper Realty Invs., Inc. v. Arkansas Contractors Licensing Bd., 355 Ark. 156, 134 S.W.3d 1 (2003).

A tax deduction is allowed only as a matter of legislative grace and one claiming the deduction bears the burden of proving that he is entitled to it and of bringing himself clearly within the terms and conditions as may be imposed by the statute. St. Louis Southwestern Ry. Co. v. Ragland, 304 Ark. 1, 4, 800 S.W.2d 410, 412 (1990); Skelton v. B.C. Land Co., 256 Ark. 961, 513 S.W.2d 919 (1974). Similarly, we have held in numerous tax-exemption cases that any tax exemption must be strictly construed against the exemption and any doubt suggests the exemption should be denied. See, e.g., Rineco Chem. Indus., Inc. v. Weiss, 344 Ark. 118, 40 S.W.3d 257 (2001); Technical Servs. of Ark., Inc. v. Pledger, 320 Ark. 333, 896 S.W.2d 433 (1995); Pledger v. C.B. Form Co., 316 Ark. 22, 871 S.W.2d 333 (1994); Southwestern Ry., supra.

In this case, the circuit court's decision denying Chrysler's claim to a deduction is based upon the circuit court's construction of "taxpayer" under the Bad Debt Statute. This court outlined our rules of statutory construction in Faulkner v. Arkansas Children's Hospital, 347 Ark. 941, 952, 69 S.W.3d 393, 400 (2002), where we stated:

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. Raley v. Wagner, 346 Ark. 234, 57 S.W.3d 683 (2001); Dunklin v. Ramsay, 328 Ark. 263, 944 S.W.2d 76 (1997). When the language of a statute is plain and unambiguous there is no need to resort to rules of statutory construction. Stephens v. Arkansas Sch. for the Blind, 341 Ark. 939, 20 S.W.3d 397 (2000); Burcham v. City of Van Buren, 330 Ark. 451, 954 S.W.2d 266 (1997). Where 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. Stephens v. Arkansas Sch. for the Blind, supra (citing State v. McLeod, 318 Ark. 781, 888 S.W.2d 639 (1994)). Finally, the ultimate rule of statutory construction is to give effect to the intent of the General Assembly. Ford v. Keith, 338 Ark. 487, 996 S.W.2d 20 (1999); Kildow v. Baldwin Piano & Organ, 333 Ark. 335, 969 S.W.2d 190 (1998).

With this standard of review in mind, we turn to Chrysler's argument on appeal.

Meaning of "Taxpayer" for the Purposes of the Bad Debt Statute

Chrysler contends that the circuit court's construction of "taxpayer" under the Bad Debt Statute is erroneous because it conflicts with the plain language and legislative intent of the statute.

Section 26-52-309 provides:

(a) In computing the amount of tax due under the Arkansas Gross Receipts Act, § 26-52-101 et seq., and any act supplemental thereto, taxpayers may deduct bad debts from the total amount upon which the tax is calculated for any report. Any deduction taken or refund paid which is attributed to bad debts shall not include interest.

(b)(1) For purposes of this section, "bad debt" means any portion of a debt for an amount which a taxpayer has reported as taxable which the taxpayer legally claims as a bad debt deduction for federal income tax purposes.

(2) Bad debts include, but are not limited to, worthless checks, worthless credit card payments, and uncollectible credit accounts.

(3) Bad debts do not include financing charges or interest, uncollectible amounts on property that remain in the possession of the taxpayer or vendor until the full purchase price is paid, expenses incurred in attempting to collect any debt, debts sold or assigned to third parties for collection, and repossessed property.

(c) Bad debts incurred for sales made prior to November 9, 1983, shall not be deducted.

(d) Bad debts must be deducted within three (3) years of the date of the sale for which the debt was incurred.

(e) If a deduction is taken for a bad debt and the taxpayer subsequently collects the debt in whole or in part, the tax on the amount so collected shall be paid and reported on the next return due after the collection.

In this case, the parties agree that Chrysler was the source of payment of the gross receipts tax due on the motor vehicles. However, the party who actually paid the gross receipts tax is not automatically a "taxpayer" for the purposes of the Bad Debt Statute. To be a "taxpayer" for the purposes of the Bad Debt Statute, Chrysler must be a "person liable to remit a tax hereunder or to make a report for the purpose of claiming any exemption from payment of taxes levied by [the Gross Receipts Act.]" Ark.Code Ann. § 26-52-103(a)(5) (Repl.1997). We first note that Chrysler is a "person" under the Bad Debt Statute, as limited liability companies are included within the definition of "person." See Ark.Code Ann. § 26-52-103(a)(1) (Repl.1997). While it is clear that Chrysler was the source of payment of the gross receipts tax to the State, the parties disagree on the issue of whether Chrysler was liable to remit the tax. "Liable" is not defined for the purposes of the Bad Debt Statute. Black's Law Dictionary defines "liability," in part as:

1. The quality or state of being legally obligated or accountable; . . .

2. A financial or pecuniary obligation; DEBT . . . 932 (8th ed. 2004).

DF & A contends that for the purposes of the motor vehicle gross receipts tax, the taxpayer, or person liable to remit the tax, is the consumer. Section 26-52-510(a)(1)(A) (Repl.1997) provides:

The tax levied by this chapter and all other gross receipts taxes levied by the state in respect to the sale of new or used motor vehicles, trailers, or semitrailers required to be licensed in this state shall be paid by the consumer to the Director of the Department of Finance and Administration instead of being collected by the dealer or seller, and it is...