Daimlerchrysler Servs. v. Dept. of Revenue

• Decision Date: 22 November 2006
• Docket Number: No. 2006AP589.,2006AP589.
• Citation: 726 N.W.2d 312,2006 WI App 265
• Court: Wisconsin Court of Appeals
• Parties: DAIMLERCHRYSLER SERVICES NORTH AMERICA LLC, Petitioner-Appellant,<SMALL><SUP>†</SUP></SMALL> v. WISCONSIN DEPARTMENT OF REVENUE, Respondent-Respondent.

726 N.W.2d 312

2006 WI App 265

DAIMLERCHRYSLER SERVICES NORTH AMERICA LLC, Petitioner-Appellant,^† v. WISCONSIN DEPARTMENT OF REVENUE, Respondent-Respondent.

No. 2006AP589.

Court of Appeals of Wisconsin.

Submitted on Briefs August 8, 2006.

Opinion Filed November 22, 2006.

COPYRIGHT MATERIAL OMITTED

On behalf of the petitioner-appellant, the cause was submitted on the briefs of Robert Horowitz and Amie Trupke of Stafford Rosenbaum LLP, Madison, and Peter O. Larsen of Akerman Senterfitt, Jacksonville, Florida.

On behalf of the respondent-respondent, the cause was submitted on the brief of F. Thomas Creeron III, assistant attorney general, and Peggy A. Lautenschlager, attorney general.

Before LUNDSTEN, P.J., DEININGER and HIGGINBOTHAM, JJ.

¶ 1 LUNDSTEN, P.J

In this appeal, we review a decision by the Tax Appeals Commission disallowing a tax deduction for the portions of bad debts attributable to the sales taxes associated with those debts. DaimlerChrysler Services North America (Chrysler) filed a claim for the deduction under WIS. STAT. §§ 77.51(4)(b)4. and 77.52(6) (1997-98) with the respondent Department of Revenue.¹ Chrysler appeals the circuit court's order affirming the commission's decision denying the deduction. Chrysler argues that it is entitled to the deduction because it is the "retailer" who "paid" the sales taxes, within the meaning of the statutes. In the alternative, Chrysler argues that it is entitled to the deduction because it is an assignee that acquired the rights to the deduction from the "retailers" who "paid" the taxes. We conclude that the commission correctly denied Chrysler the deduction, and affirm the circuit court's order upholding the commission's decision.

Background

¶ 2 The transactions underlying Chrysler's claim are motor vehicle sales. At the time of each sale, the vehicle purchaser financed the vehicle by entering into an installment contract with a vehicle dealership. The amount financed included the sales tax.

¶ 3 At or shortly after the time of sale, the dealers sold or assigned the installment contracts to Chrysler by executing assignment provisions on the reverse side of the contracts. In exchange for the assignments, Chrysler paid the dealers the full amounts financed, including amounts attributable to sales tax financed as a part of the installment contracts. The dealers subsequently remitted the sales tax attributable to the purchases to the Department.

¶ 4 The purchasers in these particular transactions defaulted on their installment contracts. To the extent Chrysler was unable to recoup the balances due on the contracts, it deemed the debts uncollectible for purposes of federal and state income taxes. The unpaid balances included a proportional share of the sales tax on the vehicles.

¶ 5 Chrysler filed a claim with the Department seeking a deduction for those proportional shares of the sales tax.² The Department denied Chrysler's claimed deduction, and Chrysler sought review before the commission. The commission ruled in favor of the Department, concluding that Chrysler was not entitled to a deduction because it was not the retailer who previously paid the sales tax to the Department. The commission further concluded that Chrysler was not entitled to a tax deduction as an assignee under the contracts at issue. Chrysler petitioned the circuit court for review of the commission's decision, and the circuit court affirmed the commission.

Discussion

A. Level Of Deference Accorded The Commission's Decision

¶ 6 We review the commission's decision, not the circuit court's. Hafner v. DOR, 2000 WI App 216, ¶ 3, 239 Wis.2d 218, 619 N.W.2d 300. This case involves the commission's interpretation of WIS.STAT. §§ 77.51(4)(b)4. and 77.52(6). When we review an administrative agency's interpretation or application of a statute, we apply one of the following: great weight deference, due weight deference, or no deference. Zip Sort, Inc. v. DOR, 2001 WI App 185, ¶¶ 11-14, 247 Wis.2d 295, 634 N.W.2d 99.

¶ 7 We give great weight deference to the agency's interpretation when all of the following conditions are met: (1) the agency was charged by the legislature with the duty of administering the statute (2) the agency's interpretation is one of long standing; (3) the agency employed its expertise or specialized knowledge in forming the interpretation; and (4) the agency's interpretation will provide uniformity and consistency in the application of the statute. Id., ¶ 12. When we give great weight deference to the agency's interpretation, we will sustain a reasonable agency conclusion even if an alternative conclusion is more reasonable. Id.

¶ 8 We give due weight deference when the agency has some experience in an area, but has not developed the expertise that necessarily places it in a better position than a court to make judgments regarding the interpretation of the statute. Id., ¶ 13. When we give due weight deference to the agency's interpretation, we will not overturn a reasonable agency decision unless we determine that there is a more reasonable interpretation available. Id.

¶ 9 We give no deference to an agency interpretation when any of the following is true: (1) the issue before the agency is clearly one of first impression; (2) a legal question is presented and there is no evidence of any special agency expertise or experience; or (3) the agency's position on an issue has been so inconsistent that it provides no real guidance. Id., ¶ 14.

¶ 10 Chrysler argues that no deference is due the commission here. Chrysler asserts that the issue is one of first impression because the commission "has never issued a decision dealing with whether the assignee of retail installment contracts who funded payment of the sales tax is entitled to a refund or deduction under the Bad Debt Statutes." "Accordingly," Chrysler argues, "the Commission does not have a long-standing interpretation of the Bad Debt Statutes regarding this specific issue."

¶ 11 We conclude that the commission's decision is entitled to at least due weight deference. "Without question, the commission has considerable experience in the administration of the sales-tax statutes, and it has applied the provisions of § 77.52, STATS.—a statute it is charged to enforce and administer—in a variety of situations." Telemark Dev., Inc. v. DOR, 218 Wis.2d 809, 820, 581 N.W.2d 585 (Ct. App.1998). Likewise, the commission has been repeatedly called upon to interpret and apply provisions in WIS. STAT. § 77.51. See, e.g., DOR v. River City Refuse Removal, Inc., 2006 WI App 34, ¶ 23, 289 Wis.2d 628, 712 N.W.2d 351; G & G Trucking, Inc. v. DOR, 2003 WI App 228, ¶12, 267 Wis.2d 847, 672 N.W.2d 80. We have consistently given at least due weight deference to the commission's interpretation of sales tax statutes.³

¶ 12 In this case, the commission undoubtedly brought its experience and expertise to bear on the task of interpreting WIS. STAT. §§ 77.51(4)(b)4. and 77.52(6). Whatever is meant by the rule that we give no deference to the agency when "the issue before the agency is clearly one of first impression," the rule cannot be referring to every situation in which the agency is called upon to apply a statute to a fact pattern it has not previously addressed. If that were the rule's meaning, deference to an agency decision "would indeed be a rarity." Barron Elec. Coop. v. PSC, 212 Wis.2d 752, 764, 569 N.W.2d 726 (Ct.App. 1997); cf. DOR v. A. Gagliano Co., 2005 WI App 170, ¶ 28 & n. 9, 284 Wis.2d 741, 702 N.W.2d 834 (requirements for great weight deference to agency do not include that agency "has previously applied a statute to the same or substantially similar facts"), review denied, 2005 WI 150, 286 Wis.2d 98, 705 N.W.2d 659 (No. 2003AP3538).

¶ 13 Accordingly, we apply due weight deference, meaning that we will not overturn the commission's decision if it is reasonable and Chrysler's proposed interpretation is not more reasonable.

B. Whether Chrysler Is Entitled To A Deduction Because It Is The "Retailer" Who Previously "Paid" The Tax

¶ 14 The parties dispute whether Chrysler is a "retailer" who "has previously paid" the sales tax as those terms are used in WIS. STAT. §§ 77.51(4)(b)4. and 77.52(6). Thus, we begin with a review of those statutes.

¶ 15 WISCONSIN STAT. § 77.51(4)(b) defines what is excluded from a retailer's "gross receipts" for purposes of the applicable sales tax:

4. In the case of accounts which are found to be worthless and charged off for income or franchise tax purposes, a retailer is relieved from liability for sales tax. A retailer who has previously paid the sales tax on such accounts may take as a deduction from the measure of the tax the amount found to be worthless and this deduction must be taken from the measure of the tax in the period in which said account is found to be worthless or within a reasonable time thereafter.

(Emphasis added.) WISCONSIN STAT. § 77.52 is the statute that imposes the retail sales tax at issue here, and subsec. (6) permits the disputed deduction:

(6) A retailer is relieved from liability for sales tax insofar as the measure of the tax is represented by accounts which have been found to be worthless and charged off for income or franchise tax purposes. If the retailer has previously paid the tax, the retailer may, under rules prescribed by the department, take as a deduction from the measure of the tax the amount found worthless and charged off for income or franchise tax purposes. If any such accounts are thereafter collected in whole or in part by the retailer, the amount as collected shall be included in the first return filed after such collection and the tax paid with the return.

(Emphasis added.)

¶ 16 Chrysler argues that it qualifies for a deduction under the plain language of the statutes because the underlying debts were worthless and properly charged off for income tax purposes and because, as the terms "retailer" and "paid" are used in the above statute...