Dep't of Revenue v. Rent-A-Center E., Inc., 2017-CA-001653-MR
Decision Date | 12 July 2019 |
Docket Number | NO. 2017-CA-001653-MR,2017-CA-001653-MR |
Parties | DEPARTMENT OF REVENUE, FINANCE AND ADMINISTRATION CABINET, COMMONWEALTH OF KENTUCKY APPELLANT v. RENT-A-CENTER EAST, INC.; AND RENT-WAY, INC. APPELLEES |
Court | Kentucky Court of Appeals |
NOT TO BE PUBLISHED
APPEAL FROM FRANKLIN CIRCUIT COURT
The essential facts are uncontested. Rent-A-Center offers household items, such as furniture and electronics, to the public on a "rent to own" basis whereby a customer obtains possession of the items for a set, periodic rental fee set forth in a written contract. Under the standard terms of the rental agreement, the customer owes Rent-A-Center the fair market value of damaged or lost rented items. Rent-A-Center collects sales tax on the rental fee.
Rent-A-Center also offers written waivers, which relieve the customer from having to pay the fair market value to Rent-A-Center for damaged or lost rental items under specified conditions (such as theft, fire and flood). A customer may decline the waiver without increasing the weekly rental fee or otherwise impacting the customer's rights to the rented property; conversely, a customer does not gain additional rights to the rented property by electing waiver coverage. Rent-A-Center does not collect sales tax on the waiver fee.
The Department of Revenue audited Rent-A-Center and Rent-Way for the tax periods between July 2007 and June 2011. Those audits resulted in issuance of a tax assessment of over $500,000 for Rent-A-Center (plus interest) and over $50,000 (plus interest and fees) for Rent-Way due to their failure to collect sales tax on the waiver fees. Both rental entities appealed to the Kentucky Board of Tax Appeals, which eventually concluded the waiver fees were not taxable. The Department filed an action in the Franklin Circuit Court challenging that determination. In September 2017, the circuit court granted summary judgment to Rent-A-Center. The Department then filed this appeal.
Because only questions of law are presented, we review the matter de novo. Estate of McVey v. Department of Revenue, 480 S.W.3d 233, 240 (Ky. 2015). We begin our analysis by listing the relevant portions of KRS 139.200, our sales tax statute:3
There is no dispute that the rentals qualify as "retail sales" under KRS 139.010(36)4 Instead, the primary question is whether the waivers are retail sales of "tangible personal property," which is defined in KRS 139.010(41) as "personal property which may be seen, weighed, measured, felt, or touched, or which is in any other manner perceptible to the senses and includes natural, artificial, and mixed gas, electricity, water, steam, and prewritten computer software[.]"5
Though the parties present voluminous arguments, we cannot materially improve upon the Franklin Circuit Court's concise, cogent analysis, and so we adopt the following portions of its opinion and order:
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