GameStop, Inc. v. St. Mary Parish Sales & Use Tax Dep't

• Decision Date: 19 March 2015
• Docket Number: No. 2014 CA 0878.,2014 CA 0878.
• Parties: GAMESTOP, INC. v. ST. MARY PARISH SALES AND USE TAX DEPARTMENT and Barry Dufrene, in his Capacity as the Duly Appointed Director of the St. Mary Parish Sales and Use Tax Department.
• Court: Court of Appeal of Louisiana — District of US

166 So.3d 1090

GAMESTOP, INC.

v.ST. MARY PARISH SALES AND USE TAX DEPARTMENT and Barry Dufrene, in his Capacity as the Duly Appointed Director of the St. Mary Parish Sales and Use Tax Department.

No. 2014 CA 0878.

Court of Appeal of Louisiana, First Circuit.

March 19, 2015.

William M. Backstrom, Jr., Matthew A. Mantle, New Orleans, LA, for Plaintiff/Appellee GameStop, Inc.

Robert R. Rainer, Drew M. Talbot, Frederick Mulhearn, Baton Rouge, LA, for Defendant/Appellant St. Mary Parish Sales and Use Tax Department.

Before GUIDRY, THERIOT, and DRAKE, JJ.

Opinion

GUIDRY, J.

Defendants/Appellants, St. Mary Parish Sales and Use Tax Department and Barry Dufrene, in his capacity as the duly appointed Director of the St. Mary Parish Sales and Use Tax Department (collectively “the Department”), appeal from a judgment of the district court granting summary judgment in favor of plaintiff, GameStop, Inc., and ordering the Department to refund to GameStop the total amount that it paid under protest, plus interest and penalties. For the reasons that follow, we affirm.

FACTS AND PROCEDURAL HISTORY

GameStop is a retailer that sells new and used video game hardware, software, and accessories to retail customers at stores located in St. Mary Parish, as well as other locations around the world. As part of its regular course of business, GameStop also accepts used games from its customers if it determines that the game is in a resalable or refurbishable condition.¹ In these “trade-in” transactions, the customer can choose to: 1) receive cash for the video game; 2) trade-in the video game and apply the trade-in amount toward the purchase of another video game at GameStop; or 3) receive the determined trade-in amount for the video game on an “Edge Card” to be used by the customer at GameStop at a later date.²

An Edge Card is a stored value card, obtained by a customer for free when he/she subscribes to Game Informer magazine, which can be loaded with the customer's trade-in credit and may be used as payment for future purchases. An Edge Card resembles a credit card, and each Edge Card has a unique number that is found on the back of the card and is also contained within the card's magnetic

strip. When a customer purchases a new game and applies the trade-in credit contained on his or her Edge Card, GameStop collects sales tax on the sales price of the game, minus the trade-in amount.

The Department conducted an audit of the books and records of GameStop for the tax periods December 1, 2005, through December 31, 2007, and determined that GameStop owed additional taxes, interest, and penalties. The Department issued a notice of assessment pursuant to La. R.S. 47:337.51, assessing additional taxes allegedly due for the taxable periods in the amount of $5,258.21, plus interest in the amount of $2,545.32 and a penalty in the amount of $1,314.59. GameStop filed a written protest with the Department. Following a hearing on GameStop's protest, the Department issued a revised notice of assessment, assessing additional taxes allegedly due in the amount of $5,258.00, plus interest in the amount of $2,860.84 and a penalty in the amount of $1,314.59.

Thereafter, GameStop paid the entire amount reflected in the revised notice of assessment to the Department under protest and notified the Department of its intention to file suit for the recovery of the entire protest amount, plus interest. On September 9, 2011, GameStop filed a petition for declaratory judgment and refund of taxes and related amounts paid under protest. Specifically, GameStop sought a judgment declaring the rights and liabilities of GameStop and the Department with respect to the proper application of the trade-in credits in computing the taxable sales price for each of the sale transactions at issue during the taxable period; that the Department's revised notice of assessment is erroneous, improper, illegal, and null and void; and that GameStop properly applied the trade-in credits at issue and properly computed the taxable sales price for each of the sales transactions at issue during the taxable period.

GameStop subsequently filed a motion for partial summary judgment, asserting that it is entitled to judgment as a matter of law: declaring that GameStop

properly applied the trade-in credits relating to the Edge Card transactions at issue in this matter and properly calculated the taxable sales price and resulting sales tax owed for each of the Edge Card transactions; declaring that the Department's assessment of additional sales tax in the amount of $1,533.67 and interest in the amount of $834.43, relating to the Edge Card transactions and the application of the trade-in credits, is erroneous, improper, illegal, and null and void; declaring that the penalty in the amount of $1,314.59 is erroneous, improper, illegal, and and void; and ordering the Department to refund the entire amount of the additional sales tax and interest assessed by the Department, which is attributable to the Edge Card transactions, and the entire amount of assessed penalties.³

The Department also filed a motion for summary judgment, asserting that it is entitled to judgment as a matter of law: declaring that all of the transactions in which games were sold by GameStop and in which all or a portion of the sales price was paid with credits previously embedded on an Edge Card are fully taxable sales at retail of articles of tangible personal property, and that the sales tax due is calculated on the total sales price, without any reduction in the sales price; declaring that all sums paid under protest by GameStop are the property of the Department as the single sales and use tax collector in St. Mary Parish; and declaring that GameStop's suit be dismissed with prejudice.

Following a hearing on the cross-motions for summary judgment, the district court signed a judgment in favor of GameStop, granting its motion for partial summary judgment. The district court declared: that GameStop properly applied the trade-in credits relating to the edge card transactions at issue in this matter; that GameStop properly calculated the taxable sales price and resulting St. Mary Parish sales tax for each of the Edge Card transactions at issue; and that the Department's

assessment of additional St. Mary Parish sales tax in the amount of $1,533.67 and interest in the amount of $834.43, relating to the Edge Card transactions and the application of the trade-in credits, is erroneous, improper, illegal, and null and void. The judgment further ordered the Department to refund to GameStop the entire amount paid under protest in the amount of $3,682.69, consisting of St. Mary Parish sales tax in the amount of $1,533.67, interest in the amount of $834.43, and penalties in the amount of $1,314.59. The judgment ordered the Department to pay statutory interest on the refund amount at the rate and for the periods provided by law.⁴

The Department now appeals from the district court's judgment.

DISCUSSION

A motion for summary judgment is a procedural device used to avoid a full scale trial when there is no genuine issue of material fact. Johnson v. Evan Hall Sugar Cooperative, Inc., 01–2956, p. 3 (La.App. 1st Cir.12/30/02), 836 So.2d 484, 486. A motion for summary judgment is properly granted if the pleadings, depositions, answers to interrogatories, and admissions, together with affidavits, if any, admitted for purposes of the motion for summary judgment, show that there is no genuine issue of material fact, and that mover is entitled to judgment as a matter of law. La. C.C.P. art. 966(B)(2).

On a motion for summary judgment, the burden of proof is on the mover. If, however, the mover will not bear the burden of proof at trial on the matter that is before the court on the motion for summary judgment, the mover's burden on the motion does not require that all essential elements of the adverse party's claim, action, or defense be negated. Instead, the mover must point out to the court that

there is an absence of factual support for one or more elements essential to the adverse party's claim, action, or defense. Thereafter, the adverse party must produce factual evidence sufficient to establish that he will be able to satisfy his evidentiary burden of proof at trial. If the adverse party fails to meet this burden, there is no genuine issue of material fact, and the mover is entitled to summary judgment. La. C.C.P. art. 966(C)(2).

In determining whether summary judgment is appropriate, appellate courts review evidence de novo under the same criteria that govern the trial court's determination of whether summary judgment is appropriate. Lieux v. Mitchell 06–0382, p. 9 (La.App. 1st Cir.12/28/06), 951 So.2d 307, 314, writ denied, 07–0905 (La.6/15/07), 958 So.2d 1199. When summary judgment is granted in the context of statutory interpretation, there are no material issues of fact in dispute and the sole issue before us is a question of law as to the correct interpretation of the statute at issue. State v. Louisiana Land and Exploration Company, 12–0884, p. 8 (La.1/30/13), 110 So.3d 1038, 1044.

In interpreting statutes, we begin with the well-settled premise that taxing statutes must be strictly construed against the taxing authority, and where a tax statute is susceptible of more than one reasonable interpretation, the construction favorable to the taxpayer is adopted. Cleco Evangeline, LLC v. Louisiana Tax Commission,

01–0561, p. 5 (La.App. 1st Cir.6/22/01), 808 So.2d 740, 744, aff'd, 01–2162 (La.4/3/02), 813 So.2d 351. Tax laws are to be interpreted liberally in favor of the taxpayer, and words defining things to be taxed should not be extended beyond their clear import. Uncertainty in the language of the statute must be resolved against the government and in favor of the taxpayer. Cleco...