Higbee Lancoms v. Robinson

• Docket Number: DOCKET NUMBER 2023 CA 0184,DOCKET NUMBER 2023 CA 0185,DOCKET NUMBER 2023 CA 0186,DOCKET NUMBER 2023 CA 0187,DOCKET NUMBER 2023 CA 0188,DOCKET NUMBER 2023 CA 0189
• Decision Date: 03 November 2023
• Citation: 378 So. 3d 88
• Parties: HIGBEE LANCOMS, LP v. Kimberly L. ROBINSON, Secretary, Department of Revenue, State of Louisiana Higbee Louisiana, LLC v. Kimberly L. Robinson, Secretary, Department of Revenue, State of Louisiana Higbee Lancoms, LP v. Kimberly L. Robinson, Secretary, Department of Revenue, State of Louisiana Higbee Louisiana, LLC v. Kimberly L. Robinson, Secretary, Department of Revenue, State of Louisiana Higbee Louisiana, LLC v. Kimberly L. Robinson, Secretary, Department of Revenue, State of Louisiana Higbee Lancoms, LP v. Kimberly L. Robinson, Secretary, Department of Revenue, State of Louisiana
• Court: Court of Appeal of Louisiana

378 So.3d 88

2023-0184 (La.App. 1 Cir. 11/3/23)

HIGBEE LANCOMS, LP

v.Kimberly L. ROBINSON, Secretary, Department of Revenue, State of Louisiana

Higbee Louisiana, LLC

v.Kimberly L. Robinson, Secretary, Department of Revenue, State of Louisiana

Higbee Lancoms, LP

v.Kimberly L. Robinson, Secretary, Department of Revenue, State of Louisiana

Higbee Louisiana, LLC

v.Kimberly L. Robinson, Secretary, Department of Revenue, State of Louisiana

Higbee Louisiana, LLC

v.Kimberly L. Robinson, Secretary, Department of Revenue, State of Louisiana

Higbee Lancoms, LP

v.Kimberly L. Robinson, Secretary, Department of Revenue, State of Louisiana

DOCKET NUMBER 2023 CA 0184

DOCKET NUMBER 2023 CA 0185

DOCKET NUMBER 2023 CA 0186

DOCKET NUMBER 2023 CA 0187

DOCKET NUMBER 2023 CA 0188

DOCKET NUMBER 2023 CA 0189

Court of Appeal of Louisiana, First Circuit.

Judgment Rendered: November 3, 2023

APPEALED FROM THE BOARD OF TAX APPEALS, STATE OF LOUISIANA, DOCKET NUMBERS 12519D c/w 12649D, 12650D, 12764D, 12786D, and 12787D, HONORABLE FRANCIS J. LOBRANO, CHAIRMAN; CADE R. COLE, VICE-CHAIRMAN; JUDGE LISA WOODRUFF-WHITE (RET.), BOARD MEMBER

Antonio C. Ferachi, Aaron Long, Baton Rouge, Louisiana, Attorneys for Defendant - 1^st Appellant Kevin Richard, in his official capacity as Successor Secretary of the Department of Revenue, State of Louisiana

Jesse R. Adams, III, Camanda J. Fergus, Baton Rouge, Louisiana, Attorneys for Plaintiffs - 2^nd Appellant Higbee LANCOMS, LP and Higbee Louisiana, LLC

BEFORE: THERIOT, PENZATO, and GREENE, JJ.

GREENE, J.

₂In these consolidated tax appeals involving refund claims under the Louisiana Bad Debt Refund Statute, the taxpayers and the Louisiana Department of Revenue both appeal the Louisiana Board of Tax Appeals’ judgment, granting in part and denying in part each side’s cross motion for summary judgment, and decreeing the taxpayers owed a partial recapture amount and the Louisiana Department of Revenue owed a partial refund. After review, we affirm in part, reverse in part, render judgment, and remand this matter to the Board of Tax Appeals.

FACTUAL AND PROCEDURAL BACKGROUND

The facts underlying this litigation are largely undisputed. Higbee Lancoms, LP and Higbee Louisiana, LLC are subsidiaries of Dillard’s, Inc. (collectively, Dillard’s) and operate a chain of department stores in Louisiana. In March 2014, Dillard’s entered into a Credit Card Program Agreement (CCPA) with Wells Fargo Bank, N.A., a national banking association (the Bank), whereby the Bank agreed to offer Dillard’s-branded credit cards to allow Dillard’s customers to purchase goods on credit. Under the CCPA, the Bank was the exclusive owner, of the credit card accounts, was entitled to receive all payments made by cardholders, and funded all cardholder indebtedness on the accounts. See CCPA § 4.4(a), (b), (c). Further, as between the Bank and Dillard’s, the Bank bore all credit losses, without recourse against Dillard’s, subject to one limited and indirect exception; that is, when the Bank wrote off unpaid credit card debt, Dillard’s share of certain revenues generated by the credit card program was reduced. See CCPA §§ 4.4., 9.1 and Schedule 9.1. (Id., 214)

When a customer used a Dillard’s credit card to finance a purchase, the CCPA required the Bank to pay Dillard’s the full amount charged. See CCPA § 4.4.(c). Dillard’s was then required to pay any sales taxes owed. See CCPA § 4.9. During the tax periods at issue, January 1, 2016 through December 31, 2019 (the Tax Periods), Dillard’s collected sales taxes on credit card purchases and remitted those taxes to the Louisiana Department of Revenue (Department). Later, after certain Dillard’s cardholders failed to pay their credit card debt to the Bank, those debts were ultimately found to be worthless ₃and uncollectible, i.e., "bad debt," as defined by applicable federal law. The Bank "wrote off" the bad debt at issue on its federal income tax returns.

Later, Dillard’s filed refund claims with the Department under the Louisiana Bad Debt Refund Statute, La. R.S. 47:315, claiming entitlement to sales tax refunds on the bad debt attributable to the unpaid credit card accounts. The Department granted some of Dillard’s refund claims and issued those refunds to Dillard’s. The Department later determined that Dillard’s was not entitled to refunds for 2016, 2017, and 2018, because it, was the Bank, not Dillard’s, who had claimed the bad debt on its federal income tax returns. The Department sought to recapture the refunds it deemed erroneously refunded to Dillard’s and denied Dillard’s refund claim for 2019.

Dillard’s filed several petitions with the Louisiana Board of Tax Appeals (BTA) seeking a determination that Dillard’s had overpaid taxes to the Department, to recover funds erroneously paid, and to have certain assessments redetermined. The Department, through its then Secretary, Kimberly L. Robinson, answered the petitions. The BTA granted Dillard’s unopposed motion to consolidate the matters.¹

Eventually, the Department filed a motion for summary judgment and an exception of no right of action. The Department argued that Dillard’s had no right to bad debt tax refunds for unpaid account balances due to the Bank and which the Bank had written off for tax purposes. Dillard’s filed a cross motion for summary judgment, claiming it qualified as a "dealer" who had paid the taxes and who could seek a refund under the Bad Debt Refund Statute.

After conducting a hearing on the cross motions and exception, the BTA issued an Order with Written Reasons in which it denied the Department’s exception and ruled that Dillard’s was entitled to partial refunds and partial redeterminations of the assessments (recaptures) for the Tax Periods and those amounts were to be calculated based on Dillard’s stake in certain revenues to which it was entitled under CCPA Schedule 9.1. On September 7, 2022, the BTA rendered judgment consistent with its ruling: granting in ₄part and denying in part each party’s motion for summary judgment; ordering that Dillard’s owed the Department a recapture amount of $130,247.68, plus applicable overpayment interest; and ordering that the Department owed Dillard’s a refund of $128,348.90, plus applicable refund inter- est. The Department and Dillard’s both appealed the BTA’s judgment.

ASSIGNMENTS OF ERROR ASSERTED BY THE DEPARTMENT

1. The BTA committed legal error by ignoring this Court’s mandate that the Bad Debt Refund Statute must be strictly construed against Dillard’s and is a matter of legislative grace.

2. The BTA committed legal error by ignoring this Court’s mandate that Louisiana Administrative Code 61:?:4369(B)(5), a regulation of the Bad Debt Refund Statute, must be strictly construed against Dillard’s and instead interpreting it to afford Dillard’s as many avenues of recourse as can be extrapolated from the language of the regulation.

3. The BTA committed legal error by finding that Dillard’s possessed a right to a refund of taxes that Dillard’s did not pay, but where Dillard’s only collected and remitted the taxes.

4. The BTA committed legal error by finding that Dillard’s was entitled to reimbursement of the amount of tax previously paid by the Bank.

5. The BTA committed legal and factual error by finding that the requirements of the Bad Debt Refund Statute related to an unpaid balance of an account due to Dillard’s, when the uncontroverted facts established that the accounts and unpaid balances were owned by and due to the Bank.

6. The BTA committed legal error by interpreting the Bad Debt Refund Statute and LAC 61:I.4369(B)(5) to allow a refund based on the loss of profits.

7. The BTA committed legal and factual error by finding that the Bank maintained "full recourse" against Dillard’s for any unpaid debt, when the agreement between the parties specifically provided that the Bank bears all credit losses relating to these credit card accounts, and has no recourse against Dillard’s to require Dillard’s to repay to the Bank any sales tax or purchase price financed by the Bank.

ASSIGNMENT OF ERROR ASSERTED BY DILLARD’S

1. The BTA erred in limiting Dillard’s reimbursements of sales tax related to the write-off of bad debt to its stake in Program Revenue under Schedule 9.1 of the CCPA, and further, by affirming the assessment of additional sales tax on that basis.

RIGHT OF ACTION

[1] In assignment of error numbers three and four, the Department contends the BTA legally erred in finding that Dillard’s had a right to a refund for taxes Dillard’s did not pay. ₅The Department argues that, although Dillard’s collected and remitted the applicable taxes, the Bank was the party who actually "paid" the taxes, because the funds Dillard’s used to pay the taxes were obtained from the Bank.

[2, 3] An action can only be asserted by a person having a real and actual interest that he asserts. La. C.C.P. art. 681. The function of the exception of no right of action is to determine whether the plaintiff belongs to the class of persons to whom the law grants the cause of action asserted in the suit. La. C.C.P. art. 927(A)(6). The exception does not question the person’s ability to prevail on the merits nor does it question whether the defendant may have a valid defense. Bannister Properties, Inc. v. State, 18-0030 (La. App. 1 Cir. 11/2/18), 265 So.3d 778, 786, writ denied, 19-0025 (La. 3/6/19), 266 So.3d 902. Whether a plaintiff has a right of action is a question of law that is reviewed de novo on appeal. Id. at 787.

Under La. R.S. 47:304(A), a dealer is responsible for collecting state and local sales taxes.² Under La. R.S. 47:301(4)(b), a dealer is defined to include a retail seller.³ See Normand v. Wal-Mart.com USA, LLC, 19-00263 (La. 1/29/20), 340 So.3d 615, 625-26. Further, under CCPA § 4.9, Dillard’s was obligated to "pay any sales taxes due and payable by it relating to the sale of [g]oods." Dillard’s introduced the affidavit of Matthew Banks, Head of State Tax for Dillard’s, who attested that during the Tax...