In re Appeal of Cessna Emps. Credit Union from an Order of the Div. of Taxation

Decision Date06 April 2012
Docket NumberNo. 105,139.,105,139.
Citation47 Kan.App.2d 275,277 P.3d 1157
PartiesIn the Matter of the Appeal of CESSNA EMPLOYEES CREDIT UNION from an Order of the Division of Taxation.
CourtKansas Court of Appeals

OPINION TEXT STARTS HERE

Syllabus by the Court

1. This court's review of statutory interpretation in tax appeal matters is unlimited, and an appellate court applies the same general rules that are applied in other contexts. Kansas appellate courts no longer give deference to an agency's interpretation of a statute and, therefore, have unlimited review.

2. A statute imposing Kansas retailers' sales tax should be strictly construed in the taxpayer's favor. This rule is, of course, subservient to the fundamental rule of statutoryconstruction which requires that the purpose and intent of the legislature govern.

3. Under the facts of this case, where a buyer merely reimburses a seller's travel expenses and associated sales tax and separately invoices those in connection with that seller's sale at retail of computer upgrade goods and services, the reimbursement and associated tax amounts are not again subject to retail sales tax in Kansas because they were not sold at retail, they were not a part of the sale of goods and services, and they were not a part of the selling price of the goods and services.

4. The basic principle is that a sales or use tax is to be paid only once on any particular item and that payment is to be made by the ultimate consumer. There is one basic principle about our sales tax act: The ultimate consumer should pay the tax and no article of taxable goods or services should have to carry more than one sales tax.

5. To the extent an administrative regulation attempts to expand imposition authority beyond statutory authority, it has no operative effect.

6. Under the facts of this case, based upon the lack of imposition authority for retail sales tax to be collectable on travel expenses and associated sales tax already paid by the vendor and separately invoiced to a purchaser of taxable goods and services for mere reimbursement, any such sales tax paid is subject to refund.

Gerald N. Capps, of Wichita, for appellant.

Alice Leslie Rawlings, of Legal Services Bureau, Kansas Department of Revenue, for appellee.

Before GREENE, C.J., LEBEN and STANDRIDGE, JJ.

GREENE, C.J.

Cessna Employees Credit Union (CECU) appeals a summary judgment entered against it by the Kansas Court of Tax Appeals (COTA) on its refund claim for sales taxes paid on the travel reimbursement component of goods and services rendered by Jack Henry and Associates (JHA) in providing computer upgrade goods and services to CECU. COTA concluded that travel expenses billed by JHA to CECU were “part of the total amount of consideration given by CECU in the transaction for which the taxable goods and goods and services were sold” and thus subject to Kansas retailers sales tax as part of the “gross receipts” of JHA in the transaction. Concluding there was no “sale” of the reimbursed travel expenses, we reverse and remand with directions to grant CECU's refund claim.

Factual and Procedural Background

The parties stipulated to the material facts, which were set forth by COTA as follows:

“In 2006, Jack Henry and Associates (‘JHA’) sold taxable goods and services to Cessna Employees Credit Union (‘CECU’). JHA invoiced CECU for the services, hardware and software. JHA separately invoiced CECU for the Travel Purchases (JHA employees' transportation, meals, and lodging).

“CECU is seeking a refund of Kansas sales tax in the amount of $3,333.05 it paid to JHA on the costs of the Travel Purchases. JHA Travel Purchases were necessary to complete JHA's taxable contractual obligations to CECU.

“CECU reimbursed JHA for the cost of its Travel Purchases including the in and out of state taxes JHA paid on the Travel Purchases. The cost of each of JHA's Travel Purchases (and supporting documentation) was separately stated on the invoices JHA submitted to CECU for payment. Department Exhibits Nos. 9.1 through 9.106 are documents relating to JHA's Travel Purchases and Reimbursements from CECU. The documents were provided to the Department by CECU.

“JHA was the ultimate consumer of the Travel Purchases JHA separately invoiced to CECU. CECU was not the ultimate consumer of the goods and services included in the cost of the separately invoiced Travel Purchases.

“On June 30, 2008, CECU filed its request for a refund of the $3,333.05 retailers'sale tax it paid to JHA on JHA's Travel Purchase costs. On October 31, 2008, the Department denied the CECU refund claim stating that the Travel Purchases and applicable retailers' sales tax paid by JHA are included in the taxable measure of the gross selling price of the goods and services JHA sold to the CECU.

“On November 11, 2008, CECU appealed the Department's denial of the refund claim to the Secretary claiming the decisions in In re [ Tax Appeal of] Bernie's Excavating Co., Inc., 13 Kan.App.2d 476, 772 P.2d 822 [ rev. denied 245 Kan. 784] (1989) and Southwestern Bell Tel. Co. v. State Commission of Revenue and Taxation, et al., 168 Kan. 227, 212 P.2d 363 (1950) exclude the Travel Purchases from the taxable measure of the gross selling price. CECU claims that the reimbursed Travel Purchases are non-taxable to the CECU because the JHA paid the tax on the purchases, the Travel Purchase are not for the sales of taxable tangible personal property or statutorily enumerated services, some of the Travel Purchases were incurred outside the state of Kansas, and taxation on the Travel Purchases is barred by the federal and Kansas state constitutions.

“On July 17, 2009, the Secretary upheld the Department's denial of the refund claim. On August 17, 2009, CECU timely appealed the Secretary's denial to the Court of Tax Appeals.”

In order to clarify precisely what is at issue, the record on appeal reflects that each of the transactions in question consisted of the individual travel expenses of a JHA employee, together with the sales tax on those expenses as paid by JHA to the vendor, but then separately invoiced to CECU for reimbursement with sales taxes computed again on the total. The amount invoiced was the original travel expenses plus sales tax paid, but with sales tax then computed on that total and billed for reimbursement to CECU. For example, an employee's hotel expense of $527.43 already included sales taxes of $35.92, but that total expense was then again subjected to Kansas retailers' sales tax before being billed to CECU for reimbursement.

COTA denied CECU's refund claim, reasoning in material part:

“The retailers' sales tax act imposes a sales tax upon the gross receipts from sales of goods and services taxable under the act. K.S.A.2009 Supp. 79–3603. The tax is paid by the consumer and collected by the retailer (seller). K.S.A.2009 Supp. 79–3604. ‘Gross receipts' is defined by the statute as the total selling price. K.S.A.2009 Supp. 79–3602( o ). Sales or selling price means the total amount of consideration, including cash, credit, property and services, for which personal property or services are sold valued in money, whether received in money or otherwise, without any deduction for the cost of materials used, labor or service cost, interest, losses, all costs of transportation to the seller, all taxes imposed on the seller, and any other expense of the seller.K.S.A.2009 Supp. 79–3602( ll )(1)(B). Enumerated in the act are specific exclusions from the definition of ‘selling price’: ( SeeK.S.A.2009 Supp. 79–3602( ll )(3)), as well as various sales tax exemptions. No statutory provision specifically excludes or exempts the expenses at issue in this case. Thus, under the maxim expressio unius est esclusio alterius, we must conclude that it was the intent of the legislature not to exclude or exempt these expenses. See In re Application of Lietz Construction Co., 273 Kan. 890, 911, 47 P.3d 1275, 1290 (2002).

We agree that the ultimate consumer of the travel was JHA and JHA paid sales tax on the travel services. In the present case, however, the travel services are not being resold to CECU. A flaw in CECU's theory is that CECU is not being taxed on travel services as the consumer of the travel. The sales tax at issue here has been levied upon the total amount of consideration given by CECU in the transaction with JHA for providing the upgrades. In this sale transaction between JHA and CECU, we find that the travel is properly considered an expense incurred by the seller. Instead of contracting for a definite total selling price, the parties made the selling price, or total amount of consideration given by the purchaser, dependent in part on the expenses of the seller by requiring the reimbursement of the expenses.

“Upon review of the uncontroverted facts presented, we find that the reimbursement of the seller's travel expenses was part of the total amount of consideration given by CECU in the transaction for which the taxable goods and services were sold by JHA. Although the expense reimbursement was separately itemized on the invoices, the selling price must include “the total cost to the consumer without any deduction or exclusion for the cost of the property or service sold, labor or service used or expended, materials used, losses, overhead or any other costs or expenses, or profit, regardless of how any contract, invoice or other evidence of the transaction is stated or computed, and whether separately billed or segregated on the same bill.” K.A.R. 92–19–46. See alsoK.S.A.2009 Supp. 79–3602( ll )(1). In the light of the inclusive character of the statute and regulation, the expense reimbursement was properly included in the gross receipts for purposes of the retailers's sales tax. The reimbursement clearly falls within the taxing statutes. The language of the statute is not ambiguous and squarely includes the expense reimbursement in gross receipts.”

After COTA denied CECU's motion for reconsideration, CECU timely perfected its ...

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2 cases
  • In re Capital Elec. Line Builders, Inc.
    • United States
    • Kansas Court of Appeals
    • May 6, 2022
    ...(BOTA), who upheld the assessment.Capital Electric asks us to expand this court's ruling in In re Tax Appeal of Cessna Employees Credit Union , 47 Kan. App. 2d 275, 277 P.3d 1157 (2012), and find such rental equipment charges are not subject to sales tax. We decline to do so because the Kan......
  • In re Capital Elec. Line Builders
    • United States
    • Kansas Court of Appeals
    • May 6, 2022
    ...seq., does not exempt such charges from taxation. Further, the rental equipment charges are materially different from the travel expenses in Cessna. correctly found the rental equipment charges were taxable, so we affirm its decision to uphold the assessment. Capital Electric's assessment f......

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