In re Gulf Consol. Services, Inc., Bankruptcy No. 86-08347-H4-11.

• Decision Date: 11 July 1989
• Docket Number: Bankruptcy No. 86-08347-H4-11.
• Parties: In re GULF CONSOLIDATED SERVICES, INC., Debtor.
• Court: United States Bankruptcy Courts. Fifth Circuit. U.S. Bankruptcy Court — Southern District of Texas

110 B.R. 267 (1989)

In re GULF CONSOLIDATED SERVICES, INC., Debtor.

Bankruptcy No. 86-08347-H4-11.

United States Bankruptcy Court, S.D. Texas, Houston Division.

July 11, 1989.

MEMORANDUM DECISION

WILLIAM R. GREENDYKE, Bankruptcy Judge.

The matter before this court concerns the amended objection of Steven A. Buxbaum, Liquidating Trustee of Gulf Consolidated Services, Inc. (hereinafter "Gulf" or "Debtor"), to proofs of claim of the State of Texas which are on file in this case. On February 1, 1989, the parties filed their "Stipulation of Facts on Claim of the State of Texas" advising the court that all matters had been resolved except with respect to

the allowance and/or priority of (i) sales taxes arising prior to three years before the commencement of the case; (ii) amounts claimed in the amended proof of claim, and (iii) any pre- or postpetition claim made by the State of Texas for interest, penalties or other costs of collection in connection with the State of Texas\'s claim.

As indicated in the subsequent briefs filed by both Gulf and the State of Texas, the parties have further limited the scope of the dispute. See Memorandum of Law in Support of Gulf's Response to Scheduling Order: Objection to Claim of State of Texas, filed February 27, 1989; Memorandum of Law in Support of the State of Texas Response to Scheduling Order; Objection to Claim of State of Texas, filed March 3, 1989. All that remains is for this court to characterize the sales tax claimed for the period October 1, 1980 through September 7, 1983; specifically, the court is asked to determine whether that sales tax is

(a) a tax required to be collected or held and for which the Debtor is liable in whatever capacity pursuant to section 507(a)(7)(C), or

(b) an excise tax under section 507(a)(7)(E).

The difference is significant in that a finding that the tax constitutes an "excise" tax will alter the status of the claim from priority to general unsecured, because the taxes in question involve transactions which occurred more than three years before the petition was filed.

This is not a matter of first impression. Gulf and the State have each cited authority in support of their respective positions. Gulf initially argues that we need not look to congressional intent to decipher the overlap between sections 507(a)(7)(C) and 507(a)(7)(E) because the "plain meaning" of the statute is clear and should control. This ostensible plain meaning is garnered from definitions of "excise" taxes found in legal and popular dictionaries. We conclude the plain meaning is not clear and resort to congressional intent is warranted.

This court finds persuasive the authority cited by the State of Texas; the second, seventh, and ninth circuits have all held that where a debtor collects a sales tax from third parties, that tax is of a "trustfund" nature entitled to priority under section 507(a)(7)(C) rather than an excise tax subject to a three-year limitation pursuant to section 507(a)(7)(E). Rosenow v. State of Illinois, Department of Revenue, 715 F.2d 277 (7th Cir.1983), DeChiaro v. New York State Tax Commission, 760 F.2d 432 (2d Cir.1985), Shank v. Washington State Department of Revenue, Excise Tax Division, 792 F.2d 829 (9th Cir.1986). In the State of Texas, "any person who receives or collects a tax or any money represented to be a tax from another person is liable to the state for the full amount. . . ." TEX.TAX CODE...