JC Penney v. BD. OF TAX ASSESSORS, A98A0410.

• Decision Date: 05 June 1998
• Docket Number: No. A98A0410.,A98A0410.
• Parties: J.C. PENNEY COMPANY, INC. v. RICHMOND COUNTY BOARD OF TAX ASSESSORS.
• Court: Georgia Court of Appeals

504 S.E.2d 201

233 Ga. App. 399

J.C. PENNEY COMPANY, INC. v. RICHMOND COUNTY BOARD OF TAX ASSESSORS.

No. A98A0410.

Court of Appeals of Georgia.

June 5, 1998.

Reconsideration Denied July 14, 1998.

Certiorari Denied November 20, 1998.

Smith, Gambrell & Russell, Edward K. Smith, William B. Wood, Atlanta, for appellant. Burnside, Wall, Daniel, Ellison & Revell, Harry D. Revell, Richmond, for appellee.

RUFFIN, Judge.

In this tax matter concerning valuation of tangible personal property, J.C. Penney Company, Inc. ("J. C. Penney") appeals from the superior court's determination of the fair market value of J.C. Penney's inventory at its store in Augusta, Georgia, for the 1996 tax year. For reasons which follow, we reverse the superior court's decision and remand the case for further consideration.

The evidence shows that on January 3, 1996, the Richmond County Board of Tax Assessors ("the Board") sent J.C. Penney notice that, for taxation purposes, the fair market value of J.C. Penney's merchandise at the store was $3,194,296. J.C. Penney contested this figure, arguing that the acquisition cost of the inventory was $2,640,268 and that the fair market value was $1,397,000. In support of its claim, J.C. Penney submitted an appraisal report to the Board. J.C. Penney's appeal was certified to the Richmond County Board of Equalization, which affirmed the Board's valuation.

J.C. Penney appealed to the superior court, which conducted a non-jury trial to review the evidence de novo. See OCGA § 48-5-311(g)(3). At trial, the Board admitted that the $3,194,296 figure was incorrect and instead argued that the fair market value was $2,640,268, the acquisition cost of the inventory. J.C. Penney supported its claim that the fair market value was $1,397,000 through the testimony of an appraiser and a J.C. Penney employee who worked in the retailer's tax department.

Under J.C. Penney's proposed valuation method, "seller" was defined for purposes of determining fair market value as an entity or business that was willing to purchase all of J.C. Penney's goods and then proceed to take J.C. Penney's place in the business arena. J.C. Penney argued that in determining fair market value the tax assessors should have started with the cost of the inventory and then adjusted for all markdowns that occurred on January 1, 1996, when the merchandise was appraised. According to J.C. Penney, these markdowns occurred because certain merchandise had not been popular with consumers and thus was obsolete or less valuable. J.C. Penney argued that the other factor the tax assessors needed to consider was J.C. Penney's name brands. J.C. Penney maintained that if another business entity purchased all of J.C. Penney's goods at one time and took over J.C. Penney's operations, the new entity would not have paid as much for the lines of clothes over which J.C. Penney had sole control. According to J.C. Penney, the labels on this merchandise had to be removed before the new business entity would have been able to sell it. To summarize J.C. Penney's calculations, the retailer started with the cost of the inventory, $2,640,268, subtracted the economic obsolescence of the goods (the markdowns on merchandise not yet sold), and then subtracted the label merchandise to arrive at the figure of $1,397,000.

In disagreeing with the Board's argument that the acquisition cost equaled the fair market value of the property, J.C. Penney's accountant explained that "[t]here are three terms: there's price which is what things are marked at or what somebody may ask; there is cost which is what somebody may pay for something; and there is value which is what it is worth." The accountant further stated that generally "cost and fair market value are alike [only] by coincidence." He then presented evidence showing that acquisition cost and fair market value in this instance were not alike.

The Board presented no witnesses or evidence at trial. Nevertheless, the superior court agreed with the Board's valuation and in a cursory order found the fair market value to be $2,640,000. J.C. Penney appealed to this Court.

"Just and fair valuation of property is a question to be determined by the factfinder, here, the trial court. [Cit.] On appellate review, the trial court's determination must be affirmed unless it is clearly erroneous. OCGA § 9-11-52(a)." Dougherty County Bd. of Equalization v. Casto Dev. Co., 228 Ga.App. 293, 295, 491 S.E.2d 483 (1997). Moreover, "[o]n appeal, this court considers the sufficiency of the evidence and not its weight. [Cit.]" Hawkins v. Grady County Bd. of Tax Assessors, 180 Ga.App. 834, 835(3), 350 S.E.2d 790 (1986).

For ad valorem tax purposes "[a]ll property shall be returned for taxation at its fair market value...." OCGA § 48-5-6. Fair market value of property is "the amount a knowledgeable buyer would pay for the property and a willing seller would accept for the property at an arm's length, bona fide sale." OCGA § 48-5-2(3). "It is the duty of the board of tax assessors to `see that all taxable property within the county is assessed and returned at its fair market value and that fair market values as between individual taxpayers are fairly and justly equalized so that each taxpayer shall pay as near as may be only his proportionate share of taxes.' [Cit.]" (Emphasis omitted.) Rogers v. DeKalb County Bd. of Tax Assessors, 247 Ga. 726, 728(2), 279 S.E.2d 223 (1981). See also Colvard v. Ridley, 218 Ga. 490, 128 S.E.2d 732 (1962).

We recently addressed the issue of determining fair market value of inventory in Eckerd Corp. v. Coweta County Bd. of Tax Assessors, 228 Ga.App. 94, 103(3), 491 S.E.2d 173 (1997). In Eckerd, the appellant argued that the tax assessors had improperly assessed its inventory at cost because cost and fair market value are exclusive of one another. We disagreed, holding that "[w]hile we agree that property must be assessed at fair market value, OCGA § 48-5-6, `cost' is not a concept foreign to such valuation. What the taxpayer was willing to pay for the personalty, its cost to him, is one of the factors from which fair market value may be determined, if not the primary factor, because such figure is fixed, while other...