Kenny Kent Chevrolet Co., Inc. v. Indiana Dept. of State Revenue, 82T10-9303-TA-00015

• Citation: 627 N.E.2d 890
• Case Date: January 25, 1994
• Court: Tax Court of Indiana

Page 890

627 N.E.2d 890 KENNY KENT CHEVROLET CO., INC., Petitioner,
v.
INDIANA DEPARTMENT OF STATE REVENUE, and Kenneth L. Miller,
Individually as Commissioner, Respondents. No. 82T10-9303-TA-00015. Tax Court of Indiana. Jan. 25, 1994.

Paul J. Wallace, Bowers, Harrison, Kent & Miller, Evansville, for petitioner.

Pamela Carter, Atty. Gen. of Indiana, David A. Arthur, Deputy Atty. Gen., Indianapolis, for respondents.

FISHER, Judge.

The Petitioner, Kenny Kent Chevrolet Co., Inc. (Kent), appeals a final determination of the Respondent, the Indiana Department of State Revenue (the Department), requiring Kent to pay intangibles tax for 1985 and 1986 (years in issue).

ISSUES

I. Whether the Department has the authority to assess and collect the intangibles tax for the years in issue notwithstanding the subsequent repeal of the tax.

II. If the Department does have that authority, whether it should calculate Kent's intangibles tax liability at the rate applicable to permit stamp holders.

FACTS AND PROCEDURAL POSTURE

Kent is an Indiana corporation in the business of selling and servicing new and used automobiles. Its principal office is located in Evansville, Indiana. Kent often assists its customers in financing the purchase of vehicles by providing installment sales contracts which it sells or assigns to various financing agencies or financial institutions.

For the years in issue, installment sales contracts were regarded as intangibles under IND.CODE 6-5.1-1-1 (repealed). Kent acquired a permit stamp to endorse its intangibles pursuant to IND.CODE 6-5.1-4-3 (repealed). Permit stamp holders were allowed

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to pay intangibles tax liabilities at a lower rate than nonpermit holders. See IND.CODE 6-5.1-2-2 (repealed); IND.CODE 6-5.1-4-1 (repealed); IND.CODE 6-5.1-4-5 (repealed). On September 17, 1985, the Department revoked Kent's stamp permit, claiming Kent had failed to report quarterly to the Department all intangibles it executed after April 1, 1985, as required by IC 6-5.1-4-4 (repealed) and IC 6-5.1-4-5 (repealed).

On November 10, 1988, the Marion Superior Court declared the Indiana intangibles tax unconstitutional. That decision was later reversed by the Indiana Supreme Court. Indiana Dep't of State Revenue v. Felix (1991), Ind., 571 N.E.2d 287, cert. dismissed, Felix v. Indiana Dep't of State Revenue (1992), --- U.S. ----, 112 S.Ct. 1073, 117 L.Ed.2d 278. In 1989, however, the legislature repealed the intangibles tax retroactive to November 10, 1988. Pub.L. 80-1989, Secs. 18-19. The legislature also removed the intangibles tax from the tax administration act's definition of "listed taxes" in IND.CODE 6-8.1-1-1.

On November 29, 1988, the Department issued to Kent notices of intangibles tax due for the period April 1, 1985, to December 31, 1986. Kent timely filed with the Department a letter protesting the assessment. On October 21, 1992, the Department denied Kent's protest. Kent now appeals. Additional facts will be supplied as necessary.

DISCUSSION AND DECISION STANDARD OF REVIEW

The court reviews appeals from the Department de novo. Maurer v. Indiana Dep't of State Revenue (1993), Ind.Tax, 607 N.E.2d 985, 986 (citing IND.CODE 6-8.1-9-1(d); Hoosier Energy Rural Elec. Coop., Inc. v. Indiana Dep't of State Revenue (1988), Ind.Tax, 528 N.E.2d 867, 869, aff'd (1991), Ind., 572 N.E.2d 481, cert. denied (1991), --- U.S. ----, 112 S.Ct. 337, 116 L.Ed.2d 277). Therefore, the court is bound by neither the issues nor the evidence at the administrative level. Id.

I

When the legislature repealed the intangibles tax effective November 10, 1988, it did two things. First, it repealed the statute that imposed the tax, IND.CODE 6-5.1-2-1. Next, it repealed all related provisions regarding the assessment, payment, and administration of the intangibles tax. More specifically, it repealed the intangibles tax as a "listed tax" in IC 6-8.1-1-1. "The provisions of ... [article 8.1] apply for the purposes of imposing, collecting, and administering the listed taxes." IND.CODE 6-8.1-1-6. Consequently, Kent argues that because there is neither an intangibles tax statute nor an administrative statute left for the Department to administer and enforce, there is no intangibles tax liability.

In response, the Department cites the "repeal-gap" statute, IND.CODE 1-1-5-1:

the repeal of any statute shall not have the effect to release or extinguish any penalty, forfeiture or liability incurred under such statute, unless the repealing act shall so expressly provide; and such statute shall be treated as still remaining in force for the purposes of sustaining any proper action or prosecution for the enforcement of such penalty, forfeiture or liability.

The Department maintains that this statute has the effect of continuing both Kent's liability for intangibles tax incurred prior to the 1988 repeal as well as the Department's authority to enforce that liability.

Kent relies on County Dep't of Public Welfare of Allen County et al. v. Potthoff (1942), 220 Ind. 574, 44 N.E.2d 494, for the proposition that when a statute was repealed "it was considered, except as to transactions passed and closed, as if it had never existed." Id. at 584, 44 N.E.2d at 497. Thus, Kent argues, IC 1-1-5-1 was intended to continue only those actions to enforce liability under the repealed statute that were instituted prior to the effective date of repeal. Because no proceeding was pending to collect taxes...