Lucent Technologies v. Director of Revenue
| Decision Date | 18 November 2003 |
| Docket Number | No. WD 62040.,WD 62040. |
| Citation | 123 S.W.3d 290 |
| Parties | LUCENT TECHNOLOGIES, INC., Respondent, v. DIRECTOR OF REVENUE, Appellant. |
| Court | Missouri Court of Appeals |
James R. Layton, Jefferson City, MO, for appellant.
Peter F. Daniel, Kansas City, MO, for respondent.
Before JOSEPH M. ELLIS, Chief Judge, HAROLD L. LOWENSTEIN, Judge and PATRICIA BRECKENRIDGE, Judge.
The Director of Revenue for the State of Missouri appeals from a decision rendered by the Administrative Hearing Commission reversing the Director's decision to partially deny Respondent Lucent Technologies, Inc.'s request for a refund of local use taxes paid by its predecessor in interest, AT & T, from April 1, 1993, through January 31, 1996. The Director contends that the Commission improperly awarded Respondent a refund of local use taxes that had been mistakenly reported by AT & T as sales tax on its sales tax returns. Viewed in the light most favorable to the Commission's award, the facts are as follows.
In Associated Industries of Missouri v. Lohman, 511 U.S. 641, 114 S.Ct. 1815, 128 L.Ed.2d 639 (1994), the United States Supreme Court, reversing the decision of the Missouri Supreme Court, held that § 144.748, RSMo Supp.1992, which applied an additional 1.5% tax on all transactions subject to the statewide use tax ("the local use tax"), impermissibly discriminated against interstate commerce in localities where that statute caused the use tax to exceed the state sales tax. North Supply Co. v. Director of Revenue, 29 S.W.3d 378, 378-79 (Mo. banc 2000). Subsequently, on remand from the U.S. Supreme Court, the Missouri Supreme Court "struck down sec. 144.748 in its entirety, having determined that the legislature clearly intended that the statute be applied uniformly throughout the state or not at all." Id. at 379 ().1
Following the Missouri Supreme Court's decision, AT & T filed applications for refund of the local use taxes paid by the company between April 1, 1993, and January 31, 1996. The applications requested a total of $4,500,000.00 in refunds. As to the "reason for overpayment," AT & T stated:
In accordance with the Missouri Supreme Court decision on March 26, 1996 declaring Statute 144.748 unconstitutional. This is a protective claim for refund being filed for the purpose of protecting the closing of the Statute of Limitations. Documentation is available to support this claim and will be provided at a latter [sic] date.
The application form asked applicants to "please attach a complete break down" and further stated, "You must submit supporting documentation."
On July 14, 1998, the Department of Revenue issued its final decision on Respondent's refund claim, refunding $1,242,539.33 in local use taxes paid by AT & T with interest. The Director arrived at that figure by referencing AT & T's tax returns over the relevant time period to determine how much AT & T had paid in use tax. The Director denied refund of the remaining $3,257,460.67 requested by AT & T in its applications for refund.
On September 14, 1998, Respondent filed an appeal to the Administrative Hearing Commission, challenging the Director's partial denial of its claims. In that petition, Respondent "protest[ed] the Director's disallowance on the basis that the Director did not refund the total amount of local use tax remitted for the periods covered by the claims." On April 18, 1999, Respondent filed its First Amended Complaint. In its amended pleading, Respondent argued that, while the Director had refunded local use tax for the amounts reported by AT & T to have been paid as use tax, the Director should also have refunded local use taxes on sums that AT & T had improperly reported as sales tax rather than vendor use tax on its returns.2
Subsequently, the Director filed a motion for summary determination asking the Commission to reject Respondent's claim based upon the fact that Respondent had failed to raise the issue of the improperly reported taxes in its refund claim. The Director argued that Respondent had failed to inform the Department of Revenue of its claim that additional use tax had been paid that was not categorized as such on its returns. The Director claimed that Respondent's failure to raise this issue denied the Director the opportunity to meaningfully consider Respondent's claim for the additional $3,257,460.67 in refunds claimed on the applications for refund. On December 27, 2000, the Commission denied the Director's motion.
The Commission heard Respondent's claims against the Director on February 13, 2002. Subsequently, the Commission issued its decision finding that Respondent was entitled to further refund of $2,130,701.87 plus interest for local use taxes that had been paid by AT & T over the relevant period but had been improperly reported as sales tax.3 The AHC found that Respondent had sufficiently stated the grounds for its claims by asserting that it was entitled to a refund of local use taxes that had been paid under § 144.748, which had been struck down by the Missouri Supreme Court as unconstitutional. The AHC stated:
[W]e also believe we should not exalt form over substance in tax matters, and that a mere mistaken nomenclature as to a complementary tax should not preclude a refund. We do not regard Lucent as raising a new claim of exemption, but as simply mislabeling the type of tax. Lucent's claim is, and always has been, that it is entitled to a refund of unconstitutional local use tax. However, it reported the use tax on the wrong form.
* * *
We have concluded that the refund claim stated the grounds for the refund claim, as the statutes require. Contrary to the Director's argument, we do not read the specificity requirement so broadly that our review is precluded because the claim did not state that the vendor's use tax was reported on sales tax returns. We are somewhat sympathetic to the Director's argument that the Director had inadequate information to discern that the use tax was reported on sales tax returns. However, we believe that our ruling here is consistent with the statutory requirements of specificity, as well as the role of this Commission in conducting de novo review.
On appeal from that decision, the Director claims that the AHC erred in refunding additional amounts to Respondent because the refund request did not reflect that Respondent was claiming that the vendor's use taxes had been improperly categorized as sales tax. The Director argues that the refund request did not reference any vendor's use tax being paid as sales tax and that, at the time the Director's final decision was rendered, Respondent had not provided the Director with sufficient information on which to determine whether and in what amount any refund of vendor's use tax could be paid.
When reviewing a decision rendered by the AHC, "[t]he Commission's `factual determinations are upheld if they are supported by the law and, after reviewing the whole record, there is substantial evidence to support them.'" Ford Motor Co. v. Director of Revenue, 97 S.W.3d 458, 460 (Mo. banc 2003) (quoting Southwestern Bell Tel. Co. v. Director of Revenue, 78 S.W.3d 763, 765 (Mo. banc 2002)). "`This Court considers only the evidence most favorable to the agency's decision, and essentially adopts the factual findings of the AHC.'" Sprint Communications Co., L.P. v. Director of Revenue, 64 S.W.3d 832, 834 (Mo. banc 2002) (quoting Hermann v. Director of Revenue, 47 S.W.3d 362, 364 (Mo. banc 2001)). But "`[d]ecisions on questions of law made by the AHC are matters for this Court's independent judgment.'" Id. (quoting Hermann, 47 S.W.3d at 364). Accordingly, "[t]his Court reviews the Commission's interpretation of revenue law de novo." Ford Motor Co., 97 S.W.3d at 460.
The issues raised in this appeal hinge upon the Commission's interpretation of the provisions of § 144.190.3, RSMo 2000. Section 144.190 "provides a limited waiver of sovereign immunity to allow the recovery of taxes, penalties, or interest paid that have been illegally or erroneously computed or collected."4 Sprint Communications Co., 64 S.W.3d at 834. In order to receive such a refund, Section 144.190.3 requires "that `[e]very claim for refund must be in writing and signed by the applicant, and must state the specific grounds upon which the claim is founded.' " Dyno Nobel Inc. v. Director of Revenue, 75 S.W.3d 240, 242 (Mo. banc 2002).
The Commission held that the provision of § 144.190.3, requiring that every claim for refund specifically state the grounds upon which the claim is founded, was sufficiently satisfied by Respondent's claim that it was entitled to a refund of local use taxes that had been paid by it under § 144.748. The Commission held that Respondent was not required to aver in its application for refund that local use taxes had been improperly reported as sales taxes on Respondent's returns. The AHC stated that to find otherwise would exalt form over substance. We disagree.
"As a general rule the sovereign need not refund taxes voluntarily paid even if illegally collected." Sprint Communications Co., 64 S.W.3d at 834. "`Section 144.190, however, provides a limited waiver of sovereign immunity to allow the recovery of taxes, penalties, or interest paid that have been illegally or erroneously computed or collected.'" Ford Motor Co., 97 S.W.3d at 461 (quoting Sprint Communications Co., 64 S.W.3d at 834). Such "[s]tatutory provisions waiving sovereign immunity are strictly construed, and when the state consents to be sued, it may prescribe the manner, extent, procedure to be followed, and any other `terms and conditions as it sees fit.'" Sprint Communications Co., 64 S.W.3d at 834 (quoting Richardson v. State Highway & Transp....
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