M & T Charters, Inc. v. Commissioner of Revenue

• Decision Date: 14 February 1989
• Citation: 533 N.E.2d 1359,404 Mass. 137
• Parties: M & T CHARTERS, INC. v. COMMISSIONER OF REVENUE.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 1359

533 N.E.2d 1359

404 Mass. 137

M & T CHARTERS, INC. v. COMMISSIONER OF REVENUE.

Supreme Judicial Court of Massachusetts,

Suffolk.

Argued Dec. 8, 1988.

Decided Feb. 14, 1989.

Michael J. McGlone, New Bedford, for taxpayer.

Rosanna Cavallaro, Asst. Atty. Gen., for the Com'r of Revenue.

Before HENNESSEY, C.J., and ABRAMS, NOLAN, LYNCH and O'CONNOR, JJ.

LYNCH, Justice.

M & T Charters, Inc. (taxpayer), appeals from a decision of the Appellate Tax Board (board), affirming the denial of an abatement of a use tax assessed on a yacht purchased by the taxpayer. G.L. c. 64I, §§ 2, 3, 8(f ) (1986 ed.). The taxpayer contends that the vessel was not purchased "for storage, use or consumption" within the Commonwealth so as to come within the ambit of the statute; that the taxpayer successfully rebutted the statutory presumption that goods brought into the Commonwealth within six months of purchase are presumed to have been bought for storage, use, or consumption within the Commonwealth; that the subject vessel is exempt from use tax as being "fifty tons burden or over" or as being purchased "for resale"; and that assessment of the use tax violates the commerce clause of the United States Constitution. The taxpayer also contends that, even if the tax was properly assessed, interest on the tax was improperly computed; and that it had reasonable cause to fail to file a proper return or to pay the tax, and therefore penalties were improperly assessed. We conclude that the abatement was properly denied but that the Commissioner of Revenue (commissioner) improperly computed the amount of interest for which the taxpayer was liable, and we remand for recomputation of interest. Further, we remand for findings and rulings whether the taxpayer had reasonable cause to fail to file a return.

The board found the following facts. The taxpayer was incorporated in New Hampshire on July 14, 1982, for the purpose of buying, selling, leasing, and managing yachts for charter voyages. On or about July 13, 1982, the taxpayer purchased a used yacht from a Missouri corporation through a Florida selling dealer, Spencer Boat Co., Inc. (Spencer). The bill of sale listed Boston, Massachusetts, as the documentation port. The sale and delivery of the yacht occurred at West Palm Beach, Florida, and Spencer was engaged to overhaul and repair the yacht. Due to delays and excessive costs of repair, the taxpayer arranged to move the yacht to Fairhaven, Massachusetts, and have the repairs performed at a shipyard owned and operated by D.N. Kelly & Sons, Inc. (Kelly). On or about August 1, 1982, when the boat was to be removed to Massachusetts, the taxpayer obtained an exemption from payment of a Florida sales and use tax on the purchase of the yacht, since it was to be repaired or altered in Florida and removed from the State within ten days thereafter. The vessel arrived at Kelly's shipyard on or about August 20, 1982, and remained there for approximately three months while extensive repair, maintenance, and cosmetic work was performed on the yacht, both out of the water and at dockside. On the weekend before or after Labor Day, 1982, Clifford H. Tuttle, treasurer and a stockholder of the taxpayer who resides in Marion, Massachusetts, took the yacht on a trip. Tuttle also was the first to charter the yacht after final repairs were completed; the vessel was delivered to him in Nassau, the Bahamas, in December 1982. From 1983 through 1985, the vessel was chartered for cruises in the Caribbean during the winter and in "New England waters," including Massachusetts waters, during the summer. At the end of the summer chartering season, Kelly performed maintenance work on the vessel before it sailed to the Caribbean for the winter. The taxpayer sold the yacht in January, 1986.

The taxpayer was notified on January 23, 1984, of the commissioner's intention to assess a deficiency in use tax for the period July, 1982, and was sent a notice of assessment of "Sales/Use Tax" on July 6, 1984, in the amount of $26,317.04, which included interest and penalties. ¹ The taxpayer filed a business use tax return on August 17, 1984, reporting the purchase of the yacht. On the same date, the taxpayer filed an application for abatement, which was denied on February 22, 1985. The taxpayer filed a timely appeal with the board pursuant to G.L. c. 62C, § 39 (1986 ed.). After a hearing and the taxpayer's request for findings and rulings pursuant to G.L. c. 58A, § 13 (1986 ed.), and Rule 32 of the Rules of Practice and Procedure of the Appellate Tax Board (1988), the board issued a decision, findings, and a report upholding the commissioner's assessment of the tax. From this decision, the taxpayer appeals. A transcript of the hearing was requested and is part of the record of this appeal.

We do not disturb a decision of the board unless it is not supported by substantial evidence or is based on an error of law. See Tenneco Inc. v. Commissioner of Revenue, 401 Mass. 380, 383, 516 N.E.2d 1164 (1988); Towle v. Commissioner of Revenue, 397 Mass. 599, 601, 492 N.E.2d 739 (1986), and cases cited. See also G.L. c. 58A, § 13. We consider the entire record in our review, Tenneco Inc., supra, 401 Mass. at 384, 516 N.E.2d 1164, and will only set aside the board's findings if "the evidence points to no felt or appreciable probability of the conclusion or points to an overwhelming probability of the contrary." Id., quoting New Boston Garden Corp. v. Assessors of Boston, 383 Mass. 456, 466, 420 N.E.2d 298 (1981). The taxpayer has the burden of proving as a matter of law its right to an abatement of the tax. Towle v. Commissioner of Revenue, supra, 397 Mass. at 603, 492 N.E.2d 739.

1. Statutory claims. The board found that the tax was properly assessed on the yacht pursuant to G.L. c. 64I, which imposes a tax "upon the storage, use or other consumption in the commonwealth of tangible personal property purchased from any vendor for storage, use or consumption within the commonwealth." G.L. c. 64I, § 2. The use tax established by G.L. c. 64I, is designed to be complementary with the sales tax established by G.L. c. 64H, in order to reach all transactions, except those expressly exempted, "in which tangible personal property is sold inside or outside the Commonwealth for storage, use, or other consumption within the Commonwealth." Boston Tow Boat Co. v. State Tax Comm'n, 366 Mass. 474, 477, 319 N.E.2d 908 (1974). The use tax was designed to prevent the loss of sales tax revenue from out-of-State purchases. Id. at 476, 319 N.E.2d 908, citing First Agricultural Nat'l Bank v. State Tax Comm'n, 353 Mass. 172, 181, 229 N.E.2d 245 (1967), rev'd on other grounds, 392 U.S. 339, 88 S.Ct. 2173, 20 L.Ed.2d 1138 (1968). The taxpayer here claims its purchase of the yacht is exempt from the provisions of G.L. c. 64I, § 2, because at the time of purchase there was no intent to purchase for storage, use or consumption within Massachusetts. In order to prevail, the taxpayer must overcome the statutory presumption created by G.L. c. 64I, § 8 (f ), which provides that, when property is shipped or brought into the Commonwealth within six months after purchase, it shall be presumed that the property "was purchased from a retailer for storage, use or other consumption" within Massachusetts. A bare assertion by the taxpayer that at the time of purchase there was no such intent, is not sufficient to rebut the presumption which arose one month later when the vessel was brought to Kelly's shipyard. See Towle v. Commissioner of Revenue, supra, 397 Mass. at 605, 492 N.E.2d 739.

The taxpayer also contends that the presumption of G.L. c. 64I, § 8(f ) is inapplicable because the boat was not purchased "from a retailer." We note first of all that the vessel would be exempt from the use tax if its sale were exempt from the sales tax imposed by c. 64H, but that c. 64H, specifically provides that casual sales of boats by a vendor "not regularly engaged in the business of making sales at retail" are not exempt from the use tax imposed by c. 64I. G.L. c. 64H, § 6 (c ). In addition, we are precluded by G.L. c. 58A, § 13, from considering any issue of law which does not appear to have been raised before the board. The record before us does not indicate that this issue was raised or addressed by the taxpayer, and the record is devoid of testimony concerning the business of the seller of the yacht to the taxpayer. The issue is therefore waived. See Brown v. Assessors of Bedford, 398 Mass. 1010, 500 N.E.2d 286 (1986); Minchin v. Commissioner of Revenue, 393 Mass. 1004, 1005, 471 N.E.2d 53 (1984).

The taxpayer argues that there was no "storage" of the vessel in Massachusetts, and that the only "use" of the vessel within the Commonwealth were the repairs performed to enable the yacht to be used in an interstate chartering business. Chapter 64I, § 1, defines "storage," as "any keeping or retention in the commonwealth for any purpose except sale in the regular course of business or subsequent use solely outside of the commonwealth" (emphasis added). The taxpayer did not meet its burden of demonstrating an entitlement to an exemption because the yacht was purchased exclusively for resale in the regular course of business, see, e.g., c. 64I, § 8 (d ); 830 Code Mass.Regs. § 64H.25.1(7) (1988), or for use solely outside the Commonwealth. The board found that Tuttle...