McDonald's Executive Offices v. Nebraska Dept. of Revenue
| Decision Date | 26 March 1993 |
| Docket Number | No. S-90-1073,S-90-1073 |
| Citation | 243 Neb. 82,497 N.W.2d 377 |
| Parties | McDONALD'S EXECUTIVE OFFICES, Appellee and Cross-Appellant, v. NEBRASKA DEPARTMENT OF REVENUE, State of Nebraska, Appellant and Cross-Appellee. |
| Court | Nebraska Supreme Court |
Syllabus by the Court
1. Statutes: Appeal and Error. Statutory interpretation is a matter of law in connection with which an appellate court has the obligation to reach an independent, correct conclusion irrespective of the determination made by the lower court.
2. Annexation: Ordinances. Under 316 Neb.Admin.Code, ch. 9, § 004.01 (1983), a map that depicts an annexed area and is attached to a certified copy of the annexation ordinance is required to be certified separately.
3. Taxation. The filing of the "Nebraska and City Sales and Use Tax Return" form without an entry of any kind on the lines dealing with use taxes constitutes the failure to file a use tax return.
Don Stenberg, Atty. Gen., and David Edward Cygan, Lincoln, for appellant.
Thomas J. Culhane and Samuel E. Clark, of Erickson & Sederstrom, P.C., Omaha, for appellee.
Through various entities, the sole proprietorship petitioner-appellee, McDonald's Executive Offices, operates a number of restaurants, including one located within an area of Omaha that was annexed subsequent to the restaurant's establishment. Determining that the proprietorship had failed to pay certain city sales and state consumer's use taxes attributable to the operation of the annexed restaurant, the respondent-appellant, Nebraska Department of Revenue, notified the proprietorship that its sales and use tax payments were deficient. Following a hearing upon the proprietorship's request for a redetermination, the Tax Commissioner sustained the department's deficiency determination.
On further appeal by the proprietorship, the district court reversed the department's determination with regard to the city sales taxes, but affirmed the department's determination with respect to the use taxes. In this court, the department claims the district court erred in ruling that the failure of the city to have separately certified the map attached to the certified copy of the annexation ordinance it provided to the department precludes collection of the sales taxes at issue. The proprietorship has in turn cross-appealed, asserting the district court erred in decreeing that a 5-year, rather than a 3-year, period of limitations applies to the use tax deficiency.
We affirm.
Neb.Rev.Stat. § 77-27,127 (Reissue 1990) specifies that final actions of the Tax Commissioner are to be reviewed under the Administrative Procedure Act, Neb.Rev.Stat. § 84-901 et seq. (Reissue 1987 & Cum.Supp.1992). PMD Investment Co. v. State, 216 Neb. 553, 345 N.W.2d 815 (1984). See, also, Interstate Printing Co. v. Department of Revenue, 236 Neb. 110, 459 N.W.2d 519 (1990). Inasmuch as the petition instituting these review proceedings was filed in the district court prior to the effective date of the amendments effected by 1989 Neb.Laws, L.B. 213, we review the factual questions involved de novo on the record. See Interstate Printing Co. v. Department of Revenue, supra.
However, this matter also involves questions of statutory interpretation, which are matters of law in connection with which we have the obligation to reach an independent, correct conclusion irrespective of the determination made by the lower court. See, Howard v. City of Lincoln, 243 Neb. 5, 497 N.W.2d 53 (1993); Northern Bank v. Federal Dep. Ins. Corp., 242 Neb. 591, 496 N.W.2d 459 (1993). See, also, Stack v. Sobczak, 243 Neb. 78, 497 N.W.2d 374 (1993).
The proprietorship has operated the restaurant since 1978 in an area which was annexed by the city through an ordinance which became effective on July 22, 1982. On that same date, the department received from the city a certified copy of the ordinance annexing the restaurant, to which copy was attached, and by reference made a part thereof, a 6 3/8- by 7 3/16-inch map depicting a part of the city and delineating, without further explanation, the "Existing City Limits" and a "Study Area." The city also supplied the department with a "Listing of Businesses In Annexation," which included the restaurant.
The proprietorship claims it had no knowledge of the annexation until a 1986 audit by the department and therefore had not collected from its customers or paid to the department the city sales tax. As a result of the audit, the department determined that the proprietorship had underpaid its taxes, and accordingly, on September 30, 1986, the department sent the proprietorship a "Notice of Deficiency Determination."
The proprietorship's position that the failure of the city to have provided the department with a separately certified map of the annexed area in which its restaurant is located rests upon language found in Neb.Rev.Stat. § 77-27,143(1) (Reissue 1990) and 316 Neb.Admin.Code, ch. 9, § 004.01 (1983). Section 77-27,143(1) provides in part:
The administration of all sales and use taxes adopted under the Local Option Revenue Act shall be by the Tax Commissioner who may prescribe forms and adopt and promulgate reasonable rules and regulations in conformity with the act for the making of returns and for the ascertainment, assessment, and collection of taxes imposed under such act. The incorporated municipality shall furnish a certified copy of the adopting or repealing ordinance to the Tax Commissioner in accordance with such rules and regulations as he or she may adopt and promulgate.
The regulation, § 004.01, adopted pursuant to the foregoing statutory authority, reads in part:
If any city in which a local sales and use tax has been imposed shall thereafter change or alter its boundaries in any manner, such city shall forward to the State Tax Commissioner by certified or registered mail a certified copy of the ordinance making such changes. Such ordinance shall reflect the effective date thereof, determined by statutory authority applicable to the class of city adopting a local option sales and use tax ordinance, and shall be accompanied by a certified map of the city clearly showing the territory added thereto or detached therefrom. The ordinance required to be furnished the Tax Commissioner shall also be accompanied by a list of all licensed retailers within the annexed or detached territory.
In effect, the department argues that since the map was attached to a certified copy of the ordinance, the map itself had been certified. It may be that in some circumstances, attachments to certified documents may be considered to have been certified. See, e.g., State v. Wallace, 240 Neb. 865, 484 N.W.2d 477 (1992) (). But in this instance, the department's position overlooks the plain language of its own regulation, which clearly requires a separately certified map, and for good reason, as this case illustrates.
The copy of the ordinance supplied the department was certified as being "a true and correct copy of the original document now on file in the City Clerk's office." Although it is true that the ordinance declares that "[a] map of the area is attached hereto, marked 'Exhibit A', and by this reference made a part of this Ordinance," the ordinance also proclaims that while the land annexed is marked on the map, the map is supplied "for convenience and, in case of discrepancy, the description" of the annexed land contained in the ordinance shall control. Moreover, whereas the ordinance describes the land annexed with reference to section, range, and township, the map makes no such references.
In addition, as a result of the failure of the map to define the meaning of the legend "Study Area" and of its failure to correlate the description of the annexed area to the description used in the ordinance, it cannot be said that the map "clearly" defines the annexed area, as the regulation requires.
Thus, the district court correctly determined that the department may not collect the sales taxes at issue.
The department has devised and distributes a "Nebraska and City Sales and Use Tax Return" form which, as its name implies, combines the reporting of sales taxes with the reporting of use taxes. In accordance with the department's policy of treating forms filed with no information supplied to questions relating to use taxes as the failure to file a return with respect to such taxes, the back of the form contains the following instructions:
This return provides for the reporting of both sales and use tax. The entries for each tax remain separate. If the retailer intends to file a return for both taxes, a word, statement, number or figure must be entered on the appropriate lines of the return. Failure to do so will extend the statute of limitations for audit and collection purposes to five years.
During the period in question, from October 1, 1980, through July 31, 1983, the proprietorship left blank on all the forms it filed the lines entitled "Nebraska consumer's use tax," "City Consumer's Use Tax," and "Total Nebraska and city consumer's use tax." On most of the forms the last entry made was on the line for sales tax due, and with few exceptions no entry was made on the line entitled "Total Nebraska and city sales and use tax due." When an entry was made on this line, the entry read the same as did the sales tax due figure.
The proprietorship realized that a consumer's use tax would be due on certain items purchased for use in its business on which sales taxes had not been collected, but incorrectly assumed that its accounting system provided for the reporting of the use tax. It did not become aware of the fact that it had not properly accounted for...
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