McNamara v. Bayou State Oil Corp.

• Decision Date: 30 October 1991
• Docket Number: No. 22565-CA,22565-CA
• Parties: Shirley McNAMARA (Sub Nom. Leon R. Tarver, II), Secretary, Department of Revenue and Taxation, State of Louisiana, Plaintiff-Appellee, v. BAYOU STATE OIL CORPORATION, Defendant-Appellant.
• Court: Court of Appeal of Louisiana — District of US

Page 1099

589 So.2d 1099

Shirley McNAMARA (Sub Nom. Leon R. Tarver, II), Secretary,

Department of Revenue and Taxation, State of

Louisiana, Plaintiff-Appellee, v. BAYOU STATE OIL CORPORATION, Defendant-Appellant.

No. 22565-CA.

Court of Appeal of Louisiana,

Second Circuit.

Oct. 30, 1991.

Rehearing Denied Nov. 27, 1991.

Writ Denied Feb. 21, 1992.

Blanchard, Walker, O'Quin & Roberts by J. Edgerton Pierson, Jr., Shreveport, for appellant.

Pugh and Pugh by Robert G. Pugh, Shreveport, William J. Guste, Jr., Atty. Gen., Roy A. Mongrue, Jr., Thomas F. Wade, Asst. Attys. Gen., Baton Rouge, for appellee.

Before MARVIN, C.J., and SEXTON, NORRIS, HIGHTOWER and BROWN, JJ.

MARVIN, Chief Judge.

In this action for the balance of severance taxes owed the state and on reargument before a five-judge panel as mandated by LSA-Const. Art. 5, Sec. 8(B), we affirm the summary judgment of almost $3,000,000 against appellant, Bayou State Oil Corporation.

The judgment represents the balance of unpaid severance taxes and accrued statutory interest on oil Bayou State produced from approximately 100 wells in the Bellevue Field in Bossier Parish during 31 months of a 34-month period that began in September 1978.

PREFACE

Because its Bellevue wells were stripper wells (producing less than 10 bbls. per day per well), Bayou State generally contends that it timely and correctly paid, and should be taxed only at, the lower stripper-well rate (3.125 percent of value) and not at the rate for fully capable wells that produce more than 25 bbls. per day (12.5 percent of value). LRS 47:633(7)(a), (c).

The judgment, dated May 15, 1990, was calculated on the unpaid three-fourths of the 12.5 percent severance tax rate (almost $1,262,000), plus accrued statutory interest (1.25 percent, or about $14,000, per month). Sec. 633(7)(a), (c), 635, 1601.

Before and after the 34-month period, Bayou State's payment of the lower stripper-well tax rate (3.125 percent) was not questioned by the State because Bayou State consistently and timely certified monthly, the preceding month's production from each well. Bayou State made that certification on Form SEV. 0-3 to the Collector and Department of Revenue, now the Secretary and Department of Revenue & Taxation, herein, for brevity, called the State.

The State did not seek additional severance taxes for three months of the 34-month period (December 1978, January 1979, and June 1979) because Bayou State timely filed, in the next respective month, the 0-3 Form certifying the preceding month's production with the State.

In 1981, after examining the severance tax returns and forms that Bayou State had filed monthly with the State during the 34-month period in question (Forms SEV. 0-1d and 0-1s, reporting production by lease and by parish, respectively), the State notified Bayou State that monthly certification to the State on Form 0-3 of the production from each well for the preceding month was necessary to obtain the lower stripper-well rate. After the State's notification, Bayou State resumed its consistent monthly filing of the 0-3 Form in July 1981.

The State's action, brought in December, 1981, was essentially founded on Bayou State's failure to certify to the State the monthly production from each well on the 0-3 Form for 31 months of the 34-month period. The critical issue is whether the severance tax statutes and regulations require monthly certification of the preceding month's production from each well.

THE CONTENTIONS

There is no genuine issue of any material fact. CCP Art. 966. Disposition in the trial court was apparently delayed by agreement of the litigants to await the result in cases involving similar issues. Sec., Dept. of Revenue v. Tex. Gas Exploration, 506 So.2d 528 (La.App. 1st Cir.1987), writ denied; Davenport Production Corp. v. Secretary of La., 490 So.2d 1140 (La.App.2d Cir.1986), writ denied. Bayou State filed amicus briefs in those cases. See also McNamara v. Scurlock Oil Co., 545 So.2d 1312 (La.App. 1st Cir.1989), writ denied. We shall discuss these three cases later in this opinion.

Under LRS 47:635, severance tax is due monthly, and the taxpayer must submit to the State, "on or before the last day of the month following the month to which the tax is applicable ... a statement on forms procured from the department, of the business conducted by such person during the preceding month, showing the kind of natural resources and the gross quantity of each so severed or produced, the names of the owners at the time of severance, the portion owned by each and any other reasonable and necessary information pertaining thereto that the secretary may require for the proper enforcement of the provisions of this Part." Compare Sec. 641, discussed infra.

The rate of severance tax on production from stripper wells is set in Sec. 633(7)(c), which, during 34-month period in question, provided:

On oil produced from a well classified by the commissioner of conservation as an oil well, and determined by the collector of revenue that such well is incapable of producing more than ten barrels of oil per day, the tax rate applicable to the oil severed from such well shall be one-quarter of the rate set forth in Subparagraph (a) of this Paragraph (7) and such well shall be defined, for severance tax purposes, as a stripper well; provided, however, that such well has been certified as a stripper well to the collector of revenue on or before the last day of the month following the month of production. ¹

Bayou State's reply brief says that:

Bayou State has never contended that the Form SEV. 0-3 is not due on a monthly basis, nor that it is not due on or before the last day of the month following the month in which the production occurs. In its ... Original Brief ... [Bayou State] acknowledged that such returns were not timely filed.... [Timeliness of filing Form 0-3] is not the issue presented for resolution. The real issue before this Court is what is the penalty to be extracted from Bayou State for failing to file that severance tax report. (Emphasis in original.)

Bayou State argues there is no penalty because Sec. 642, before its amendment in 1986, provided:

If any person fails to make a report of the gross production and value of its natural products upon which the severance tax is herein levied within the time and in the manner prescribed, the collector shall examine the books, records and files of any such person to ascertain the amount and value of such production and to compute the tax thereon as provided herein, and according to the procedure hereinbefore provided.

This argument will not stand if the timely filing of the monthly certification Form 0-3 is a prerequisite to the application of the lower stripper-well tax rate under Sec. 633(7)(c), and not merely a report to facilitate the State's periodic audit of severance tax returns, as Bayou State argues. We shall read all sections of the severance tax law together.

The current Sec. 642, now a "specific penalty" section adopted by Act 536 of 1986, also does not avail Bayou State nor limit its obligation to the State, as Bayou State argues. That section imposes a penalty of $250 "for each reporting period" for the failure to make a report of the production upon which the severance tax is levied, but concludes, by stating [in part A] that this specific penalty is "in addition to any other penalties provided" and [in part B] that:

The imposition of the penalty ... shall not be construed as releasing the severer or purchaser from paying ... the amount of tax that may be owed ... under this part.

The State did not seek to apply retroactively, the current $250 "specific penalty" in its action.

Sec. 641 states that the severance tax "shall become delinquent after the date fixed for each monthly report to be filed in the office of the collector, and from such time shall be subject to the addition of interest, penalties, and costs as provided in [R.S. 47:1501 et seq.]." Our emphasis.

Under Sec. 635A(3), "A taxpayer not complying with the provisions of this Subsection [the monthly filing and paying of severance tax, as partially quoted supra] shall be considered delinquent and shall be subject to penalties and interest as provided in R.S. 47:1601 and 1602."

We must therefore conclude that Secs. 635 and 641 of the severance tax chapter, Chapter 6, Taxes on Natural Resources, of Title 47, thereby incorporate the Chapter 18 (Administrative Provisions) of Title 47.

The penalty under Sec. 1602, also not sought in this action by the State, is five percent of the unremitted tax for a period of not more than five months. Although Bayou State does not squarely argue (as it does about the Sec. 642 penalty) that its liability should be limited to the Sec. 1602 penalty in lieu of requiring it to pay the unremitted taxes, any suggested limitation of liability would be directly contrary to the legislative directive in Sec. 1602. That section clearly states that the penalty is "to be added to the [delinquent] tax." We also note that statutory interest is legislatively deemed as if it were "part of the tax due" and is legislatively prohibited from being "waived or remitted." Sec. 1601, hereafter discussed.

Sec. 1601 provides for interest on unpaid severance taxes at the rate of 1.25 percent per month from the "due date until the tax is paid." That section clearly states:

The interest provided for herein shall be an obligation to be collected and accounted for in the same manner as if it were a part of the tax due and can be enforced in a separate action or in the same action for collection of the tax and shall not be waived or remitted. (Our emphasis.)

The State sought only the tax and the statutory interest in its action. We do not and need not consider whether any or all of the penalties, general or specific, in the several sections above discussed, are applicable or are mutually exclusive in Bayou State's circumstance.

We agree that Sec. 633(7) is...