Petworth Pharmacy, Inc. v. District of Columbia, 7525.
| Decision Date | 26 March 1975 |
| Docket Number | No. 7525.,7525. |
| Citation | 335 A.2d 256 |
| Parties | PETWORTH PHARMACY, INC., Appellant, v. DISTRICT OF COLUMBIA, Appellee. |
| Court | D.C. Court of Appeals |
Sylman I. Euzent, Kensington, Md., for appellant.
Melvin J. Washington, Asst. Corp. Counsel, Washington, D. C., with whom C. Francis Murphy, Corp. Counsel, and Henry E. Wixon, Asst. Corp. Counsel, Washington, D. C., were on the brief, for appellee.
Before KELLY, KERN and PAIR,* Associate Judges.
This appeal from a determination in the Superior Court, Tax Division, that a franchise tax deficiency in the sum of $25,255.-99 was validly assessed against appellant Petworth Pharmacy, Inc. (Petworth) raises questions of whether the trial court erred in (1) refusing to admit into evidence certain of Petworth's business records; (2) declining to dismiss the tax fraud penalty for failure of the District of Columbia to comply with Super.Ct.Tax R. 7; (3) finding that Petworth's books and records were inadequate; (4) holding the government had met its burden of proving a tax deficiency; (5) finding that the proof of price was adequate; (6) holding the government had met its burden of proof of fraud; (7) failing to rule that the government's stipulated answers to a hypothetical question necessarily inferred a stipulation of the facts contained therein; and (8) failing to grant a fair, impartial and unprejudiced trial. We reverse and remand for a new trial.
On October 13, 1971, the District of Columbia Department of Finance and Revenue sent notice to Petworth of a $34,491.30 tax deficiency, including a 50% fraud penalty and interest charges, based upon an intentional failure to report income of $393,234.13 for the calendar years 1967, 1968 and 1969. Petworth was alleged to have made illegal sales of Robitussin AC, a cough syrup containing codeine, without reporting revenues from such sales on its tax return, and to have awarded Richard Rosenberg, a corporate officer, an excessive corporate bonus of $25,300.
Petworth paid the tax and brought suit pursuant to D.C.Code 1973, § 47-1593, and Super.Ct.Tax R. 6(b)(7)(A) for a redetermination of the assessed deficiency, claiming it had reported all Robitussin AC sales in its duly-filed tax returns for each of the years in question and that the bonus had been properly treated as a deductible item under D.C.Code 1973, § 47-1561. In a subsequent amendment to the complaint Petworth admitted that an additional tax of $1,518 was due for the year 1969, thus reflecting its acceptance of the government's disallowance of the bonus.
Petworth took the position at trial that the nonprescription Robitussin AC sales were cash sales, rung up on its cash registers and included in its daily cash receipts as miscellaneous products sales, upon which franchise taxes had been paid for all three years in dispute. Its direct case consisted of testimony by Richard Rosenberg, Petworth's co-manager and vice-president; by Phil Blank, a District of Columbia tax investigator and of various exhibits, all in an attempt to prove that Robitussin AC sales were included in Petworth's revenues and reported in its tax returns. When Petworth attempted to introduce its daily cash reports, cash register tapes, and 1968 summary book, under the Federal Shop Book Act, 28 U.S.C. § 1732(a) (1970), the court refused their admission on the grounds that they were irrelevant and contained discrepancies which rendered them inaccurate. The parties submitted posttrial briefs in accordance with Super.Ct. Tax R. 12, after which the trial judge entered an initial order finding unreported sales by Petworth of Robitussin AC which were the result of a conscious fraudulent plan. The court issued a subsequent order belatedly admitting Petworth's exhibits 1, 4 and 5 only into evidence, and stating the exhibits would be considered in determining the final order in the case which dealt only with the dollar amount of the tax deficiency.
The governent's theory of the case was that the Rosenbergs had made sales of Robitussin AC on behalf of the pharmacy but had kept the profits themselves without reporting them as corporate sales. Its case consisted of testimony and records of wholesale drug distributors attesting to...
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