Revenue Cabinet v. Castleton, Inc., 91-CA-000218-MR

• Decision Date: 27 March 1992
• Docket Number: No. 91-CA-000218-MR,91-CA-000218-MR
• Citation: 826 S.W.2d 334
• Parties: REVENUE CABINET Commonwealth of Kentucky, Appellant, v. CASTLETON, INC., Appellee.
• Court: Kentucky Court of Appeals

Page 334

826 S.W.2d 334

REVENUE CABINET Commonwealth of Kentucky, Appellant, v. CASTLETON, INC., Appellee.

No. 91-CA-000218-MR.

Court of Appeals of Kentucky.

March 27, 1992.

Celia M. Dunlap, Div. of Legal Services, Frankfort, for appellant.

Douglas P. Romaine, Stoll, Keenon & Park, Lexington, for appellee.

Before LESTER, C.J., and EMBERTON and HUDDLESTON, JJ.

HUDDLESTON, Judge.

This is an appeal from a judgment which reversed an order of the Kentucky Board of Tax Appeals. The Board had dismissed an appeal by Castleton, Inc., from a ruling by the Revenue Cabinet denying its claim for a tax refund. The Board refused to consider the appeal because of a finding that it was not timely filed. Because we agree with Fayette Circuit Court that the appeal to the Board was timely, we affirm its judgment.

On January 17, 1984, the Revenue Cabinet issued a sales and use tax assessment against Castleton, Inc., in the amount of $51,450.90, plus applicable interest and penalties. In response, Castleton, on February 12, 1984, made a payment of $8,348.98 to the Cabinet for a portion of the assessment and protested the remaining portion. On December 27, 1984, the Revenue Cabinet issued a final letter ruling finding Castleton's remaining tax liability, after its payment, to be $42,012.39, plus applicable interest.

Castleton appealed to the Board of Tax Appeals, protesting the Cabinet's tax assessment. On April 17, 1986, the Board ruled that Castleton was liable for only $26,934.32 of this assessment.

On May 22, 1986, Castleton filed a claim with the Cabinet requesting a refund of $2,960.08 of its initial $8,384.98 tax payment made in 1984, asserting that certain transactions upon which the tax had been paid were, in fact, exempt. The Revenue Cabinet, in a letter dated June 11, 1987, denied Castleton's refund claim. Castleton then filed a formal written protest with the Cabinet concerning the denial of the claim.

Thereafter, Castleton made repeated requests for a final ruling by the Cabinet. On November 23, 1988, the Revenue Cabinet issued a final ruling denying Castleton's claim for refund. Castleton filed an appeal from that ruling with the Board of Tax Appeals. The Cabinet later moved to dismiss this appeal, claiming that the Board was without jurisdiction because it was not timely filed. On May 12, 1989, the Board entered an order dismissing Castleton's appeal based upon a finding that the Cabinet's June 11, 1987, letter to Castleton denying its refund claim constituted a final ruling for appeal purposes. Hence, the Board concluded, Castleton was required to file an appeal concerning the refund denial within thirty days thereafter.

Castleton appealed the Board's decision to Fayette Circuit Court. On December 7, 1990, the court, reversed the Board's decision, finding that the Cabinet's June 11, 1987, letter was not a final, appealable order, and holding that the Board did have jurisdiction to hear the appeal from the Cabinet's final ruling of November 23, 1988.

On appeal, to this Court, the Revenue Cabinet contends that the Board of Tax Appeals correctly determined that Castleton had a statutory duty to appeal its June 11, 1987, letter denying Castleton's refund claim. The Cabinet asserts that while such denial did not constitute a final ruling, it did amount to a "determination" from which Castleton was required to appeal. Thus, the Cabinet insists that the present appeal from the November 23, 1988, ruling, which again denied the refund claim, was untimely.

The relevant statute, KRS 131.340(1), provides:

The Kentucky board of tax appeals is hereby vested with exclusive jurisdiction to hear and determine appeals from final rulings, orders and determinations of any agency of state or county government affecting revenue and taxation. (Emphasis supplied.)

In its May 12, 1989, order dismissing Castleton's appeal, the Board specifically found that the letter issued by the Revenue Cabinet to Castleton on June 11, 1987, was a final ruling under KRS 131.340. While now admitting that the Board erred in making such a finding, the Cabinet, nevertheless, argues that even though it was not a final ruling, it was still a "determination" under the rule from which an appeal was required to be taken within thirty days. We do not so interpret KRS 131.340(1).

From our reading of this statutory provision we conclude that the Board of Tax Appeals is vested with exclusive jurisdiction to hear and determine appeals only from final determinations or rulings by the Revenue Cabinet on matters affecting revenue and taxation. The "plain meaning" of the language contained in KRS 131.340(1) that the word "final" modifies not only "rulings," but also "orders and determinations." See, generally, Board of Education of Russellville Independent Schools v. Logan Aluminum, Inc., Ky., 764 S.W.2d 75 (1989); Revenue Cabinet v. JRS Data Systems, Inc., Ky.App., 738 S.W.2d 828 (1987).

This interpretation is also consistent with other statutory provisions applicable to the Revenue Cabinet. KRS 131.110, which applies to protests of tax assessments, provided, in pertinent part, prior to amendment in 1990 that:

(1) The Revenue Cabinet shall mail to the taxpayers a notice of any tax assessed by it. The assessment shall be final if not protected in writing to the cabinet within thirty (30) days from the date of notice. Such protest shall be accompanied by a supporting statement setting forth the grounds upon which the protest is made. Upon written request, the cabinet may extend the time for filing the supporting statement if it appears the delay is necessary and unavoidable. The refusal of such extension may be reviewed in the same manner as a protested assessment.

* * * * * *

(3) After considering the taxpayer's protest, including any matters presented at the final conference, the cabinet shall issue a final ruling on any matter still in controversy, which shall be mailed to the taxpayer. The ruling shall state that it is a final ruling of the cabinet, generally state the issues in controversy, the cabinet's position thereon and set forth the procedure for prosecuting an appeal to the Kentucky Board of Tax Appeals.

* * * * * *

(5) After a final ruling has been issued, the taxpayers may appeal to the Kentucky Board of Tax Appeals pursuant to the provisions of KRS 131.340. (Emphasis supplied.)

This statute clearly indicates that after a protest to a tax assessment has been made by a taxpayer, the Cabinet shall issue a final ruling or determination on the matter. It is only when such ruling is final--and so states--that it can be appealed to the Board of Tax Appeals.

The Cabinet appears to concede that its June 11, 1987, determination or ruling was not a "fina...