State Bd. of Tax Com'rs v. Jewell Grain Co., Inc., 86S00-8812-TA-981
| Decision Date | 12 July 1990 |
| Docket Number | No. 86S00-8812-TA-981,86S00-8812-TA-981 |
| Citation | 556 N.E.2d 920 |
| Parties | STATE BOARD OF TAX COMMISSIONERS Appellant (Respondent Below), v. JEWELL GRAIN COMPANY, INC., Appellee (Petitioner Below). |
| Court | Indiana Supreme Court |
Linley E. Pearson, Atty. Gen. and Ted J. Holaday, Deputy Atty. Gen., Indianapolis, for appellant.
Steven R. Buschmann, Bushmann, Carr & Shanks, P.C., Indianapolis, for appellee.
Jewell Grain acquired a grain elevator in Steuben Township, Warren County, during June 1985. Jewell filed its first Indiana business tangible personal property tax return for the elevator on May 15, 1986. On that return, Jewell listed the grain it owned, but it failed to file a Form 103-N indicating property that was in its possession but owned by someone else. In October 1986, the State Board of Tax Commissioners audited Jewell. The Board requested that Jewell provide the information that should have been on the Form 103-N. Jewell did so.
The Board compared the information provided by Jewell with personal property tax returns filed in Steuben Township. The Board deducted government-owned grain, grain located in Illinois, and grain which had been reported by farmers in Steuben Township from the amounts and values Jewell provided, and it increased Jewell's assessment accordingly. The Board did not compare the list with personal property tax returns filed outside of Steuben Township and therefore did not give Jewell credit for taxes grain owners may have paid outside of Steuben Township.
Jewell appealed the Board's final assessment to the Indiana Tax Court. The Tax Court found the Board's assessment contrary to law, and remanded it for redetermination. Jewell Grain Co. v. State Bd. of Tax Comm'rs (1988), Ind.Tax, 524 N.E.2d 49.
The Board now appeals to this Court. It claims The Tax Court erred by looking at the applicable statutes and regulations in isolation and failing to give effect to overall meaning, and by looking for authority requiring assessment rather than authority permitting assessment. The Board asks us to reverse the Tax Court's determination that the State Board acted unlawfully in assessing taxes against Jewell for the grain Jewell failed to report until after it was audited.
Judicial review of an administrative decision is limited to whether the agency possessed jurisdiction over the subject matter, and whether the agency's decision was made pursuant to proper procedures, was based upon substantial evidence, was not arbitrary or capricious, and was not in violation of any constitutional, statutory or legal principle. State Bd. of Tax Comm'rs v. South Shore Marina (1981), Ind.App., 422 N.E.2d 723 [hereinafter South Shore I ].
Given this standard of review for administrative actions we cannot say that the Board's assessment against Jewell Grain was erroneous.
Liability for property tax is set forth in Chapter 2, Section 4 of the article on property taxes which reads:
(a) The owner of any tangible property on the assessment date of a year is liable for the taxes imposed for that year on the property.
(b) A person holding, possessing, controlling, or occupying any tangible property on the assessment date of a year is liable for the taxes imposed for that year on the property unless:
(1) he establishes that the property is being assessed and taxed in the name of the owner; or
(2) the owner is liable for the taxes under a contract with that person.
When a person other than the owner pays any property taxes as required by this section, that person may recover the amount paid from the owner, unless the parties have agreed to other terms in a contract.
Ind.Code Sec. 6-1.1-2-4 (West 1989).
Any ambiguity in a tax-levying statute is construed against the State and in favor of the taxpayer. State Dep't of Revenue v. Estate of Eberbach (1989), Ind., 535 N.E.2d 1194. When a statute is clear and unambiguous, however, there is no need to apply any rules of construction other than the rule that words and phrases shall be taken in their plain, ordinary, and usual sense. State v. Indiana-Kentucky Elec. Corp. (1982), Ind.App., 436 N.E.2d 352, 356, reh'g granted, (1982), 438 N.E.2d 782.
We find this statute unambiguous. Under the ordinary meaning of the words chosen by the legislature, the Board has the discretion to tax either the owner or the possessor unless the possessor can prove the owner is being taxed, or the owner has accepted liability for the tax under contract.
The statute does not clearly indicate any order of priority. The statute does not place primary tax liability on a possessor, because its provisions allow the possessor to escape liability by establishing that the property is being assessed and taxed to the owner, and to recover the amount paid from the owner unless the parties agreed to other terms in a contract. Empire Gas of Rochester, Inc. v. State (1985), Ind.App., 486 N.E.2d 1036, 1041.
The Tax Court has permitted the use of Ind.Code Sec. 6-1.1-2-4(b) in certain circumstances to levy an assessment against a possessor. In State Line Elevator v. Board of Tax Comm'rs (1988), Ind.Tax, 528 N.E.2d 501, the State Board found the operator of a grain elevator liable for business personal property tax on grain stored in elevators. The elevator appealed the final determination and attempted to claim an exemption available only to owners. The Tax Court indicated that State Line Elevator was incorrect in its assumption that the assessment was based on ownership. "The assessment was made under IC 6-1.1-2-4(b) on the basis that State Line is a possessor who has not established that 'the property is assessed and taxed in the name of the owner.' " 528 N.E.2d at 502. This reading of the statute is consistent with the provision that sets forth the assessor's recourse in the event a taxpayer fails to file. 1
While Ind.Code Sec. 6-1.1-2-4 requires that the holder establish that the owner has in fact been assessed, the Indiana Administrative Code provides an even simpler means for a holder to escape liability. Under the administrative rules grain in storage was to be assessed as follows:
The owner of grain shall file an assessment return declaring the assessment and liability for taxes in each taxing district where said grain was located as of March 1 of each assessment year.
Every elevator or other storage facility shall file a true and complete list of all owners to be assessed, including name and address, description, quantity, etc., for any property which it may hold, possess or control in any capacity whatsoever on the assessment date and attach same as part of its business personal property assessment return Form 103.
In the event an elevator or other storage facility does not furnish a listing of property held, possessed or controlled as of the assessment date, so as to enable the property to be assessed and taxed to the owner, then the assessor shall assess and tax said property to the elevator or other storage facility so holding, possessing or controlling the property.
Ind.Admin.Code tit. 50, r. 1-2-1(b)(3) (1988). 2 Jewell Grain did not provide the evidence required by statute to avoid assessment. It did not avail itself of the opportunity to avoid assessment by filing Form 103-N with its return. It provided the form only after it was audited. The Board was not under any statutory obligation to accommodate this tardy compliance. Simply stated, the Board's assessment was lawful.
An arbitrary and capricious administrative act is defined in South Shore I as "one which is willful and unreasonable, without consideration and in disregard of the facts or circumstances in the case." 422 N.E.2d at 727. That opinion further explains that an arbitrary and capricious act is "one without some basis which would lead a reasonable and honest person to the same conclusion." Id. The Tax Court found the Board's assessment to be arbitrary and capricious. We disagree.
Jewell argues that the Board disregarded two facts: (1) Jewell cooperated with the Board's audit by supplying the necessary information upon request, making it possible for the Board to assess the owners before the statute of limitations ran, and (2) the Board's assessment did not take into account taxes that owners may have paid but that were improperly filed.
Jewell argues that it can not be liable for the tax unless the Board has no alternative. That assertion is not supported by law. Under the Ind.Code Sec. 6-1.1-2-4 Jewell can avoid liability by establishing that the property is taxed to the owner. The regulations allow the holder to escape liability by doing even less. Under title 50, rule 1-2-1(b)(3) of the Indiana Administrative Code, Jewell only needed to file a 103-N to avoid tax liability. Jewell did not do either of these things. We know of no provision allowing one protection from tax liability merely because one's failure to file was in good faith.
Jewell asserts that South Shore I and South Shore Marina v. Board of Tax Comm'rs (1988), Ind.Tax, 527 N.E.2d 738, aff'd, (1989), Ind., 543 N.E.2d 644 [South Shore II ], prevent the Board from assessing the holder of stored property unless the conduct of the holder makes it impossible to assess the owner. Brief of Appellee at 15. In South Shore I, the marina refused to cooperate with the State Board's attempts to discover who owned the boats stored at the marina, and the Board assessed the marina for the value of the boats. The Court of Appeals held that once property is assessed to an individual, that person has the burden to establish he is not liable for the tax. 422 N.E.2d at 735. The court held that the Marina invited the error, and the Board's assessment was the natural consequence of the Marina's actions.
"Faced with Marina's refusal to supply the information, the Board was without alternative." Id. at 730. The court reinstated the...
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