State v. Lewis

• Decision Date: 12 April 2002
• Citation: 832 So.2d 81
• Parties: STATE of Alabama v. Charles LEWIS d/b/a Big Boys Automotive.
• Court: Alabama Court of Civil Appeals

832 So.2d 81

STATE of Alabama v. Charles LEWIS d/b/a Big Boys Automotive.

2010011.

Court of Civil Appeals of Alabama.

April 12, 2002.

Bill Pryor, atty. gen.; Ron Bowden, chief counsel, Department of Revenue, and asst. atty. gen.; and David E. Avery III, asst. counsel, Department of Revenue, and asst. atty. gen., for appellant.

Submitted on appellant's brief only.

THOMPSON, Judge.

On May 22, 2001, the State of Alabama (hereinafter "the State") filed an action against Charles Lewis d/b/a Big Boys Automotive (hereinafter "Lewis") seeking, pursuant to § 40-23-27, Ala.Code 1975, a preliminary injunction restraining Lewis from operating his business until he paid his delinquent Alabama's sales-tax liability.¹

On July 19, 2001, the trial court held a hearing in its chambers on the State's complaint.² At the time of that hearing, Lewis had not been served with a summons or with the State's complaint in the action. However, the record indicates that Lewis was aware of the hearing and that he appeared at the hearing to object to the proceedings based on the insufficiency of service of process; the trial court overruled Lewis's objection. The record indicates that following questioning by the trial court, Lewis admitted he had not paid the necessary taxes under Alabama's sales and use tax laws. See § 40-23-1 et seq., Ala.Code 1975. According to the record, Lewis made a settlement offer to the State in exchange for the State's withdrawal of its request for an injunction. The State refused Lewis's settlement offer.

On September 25, 2001, the trial court entered an order purporting to grant the State's request for an injunction, but suspending the effectiveness of the order during the period in which Lewis strictly adhered to his settlement offer. The trial court's September 25, 2001, order incorporated the terms of Lewis's settlement offer. Pursuant to the trial court's September 25, 2001, order, Lewis was required to pay the State $200 per month, in addition to his current sales-tax liability, until the deficient sales-tax liability was paid in full. That order provides that Lewis's failure to strictly comply with the order will cause the injunction to become immediately effective. The State appealed.³

The trial court's September 25, 2001, order states, in pertinent part:

"The State of Alabama is hereby enjoined from taking any collection actions against [Lewis] concerning any taxes whether mentioned in the Complaint filed in this matter or not, so long as [Lewis] has not violated any part of the [settlement] agreement. Specifically and without limitation, the State of Alabama is hereby enjoined from execution on property owned by [Lewis], filing liens against property owned by [Lewis] or taking any other actions to collect any taxes owned by [Lewis] to the [State] whether determined at this time or not."

On appeal, the State argues that the trial court erred in entering its September 25, 2001, order because, it argues, the trial court lacked jurisdiction to enjoin the State from performing a governmental function on an admitted and legally enforceable debt owed the State by Lewis. In support of its assertion, the State cites State v. Maddox Tractor & Equipment Co., 260 Ala. 136, 69 So.2d 426 (1953). In Maddox Tractor, the Alabama Department of Revenue (hereinafter "the Department") advised a tractor company that it was to collect a one-half of one percent sales tax on tractor-drawn equipment when that equipment was sold as a unit with a tractor. Two years later, the Department changed its position and determined that a two-percent tax should have been assessed. Following its change in position, the Department attempted to assess and collect the tax for the previous period. The trial court estopped the State from collecting the allegedly underpaid taxes. The Supreme Court of Alabama reversed the decision of the trial court. Maddox Tractor, supra. According to the court, "the doctrine of estoppel cannot be applied against the State acting in its governmental capacity in the collection of taxes duly levied by the legislature of the State." Maddox Tractor, 260 Ala. at 140, 69 So.2d at 430.

The facts of Maddox Tractor are distinguishable from the facts of this case. In Maddox Tractor, the taxpayer sought to be excused from its sales-tax liability for the additional tax the Department assessed. In this case, Lewis does not deny liability for the unpaid sales tax, nor does he seek to be excused from that liability. The trial court's September 25, 2001, order precludes the state from pursuing any collection actions against Lewis so long as Lewis is paying his current sales-tax liability and the delinquent sales-tax liability pursuant to the payment schedule set forth in the trial court's order. Alabama law is clear that the State is acting in its governmental capacity when it assesses and collects taxes, and, thus, it cannot be estopped from enforcing those taxes. See Maddox Tractor, supra

. See also State v. Norman Tie & Lumber Co., 393 So.2d 1022 (Ala.Civ.App.1981); State v. Hunt Oil Co., 49 Ala.App. 445, 273 So.2d 207 (Ala. Civ.App.1972). The trial court's September 25, 2001, order does not release, postpone, or in any way diminish Lewis's sales-tax liability. See Maddox Tractor, supra. Rather, Lewis is required to pay the full amount of the deficiency in scheduled payments set forth in the trial court's September 25, 2001, order. Further, the trial court's September 25, 2001, order does not estop the State from collecting the past-due taxes; rather, it restricts the manner in which the State may collect the tax.

Therefore, we do not agree with the State's assertion that the trial court lacked jurisdiction to enter an order.

On appeal, the State also asserts that the payment schedule set forth in the trial court's September 25, 2001, order is an installment-payment plan, and that, pursuant to § 40-2A-4(b)(6), Ala.Code 1975, the trial court did not have jurisdiction to allow Lewis to pay his taxes pursuant to an installment-payment plan over the State's objection. Section 40-2A-4(b)(6), Ala.Code 1975, related to installment payments, states:

"a. The commissioner is authorized to enter into written agreements to allow any taxpayer to pay any tax in installment payments if the commissioner determines that such agreement will facilitate collection of such tax. Notwithstanding the preceding sentence, such agreements shall be entered into only regarding a tax that has been finally assessed by the department and not appealed, and such agreements shall not extend for a period exceeding twelve months, provided, that any such agreement may be renewed at the discretion of the commissioner for succeeding periods not to exceed twelve months. The commissioner shall only be authorized to enter such an agreement with regard to a tax administered or collected by the department.

"b. The commissioner may terminate, alter, or modify any agreement entered into hereunder if:

"1. Information provided by the taxpayer to the commissioner prior to the date of such agreement was inaccurate or incomplete;

"2. The taxpayer fails to pay any installment at the time such installment payment is due under such agreement;

"3. The taxpayer fails to pay any other tax liability due the department at the time such liability is due, unless the taxpayer has appealed such other liability pursuant to the terms of this chapter;

"4. The financial condition of the taxpayer has significantly changed;

"5. The taxpayer fails to provide a financial condition update as requested by the commissioner; or

"6. The commissioner believes that collection of any tax to which an agreement under this provision relates is in jeopardy.

"c. The commissioner shall have sole authority or discretion to enter into or amend, modify, or terminate any installment payment agreement provided for herein. The commissioner shall promulgate regulations necessary for the implementation of this provision."

(Emphasis added.) Section 40-2A-3(4), Ala.Code 1975, defines "commissioner" as "[t]he commissioner of the department [of revenue] or his or her delegate." Further, § 40-2A-2(2) states that "[t]he provisions contained herein shall govern all matters administered by the department except as otherwise provided by law or by agreement entered into pursuant to lawful authority." (Emphasis added.)

The trial court's September 25, 2001, order requires Lewis to make monthly payments to eliminate his deficient sales-tax liability. The record on appeal indicates that the payment schedule set forth in the trial court's September 25, 2001, order extends Lewis's payments over a period of three years. Therefore, this court concludes that the trial court's September 25, 2001, order establishes an installment-payment plan for Lewis to pay his deficient sales-tax liability. Pursuant to § 40-2A-4(b)(6)(c), Ala.Code 1975, the commissioner of the department of revenue has the sole authority to enter into an installment-payment agreement related to a taxpayer's Alabama sales-and-use-tax liability. Further, § 40-2A-4(b)(6)(a), ...