Tarbox v. Tax Com'n

• Decision Date: 15 November 1984
• Docket Number: No. 14883,14883
• Parties: Fred TARBOX and Mary Tarbox, husband and wife, Plaintiffs-Appellants, v. TAX COMMISSION OF the STATE OF IDAHO, Defendant-Respondent.
• Court: Idaho Supreme Court

Page 342

695 P.2d 342

107 Idaho 957

Fred TARBOX and Mary Tarbox, husband and wife, Plaintiffs-Appellants, v. TAX COMMISSION OF the STATE OF IDAHO, Defendant-Respondent.

No. 14883.

Supreme Court of Idaho.

Nov. 15, 1984.

Rehearing Denied Feb. 20, 1985.

Danny J. Radakovich, Lewiston, for plaintiffs-appellants

Jim Jones, Atty. Gen., and Stephen J. Lord, Deputy Atty. Gen., State Tax Com'n, Boise, for defendant-respondent.

ON DENIAL OF PETITION FOR REHEARING

HUNTLEY, Justice.

In June of 1979 Fred and Mary Tarbox, doing business as M & K Sales, a used car proprietorship, were issued a Notice of Deficiency Determination by the Idaho Tax Commission. Most of the tax asserted in the deficiency notice is sales tax on the sales of licensed motor vehicles; however the assessment also includes a fifty percent fraud penalty. The penalty was imposed because although the Tarboxes were and continued to be engaged in the used car business when the Idaho Sales Tax Act came into effect on July 1, 1965, they did not obtain a seller's permit thereunder until June 30, 1974. The penalty also reflects the fact that Mr. Tarbox admitted preparing false invoices intended to reduce or eliminate the sales tax charged when vehicles The Taxboxes appealed the redetermination decision to district court. Under Idaho Code § 63-3049(b), that court does not acquire jurisdiction over an appeal unless the taxpayer first pays the alleged deficiency, or files a surety bond in double the amount thereof. Mr. and Mrs. Tarbox did not have $22,649 in cash, nor were they able to qualify for a surety bond, so instead they filed a property bond in double the amount of the deficiency assessment, pledging their home and land, which they own free and clear. Due to failure of the Tarboxes to file the proper type of bond, the Tax Commission moved for summary judgment. The district court granted the motion and dismissed the complaint with prejudice.

are titled. The Tarboxes protested the assessment and filed a petition for redetermination, which was granted, with the result that the amount of the deficiency was lowered. They were nevertheless still found to be owing $22,649 in tax, interest and penalty.

On appeal to this Court the Tarboxes raise as error the failure of the district court to waive the bond requirement. They also contend that the surety bond requirement violates their constitutional rights to equal protection under the law, Idaho Const., art. I, § 2, U.S. Const., amend. XIV, and due process of law, Idaho Const., art. I, § 13, U.S. Const., amend. XIV. They do not take issue with the "pay first, litigate later" part of the statute. We hold that the decision of the district court was proper in all respects and accordingly affirm.

I WAIVER OF THE SURETY BOND REQUIREMENT

The Tarboxes rely on Graves v. Cogswell, 97 Idaho 716, 552 P.2d 224 (1976), as authority for their contention that the district court erred by not waiving the bond requirement altogether. Reliance on Graves is misplaced. That case involved an 84 year-old indigent woman who had been receiving public assistance benefits solely because of her indigency. Her benefits were terminated and she was clearly without funds or other resources to pay the filing fee required for an appeal from the administrative agency decision. Had the requirement not been waived, Mrs. Graves would have been completely precluded from exercising her right to appeal. Focusing narrowly on the specific facts of the case, this Court held that, in such cases, the right to due process guaranteed under article 1, § 13 of the Idaho Constitution mandated that the filing fee be waived. Id., at 717, 552 P.2d 224.

There is no factual similarity between the financial situation of the Tarboxes and the plight of Mrs. Graves in that there is no contention or showing that the Tarboxes are indigent or that they could not have obtained the bond money by procuring a loan on the equity in their home. Accordingly, the trial court did not abuse its discretion in refusing to waive the surety bond requirement.

II EQUAL PROTECTION

The first step in an equal protection analysis is to identify the classification which is being challenged. The "class" into which the Tarboxes fall for the purpose of this case is that class of litigants seeking to appeal an adverse decision of the Tax Commission. The classification is asserted to be unconstitutionally discriminatory because the bond, being a jurisdictional prerequisite to appeal pursuant to Idaho Code § 63-3049(b), is unique to tax cases.

The second step is to determine the standard under which the classification will be judicially reviewed. The established rule in Idaho is that the rational basis test is the appropriate standard of review of classifications made for tax purposes. Sheppard v. State Department of Employment, 103 Idaho 501, 504, 650 P.2d 643 (1982). Although the Tarboxes urge the strict scrutiny standard, that level of review would be inappropriate in this case as they do not fall into a "suspect class", nor does the statute in question infringe upon a fundamental The rational basis test "requires 'that legislation classify the persons it affects in a manner rationally related to legitimate governmental objectives.' " Twin Falls Clinic & Hospital Building Corporation v. Hamill, 103 Idaho 19, 24-5, 644 P.2d 341 (1982) (quoting Schweiker v. Wilson, 450 U.S. 221, 230, 101 S.Ct. 1074, 1080, 67 L.Ed.2d 186 (1981)). In establishing the surety bond alternative under I.C. § 63-3049(b), the legislature opted for a commercially prudent course. To obtain a surety bond, relatively stringent financial standards must be met. The legislature thus enacted a statute rationally related to the governmental objective of ensuring the efficient collection of taxes. That this is a legitimate objective is beyond dispute. Taxes are the means by which government raises revenue for the health, education, safety and general welfare of its citizens. In the seminal case of Cheatham v. Norvekl, 92 U.S. (23 Wall.) 85, 89, 23 L.Ed. 561, 562 (1876), the United States Supreme Court upheld the validity of the "pay first, litigate later" rule on the ground that, "it is essential to the honor and orderly conduct of the government that its taxes should be promptly paid, and drawbacks speedily adjusted ...." It is likewise essential to the honor and orderly conduct of government that when a bond is accepted in lieu of payment of the deficiency assessment itself, that it be of a nature so reliable that the government will be able to collect on it without delay and without competition from other creditors, in the event that taxpayer is found liable for the deficiency assessment.

                right. 1  See id.;   Newlan v. State, 96 Idaho 711, 713-714, 535 P.2d 1348 (1975).  Nor is the intermediate standard of equal protection review, described as the "means-focus" test applicable in the instant case.  This court has limited review under that standard to statutes of a blatantly discriminatory nature. 2
                

The Tarboxes also challenge the double amount requirement on equal protection grounds. Aside from securing payment, the double amount requirement serves a second governmental objective, that of discouraging frivolous appeals, and therefore that classification is also clearly valid. Thus, the jurisdictional requirements of I.C. § 63-3049(b) present no violation of either the Idaho or United States Constitutions. ³

III DUE...