Walgreen Co. v. Charnes

Decision Date28 October 1991
Docket NumberNo. 90SA263,90SA263
Citation819 P.2d 1039
PartiesWALGREEN CO., an Illinois corporation, Plaintiff-Appellee, v. Alan N. CHARNES, Manager of Revenue for the City and County of Denver, State of Colorado, and City and County of Denver, a municipal corporation, Defendants-Appellants.
CourtColorado Supreme Court

Eiberger, Stacy, Smith & Martin, Raymond W. Martin, Rodney L. Smith, Roy A. Adkins, Denver, for plaintiff-appellee.

Daniel E. Muse, City Atty., Robert F. Strenski, Asst. City Atty., Denver, for defendants-appellants.

Colorado Ass'n of Commerce and Industry, Patrick C. Boyle, Lentz, Evans and King, P.C., Robert A. Wherry, Jr., Denver, for amicus curiae Colorado Ass'n of Commerce and Industry.

Justice VOLLACK delivered the Opinion of the Court.

The City and County of Denver (Denver) appeals from a district court ruling that sections 53-56 and 53-124 of the Denver municipal code do not supersede a state statute regarding appellate procedures governing contested sales and use taxes in section 29-2-106.1, 12A C.R.S. (1986). We affirm. 1


On December 12, 1988, the Denver Manager of Revenue (revenue manager) issued Walgreen Co., an Illinois corporation (Walgreen), a notice of assessment and demand for payment of use taxes (demand) pursuant to article III of chapter 53 of the Revised Municipal Code of the City and County of Denver (DRMC). Denver assessed taxes on Walgreen's use of preprinted advertising inserts distributed in conjunction with The Rocky Mountain News and The Denver Post between July 1, 1985, and June 30, 1988. 2 The demand stated that if Walgreen failed to pay the use taxes, Denver would proceed to collect the assessed taxes in accordance with the provisions of the DRMC. Walgreen was not assessed a sales tax in the demand.

Walgreen challenged the assessment and requested a hearing before the revenue manager. A hearing was held, and the revenue manager affirmed the original assessment. Walgreen appealed to the Denver District Court.

During its appeal, Walgreen argued to the district court that appellate procedures governing both the sales and use tax articles of the DRMC were ultra vires, null, void, and unconstitutional, and that Walgreen's appeal to the district court was properly governed by state appellate procedures found in section 29-2-106.1. Denver contended that the DRMC's appeal procedures superseded the state procedures. The district court found for Walgreen.

In support of its arguments, Denver relies on sections 53-56 and 53-124 of the DRMC. 3 Those sections allow taxpayers aggrieved by the manager's decision to have that decision reviewed pursuant to Rule 106(a)(4) of the Colorado Rules of Civil Procedure. Sections 53-56 and 53-124 of the DRMC limit the standard of review of the manager's decision to abuse of discretion or excess of jurisdiction. The appeal procedure provides the exclusive remedy for review of the manager's decision. Rule 106(a)(4) gives district courts authority to fashion relief where "any governmental body or officer or any lower judicial body exercising judicial or quasi-judicial functions has exceeded its jurisdiction or abused its discretion." Review is limited to abuse of discretion or excess of jurisdiction.

In support of its arguments, Walgreen relies on section 29-2-106.1. 4 This section also allows taxpayers to appeal final determinations of local governments. Such appeals, however, shall be heard de novo and are governed by section 39-21-105, 16B C.R.S. (1982). Section 39-21-105 confers jurisdiction on district courts to hear and determine such appeals, and also states that "[t]he district court shall try the case de novo, reviewing all questions of law and fact, such review being conducted in accordance with the Colorado rules of civil procedure." § 39-21-105(2)(b).

The conflict between the two appellate schemes, thus, is whether an aggrieved taxpayer has a right to de novo review of a final determination upholding a local use or sales tax assessment. We now individually address Denver's contentions.


Denver contends that Walgreen does not have standing to challenge the constitutionality of the sales tax appeal procedure, because Walgreen was never assessed a sales tax, and thus suffered no injury in fact. 5 We disagree. We hold that because the DRMC must be construed in pari materia in order to effectuate legislative intent, Walgreen had standing to challenge the appellate procedures for both use and sales tax assessments. 6

"City charters and ordinances pertaining to the same subject matter are to be construed in pari materia to ascertain legislative intent and to avoid inconsistencies and absurdities." Darnall v. City of Englewood, 740 P.2d 536, 537 (Colo.App.1987) (citing Whisler v. Kuckler, 36 Colo.App. 200, 538 P.2d 477 (1975), rev'd on other grounds, 191 Colo. 260, 552 P.2d 18 (1976)). See also § 2-4-201, 1B C.R.S. (1980). Similarly, "[a] tax statute, like any other statute, must be construed 'to give consistent, harmonious and sensible effect to all its parts.' " Howard Elec. and Mechanical, Inc. v. Department of Revenue of Colorado, 771 P.2d 475, 477 (Colo.1989) (quoting J.A. Tobin Constr. Co. v. Weed, 158 Colo. 430, 407 P.2d 350 (1965)).

We have held that use taxes are not separate from, but are complementary to, sales taxes. Howard Elec., 771 P.2d at 477 (citing Matthews v. Department of Revenue, 193 Colo. 44, 562 P.2d 415 (1977)). The two taxes were " 'designed to form a comprehensive tax system.' " Id. (quoting Kentucky v. City of Elizabethtown, 435 S.W.2d 78, 79-80 (Ky.App.1968)). We explained in Matthews that the use tax prevents consumers of retail products from purchasing out of state in order to avoid paying a Colorado sales tax. Matthews, 193 Colo. 44, 47, 562 P.2d 415, 417 (1977). Where a seller has not collected a sales tax, the Colorado consumer will accordingly be liable for a use tax. J.A. Tobin Constr. Co. v. Weed, 158 Colo. 430, 435, 407 P.2d 350, 353 (1965). This structure "equalize[s] the tax burden among Colorado purchasers." Matthews, 193 Colo. at 47, 562 P.2d at 417. We have thus noted that "only the most abstract legalistic approach" could justify viewing the use tax separately from the sales tax. Id. at 46-47, 562 P.2d at 417.

Walgreen challenged the validity of the appeal procedures for both use and sales tax determinations pursuant to DRMC sections 53-56 and 53-124. Sections 53-56 and 53-124 provide identical means for challenging sales or use tax assessments. 7 Denver contends that because no sales tax was assessed against Walgreen, the district court's judgment with respect to the sales tax should be reversed. Denver concedes, however, that the challenged appeal provisions are contained in both the use tax and sales tax articles.

The use and sales taxes are part of a comprehensive legislative scheme to equally tax the purchase of goods. Changing the appellate procedures for one and not the other would therefore create an absurd incongruity. Colorado consumers challenging use taxes assessed on goods purchased out-of-state would be required to comply with appellate procedures different than those imposed on goods purchased in-state. See, e.g., Matthews, 193 Colo. at 46-47, 562 P.2d at 417-18 ("[T]he state cannot structure the tax system to discriminate against out-of-state purchases.") (citing Henneford v. Silas Mason Co., 300 U.S. 577, 57 S.Ct. 524, 81 L.Ed. 814 (1937)).

We conclude that Walgreen has standing to challenge both appellate procedures found in DRMC sections 53-56 and 53-124, because they are identical and are part of the same tax scheme.


Denver next contends that the definition of local government set forth in section 29-2-106.1(10), 12A C.R.S. (1986), does not include the City and County of Denver. We disagree.

Section 29-2-106.1(10) provides that "[a]s used in this section, local government means home rule and statutory cities, towns, cities and counties, and counties." Denver contends that the phrase "home rule and statutory" limits the remainder of the section so that it only includes local governments that are both home rule and statutory. This is the proper construction of subsection (10), according to Denver, because section 29-2-106.1 was simultaneously enacted with sections 29-2-105(2), (3), and (4), wherein "or" is used to separate "home rule" and "statutory." Denver contends that the General Assembly would have chosen "or" if it intended a broad interpretation in section 29-2-106.1.

We begin by noting that, when construing a statute, the intent of the legislature is to be ascertained and given effect wherever possible. 8 People v. Sneed, 183 Colo. 96, 514 P.2d 776 (1973). Statutes cannot be construed in such a way as to defeat obvious legislative intent, People v. Meyers, 182 Colo. 21, 510 P.2d 430 (1973), and the best guide to intent is the declaration of policy which forms the initial part of an enactment. St. Luke's Hosp. v. Industrial Comm'n, 142 Colo. 28, 349 P.2d 995 (1960).

We also note that, where a statute is ambiguous, the court may consider the legislative declaration and the consequences of a particular construction when determining the General Assembly's intent. § 2-4-203, 1B C.R.S. (1980). Statutes must be construed as a whole. Dunbar v. Gym of America, 177 Colo. 97, 493 P.2d 660 (1972).

In ascertaining whether subsection (10) should be narrowly construed so as to only apply to both home rule and statutory entities, we first look to the legislative intent of section 29-2-106.1. Section 29-2-106.1 is titled "Deficiency notice--dispute resolution." Subsection (1) of section 29-2-106.1 provides:

The general assembly hereby finds, determines, and declares that the enforcement of sales and use taxes can affect persons and entities across the jurisdictional boundaries of taxing jurisdictions and that dispute resolution is a matter of statewide concern for which the procedures set forth in ...

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