Wechter v. Indiana Dept. of State Revenue

• Decision Date: 27 September 1989
• Docket Number: No. 49T05-8809-TA-00048,49T05-8809-TA-00048
• Citation: 544 N.E.2d 221
• Parties: Larry S. WECHTER, Petitioner, v. INDIANA DEPARTMENT OF STATE REVENUE, Respondent. Cause
• Court: Indiana Tax Court

Page 221

544 N.E.2d 221

Larry S. WECHTER, Petitioner, v. INDIANA DEPARTMENT OF STATE REVENUE, Respondent.

Cause No. 49T05-8809-TA-00048.

Tax Court of Indiana.

Sept. 27, 1989.

John E. Taylor, Williams & Taylor, Indianapolis, for petitioner.

Linley E. Pearson, Atty. Gen. by Terry G. Duga, Deputy Atty. Gen., Indianapolis, for respondent.

FISHER, Judge.

This matter is before the court on petitioner's motion for summary judgment and respondent's response thereto.

FACTS

Wechter challenges the Department's assessment for penalty and interest on delinquent sales tax pursuant to IC 6-2.5-9-3. ¹ During the period assessed, Wechter was the president of a now defunct Indiana corporation, Muskies, Inc. Muskies owned and operated a restaurant/bar in Indianapolis which closed in September, 1985.

On August 9, 1985, the Department issued seven notices of assessment to Muskies for the period beginning November, 1984 and ending May, 1985. These notices were for delinquent sales tax plus penalty and interest.

Wechter, as responsible officer for Muskies, remitted seven cashier's checks in payment of actual sales tax due the Department. Wechter did not remit any money for the penalty and interest attributable to the sales tax. Wechter sought and was granted an injunction enjoining the Department from proceeding with collection efforts during the pendency of this original tax appeal.

ISSUE AND DECISION

The sole issue to be determined is whether the Department can assess Wechter, as a responsible officer of Muskies, Inc., for penalty and interest under the version of IC 6-2.5-9-3 in effect during the period of assessment.

At the time the subject sales tax liabilities accrued, IC 6-2.5-9-3 provided in relevant part:

An individual who:

(1) is an individual retail merchant or is an employee, officer, or member of a corporate or partnership retail merchant; and

(2) has a duty to remit state gross retail or use taxes to the department of revenue;

holds those taxes in trust for the state and is personally liable for the payment of those taxes to the state.

Subsequently, the above statute was amended and the phrase "plus any penalties and interest attributable to those taxes" was added to the last line before "to the state." This amendment was effective July 1, 1986.

The Department's regulation in effect during the period of assessment provided in pertinent part:

Businesses hold sales ... taxes in trust accounts for the state of Indiana. If businesses do not properly remit these taxes, responsible officers can be held personally liable for those trust fund taxes. 45 IAC Sec. 2.2-9-4.

Wechter contends that since the former version of the statute and the Department's regulation did not include "any penalties and interest attributable to those taxes" he cannot be held personally liable for penalties and interest.

In Van Orman v. State (1981), Ind.App., 416 N.E.2d 1301, Van Orman, a corporate officer, argued that he was not personally liable under existing law for unpaid corporate taxes which had accrued prior to April 1, 1967. The former version provided:

Every retail merchant shall be personally liable for such taxes, which shall constitute a trust fund in the hands of the retail merchant and shall be owned by the state. IC 1971, 6-2-1-49 (now repealed).

The statute was amended in 1967 to extend personal liability for the payment of the sales and use tax to "every officer ... of such retail merchant who as such officer ... is under a duty to remit such taxes."

The state argued that even though the former statute did not contain language assigning personal liability to corporate officers, it was clear that the legislature intended to impose personal liability on persons doing business in the corporate form. The court rejected this argument. The court stated various rules of statutory construction including "when a statute is amended by the addition of a provision, a presumption is raised that the legislature intended to change the law unless it clearly appears an amendment was made only to express more clearly the original intention of the legislature." 416 N.E.2d at 1305. The court found no clear expression to the contrary and concluded that the amendment was a change in the law.

Likewise, to prevail in the case at bar, the Department must overcome the presumption that a change was intended by the amendment. The Department must show that it "clearly appears" that the 1985 amendment to IC 6-2.5-9-3 was a clarification of the original intention of the legislature.

Wechter and the Department each cite to various rules of statutory construction which best support their respective positions. The fundamental or cardinal rule in the construction of Indiana statutes is to ascertain the legislative intent. Park 100 Development v. Indiana Dep't of State Revenue (1981), Ind., 429 N.E.2d 220. When a statute is ambiguous, the court may look to subsequent amendments for evidence of the legislature's initial intent. Seymour Nat'l Bank v. State (1981), Ind., 422 N.E.2d 1223, 1226, modified, 428 N.E.2d 203. However, "we must bear in mind that the intent we are searching for is that of the legislature that passed the original statute, not that of any subsequent legislature." Bailey v. Menzie (1987), Ind.App., 505 N.E.2d 126, 128.

The Department relies heavily on the version of IC 6-2.5-9-3 effective as of July 1, 1986 to prove legislative intent. But, the court needs more. "Later acts of a legislature provide a 'highly unreliable basis for making a secondary inference respecting the original legislative intent.' " Bailey, 505 N.E.2d at 128 (quoting R. Dickerson, The Interpretation and Application of Statutes 179 (1975)). Moreover, "[t]o the extent that the amendment merely represents the opinion of the amending legislature as to how the statute should be construed, it is not controlling. Construction of doubtful statutes is a judicial function which the courts alone must perform." Bailey, 505 N.E.2d at 128.

On its face, the version of IC 6-2.5-9-3 in force during the period of assessment does not appear ambiguous. The statute clearly states that those individuals who have a duty to permit state gross retail or use taxes to the Department are personally liable for the payment of those taxes to the state. Another statute in force during the period of assessment stated that in the case of withholding tax, responsible officers would be personally liable for "such taxes, penalties, and interest." IC 1981, 6-3-4-8(d) (current version at IC 6-3-4-8(f)). It is difficult to conclude that the legislature, by its silence, intended penalties and interest to be included in IC 6-2.5-9-3 when it used the words "penalties and interest" in IC 6-3-4-8(d). If the intent was to include penalties and interest in both statutes, then both statutes should either include or exclude the words.

The Department contends that prior to the amendment of IC 6-2.5-9-3, the Department took the position that responsible officers could be held liable for penalties and interest due on sales and use tax. See Angelone, Indiana Responsible Officer Tax Liabilities, 23 Res Gestae 68 (1979). ² The Department contends that other statutes which impose penalties and interest on individuals show that the legislature has always intended to impose penalties and interest under IC 6-2.5-9-3. The Department cites to the following:

IC 6-8.1-10-1 which provides in...