DAIMLERCHRA SLER SERVS, N. A1 LLC V: WEISS 188 Citt as 360 Ark: 188 (2004) [360 DAIMLERCHRYSLER SERVICES NORTH AMERICA, LLC v: Richard WEISS, Director of Department of Finance and Administration and Timothy Leathers, Commissioner of Revenue 04-284 200 S.W3d 405 Supreme Court of Arkansas Opinion delivered December lo, 2004 [Rehearing denied January 20, 2005 ] 1 JUDGMENT — GRANT OF MOTION FOR SUMMARY JUDGMENT — STANDARD OF REVIEW, — As a general rule, in reviewing the grant of
DAIMLERCHRY SLF R SERVS N. Am LLC v. WEISS
ARK ] Cite a5 360 Ark 188 (2004) 189 a motion for summary j udgment, the appellate court determines if summar y j udgment was appropriate based on whether evidence presented in support of summar y j udgment leaves a material question of fact unanswered; the appellate court views the evidence in the hght most favorable to the party against whom the motion was filed, resolving all doubts and inferences against the moving party STATUTES — INTERPRETATION & APPLICATION — QUESTION OF LAW — The question of the correct application and interpretation of an Arkansas statute is a question of law, which the supreme court decides de novo: 3: TAXATION — DEDUCTIONS — BURDEN OF PROOF — A tax deduction is allowed only as a matter of legislative grace and one claiming the deduction bears the burden of proving that he is entitled to it and of bringing himself clearly within the terms and conditions as may be imposed by the statute, TAXATION — EXEMPTIONS — STRICTLY CONSTRUED — Any tax exemption must be strictly construed against the exemption and any doubt suggests the exemption should be denied: 5, STATUTES — CONSTRUCTION — BASIC RULES — The first rule in considenng the meaning and effect of a statute is to construe it just as it reads, giving the words their ordinary and usually accepted meaning in common language; when language of a statute is plain and unambiguous, there is no need to resort to rules of statutory construction; where the meaning is not clear, the supreme court looks to the language of the statute, the subject matter, the object to be accomplished, the purpose to be served, the remedy provided, the legislative history, and other appropnate means that shed hght on the subject; finally, the ultimate rule of statutory construction is to give effect to the intent of the General Assembly TAXATION — BAD DEBT STATUT F — WHAT CONSTITUTES "TAXPAYER' ' & "PERSON" UNDER STATUTE — To be a "taxpayer" for the purposes of the Bad Debt Statute, appellant must be a "person liable to remit a tax hereunder or to make a report for the purpose of claiming any exemption from payment of taxes levied by [the Gross Receipts Actr [Ark, Code Ann, 26-52-103(a)(5) (Rept 1007)]; however, it was clear that appellant was a "person" under the Bad Debt Statute, as limited liability companies are included within the definition of " person
DAIMLERCHRYSLER SERVS N. Aro , LLL, v: WEISS
190 Cite as 360 Ark 188 (2004) [360 7. WORDS & PHRASES — 'LIABILITY " DEFINED — Black's Law Dictionary (8th ed 2004) defines -hability," in part as "the quality or state of being legally obligated or accountable, a financial or pecuniary obligation, debt": 8 TAXATION — MOTOR VEHICLE CROSS RECEIPTS TAX — APPELLANT NOT LIABLE TO REMIT TAX — Appellee's contention that for purposes of the motor vehicle gross receipts tax, the taxpayer, or person liable to remit the tax, is the consumer was well taken, Ark Code Ann: 26-52-510(a)(1)(A) (Repl 1997) clearly provides that the tax levied by this chapter and all other gross receipts taxes levied by the state in respect to sale of new or used motor vehicles, trailers, or senutrailers required to be licensed in Arkansas shall be paid by the consumer to the Director of the Department of Finance and Administration instead of being collected by the dealer or seller, and it is the mandatory dury of the director to require the payment of such tax at the rime of registration before issuing hcenses for new or used motor vehicles or trailers, clearly, appellant was not liable to remit the tax TAXATION — APPELLANT PAID SUBSTANTIAL TAXES IN ARKANSAS — POSSIBLE FOR APPELLANT TO BE TAXPAYER FOR ONE KIND OF TAX, WHILE NOT TAXPAYER FOR ANOTHER KIND OF TAX — Appellant argued that it was a taxpayer because it possessed an Arkansas Sales and Use Tax Permit and paid substantial taxes in Arkansas, appellant's sales and use tax permit provided that appellant was engaged in the business of "automobile leasing", the permit did not descnbe appellant as being engaged in the business of the sale of motor vehicles, since appellant was not required to remit motor vehicle gross receipts taxes and make reports of those taxes, then appellant could not claim that it was a "taxpayer" in the sale of motor vehicles, lt is possible to be a taxpayer for one kind of tax, while not a taxpayer for another kind of tax 10 TAXATION — ONLY CONSUMER IS LIABLE TO PAY MOTOR VEHICLE GROSS RECEIPTS TAX — LIEN-HOLDERS MERELY ALLOWED TO PAY ON BEHALF LiF LUNSUMER - The only party who is liable to pay the motor vehicle gross receipts tax is the consumer; DF&A Regulation 1994-3 allows henholders to pay gross receipts tax on behalf of consumers; however, this allowance does not transfer ultimate liability of payment of the gross receipts tax from the consumer to the hen-holder
DAIMLERCHRYSLER SERVS N. Am , LLC v. WEISS ARK ] Cite as 160 Ark 188 (20141 191 11 STATUTES — GENERAL STATUTE YIELDS TO SPECIFIC ONE — APPEL-[ANTS ARGUMENT NOT ADDRESSED — The supreme court did not need to address the merits of appellant's argument that it was a "taxpa y er" under the Arkansas TaX Procedure Act, the Bad Debt Statute is a part of the Arkansas Gross Receipts Act, and "taxpayer" is specificall y defined under that Act, for the purposes of that Act, a general statute must yield when there is a specific statute involving particular subject matter 1 1 : APPEAL & ERROR — APPELLANT STATED THAT ASSIGNMENT ISSUE NOT ISSUE ON APPEAL — ISSUE NOT ADDRESSED — Appellant argued that as an assignee of the sellers, it was a "taxpayer" entitled to relief under the Bad Debt Statute, appellant stated that in the event that the supreme court determined that the sellers were "taxpayers" under the Bad Debt Statute, appellant was also a "taxpayer" by assignment under Arkansas' common law of assignment, and was therefore entitled to a refund or deduction because the sellers assigned all of their rights under the Bad Debt Statute to appellant, appellant went on to say that the circuit court agreed that this was a solid argument and that this was not an issue on appeal, while the circuit court did state that "Chrysler sets forth a solid argument," the circuit court concluded that "the Sellers are not taxpayers as defined by the Arkansas Code", since appellant stated that this was "not an issue on appeal," the supreme court did not address it Appeal from Pulaski Circuit Court, Mackie McClellan Pierce, Judge. affirmed: Akerman Sentelitt, by: Peter 0 Larsen and David E. Otero, and Mitchell, Williams, Selig, Gates & Woodyard, P L LC., by: John K. Baker, for appellant: Ronna L. Abshure and Martha G Hunt, Revenue Legal Counsel, for appellee: im HANNAH, Justice: Appellant DairnlerChrysler Services J North America, LLC ("Chrysler") appeals the order of dismissal of the Pulaski County Circuit Court, Seventeenth Division, wherein the circuit court found that it lacked jurisdiction to award a "bad debt" refund to Chrysler because Chrysler is not a "taxpayer" for the purposes of Ark, Code Ann: 5 26-52-309 (Repl: 1997), which is commonly known as the "ri,a Debt Statute:" We find no error and,
DAIMLERCHILYSLER SERVS N. Ana , LLC V. WEISS 191 Cite .33 360 Ark, 188 (2004) [360 accordingly, we affirm: This is an appeal required by law to be heard by this court, our junsdiction is pursuant to Ark Sup Ct R 1-2(a)(8): See also Ark. Code Ann: 5 26-18-406 (Repl 1997) Facts Chrysler sold and leased motor vehicles and financed the sale of motor vehicles from motor-vehicle dealerships (collectively referred to as "sellers") to consumer purchasers: In a typical transaction, the consumer purchaser entered into an installment contract for the purchase of a motor vehicle from the seller. The amount financed included the purchase price of the motor vehicle, as well as the gross receipts tax due on the vehicle, which the seller paid to the State The seller then assigned the installment contract to Chrysler, and Chrysler collected the payments: In return, Chrysler paid the seller the full financed amount. At some point during the period of repayment, the purchaser defaulted on the installment contract. After resorting to available remedies against the purchaser, Chrysler wrote off the uncollectible portion of the debt for federal income tax purposes: On February 16, 2000, Chrysler filed a claim with appellee Department of Finance and Administration (DF&A) for a refund or deduction of the pro rata portion of gross receipts tax related to bad debts arising out of the sale and financing of motor vehicles in Arkansas. The claim was filed pursuant to the Bad Debt Statute, which allows taxpayers that finance sales transactions a deduction or refund for gross receipt tax that was previously reported and remitted, but is now uncollectible. DF&A determined that Chrysler was not a taxpayer under the Bad Debt Statute and denied Chrysler's claim for a refund. Pursuant to Ark Code Ann 5 26-18-406, Chrysler appealed DF&A's decision to the circuit court, and in an order entered on November 13, 2003, the circuit court dismissed the case, holding that Chrysler was not a "taxpayer" for the purposes of the Bad Debt Statute and, as such, Chrysler was not entitled to a deduction: Chrysler's sole point on appeal is that the circuit court erred in finding that it lacked jurisdiction to award a deduction on the ground that Chrysler is not a "taxpayer" for the purposes of the Bad Debt Statute. Standard of Review [1] As a general rule, in reviewing the grant of a motion for summary judgment, the appellate court determines if summary
DAINILERCHR yc LER SERVS: N AM LLC v: WEISS ARK] Cite as 360 Ark 188 (2004) 193 judgment was appropriate based on whether the evidence presented in support of summary ludgment leaves a material question of fact unanswered: Mack v: Brazil, Adlong, & Winningham, PLC, 357 Ark: 1, 159 S:W:3d 291 (2004): The appellate court views the evidence in the light most favorable to the party against whom the motion was filed, resolving all doubts and inferences against the moving party: Id: [2] However, the granting of this summary judgment motion was based upon the circuit court's interpretation of the Bad Debt Statute: The question of the correct application and interpretation of an Arkansas statute is a question oflaw, which this court decides de novo: Cooper Realty Invs., Inc: v, Arkansas Contractors Licensing Bd , 355 Ark: 156, 134 S.W.3d 1 (2003). [3, 4] A tax deduction is allowed only as a matter of legislative grace and one claiming the deduction bears the burden of proving that he is entitled to it and of bringing himself clearly within the terms and conditions as may be imposed by the statute. St. Louis Southwestern Ry Co v Ragland. 304 Ark: 1, 4, 800 S.W.2d 410, 412 (1990); Skelton v B C. Land Co:, 256 Ark. 961, 513 S.W.2d 91 0 (1974) Similarly, we have held in numerous tax-exemption cases that any tax exemption must be strictly construed against the exemption and any doubt suggests the exemption should be denied See, e g , Rineco Chem: Indus:, Inc. v. Weiss, 344 Ark. 118, 40 S W 3d 257 (2001); Technical Servs, of Ark:, Inc, V. Pledger, 320 Ark 333, 89t1 S W 2d 433 (1995); Pledger v. CB, Form Co., 316 Ark. 22, 871 S W 2d 333 (1994); Southwestern Ry., supra. [5] In this case, the circuit court's decision denying Chrysler's claim to a deduction is based upon the circuit court's construction of "taxpayer" under the Bad Debt Statute This court outlined our rules of statutory construction in Faulkner v: Arkansas Children's Hospital, 347 Ark. 041, 0 52, S W 3d 393, 400 (2002), where we stated: The first rule in considering the meaning and effect of a statute is to construe it just as it reads , giving the words their ordinary and usually accepted meanmg in rnmmon language: Raley v, Wagner, 346 Ark 234, 57 S W 3d 683 (2001): Dunklin v: Ratnsay, 328 Ark. 263, 944 S W:2d 76 (1997), When the language of a statute is plain and unambiguous. there is no need to resort to rules of statutory construction Stephm i Arkanvac Sal for the Blind, 341 Ark 939,
DAINILLR.CHPASLER SERVS N: Am , LLC R WEISS 194 Cite a3 360 Ark: 188 (2004) [360 20 S.W.3d 397 (2000); Burcham v. City cf Van Buren, 330 Ark 451, 954 SW:2d 266 (1997): Where the meaning is not clear, we look to the language of the statute, the subject matter, the object to be accomplished, the purpose to be served, the remedy provided, the legislative history, and other appropnate means that shed light on the subject: Stephens v. Arkansas Sch: for the Blind, supra (citing State v McLeod, 318 Ark, 781, 888 S.W.2c1 639 (1994)). Finally, the ultimate rule of statutory construction is to give effect to the intent of the General Assembly Ford v: Keith, 338 Ark: 487, 996 S,W,2d 20 (1999); Kildow v Baldwin Piano & Organ, 333 Ark: 335, 969 S,W,2d 190 (1998) With this standard of rev ew in mind, we turn to Chrysler's argument on appeal: Aleaning of "Taxpayerifor the Purposes of the Bad Debt Statute Chrysler contends that the circuit court's construction of "taxpayer" under the Bad Debt Statute is erroneous because it conflicts with the plain language and legislative intent of the statute. Section 26-52-309 provides: (a) In computing the amount of tax due under the Arkansas Gross Receipts Act, 5 26-52-101 et seq , and any act supplemental thereto, taxpayers may deduct bad debts from the total amount upon which the tax is calculated for any report Any deduction taken or refUnd paid which is attributed to bad debts shall not include interest (b)(1) For purposes of this section, "bad debt" means any portion of a debt for an amount which a taxpayer has reported as taxable which the taxpayer legally claims as a bad debt deduction for federal income tax purposes (2) Bad debts include, but are nor limited to, worthless checks, worthless credit card payments, and uncollecnble credit accounts (3) Bad debts do not include financing charges or interest, uncol-lecnble amounts on property that remain in the possession of the taxpayer or vendor until the full purchase pnce is paid, expenses incurred in attempting to collect any debt, debts sold or assigned to third parties for collection, and repossessed property.
DAIMLERCHRYSLER SERVS N. Am , LLC V: WEISS ARK Cite as 3O Ark 188 (20041 195 (c) Bad debts incurred for sales made prior to November 9, 1981, shall not be deducted (d) Bad debts must be deducted within three (3) y ears of the date of the sale for which the debt was incurred (e) If a deduction is taken for a bad debt and the taxpayer subsequently collects the debt in whole or in part, the tax on the amount so collected shall be paid and reported on the next return due after the collection, [6, 7] In this case, the parties agree that Chrysler was the source of payment of the gross receipts tax due on the motor vehicles: However, the party who actually paid the gross receipts tax is not automatically a "taxpayer" for the purposes of the Bad Debt Statute, To be a "taxpayer" for the purposes of the Bad Debt Statute, Chrysler must be a "person liable to remit a tax hereunder or to make a report for the purpose of claiming any exemption from payment of taxes levied by [the Gross Receipts Actl" Ark Code Ann, 5 26-52-103(a)(5) (Repl. 1 99 7). We first note that Chrysler is a "person" under the Bad Debt Statute, as limited liability companies are included within the definition of "person See Ark: Code Ann, 5 26-52-103(a)(1) (Repl. 1 99 7). While it is clear that Chrysler was the source of payment of the gross receipts tax to the State, the parties disagree on the issue of whether Chrysler was liable to remit the tax: "Liable" is not defined for the purposes of the Bad Debt Statute: Black's LAW Dictionary defines "liability," in part as: 1 The quality or state of being legally obligated or accountable, 2, A financial or pecuniary obligation, DEBT < tax liability > 932 (8th ed, 2004): [8] DF&A contends that for the purposes of the motor vehicle gross receipts tax, the taxpayer, or person liable to remit the tax, is the consumer: Section 26-52-510(a)(1)(A) (Repl 1997) provides: The tax levied by this chapter and all other gross receipts taxes levied by the state Ifl respect to the , iale of new or Ivied motor vehicles, trailers, or
DAIMLERCHRYSLER SERVS N. LLC V. WEISS 196 Cite ii 360 Ark 188 (2004) [360 semitrailers required to be licensed in this state shall be paid by the consumer to the Director of the Department of Finance and Administration instead of being collected by the dealer or seller, and it is the mandatory duty of the director to require the payment of such tax at the time of registration before issuing licenses for new or used motor vehicles or trailers: (Emphasis added.) DF&A's argument is well-taken Clearly, Chrysler is not liable to remit the tax. [9] Chrysler next argues that it is a taxpayer because it possesses an Arkansas Sales and Use Tax Permit and pays substantial tax in Arkansas: DF&A points out that Chrysler's sales and use tax permit provides that Chrysler is engaged in the business of "automobile leasing." The permit does not describe Chrysler as being engaged in the business of the sale of motor vehicles. DF&A argues that since Chrysler is not required to remit taxes and make reports of those taxes for motor vehicle gross receipts tax and make reports of that tax, then Chrysler cannot claim that it is a "taxpayer- in the sale of motor vehicles: We agree with DF&A's contention that it is possible to be a taxpayer for one kind of tax, while not a taxpayer for another kind of tax: Chrysler goes on to argue that even if it is not a "taxpayer-as defined under 5 26-52-103(a)(5), it is a taxpayer under DF&A's Regulation 1994-3. That regulation provides in part: Pursuant to authonty given the Commission of Revenues by subsection (b) of Section 1 of Act 2 9 3 of 1991 (Ark Code Ann. c5 27-14-90o(b)), after the effective date of this regulation, henhold-ers and motor vehicle dealers may apply for registration and certificates of title on behalf cf the purchasers of new or used vehicles The dealer or lienholder shall fde the application with the Commissioner, shall attach thereto a copy of the instrument creating and evidencing the lien or encumbrance and shall pay all taxes and fees due for such registration and issuance of a title, [10] We agree with DF&A's contention that the only party who is liable to pay the motor vehicle gross receipts tax is the consumer Regulation 1994-3 allows lienholders to pay gross receipts tax on behalf of consumers however, this allowance does not transfer ultimate liability of payment of the gross receipts tax from the consumer to the henholder:
DAIMLERCHRYSLER SERVS N. Aisa , LLC 0 WEIss
ARK 1 Cite as 360 Ark 188 (004) 197 Chrysler further argues that it is a "taxpayer" because it meets the requirements of a "taxpayer" as defined by the Arkansas Tax Procedure Act, which is codified at Ark, Code Ann: 5 26-18- 101 (Repl: 1997): A "taxpayer" under this Act is defined as follows: (A) Any person subject to or liable for any state tax; (B) Any person required to file a return, or to pay, or withhold and remit any tax required by the provisions of any state tax law, or (C) Any person required to obtain a license or a permit or to keep any records under the provisions of any state tax law; Ark Code Ann: 5 26-18-104(14) (Repl, 1997): [11] We need not address the merits of Chrysler's argument that it is a "taxpayer" under the Arkansas Tax Procedure Act. The Bad Debt Statute is a part of the Arkansas Gross Receipts Act, and "taxpayer" is specifically defined under that Act, for the purposes of that Act: We have long held that a general statute must yield when there is a specific statute involving particular subject matter, See, e,g„ Ozark Gas Pipeline Cm: 0: Arkansas Pub: Sew, Comm'n. 342 Ark: 591, 29 S:W:3d 730 (2000), Shelton Fiser, 340 Ark: 89. 8 S,W:3d 557 (2000): Next, Chrysler argues that as an assignee of the sellers, Chrysler is a "taxpayer" entitled to relief under the Bad Debt Statute: Chrysler states: in the event that this Court determines that the Sellers are "taxpayers" under the Bad Debt Statute, Chrysler also is a "taxpayer" by assignment under Arkansas common law of assignment, and is therefore entitled to a refund or deduction because the Sellers assigned all of their nghts under the Bad Debt Statute to Chrysler: The circuit court agreed this is a sohd argument and this is not an issue on appeal, [12] While the circuit court does state that "Chrysler sets forth a solid argument," the circuit court concludes that "the Sellers are not taxpayers as defined by the Arkansas Code:" Since Chrysler states that this is "not an issue on appeal," we do not address it: A ffi rm ed
DAIMLERCHRYSLER SERVS N AM, LLC WEISS
198 Cite as 360 Ark 188 (2004) [360 BROWN, J., concurring. THORNTON, J,, not participating. OBERT L: BROWN, Justice, concurring: I concur with the R result reached by the majority opinion, but do so with serious misgivings. The result of today's decision is to render the Bad Debt Statute, Ark, Code Ann, 5 26-52-309 (Rept 1997), useless for transactions involving motor vehicle financing: This means those lenders who finance car sales are unable to collect a refund of salts taxes paid on uncollectible debts. Thus, a major sector of our business community is treated differently from all other sales transactions in our state. As a result, lenders on car sales pay a tax they do not owe, and the State realizes a considerable windfall: I would hope that the General Assembly will look closely at this situation at its next regular session, commencing in January: The majority rationalizes its decision on the basis that sales tax refunds for uncollectible bad debt are only available to "taxpayers " Lenders of the money to pay the sales tax are not defined as taxpayers under Ark Code Ann: 5 26-52-103(a)(5) (Repl, 1997), says the majority, because lenders are not liable to pay the sales tax_ The majority refers to Ark Code Ann 5 26-52- 510(a)(1)(A) (Rept 1997), where it is the consumer who is directed to pay the sales tax on motor vehicle purchases The problem with the majority's analysis is that it renders the Bad Debt Statute meaningless for sales of motor vehicles when financing is involved: In today's world, it is a rare new-car sale where the price is paid in cash. Without question, financing a car purchase is the preferred method for the vast majority of consumers Yet, the majority's analysis forecloses the lender, who actually provides the money to pay the sales tax, from collecting a refund for the portion of the tax paid on the bad debt: Who then would be available to collect the refund under the Bad Debt Statute? Not the seller/dealer, because no debt is owing to it The dealer has been paid the purchase price in full_ Not the consumer/purchaser He or she did not pay the sales tax but owes that amount to the lender: As a result, under the majority's interpretation, no entity or person can claim a bad debt refund when a motor vehicle loan is involved. Though the majority does not expressly state this, it has concluded, in effect, that motor vehicle transactions are excluded from refunds under the Bad Debt Statute, even though the General
DAIMLER CHR N. -sr FR Smays N. Am LLC v: WEISS ARK ] Cite as 360 Ark 188 (2004) 199 Assembly never makes that declaration in the statute. The majority is simply reading in an exception that is not there: Lenders like Daimler Chrysler no doubt are puzzled as to why the statute does not apply to them_ They have paid a tax they do not owe; yet, the State keeps the money and realizes a windfall and refuses to extend them the refund privilege_ That is not right Having said that, the Bad Debt Statute is not a model of clarity_ And though the statute does not expressly exempt motor vehicle sales, some meager doubt is raised because other statutes do treat payment of the sales tax on motor vehicle sales differently from sales of ordinary tangible propert y. Compare Ark. Code Ann. (3' 26-52-510 (Repl: 1997) (consumers pay the sales tax directly to the State for car purchases) to Ark. Code Ann: S 26-52-508 (Repl. 1997) (sellers collect sales tax on sales of tangible personal property and remit to State): Our standard of review for an exemption or deduction from paying a tax is that we strictly construe the statute against an exemption and if there is any doubt, the exemption or deduction should be denied. See, e.g., St Lotus Southwestern Ry Co, v. Ragland, 304 Ark. 1, 800 S W 2d 410 (1990) Though I think the majority's analysis on the liabthty to pay the tax is questionable. I must confess to some doubt as to what the General Assembly intended for refunds for bad debts associated with motor vehicle sales: There is one final point about the majority opinion It does not discuss Daimler Chrysler's assignment argument which the trial court addressed and which Daimler Chrysler argues on appeal The seminal case on this point, Puget Sound Nat'l Bank v. State Dep't of Revenue, 123 Wash 2d 284, 868 P 2d 127 (1994), holds that the Washington State bad debt statute did not prohibit the refund of assigned sales tax refunds to lenders; nor did public policy prohibit the assignment of a tax refund, since any other rule would be inequitable and entitle the state to a financial windfall. That issue needs to be resolved. For these stated reasons. I concur only in the result
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