Case Title: State Tax Comm'n v. American Home Shield of Nev., Inc.

Citation: 127 Nev. Adv. Op. No. 31

Docket Number: 55470

State: nevada

Court: Nevada Supreme Court

Date: 2011-07-07T00:00:00Z

Document:
427 Nev., Advance Opinion St
IN THE SUPREME COURT OF THE STATE OF NEVADA

 

STATE OF NEVADA TAX | No. 55470

COMMISSION, EX REL. NEVADA

DEPARTMENT OF TAXATION, |

Appellant, FILED

AMERICAN HOME SHIELD OF

NEVADA, INC., JUL 07 2011

Respondent. ae.
Pe

Appeal from a district court order granting a petition for
judicial review in a tax action. Highth Judicial District Court, Clark
County: Timothy C. Williams, Judge.

Reversed,

Catherine Cortez Masto, Attorney General, and Deonne E. Contine,

Deputy Attorney General, Carson City,
for Appellant.

Greenberg Traurig, LLP, and Kara B. Hendricks, Philip M. Hymanson,
and Puneet K. Garg, Las Vega:
for Respondent.

 

BEFORE THE COURT EN BANC.
OPINION
By the Court, GIBBONS, J.:
‘This opinion primarily addresses the law that governs when a
Nevada taxpayer claims a refund from the Nevada Department of
Taxation for amounts erroneously paid as insurance premium taxes.

Respondent American Home Shield of Nevada, Inc. (AHS), provides both

 

 

[-A0le4
home protection insurance and home service contracts,’ also known as
service warranties, to Nevada residents. In 2006, AHS sought a refund on
insurance premium taxes it had erroneously paid on service contracts,
between 2003 and 2006, which are exempt from taxation under NRS
690C.110. The Department granted AHS a refund for 2005 and 2006, but
it denied AHS a refund for 2003 and 2004 based on the one-year
limitations period set forth in NRS 680B.120, which governs the refund of
overpayments of insurance premium taxes. The Department also denied
AHS interest based on NRS 680B.120. The Nevada Tax Commission
upheld the Department's decision, and AHS petitioned the district court
for judicial review.

‘The district court granted AHS's petition and concluded that
the Commission's decision was erroneous because (1) the mistaken
Payments were never originally required to be paid under NRS Chapter
690C, which governs service contracts, and thus, the NRS 680B.120
limitations period did not apply; (2) the application of NRS 680B.120

violated the Taxpayers’ Bill of Rights, NRS 360.291; (3) Humboldt County.
v. Lander County, 24 Nev. 461, 56 P. 228 (1899), obligated the Department

to refund the taxes; and (4) NRS 360.2935 entitled AHS to interest. The
Department now appeals the order granting judicial review.

We first address whether NRS 680B.120 applies to AHS's
refund request. Because we determine that NRS 680B.120 applies to any

1A “service contract,” or service warranty, obligates a provider “to
repair, replace or perform maintenance on, or indemnify or reimburse the
holder for the costs of repairing, replacing or performing maintenance on,
goods that are described in the service contract and which have an
operational or structural failure as a result of a defect in materials,
workmanship or normal wear and tear.” NRS 690C.080(1).

 
and all overpayments of insurance premium taxes, regardless of whether
they were made in error or on exempt services, we conclude that the
Department did not legally err or abuse its discretion when it determined
that AHS’s refund requests for taxes paid in 2003 and 2004 were barred
by NRS 680B.120's one-year limitation period. We also conclude that the
district court's reliance on Humboldt County in determining that AHS was
entitled to a refund of all of its erroneous tax payments was misplaced.
Finally, because NRS 680B.120 is the applicable statute governing AHS's
refund request and it does not provide for interest, we hold that the
district court erred by determining that AHS was entitled to interest on its,
refunds. Accordingly, we reverse the district court's order granting the
petition for judicial review.

FACTS AND PROCEDURAL HISTORY
AHS exclusively provided home insurance prior to 2003, on

which it paid taxes pursuant to NRS Chapter 680B. In 2003, AHS began
also providing service contracts, after the Legislature enacted NRS
Chapter 690C allowing it to do so. Although taxes are not imposed on
service contracts under NRS Chapter 690C, AHS mistakenly failed to
distinguish between its insurance premiums and service contracts, which
resulted in it making erroneous tax payments to the Department for its
service contracts, as if they were insurance premiums.

After realizing its mistake, in 2006, AHS sent a letter to the
Department requesting a refund for the overpayment of taxes from 2003
through 2006, The Department granted a refund for 2005 and 2006, but
denied a refund for 2003 and 2004 based on NRS 680B.120's one-year
limitation period. AHS appealed to the Tax Commis

 

ion

 

‘The Commission denied AHS's appeal of the Department's
decision. It concluded that NRS 680B.120(1) barred AHS's request for a
eae 3

 

2 Sr RHR
refund of the 2003 and 2004 taxes it had mistakenly paid because the
2006 request was not made within one year of the date NRS Chapter 680B
taxes were originally required to be paid. The Commission also concluded
that NRS 680B.120 specifically governs insurance premium tax refunds
and does not provide for interest on those refunds; therefore, AHS was not
entitled to interest on its partial refund. AHS petitioned the district court
for judicial review.

‘The district court granted AHS's petition for judicial review
and issued findings of fact and conclusions of law. ‘The distriet court
concluded that NRS 680B.120 did not apply to this matter because the
amounts paid for the service contracts were not imposed under NRS
Chapter 680B, and thus, AHS was not seeking a refund for an
overpayment of insurance tax premiums. The court reasoned that even if
NRS 680B.120 applied, the limitations period started to run only after the
date any taxes were originally required to be paid, and since the taxes
were not required to be paid, the limitations period never began.

‘The district court further concluded that the Taxpayers’ Bill of
Rights required construing the statutes in AHS's favor, and that
application of NRS 680B.120 violated the Taxpayers’ Bill of Rights
because it involved the application of a specific insurance statute to a line
of business specifically excluded from insurance taxation under NRS
690.110.

‘The district court also concluded that the Department had an
affirmative duty to reimburse AHS because it was never obligated to pay
taxes for its service contracts. ‘The district court relied on Humboldt
County v. Lander County, 24 Nev. 461, 56 P. 228 (1899), for the
proposition that an entity like the Department had a duty to refund taxes

that it was not entitled to collect. And similarly, because there was no

 
authority to assess, collect, or retain taxes upon AHS’s issuance of service
contracts, the district court concluded that those erroneously paid
amounts were recoverable.

Finally, the district court concluded that AHS was entitled to
interest on all of the erroneous tax payments because the general tax
statute, NRS 360.2935, granted a right to interest on any refund. The
Department appealed.

DISCUSSION

 

Standard of review

‘This case requires the review of an agency decision
interpreting a Nevada statute. In a role identical to the district court’s
role, this court reviews an administrative decision to determine if the
“agency's decision was arbitrary or capricious and was thus an abuse of
the agency's discretion,” or if it was otherwise affected by prejudicial legal
error. Campbell v. State, Dep't of Taxation, 109 Nev. 512, 515, 853 P.2d
717, 719 (1993); NRS 233B.135(8). Statutory construction is a question of
law reviewed de novo. State, Dep't of Taxation v. DaimlerChrysler, 121
Nev. 541, 543, 119 P.3d 185, 136 (2005). Unambiguous statutory language
is given “its ordinary meaning unless it is clear that this meaning was not
intended.” Id, Tax statutes must explicitly communicate their meaning
and are not extended by implication. State, Dept. of Taxation v, Visual
Comm., 108 Nev, 721, 725, 836 P.2d 1245, 1247 (1992). Conflict and
inconsistency among tax statutes will be construed to reduce uncertainty
and doubt, Id,

1, 120 bars muests for t and
2004

‘The Department asserts that even though NRS 680B.120

allows refunds for erroneous insurance premium tax payments and AHS

made erroneous tax payments in 2003 and 2004, AHS is barred from

 

 
claiming refunds for those years by that statute’s one-year limitation
period. We agree.

NRS Chapter 680B governs fees and taxes for insurance, NRS
680B.120 is entitled “Refund of overpayments,” and subsection 1 of that
statute provides that “[alny person from whom fees, charges or taxes
imposed by this Code have been erroneously collected may apply for
refund at any time within 1 year after the date such fees, charges or taxes
Although AHS contends that

were originally required to be paid...
NRS 680B.120 does not apply to its payments made on exempt service
contracts because it governs only “taxes imposed” that are “originally
required to be paid,” we reject such a hypertechnical interpretation of the
statute.

Statutes must be construed as a whole, and phrases may not
be read in isolation to defeat the purpose behind the statute. See
Southern Nev. Homebuilders v. Clark County, 121 Nev. 446, 449, 117 P.3d
171, 173 (2005); Backhus v. Transit Cas. Co., 549 So. 2d 283, 291 (La.
1989) (noting that hypertechnical interpretations of a statute should be
rejected when its plain language leads to a reasonable interpretation
consistent with legislative intent). NRS 680.120(1) clearly governs all
requests for refunds of taxes mistakenly paid and collected under the
Nevada Insurance Code, regardless of reason for overpayment. Indeed, its
very title indicates that it covers all “refunds of overpayments,” which
certainly includes the erroneous payment of taxes on exempt services. See
Nevada Power Co. v. Haggerty, 115 Nev. 858, 366, 989 P.2d 870, 878
(1999) (noting that a statute's title can reflect legislative intent). In the
context of the federal tax code, the United States Supreme Court has long
refused to limit refund statutes based on unrealistically narrow

interpretations of the term “overpayment,” explaining that an

 
ye
commana

“overpayment” for which a refund may be sought is “any payment in
excess of that which is properly due,” whether “[s]uch an excess payment

[is] traced to an error in mathematics or in judgment or in interpretation

of facts or law.” Jones v. Liberty Glass Co., 832 U.S. 524, 581 (1947),
quoted in United States v. Fior D'Italia, Inc,, 536 U.S. 238, 259 (2002). An

error resulting in overpayment “may be committed by the taxpayer or by
the revenue agents,” but “[wJhatever the reason, the payment of more
than is rightfully due is what characterizes an overpayment.” Jones, 332
USS. at 531. Relying on Jones, federal courts flatly reject the notion that
erroneous payments are not “overpayments” if the tax was not actually
“imposed” on the activity for which the payment was made. See. e.g.
Krieger v. United States, 539 F.2d 317, 320 (3d Cir. 1976)? Thus, in
accordance with the ordinary meaning of the statute, we conclude that
NRS 680B.120 applies to any and all overpayments of insurance premium
taxes, regardless of whether they were made on exempt services.
Recovering erroneously paid taxes requires following statutory
procedure if such procedure exists. Washoe County v. Golden Road Motor
Inn, 105 Nev. 402, 404, 777 P.2d 358, 359 (1989). Doing so promotes
predictability and reduces uncertainty by directing taxpayers to seek a
vefund under the refund statute applicable to the tax that was erroneously
paid. See Visual Comm., 108 Nev. at 725, 836 P.2d at 1247; Golden Road,
105 Nev. at 404, 777 P.2d at 359. Here, a statutory procedure for

 

°The Department also demonstrates that other jurisdictions
interpret their refund statutes to include taxes erroneously paid on
exempt transactions. See Walden v. University of Tampa, Incorporated,
304 So. 2d 184, 135 (Fla. Dist. Ct. App. 1974); Snake River Mutual Fire
Insurance Co, v. Neill, 336 P.2d 107, 108 (Idaho 1959); May Dept. Stores
Co. v, City of Pittsburgh, 376 A.2d 309, 312 (Pa. Commw. Ct. 1977).

 

 
on

refunding insurance premium tax overpayments exists, and AHS
calculated, reported, and made overpayments of the insurance premium
tax under NRS 680B.027. As such, NRS 680B.120 applies to AHS's refund
claims. And because AHS made its refund request in 2006, it is barred
under NRS 680B.120(1)'s one-year limitation period from seeking a refund
for its overpayments made in 2003 and 2004.*

sit district court en on Humbol

We next address the district court's conclusion that Humboldt
County obligated the Department to grant AHS's refund for all of the
erroneous payments. The Department argues that the district court erred
by relying on Humboldt County to impose a duty on the Department to
refund all of AHS's erroneous tax payments. We agree.

Humboldt County is inapplicable to this case because it
involved an equitable claim of restitution between counties, whereas here
we have a tax claim and a statutory scheme. See Humboldt Co,, 24 Nev.
at 473-76, 56 P. at 230-31; Golden Road, 105 Nev. at 404, 777 P.2d at 359
(stating that an existing statutory procedure for the recovery of a benefit
must be followed), Although Humboldt County stands for the proposition
that a taxpayer may seek equitable relief in some circumstances, it has no
application here and is limited to its unique factual circumstances. More
importantly, because NRS 680B,120 applies to AHS's refund request, this
procedure must be followed before AHS can resort to any equitable claim
of restitution, We hold that the district court erred by relying on

Consequently, because NRS 680B.120 governs AHS's refund
request, we also hold that the district court erred in concluding that the
Department violated the Taxpayers’ Bill of Rights by applying NRS

680B.120 to bar AHS’s refund requests made outside of the one-year
limitation period.

 

 

 
Humboldt County to obligate the Department to refund AHS's erroneous
payments.
IV. NRS680B, t allow the Ds zrant inte

‘The Department argues that the district court erred by
granting interest to AHS for its tax refunds for 2005 and 2006 because
RS 680B.120, the specific provision governing overpayment of insurance
premium taxes, does not provide for interest; NRS 360.2935, which does
provide for interest, is plainly inapplicable; and NRS 680B.120 does not
incorporate NRS 360.2935. We agree.

A specific statute controls over a general statute. Nevada
Power Co. v. Haggerty, 115 Nev. 358, 364, 989 P.2d 870, 877 (1999). NRS
680B.120 does not provide for interest on refunds for the overpayment of
taxes paid. NRS 360.2935 provides that “[e]xcept as otherwise provided in
[Title 82 of the NRS—Revenue and Taxation], a taxpayer is entitled to
receive on any overpayment of taxes, after the offset required by NRS
360.320 has been made, a refund together with interest.” Under this
statute, the district court granted interest to AHS, concluding that there
were no caveats or exceptions to NRS 360.2935, which “simply declares
that taxpayers are entitled to interest upon the overpayment of taxes to
the State.”

‘The Department argues that because NRS 680B.120
specifically governs AHS's refund claim and the general statute of NRS
360.2035 applies to revenue and taxation, not insurance overpayments, no
interest is due. The Department also points out that NRS 360.2935 is
contained in Title 32, which governs revenue and taxation, while NRS
Chapters 680B and 690C are found in Title 57, the Nevada Insurance
Code. The Department contends that application of NRS 360.2935 would

render NRS 680B.120, as well as other statutes providing for refunds for

 

 
 

‘overpayments, meaningless.‘ Finally, the Department notes that the
Legislature has repeatedly narrowed the language of NRS 360.2935 since
its original passage in 1991° and has specifically included reference to
taxes paid in NRS Chapter 680B in some NRS Chapter 360 provisions.*
Because NRS 680B.120 is the specific statute governing AHS's refund
claim for payments erroneously made under NRS 680B.027, we conclude
that NRS 360.2935 does not permit interest for payments erroneously
made under NRS 680B.027.7

‘See NRS 363B.150(1)(a) (three-year limitation for modified
business tax); NRS 366,650(1) (one-year limitation for special fuel tax
refund); NRS 372.635(1) (three-year limitation on refund for sales and use
tax).

 

5See 1991 Nev. Stat., ch. 508, § 8, at 1581; 1999 Nev. Stat., ch. 484, §
6, at 2483; 2001 Nev. Stat., ch. 331, § 3, at 1640; 2003 Nev. Stat. 20th
Special Sess., ch. 5, § 110, at 158.

"Compare NRS 360.297 (referencing NRS Chapter 680B), and NRS
360.300 (same), with NRS 360.2935, and NRS 360.2937 (omitting NRS
Chapter 680B from list of chapters for which a particular interest rate,
different from that under NRS 360.2935, must be paid on overpayments).

7AHS also argues that NRS 680B.060 read together with NRS
360.2935 entitles it to interest. NRS 680B.060(2) provides that if the
insurance premium tax “is not paid by the insurer on or before the date
required for payment, the tax then becomes delinquent, and payment
thereof may be enforced by court action ... by the Attorney General,” in
which “[t]he administrative and substantive enforcement provisions of
chapters 360 and 372 of NRS apply to the enforcement of taxes imposed
under NRS 680B.027.” As the Department points out, NRS 360.2935 is
not contained within either the administration section or enforcement
section of NRS Chapter 360. We conclude that NRS 680B.060 and NRS
360.2935 do not together confer a right to interest on payments
erroneously made under NRS 680B.027.

10

 

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Because we conclude that NRS 680B.120 applies to insurance
premium refund requests and NRS 680B.120 does not provide for interest,
AHS was not entitled to interest on its refunds for 2005 and 2006.
DaimlerChrysler, 121 Nev. at 548, 119 P.3d at 139 (stating that subject
matter omitted from a statute is deemed intentional). We hold that the
district court erred by concluding that AHS was entitled to interest on its
refunds for taxes erroneously paid under NRS 680B.027.

Accordingly, as the Tax Commission did not err in denying
refunds for 2003 and 2004 and interest on the insurance premium
overpayments, the district court's order granting AHS's petition for

judicial review is reversed.

 

We concur:

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