Title: M&S Market, Inc. v. Dept. of Rev.
Citation: N/A
Docket Number: S054754
State: Oregon
Issuer: Oregon Supreme Court
Date: April 17, 2008

FILED: April 17, 2008
IN THE SUPREME COURT OF THE STATE 
OF OREGON
M&amp;S MARKET, INC., 
Appellant,
v.
DEPARTMENT OF REVENUE,
Respondent.
(TC 4757; SC S054754)
En Banc
On appeal from the Oregon Tax Court.*
Submitted on the record March 7, 2008.
Michael Mills, Salem, filed the briefs for appellant.
Joseph Laronge, Assistant Attorney General, Salem, filed the brief for respondent.  With him on the brief was Hardy Myers, Attorney General.
KISTLER, J.
The judgment of the Tax Court is affirmed.
*19 OTR 207 (2007).
KISTLER, J.
The issue in this case is whether
the Department of Revenue (department) is estopped from seeking to dismiss
taxpayer's untimely appeal.  The Tax Court ruled, on summary judgment, that
taxpayer had not proved that the department was estopped and entered judgment
in the department's favor.  We affirm the Tax Court's judgment.
Because this case arises on the
department's motion for summary judgment, we state any disputed facts in the
light most favorable to taxpayer.  On January 7, 2005, the department issued
three Notices of Assessment to taxpayer.  Each notice stated that taxpayer had
purchased tobacco products from Lil Brown Smoke Shack without paying any
tobacco tax.  The notices set out the amount of the tax, penalties, and
interest that taxpayer owed and explained the department's basis for calculating
those amounts.  Finally, each notice stated:
"Oregon law requires all tax due be paid on or before
the due date of the return.  This notice includes charges for penalty and/or
interest.  IF YOU DISAGREE OR ONLY HAVE CONCERNS ABOUT THE PAYMENTS MADE OR THE
PENALTY AND/OR INTEREST CHARGES, PLEASE CONTACT THE DEPARTMENT OF REVENUE [at a
specified location].  IT IS POSSIBLE THAT AN ADJUSTMENT CAN BE MADE WITHOUT
HAVING TO FILE AN APPEAL.
"If you have other disagreements or concerns, you may
file an appeal.
"* * * * *
"HOW TO APPEAL A NOTICE OF ASSESSMENT TO THE OREGON TAX
COURT.
"IF YOU DISAGREE WITH THIS NOTICE OF ASSESSMENT, YOU
HAVE THE RIGHT TO APPEAL TO THE OREGON TAX COURT.  You must appeal to the
Magistrate Division of the Oregon Tax Court within 90 days from the date of the
Notice of Assessment.  [The notice then explains how and where to file the
appeal.]
"IF YOU DO NOT APPEAL ON TIME, YOUR APPEAL RIGHTS
EXPIRE, AND THE ADJUSTMENTS ARE FINAL."
After receiving the notices of
assessment, Ellen Bewly, taxpayer's licensed tax consultant, wrote the department
on January 21, 2005, that taxpayer disagreed with the assessments and asked for
the information on which the department had relied.  In February, Fred Nichol,
an auditor with the department, called Bewly.  During their conversation, Bewly
said that taxpayer had not bought tobacco products from Lil Brown Smoke Shack
and asked Nichol what support the department had for its assessments.  Nichol
told her that the department's computer showed that taxpayer had made the
purchases.  He said that he would get the underlying documentation and forward
it to taxpayer for its review and response.  Bewly did not receive the
documentation before April 6, 2005, the last day on which taxpayer could file a
timely appeal from the notices of assessment.
Sometime before April 6, 2005, Lal
Sidhu, one of taxpayer's owners, also called Nichol and told him, as Bewly had
done, that the assessments were incorrect.  He reiterated that taxpayer had
never bought tobacco products from Lil Brown Smoke Shack and had no record of
issuing any payments or credits to Lil Brown Smoke Shack.  Nichol told Sidhu
that he would check the documentation for the information in the department's
computer records and send that documentation to Sidhu for his review.  Nichol,
however, did not send the documentation to Sidhu until July 29, 2005.
On June 9, 2005, Sidhu sent the
department a letter stating that taxpayer was "appealing and
disputing" the department's decision that it owed taxes, penalties, and
interest for purchasing tobacco products from Lil Brown Smoke Shack.  On July
29, 2005, Nichol responded, consistently with the notices of assessment, that
taxpayer had to appeal to the Magistrate Division of the Oregon Tax Court, not
to the department.  Nichol also explained that the department had based the
assessments on information obtained as a result of a search warrant executed on
Lil Brown Smoke Shack.  In his letter, Nichol enclosed "[i]nformation
regarding [taxpayer's] address on [Lil Brown Smoke Shack's computer] system and
regarding invoices for purchases by [taxpayer]."
On August 22, 2005, Sidhu sent
another letter to the department stating that taxpayer was "appealing"
from the notices of assessment.  Nichol faxed Sidhu information regarding the
appeals process and, on September 15, 2005, the department wrote Sidhu
reviewing its understanding of their communications and stating that the
department had not received notice that taxpayer had filed an appeal with the
Oregon Tax Court.
On September 23, 2005, taxpayer
filed an appeal with the Magistrate Division of the Tax Court.  The department
moved to dismiss taxpayer's appeal as untimely, and the Magistrate Division
granted the motion.  Taxpayer appealed to the Regular Division of the Tax
Court.  On the department's motion for summary judgment, the Regular Division
ruled that taxpayer's September 23, 2005, appeal was untimely and that the
department was not estopped from asserting otherwise.  The Tax Court entered
judgment against taxpayer.  Taxpayer has appealed that judgment to this court.
ORS 305.280(2) provides that
"[a]n appeal * * * from any notice of assessment * * * issued by the
Department of Revenue [regarding certain taxes] shall be filed within 90 days
after the date of the notice." (1) There is no dispute that taxpayer filed its appeal more than 90 days after the
date on the notices of assessment.  The only question that the parties have raised
on appeal is whether the department's actions estop it from claiming that
taxpayer's appeal was untimely.  To establish that the department is estopped,
taxpayer must prove:
"'(1) [the department made]
a false representation; (2) it [was] made with knowledge of the facts; (3) the [taxpayer]
must have been ignorant of the truth; (4) it must have been made with the
intention that it should be acted upon by the [taxpayer]; (5) the [taxpayer]
must have been induced to act upon it[.]'"
Welch v. Washington County,
314 Or 707, 715-16, 842 P2d 793 (1992) (quoting and applying the standard from Coos
County v. State of Oregon, 303 Or 173, 180-81, 734 P2d 1348 (1987), against
a taxing authority).
The primary dispute in this case
centers on whether the department made a false or misleading representation.  See
Pilgrim Turkey Packers v. Dept. of Rev., 261 Or 305, 493 P2d 1372 (1972)
(holding the department was estopped because an ambiguity in a form would have
led a reasonable person to file the form with the wrong entity).  As we
understand taxpayer's argument, it rests on the premise that taxpayer reasonably
understood from the notices of assessment that, if it sought an adjustment from
the department, it could defer filing an appeal as long as it was in the
process of negotiating an adjustment.  Building on that premise, taxpayer notes
that Nichol never told Bewly or Sidhu otherwise and that Nichol's failure to
provide the underlying documentation sooner resulted in taxpayer's failure to
file a timely appeal.  It follows, taxpayer concludes, that the department is
estopped.
We begin with the premise of taxpayer's
argument -- that it reasonably understood from the notices of assessment that
it need not file an appeal as long as it was negotiating an adjustment with the
department.  On that issue, the relevant portions of each notice divide into
two parts.  The first part of the notices invited taxpayer to seek an
adjustment of certain matters with the department.  Each notice explained that,
"[i]f you disagree or only have concerns about the payments made or the
penalty and/or interest charges, please contact the Department of Revenue [at a
specified location].  It is possible that an adjustment can be made without
having to file an appeal."  (Some capitalization omitted.)  Although those
sentences invited taxpayer to seek to resolve certain disagreements informally,
neither sentence told taxpayer that it could defer filing an appeal until after
any negotiations regarding an adjustment were concluded.  The last sentence held
out the possibility that taxpayer might be able to avoid having to file an
appeal, but it did not address when an appeal, if one were necessary, should be
filed.  The second part of the notices addressed that issue.
That part was captioned:  "HOW
TO APPEAL A NOTICE OF ASSESSMENT TO THE OREGON TAX COURT."  Beneath that
caption, each notice stated, "IF YOU DISAGREE WITH THIS NOTICE OF
ASSESSMENT, YOU HAVE THE RIGHT TO APPEAL TO THE OREGON TAX COURT."  Each
notice then stated that "[y]ou must appeal to the Magistrate Division of
the Oregon Tax Court within 90 days from the date of the Notice of
Assessment."  Each notice set out where the appeal should be filed. 
Finally, each notice added, "IF YOU DO NOT APPEAL ON TIME, YOUR APPEAL
RIGHTS EXPIRE, AND THE ADJUSTMENTS ARE FINAL."
The two parts of the notices, read
together, are clear:  Although taxpayer could seek an informal adjustment from
the department, taxpayer must appeal to the Tax Court within 90 days of the
notice of assessment to preserve any disagreement that it might have with the
department.  If taxpayer did not appeal "on time," taxpayer's appeal
rights would expire, and any adjustments that the department may or may not
have made would become final.
In arguing that a reasonable person could
draw a different conclusion, taxpayer contends that the sentence -- "[i]f
you disagree or only have concerns about the payments made or the penalty
and/or interest charges, please contact the Department of Revenue" -- is
ambiguous and thus misleading.  In taxpayer's view, the phrase "[i]f you
disagree" is not limited to disagreements over the "the payments made
or the penalty and/or interest charges" but also includes disagreements
over the assessment itself.
Taxpayer's argument misses the
mark.  Even if the ambiguity that taxpayer perceives exists, that ambiguity does
not advance its argument.  The ambiguity that taxpayer identifies goes to what
matters are subject to an adjustment. (2) It does not go to when an appeal should be filed.  The second part of the
notices made clear that, whether a matter is subject to adjustment or not,
taxpayer still had to file an appeal within 90 days after the date of the
notice of assessment.  We thus disagree with taxpayer's argument that it
reasonably understood from the notices of assessment that it did not have to
file an appeal as long as negotiations were ongoing.  Far from being ambiguous
on that point, the notices of assessment were clear that taxpayer needed to file
an appeal within 90 days from the date of the notices or it would lose its
right to appeal the notices of assessment.
Taxpayer advances two other
arguments in support of its claim that the department is estopped.  It notes that,
when Nichol spoke with Bewly and Sidhu, he did not tell them that taxpayer needed
to file an appeal within 90 days.  Taxpayer also notes that Nichol did not send
Bewly or Sidhu the underlying documentation until after the 90 days to appeal
had passed.  Taxpayer's arguments, as we understand them, depend on the premise
that the notices of assessment were ambiguous and thus misleading; that is, 
Nichol's failure to remind Bewly and Sidhu that taxpayer needed to appeal
within 90 days matters only if the notices of assessment were misleading on
that point.  Similarly, Nichol's lengthy delay in getting the underlying
documentation to taxpayer matters only if taxpayer reasonably understood that
it need not file an appeal as long as it was seeking to obtain an adjustment. 
The notices, however, were neither ambiguous nor misleading as to when taxpayer
needed to file an appeal.  It follows that neither Nichol's silence nor his
delay adds anything to taxpayer's estoppel claim.  The Tax Court correctly
concluded that the department was not estopped from asserting that taxpayer's
appeal was untimely.
The judgment of the Tax Court is
affirmed.
1. Taxpayer does not dispute that ORS 305.280(2) applies to tobacco
taxes.  See ORS 323.623(1) (providing for an appeal from imposition of
tobacco taxes "in the time and manner provided in ORS 305.404 to
305.560"); ORS 305.560(1) (providing that an appeal may be taken by filing
a complaint in the Magistrate Division within the time allowed under ORS
305.280(2)).
2. We
note that the next sentence in the first part of each notice states that,
"[i]f you have other disagreements or concerns, you may file an appeal." 
That sentence implies that some disagreements are not subject to adjustment
but, as taxpayer argues, does not specify which disagreements are and are not
subject to adjustment.  Indeed, the sentence is awkward and confusing in that
respect.  As explained above, however, any ambiguity concerning which
disagreements are subject to adjustment does not advance taxpayer's point that
the notices were misleading as to when it had to file an appeal if there were a
disagreement.