Opinion ID: 4271526
Heading Depth: 2
Heading Rank: 3

Heading: Review before the OTA.

Text: Ashland timely petitioned the OTA to review the Commissioner’s August 2012 penalty assessment. The administrative law judge (ALJ) conducted an evidentiary hearing in August 2013. Testimony offered at the hearing by a representative of the West Virginia State Tax Department indicated that the Commissioner consistently imposes a 500%-of-retail-value penalty for violations of West Virginia Code § 16-9D-3(c). Specifically, the Commissioner’s representative testified: Yes. My auditors have no discretion. I mean they have the ability to come to me. I have the ability to go to my director and get anything—to request something less. It’s never happened. I mean we—in my recollection, they’ve all been 500 percent that we’ve done. And these are rare. There’s not many of them. . . . I’ve never gone up the food chain for any—. I’ve never heard a good explanation to go up the food chain. Our audit program is locked in at 500 percent. I mean I don’t—. Like I said, these were rare. I don’t recall any reason to ask for a reduced rate. When asked to justify the 500%-of-retail-value penalty imposed by the Commissioner in this case, the representative explained that Ashland had “two previous 5 audits, that they’ve been forewarned, and—they’re still continuing to do so, I don’t really see any need to reduce it. I mean, they’ve had plenty of warning and they keep making the same error.” In August 2014, the ALJ issued a written order finding the Commissioner’s $159,398 penalty to be “erroneous, unlawful, void, or otherwise invalid[.]” The ALJ reasoned that “the Tax Commissioner exercised no discretion at all in issuing the penalty” to Ashland because the evidence demonstrated that the Commissioner invariably assessed the 500%-of-retail-value penalty for the sale of delisted cigarettes. Additionally, the ALJ concluded that the $159,398 penalty was too harsh because “[c]ommon sense tells us that the maximum penalty should be reserved for the worst offenders, for example, a seller who deliberately sells delisted brands or who engages in some criminal activity in connection with cigarette sales.” Consequently, the ALJ reduced the penalty by 25% to $119,548.50. D. Review before the Circuit Court of Kanawha County. Both the Commissioner and Ashland appealed the OTA’s reduction of the Commissioner’s original penalty, and briefing on the matter proceeded before the Circuit Court of Kanawha County.11 On April 11, 2017, the circuit court entered an order reversing the order of the OTA and reinstating the Commissioner’s original penalty. The circuit 11 Ashland appealed to the Circuit Court of Cabell County, and the Commissioner appealed to the Circuit Court of Kanawha County. The Circuit Court of Cabell County transferred Ashland’s appeal to the Circuit Court of Kanawha County. 6 court found, among other things, that: (1) the OTA erred in concluding that the Commissioner exercised no judgment, when the $159,398 penalty imposed was not the maximum permitted by West Virginia Code § 16-9D-8(a); (2) the OTA erred in concluding that the Commissioner abused his discretion by imposing the same, proportional penalty on all violators of § 16-9D-3(c); and (3) the $159,398 penalty did not violate the Excessive Fines Clause of the West Virginia Constitution or the Eighth Amendment to the United States Constitution. Ashland now appeals from that order.