Opinion ID: 1686100
Heading Depth: 2
Heading Rank: 2

Heading: Jurisdiction to Adjudicate Sales-Tax Liability

Text: After the trial court upheld the Act, it determined that Russell Petroleum owed the City $164,428.26 for [business] license fees, gas taxes, sales taxes, and penalties. . . . Russell Petroleum does not contest that, if the annexation is valid, the trial court could have entered a judgment with respect to business-license fees and municipal gasoline taxes. It argues, however, that the judgment should be reversed because, it says, the trial court lacked jurisdiction to order Russell Petroleum to pay municipal sales taxes. A brief overview of the facts related to the sales-tax award is necessary. In its complaint the City sought to collect only municipal business-license fees and gasoline taxes. Although Russell Petroleum claimed that the collection of those taxes was illegal, it interpleaded $36,534.68 into court; Russell Petroleum alleged in its counterclaim that those moneys constituted license fees and gasoline taxes. Russell Petroleum further alleged that, because the annexation was invalid and it did not have records indicating the identities of its customers, the trial court should order a cy pres refund of the funds it had paid into court. As noted above, the trial court received evidence indicating (1) that the funds paid into court were municipal sales taxes that Russell Petroleum had collected from its retail customers, and (2) that Russell Petroleum had collected over $78,000 in those taxes after 2001. Given these circumstances, the trial court effectively conformed the pleadings to the evidence when it found that sales taxes were placed in dispute in this case. Moreover, when it entered a judgment for the City, it ordered Russell Petroleum to remit all three types of contested funds  business-license fees, gasoline taxes, and sales taxes. Unquestionably, the evidence and developments below supported the trial court's finding that Russell Petroleum interjected the sales-tax dispute into consideration. Notwithstanding, we agree with Russell Petroleum that the trial court did not have authority to order it to pay sales taxes. In 1992 the legislature enacted the Taxpayers' Bill of Rights and Uniform Revenue Procedures Act, Ala.Code 1975, § 40-2A-1 et seq. (the TBOR). The legislature intended that the TBOR provide equitable and uniform procedures for the assessment and collection of taxes and for the resolution of tax disputes between taxpayers and the Alabama Department of Revenue (the Department). § 40-2A-2(1)a. In disputes concerning unpaid taxes, the TBOR, among other things, established procedures for the entry of a preliminary assessment, a request by the taxpayer for an administrative review of a preliminary assessment, a final assessment, the appeal of a final assessment to the administrative law division of the Department, and an appeal to circuit court of any final order issued by an administrative law judge. See §§ 40-2A-4, -7, and -9. The TBOR is not merely procedural legislation, but also deals with the rights, remedies, and responsibilities of both taxpayers and the Department. Ex parte State Dep't of Revenue, 792 So.2d 380, 383 (Ala.1999). Initially, the administrative requirements of the TBOR were directed only to the activities of the Department. However, the legislature subsequently passed the Local Tax Simplification Act of 1998, Act No. 98-192, Ala. Acts 1998 (the LTSA). Section 2 of that act states: The Legislature finds and declares that the enactment by this state of a simplified system of local sales, use, rental, and lodgings taxes which may be levied by or for the benefit of municipalities and counties in Alabama effectuates desirable public policy by promoting understanding of and compliance with applicable local tax laws. . . .  Section 3 amended, among other sections, § 11-51-201(a), Ala.Code 1975, to read as follows: § 11-51-201 (a) All taxes levied or assessed by any municipality pursuant to the provisions of Section 11-51-200 shall be subject to all definitions, exceptions, exemptions, proceedings, requirements, provisions, rules and regulations promulgated under the Alabama Administrative Procedure Act, direct pay permit and drive-out certificate procedures, statutes of limitation, penalties, fines, punishments, and deductions for the corresponding state tax as are provided by Sections 40-2A-7, 40-23-1, 40-23-2, 40-23-2.1, 40-23-4 to 40-23-31, inclusive, 40-23-36, 40-23-37, except for those provisions relating to the tax rate, and 40-23-38, except where inapplicable or where otherwise provided in this article. Upon enactment of the LTSA, both § 11-51-201(a) (concerning municipal sales taxes) and § 11-51-203(a) (addressing municipal excise, use, and lodging taxes) were amended to add language stating that the assessment of those local taxes impacted by the LTSA were subject to all definitions, exceptions, exemptions, proceedings, requirements, provisions, rules and regulations promulgated under the Alabama Administrative Procedure Act for the corresponding state tax. Considering the TBOR (including a 1998 amendment thereto now codified at § 40-2A-13) and the LTSA in their entirety, we held as follows in General Motors Acceptance Corp. v. City of Red Bay, 894 So.2d 650 (Ala.2004): [The LTSA] made the TBOR equally applicable to tax assessments and tax-collection procedures by local taxing authorities such as [municipalities and counties]. . . . . . . . . . . The statutes amended by the LTSA clearly adopt the administrative rules and regulations promulgated by the Department to implement the TBOR, thus making municipalities and counties subject to the statutory mandates applicable to both taxing authorities and taxpayers alike when enforcing the State's tax laws. 894 So.2d at 653-54. Here the City did not use the administrative procedures mandated by the TBOR when collecting its sales taxes. [6] It did not provide Russell Petroleum notice of a preliminary or final assessment of sales taxes, and there was no administrative consideration of the dispute concerning that alleged deficiency. Instead, the City's initial attempt to collect sales taxes from Russell Petroleum occurred in the Elmore Circuit Court. We recently were confronted with an analogous situation in City of Red Bay, supra . There the municipality filed an action in the circuit court to collect sales and/or rental taxes on vehicles leased by the defendant; the administrative procedures envisioned by the TBOR were not invoked before that action was filed. 894 So.2d at 652. Relying on the well-reasoned authority in Patterson v. Gladwin Corp., 835 So.2d 137, 153 (Ala.2002), the Court vacated a class-certification order by the trial court concerning the collection of those municipal taxes and stated: The [ Patterson ] Court held that compliance with the TBOR is the exclusive means for obtaining a franchise-tax refund, and explicitly stated that `[t]he TBOR is jurisdictional on its face. See § 40-2A-7(c)(5) c; § 40-2A-9(g)(1).' 835 So.2d at 153. See also State v. Amerada Hess Corp., 788 So.2d 179 (Ala.Civ.App.2000), in which the Court of Civil Appeals dismissed an action by the Department to recover severance taxes on the basis that the trial court lacked jurisdiction over the action because the Department had failed to follow the TBOR. Because the failure of the City and the County to comply with the provisions of the TBOR before filing their complaint deprived the trial court of jurisdiction, we vacate the class-certification order and remand the cause for the trial court to enter an order of dismissal. 894 So.2d at 656 (quoting Patterson, 835 So.2d at 153). The City of Red Bay decision is controlling authority. As in that case, the circuit court here did not have subject-matter jurisdiction to adjudicate the sales-tax issue because the City litigated that dispute without availing itself of the administrative procedures in the TBOR, which the LTSA made applicable to the assessment of local sales, use, rental, and lodgings taxes. [7] In so holding, we reject the City's argument that, because Russell Petroleum paid $36,534.68 in sales taxes into court and withheld other such taxes, it waived any objection to the trial court's adjudication of the sales-tax dispute. It is axiomatic that, where a court has no jurisdiction to consider the subject matter of a cause, the litigants may not confer authority on that court to consider that matter by their agreement, stipulation, or other conduct. 21 C.J.S. Courts § 84 (2006).