Court Opinion

ID: 9790255
Source: CourtListenerOpinion
Date Created: 2023-08-31 01:49:37.395772+00
Date Added: 2024-06-11T07:37:27.789157
License: Public Domain

*94ROVIRA, Justice,
dissenting.
I begin my analysis with a recognition that Montgomery Ward & Co., Inc. (Wards), as a retailer, is a collection agent for the state and that the burden of paying the sales tax falls upon the purchaser. Department of Revenue v. Modern Trailer Sales, Inc., 175 Colo. 296, 486 P.2d 1064 (1971).1
I.
The dispute between the parties centers on the language of sections 39-26-102(5) and 39-26-111, C.R.S.1973, and the applicability of these statutes to sales made on credit which are subject to the sales tax.
Section 39-26-102(5) provides in relevant part that:
“On all sales at retail, valued in money, when such sales are made under conditional sales contract, or under other forms of sale where the payment of the principal sum thereunder is extended over a period longer than sixty days from the date of sale thereof, only such portion of the sale amount thereof may be counted for the purpose of imposition of the tax imposed by this article as has actually been received in cash by the taxpayer during the period for which the tax imposed by this article is due and payable....”
Section 39-26-111 provides in pertinent part:
“In case of a sale upon credit ... there shall be paid upon each payment, upon the account of purchase price, that portion of the total tax which the amount paid bears in the total purchase price. The executive director ... may authorize a retailer doing business, wholly or partly on a credit basis, to make returns on the basis of cash actually received. Thereafter the retailer shall make return and pay taxes on that basis until further order of the executive director... . ”
The Department of Revenue (Department) contends that Wards does not qualify under the provisions of section 39-26-102(5), C.R.S.1973, because its credit accounts may be paid in less than sixty days. The Department admits in its brief that if Wards did qualify under this statute it would need “neither a court order nor permission from the Director to remit sales tax on the basis of cash received.”
My reading of section 39-26-102(5), C.R. S.1973, satisfies me that the Department’s analysis of that section is too narrow and does not comport with reality.
Wards asserts that, under its Charg-All account, the customer has the right to defer payment over a period of more than sixty days even though he has the right to prepay within the sixty days.2 To accept the view of the Department that the right of prepayment by Wards’ Charg-All customers destroys the applicability of section 39-26-102(5) would be to require Wards to prohibit prepayment within the sixty-day period if it desired to remain eligible under the terms of the statute. Such a prohibition Wards cannot impose because section 5-2-209, C.R. S.1973 (the Uniform Consumer Credit Code), mandates that the consumer buyer has the right to prepay the unpaid balance of a consumer credit sale at any time without penalty.
In my opinion, if the Wards Charg-All account extends customer credit over a period longer than sixty days, then such credit sales come within the provision of section 39-26-102(5) and Wards is entitled as a matter of law to pay the sales tax on a cash basis.
Since the trial court made no specific findings as to whether Wards’ credit accounts at issue come within the provisions of section 39-26-102(5), C.R.S.1973,1 would remand to the trial court for a factual determination as to whether Wards’ credit *95accounts are a form of sale “where the payment of the principal sum thereunder is extended over a period longer than sixty days from the date of sale thereof.”
Since it is my view that Wards would come within the purview of section 39-26-102(5), C.R.S.1973, if its charge accounts extend credit for more than sixty days from the date of sale, I do not think it necessary to decide whether section 39-26-111, C.R.S. 1973, authorizes the Department of Revenue to require payment of sales taxes on the accrual basis.
II.
The majority opinion adopts the trial court’s rationale that the sale of the accounts receivable (finance paper) by Wards to its wholly owned subsidiary, Montgomery Ward Credit Corporation (Credit Corporation), was a payment of the credit sales and therefore the sales tax was due.
In support of its position, the majority adopts the view that since Wards and Credit Corporation were separate corporations, one organized in Illinois and the other in Delaware, they could not be a “person” as defined in section 39-26-102(6), C.R.S.1973.
The majority also concludes that Regulation 138-5-11, C.C.R., is not inconsistent with section 39-26-111, C.R.S.1973, because, when Wards sold the accounts receivable to Credit Corporation, it received payment for the accounts including the tax owing on the accounts.
However, it is clear that Regulation 138-5-11 contemplates that the sales tax is not due on credit sales until the retailer receives payment from the purchaser. Such a conclusion is inescapable; otherwise, there would be no need for a regulation relating to the sale of finance paper (accounts receivable) if the retailer were reporting his sales on an accrual basis and paying the sales tax at the time of sale.
In my reading of part 1 of article 26 of title 39, C.R.S.1973,1 find no statutory provision which supports the issuance of Regulation 138-5-11 other than section 39-26-122, C.R.S.1973, which authorizes the Director of the Department of Revenue to prescribe reasonable rules and regulations.
In short, there is no statutory authority to support a regulation which requires a retailer who “negotiates or sells” his finance paper to remit a sales tax which it has not yet collected from the purchaser.
Further analysis supports this conclusion. The regulation distinguishes “negotiates” from “sells” in referring to finance paper. A retailer negotiating his finance paper may be doing nothing more than pledging such paper at its local bank to secure advances made for working capital or other business purposes. Under such circumstances, according to the position taken by the Department of Revenue, the pledge of finance paper to secure a loan would mandate that the retailer would have to pay the sales tax on credit sales even though the purchaser would not have paid the full purchase price.
I do not agree with the majority that Regulation 138-5-11 is consistent with section 39-26-111, C.R.S.1973. In my view, the inconsistency between the statute and the regulation is easily discernable.
The statute requires that the retailer pay sales taxes on credit sales only for the same percentage of total tax due as he receives in payment upon the account of the purchase price.
The regulation makes the sale or the negotiation of the account the event which mandates the payment by the retailer of the sales tax.
According to section 39-26-111, C.R.S. 1973, a payment made by the purchaser of goods, which is a taxable transaction, is the decisive event. The regulation holds that the sale of the accounts receivable, a nontaxable transaction, is the decisive event.
I am of the view that the regulation is inconsistent with the statute and therefore void. Frontier Airlines v. Department of Revenue, 194 Colo. 230, 571 P.2d 1088 (1977).
I also disagree with the majority’s conclusion that, as a matter of law, Wards and *96Credit Corporation were not a single person. This conclusion is not supported by the record.
“Person,” as defined in section 39-26-102(6), C.R.S.1973, includes “any individual, firm, partnership, joint adventure, corporation, estate or trust, or any group or combination acting as a unit, and the plural as well as the singular number." (Emphasis added.) A fair reading of the plain statutory language shows that a “person” may include corporations or any group or combination acting as a unit.
The trial court made no finding that Wards and its wholly owned subsidiary were not “acting as a unit” in dealing with the accounts receivable (finance paper).
The trial court stated that:
“[I]f Montgomery Ward and Credit Corporation are one ‘person’ then, in this Court’s opinion, the Deputy Director did give Montgomery Ward permission to pay sales tax on accounts sold Credit Corporation as payments were made to Montgomery Ward. If Montgomery Ward and Credit Corporation are not one ‘person’ as defined by statute, then the Deputy Director could not give permission contrary to the pertinent statute, C.R.S. ’73, 39-26-102(5) and 39-26-111 and Regulation 138-5-11. ...”
The trial court’s conclusions are expressed in the following terms:
“The court concludes as a matter of law that Montgomery Ward and Credit Corporation are not one ‘person’ as defined by statute, since Montgomery Ward is an Illinois corporation and Credit Corporation is a Delaware corporation which does no business in Colorado and does not pay any income tax in this state. (White Motor Corp. v. Koysdar, 50 Ohio [St.]2[n]d 290, 364 N.E.2d 252.) Since Montgomery Ward and Credit Corporation are not one ‘person,’ it follows that the sale of accounts receivable by Montgomery Ward to Credit Corporation are cash sales and the sales tax on such sales are due on a cash basis.”
The trial court made no finding as to whether Wards and Credit Corporation were corporations “acting as a unit” even though there was evidence in the record that Wards maintains all the records in connection with the accounts, accepts all payments from the customers, and makes all charges and credits to the account.
The conclusion of the trial court, adopted by the majority opinion, that because two corporations are separate legal entities, they cannot come within the definition of “person” pursuant to section 39-26-102(6), C.R.S.1973, wholly fails to give recognition to the statutory language “acting as a unit.”
Before a conclusion can be reached that the two corporations were not one “person,” as defined by section 39-26-102(6), C.R.S. 1973, there must be a determination that the two corporations were not acting as a unit. I would remand to the trial court for a finding of fact as to this issue.
The judgment of the trial court should be reversed.
I am authorized to say that LOHR, J., joins in this dissent.

. Section 39-26-108, C.R.S.1973, provides that it is unlawful for any retailer to advertise or hold out to the public that the sales tax will be assumed or absorbed by the retailer. A retailer who does so is guilty of a misdemeanor.

. The Montgomery Ward Charg-All Credit Agreement (Exhibit I) allows the credit buyer twenty months in which to pay an account balance of $160; for an account balance of over $504, twenty-eight months is permitted.