Court Opinion

ID: 9611302
Source: CourtListenerOpinion
Date Created: 2023-08-22 03:54:51.312148+00
Date Added: 2024-06-11T18:03:12.466803
License: Public Domain

Robert L. Brown, Justice, concurring. I concur with the result reached by the majority opinion, but do so with serious misgivings. The result of today’s decision is to render the Bad Debt Statute, Ark. Code Ann. § 26-52-309 (Repl. 1997), useless for transactions involving motor vehicle financing. This means those lenders who finance car sales are unable to collect a refund of sales taxes paid on uncollectible debts. Thus, a major sector of our business community is treated differently from all other sales transactions in our state. As a result, lenders on car sales pay a tax they do not owe, and the State realizes a considerable windfall. I would hope that the General Assembly will look closely at this situation at its next regular session, commencing in January. The majority rationalizes its decision on the basis that sales tax refunds for uncollectible bad debt are only available to “taxpayers.” Lenders of the money to pay the sales tax are not defined as taxpayers under Ark. Code Ann. § 26-52-103(a)(5) (Repl. ■1997), says the majority, because lenders are not liable to pay the sales tax. The majority refers to Ark. Code Ann. § 26-52-510(a)(1)(A) (Repl. 1997), where it is the consumer who is directed to pay the sales tax on motor vehicle purchases. The problem with the majority’s analysis is that it renders the Bad Debt Statute meaningless for sales of motor vehicles when financing is involved. In today’s world, it is a rare new-car sale where the price is paid in cash. Without question, financing a car purchase is the preferred method for the vast majority of consumers. Yet, the majority’s analysis forecloses the lender, who actually provides the money to pay the sales tax, from collecting a refund for the portion of the tax paid on the bad debt. Who then would be available to collect the refund under the Bad Debt Statute? Not the seller/dealer, because no debt is owing to it. The dealer has been paid the purchase price in full. Not the consumer/purchaser. He or she did not pay the sales tax but owes that amount to the lender. As a result, under the majority’s interpretation, no entity or person can claim a bad debt refund when a motor vehicle loan is involved. Though the majority does not expressly state this, it has concluded, in effect, that motor vehicle transactions are excluded from refunds under the Bad Debt Statute, even though the General Assembly never makes that declaration in the statute. The majority is simply reading in an exception that is not there. Lenders like Daimler Chrysler no doubt are puzzled as to why the statute does not apply to them. They have paid a tax they do not owe; yet, the State keeps the money and realizes a windfall and refuses to extend them the refund privilege. That is not right. Having said that, the Bad Debt Statute is not a model of clarity. And though the statute does not expressly exempt motor vehicle sales, some meager doubt is raised because other statutes do treat payment of the sales tax on motor vehicle sales differently from sales of ordinary tangible property. Compare Ark. Code Ann. § 26-52-510 (Repl. 1997) (consumers pay the sales tax directly to the State for car purchases) to Ark. Code Ann. § 26-52-508 (Repl. 1997) (sellers collect sales tax on sales of tangible personal property and remit to State). Our standard of review for an exemption or deduction from paying a tax is that we strictly construe the statute against an exemption and if there is any doubt, the exemption or deduction should be denied. See, e.g., St. Louis Southwestern Ry. Co. v. Ragland, 304 Ark. 1, 800 S.W.2d 410 (1990). Though I think the majority’s analysis on the liability to pay the tax is questionable, I must confess to some doubt as to what the General Assembly intended for refunds for bad debts associated with motor vehicle sales. There is one final point about the majority opinion. It does not discuss Daimler Chrysler’s assignment argument which the trial court addressed and which Daimler Chrysler argues on appeal. The seminal case on this point, Puget Sound Nat’l Bank v. State Dep’t of Revenue, 123 Wash. 2d 284, 868 P.2d 127 (1994), holds that the Washington State bad debt statute did not prohibit the refund of assigned sales tax refunds to lenders; nor did public policy prohibit the assignment of a tax refund, since any other rule would be inequitable and entitle the state to a financial windfall. That issue needs to be resolved. For these stated reasons, I concur only in the result.