Court Opinion

ID: 7826311
Source: CourtListenerOpinion
Date Created: 2022-09-07 18:07:47.530859+00
Date Added: 2024-06-11T16:30:52.410463
License: Public Domain

ROBERT H. DUDLEY, Justice, dissenting. The facts, taken from the complaint as being true, are that the taxpayer was in the business of selling vacuum cleaners at suggested retail prices ranging from $1,031.00 to $1,191.00 per unit; if the customer paid cash, the customer received a $50.00 cash discount; if the customer traded in a used vacuum cleaner the customer received a trade-in allowance or “special discount” of $100 to $150. The “special discount” given for the trade-in vacuum cleaners was not included by the taxpayer as part of the total consideration when the sales tax was calculated on the sale, even though there is no dispute that the trade-in vacuum cleaner had value. The taxpayer did not collect, nor did it remit, sales tax on the amount of the “special discount.” The issue on appeal is whether sales tax is due on the amount of the “special discount.” The chancellor dismissed the taxpayer’s suit for a refund because its complaint did not state a cause of action. The majority opinion reverses the riding of the chancellor and holds that the taxpayer’s complaint states a cause of action because “the discount was not based on the value of the vacuum cleaners received by” the taxpayer. I dissent from that holding. As a matter of law, unless expressly exempted, gross proceeds or gross receipts includes not only the cash consideration, but also the value of any property traded in and accepted as partial consideration in the purchase of new property. Section 26-52-301 of the Arkansas Code Annotated provides: There is levied an excise tax of three percent (3%) upon the gross proceeds or gross receipts derived from all sales to any person of the following: (1) Tangible personal property .... Section 26-52-103 provides: (a) The following words and phrases, except where the context clearly indicates a different meaning, when used in this act shall have the following meanings: (4) “Gross receipts” or “gross proceeds” means the total amount of consideration for the sale of tangible personal property and such services are herein specifically provided for, whether the consideration is in money or otherwise, mthout any deduction on account of the cost of the properties sold, labor service performed, interest paid, losses, or any expenses whatsoever. Ark. Code Ann. § 26-52-103 (Supp. 1996) (emphasis added). The Department’s Gross Receipts Tax Regulations define “Gross receipts or gross proceeds” as: (1) [T]he total amount of consideration for the sale of tangible personal property and such services as are herein provided for, whether the consideration is in money or otherwise, without any deduction ... [for] ... losses or any expenses whatsoever. (3) The term “Gross Receipts” or “Gross Proceeds” includes the value of any property taken in lieu of or in addition to money as consideration for a sale. Arkansas Department of Finance and Administration Gross Receipts Tax Regulation GR-3.C.(1) & (3) (emphasis added). The “total amount of consideration of the sale[,] ... whether the consideration is in money or otherwise,” means the agreed value of the sale. It can mean nothing else. The amount the customer is told that he or she is paying for the vacuum cleaner is the agreed value. Indeed, the gross-receipts tax by its very nature is a tax on the purchaser, not on the seller, and that renders any value that the seller may later get by reselling the trade-in irrelevant. The majority opinion states that the taxpayer stated a cause of action because the discount was not based on the value of the vacuum cleaners received by the seller. The majority opinion fails to understand that the value ultimately received by the seller is immaterial. Under both the statute and the regulation it is the agreed value that determines the amount of tax. The Department has always construed the statute and its regulations to mean that agreed value is the proper valuation for trade-in property. We have frequently held that the interpretation placed on a statute or regulation by an agency or department charged with its administration is entitled to great deference and should not be overturned unless clearly wrong. Douglass v. Dynamic Enters., Inc., 315 Ark. 575, 869 S.W.2d 14 (1994). The few courts that have passed on the question agree that taxing authorities are entitled to accept agreed value in valuing trade-in property. See 68 Am. Jur. 2d Sales and Use Tax § 180 (1993); Annotation, Computation of Sales Tax where Property is turned in by Purchaser, 4 A.L.R. 2d 1059, 1063 (1949); Annotation, Computation of Sales Tax, 150 A.L.R. 1314 (1944); and see the survey of older cases contained in Hawley v. Johnson, 58 Cal. App. 2d 232, 136 P.2d 638 (1943). The majority opinion cites no authority whatsoever for its holding, and the writer of this dissenting opinion is unable to find any other case in the nation that holds as does the majority opinion. The holding of the majority opinion is also wrong as a practical matter. It will result in inconvenience and uncertainty for both the public and the Department. A sale will no longer be valued on the date of the sale and will no longer be at the agreed sales price, but rather will be valued on the date the trade-in is ultimately resold and it will then reflect the amount of the trade-in. It follows that the amount of sales tax to be paid by the purchaser cannot be known until the trade-in is resold. The purchaser has traditionally paid the tax on the agreed amount on the date of the sale, but now the amount will not be known on the date of the sale. This plight may not cause a significant inconvenience when a vacuum cleaner is sold, but the majority opinion will necessarily govern all sales-tax collections and will apply to the sale of high price items where trade-ins are frequently accepted, such as automobiles, boats, airplanes, and diamonds. Some purchasers may be required to wait months until they know the amount of the sales tax on their purchase. Additional complications may arise when the purchasers must show that they have paid the sales tax before the property can be licensed, as is the case when a car or truck is purchased. Without doubt, the Department will have a difficult time administering sales-tax collections under these conditions. For these reasons, I dissent. Glaze and Roaf, JJ., join in this dissent.