Court Opinion

ID: 2864314
Source: CourtListenerOpinion
Date Created: 2015-09-06 00:01:13.361913+00
Date Added: 2024-06-11T12:44:21.508984
License: Public Domain

TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN

                                     444444444444444
                                     NO. 03-00-00071-CV
                                     444444444444444

                   Mary Ann Chambers, f/d/b/a Today’s Signs, Appellant

                                               v.

                     State of Texas and City of Denton, Texas, Appellees

44444444444444444444444444444444444444444444444444444444444444444
   FROM THE DISTRICT COURT OF TRAVIS COUNTY, 201ST JUDICIAL DISTRICT
       NO. 96-07787, HONORABLE MARGARET COOPER, JUDGE PRESIDING
44444444444444444444444444444444444444444444444444444444444444444

              The State of Texas and the City of Denton, Texas (“the State”), sued appellant

Mary Ann Chambers f/d/b/a Today’s Signs to recover delinquent sales taxes. Following a

nonjury trial, the trial court rendered judgment that the State recover $96,703.37 in sales tax,

penalty, and interest. At Chambers’s request, the court filed findings of fact and conclusions of

law. We will affirm the trial court’s judgment.

              Chambers, a sole proprietor, did business making and selling signs under the name

Today’s Signs. Today’s Signs was in operation until March 1996. In 1994, the comptroller

audited Today’s Signs for sales tax compliance from 1990 through 1993 and issued a notice of

tax due. Following the audit, Today’s Signs continued to accrue unpaid sales taxes, for which

the comptroller assessed a deficiency. Although the total liability period of Today’s Signs

extends from January 1990 through February 1996, the portion of the tax that Chambers contests

on appeal relates only to the period audited by the comptroller.
               In her first issue, Chambers contends that the trial court erred in determining that

she is liable for tax on out-of-state sales. Chambers maintains that a tax on out-of-state sales

unconstitutionally burdens interstate commerce. It is clear that taxing out-of-state sales is

unconstitutional. Bullock v. Lone Star Gas Co., 567 S.W.2d 493, 497 (Tex. 1978); see Tex. Tax

Code Ann. § 151.051(a) (West 1992). The record does not show, however, that the trial court

imposed such a tax. Rather, the judgment can be supported on the ground that Chambers

erroneously collected out-of-state sales tax without showing she was entitled to a refund. We

discuss this ground below.

               A vendor such as Chambers who collects money represented to be a tax from a

customer holds the amount collected in trust for the benefit of the State and is liable to the State

for the full amount collected. Tax Code § 111.016(a) (West Supp. 2001);1 Fleming Foods of

Tex., Inc. v. Rylander, 6 S.W.3d 278, 281 (Tex. 1999). If the vendor has erroneously collected

taxes from a customer, the vendor may seek a refund from the comptroller, but only after

reimbursing the customer for all taxes collected. § 111.104(f). 2 Moreover, the customer, as a

person from whom the vendor erroneously collected the tax without reimbursement, can also

seek a refund from the comptroller. § 111.104(a), (b); Fleming Foods, 6 S.W.3d at 280-81. This

scheme applies without doubt to taxes erroneously collected on out-of-state sales and repudiates

Chambers’s argument that section 111.016(a) unconstitutionally taxes such sales. Rather, these

       1
            Although the prior version of section 111.016 governs this case, the 1995 amendment
is irrelevant here and we cite the current version for convenience.
       2
            Although the prior version of section 111.104 controls, the 1999 amendment is
irrelevant to this cause.

                                                 2
sections require a vendor who does not reimburse her customer to remit erroneously collected

taxes to the State, from which the customer may ultimately obtain a refund.

              Chambers testified that during the time subject to the audit, she collected tax on

sales to an out-of-state customer, United States Tobacco Company. The evidence shows that

from March 31, 1990, through the end of December 1993, Chambers collected $20,384.09 in

tax on these sales. This amount forms part of the deficiency the State sued to collect.

              In a suit to collect sales taxes, the comptroller’s certificate showing a delinquency

is prima facie proof of the amount of tax due after all lawful credits have been allowed.

§ 111.013(a) (West 1992). The comptroller’s delinquency certificate was admitted in evidence

in this case and showed that Chambers owed the State sales taxes of $96,703.37. The

presumption of validity accorded the comptroller’s certificate shifted the burden to Chambers

to show by competent evidence that the assessment was illegal and excessive. Smith v. State,

418 S.W.2d 893, 896 (Tex. Civ. App.—Austin 1967, no writ).

              Chambers argues that she proved as a matter of law that she refunded the out-of-

state sales tax to U.S. Tobacco. She contends that during the audit of Today’s Signs, the auditor

found that she had fully reimbursed U.S. Tobacco and that he credited the amount of out-of-state

sales tax against the remainder of tax due. The trial court found that Chambers had received

credit for all offsets to which she was entitled. To resolve Chambers’s matter-of-law contention,

we first examine the evidence supporting the court’s finding, ignoring any contrary evidence.

If no evidence supports the finding, we then examine the entire record to see if the contrary

proposition is established as a matter of law. Holley v. Watts, 629 S.W.2d 694, 696 (Tex. 1982).

                                                3
               Mary Hawkins, an auditor for the comptroller, testified for the State. Although

Hawkins did not audit Chambers’s business herself, she had reviewed the documents prepared

by the person who performed the audit, Robert Palla. Hawkins described a document titled

“Adjustments to Taxable Sales - Credits” that Palla had prepared for Chambers during the audit.

In this document, Palla itemized Chambers’s out-of-state sales to U.S. Tobacco and calculated

$20,384.09 as the total sales tax that Chambers had billed and collected. A footnote relating to

each sale states, “Items shipped to US Tobacco OOS [out-of-state] locations. The tax was

refunded to the customer.” Near the bottom of the document, in a section called “Comments,”

Palla wrote, “This exam is to give credit for tax collected in error.” The document is dated April

8, 1994.3

               Hawkins testified that the audit package prepared by Palla contained all the

adjustments made in the audit and that the document itemizing sales to U.S. Tobacco was not

part of the audit. It was instead prepared on the date of the exit conference with Chambers and

appeared to be information showing her how the audit could be amended if she refunded the

erroneously collected tax. In a report Palla submitted as part of the audit documents, Palla noted

that he had informed Chambers that credit would be allowed in the audit only after he could

verify that the taxes paid in error had been refunded to the customer. The audit package

indicated to Hawkins that Chambers had presented no documentation to show Palla that she had

in fact refunded the money to U.S. Tobacco.

       3
           Although Chambers characterizes Palla’s statements in the document as an admission,
the testimony contradicting the effect of the statements negates their use as an admission.
Marshall v. Vise, 767 S.W.2d 699, 700 (Tex. 1989).

                                                4
               Chambers testified that Palla gave her the document itemizing sales to U.S.

Tobacco. Palla told her that she needed to refund $20,384.09 to the customer and that once she

refunded the money, she would receive a credit from the comptroller. After the audit, Chambers

issued U.S. Tobacco a credit of $20,384.09 to use against future sales. Chambers stated that

U.S. Tobacco drew down the credit over the course of the following year. An invoice of

Today’s Signs showing a credit to U.S. Tobacco of $20,384.09, without identifying the reason

for the credit, was admitted in evidence and is dated October 5, 1994. This date follows by a

significant time April 8, 1994, the date of Palla’s document. Chambers testified that once the

audit was completed, she never requested a rehearing of the audit or of any returns that she had

filed.

               Hawkins’s and Chambers’s testimony provides evidence that Chambers failed to

show during the audit that she had made reimbursement and failed to ask the comptroller for a

redetermination of the audit afterward. Therefore, despite some evidence that she reimbursed

U.S. Tobacco after the audit, Chambers did not prove as a matter of law that she documented

the reimbursement with the comptroller so as to be entitled to credit for the out-of-state tax. We

accordingly overrule issue one.

               In her second issue, Chambers claims the trial court erroneously allowed the State

to ambush her at trial with evidence that was inconsistent with information it provided in

discovery. Chambers argues that the court erred by overruling her motion to strike the State’s

evidence. In two interrogatories submitted before trial, Chambers asked the State to identify

each period it contended she incorrectly reported taxes and to identify each payment she made

                                                5
during the liability period. The document the State provided supplies this information.

Chambers complains because the total tax due that she extrapolated from the document differs

significantly from the amount Hawkins testified to at trial. Chambers’s extrapolation, however,

does not account for overdue amounts the auditor found during the audit in addition to the

amounts Chambers incorrectly reported in each tax period. That Chambers interpreted the

document in an unwarranted manner does not entitle her to relief on appeal.

              Assuming that the State’s document was unresponsive, however, the failure to

obtain a pretrial ruling on a discovery dispute that exists before trial waives any claim for

sanctions based on that conduct. Remington Arms Co. v. Caldwell, 850 S.W.2d 167, 170 (Tex.

1993). Because Chambers failed to move to compel a responsive answer before trial, the trial

court properly overruled her motion to strike. We overrule issue two.

              We affirm the trial court’s judgment.

                                           Bea Ann Smith, Justice

Before Chief Justice Aboussie, Justices B. A. Smith and Patterson

Affirmed

Filed: February 28, 2001

Do Not Publish

                                              6