Summary 2011 WY 146

Summary of Decision October 21, 2011


[SPECIAL NOTE: This opinion uses the "Universal Citation." It was given an "official" citation when it is issued. You should use this citation whenever you cite the opinion, with a P.3d parallel citation. You will also note when you look at the opinion that all of the paragraphs are numbered. When you need to provide a pinpoint citation to a quote the universal portion of the citation will use that paragraph number. The pinpoint citation in the P.3d portion will need to have the reporter page number. If you need assistance in putting together a citation from this, or any future opinion using the Universal Citation form, please contact the Wyoming State Law Library and we will provide any needed assistance]

Summaries are prepared by Law Librarians and are not official statements of the Wyoming Supreme Court

Case Name: Wyoming Department of Revenue v. QWEST Corporation

Citation: 2011 WY 146

Docket Number: S-11-0002

URL: http://wyomcases.courts.state.wy.us/applications/oscn/DeliverDocument.asp?CiteID=464650

Appeal from the District Court of Laramie County, Honorable Peter G. Arnold, Judge

Representing Appellant (Petitioner): Gregory A. Phillips, Wyoming Attorney General; Michael L. Hubbard, Deputy Attorney General; Cathleen D. Parker, Senior Assistant Attorney General; Martin L. Hardsocg, Senior Assistant Attorney General.

Representing Appellee (Respondent): Michael Rosenthal and Lucas Buckley, Hathaway & Kunz, P.C.; Larry H. McMillin and Roy A. Adkins, Qwest Corporation, Denver, Colorado.

Date of Decision: October 21, 2011

Facts: After an audit by the Department of Audit (DOA), the Department of Revenue (DOR) determined that Appellee was not entitled to a refund of sales tax which was incorrectly collected from its customers and remitted to the state because Appellee did not provide data showing the actual amount of tax collected and remitted by month and by county. Appellee appealed the DOR’s determination to the State Board of Equalization (SBOE), asserting it did not retain that type of information and its refund should be estimated using a process employed in a prior audit to assess sales tax. The SBOE held a contested case hearing, then stayed the matter to give the parties an opportunity to settle their differences. Two months after the evidentiary portion of the contested case hearing concluded, Appellee produced to the DOR the actual sales tax information it had claimed did not exist. It explained that another department of the Appellee organization had the material and Appellee employees involved with the DOA audit were not previously aware that the information existed. The SBOE supplemented the record with the actual data, reversed the DOR’s decision that Appellee was not entitled to a refund and remanded the case to the DOR to accomplish the refund in accordance with the newly produced evidence. The DOR petitioned the district court for review, it affirmed, and the DOR appealed to this Court.

Issues: Whether the SBOE erred by considering, in a contested case proceeding, Appellee’s evidence of the actual sales tax collected when Appellee did not provide such information to the DOR/DOA prior to the final assessment, despite repeated requests by the DOR/DOA for such information. Whether there is substantial evidence in the record to support the SBOE’s ruling that Appellee was entitled to a refund of sales tax.

Holdings: Sales tax payers have an obligation to preserve tax records and make them available for examination by the DOR and failure to comply with the record retention requirement will result in the taxpayer bearing the burden of proof as to the correctness of the assessment. Consistently, the DOR Rules require the taxpayer to provide information to support refund claims.

Wyo. Stat. 39-15-107(a) (ix) requires the DOR to examine each sales tax return and determine if the amount of tax remitted is incorrect. If the amount paid exceeds that which is due, the excess shall be refunded to the taxpayer or credited against subsequent tax liability. The statutes do not, however, answer the question of whether a taxpayer can withhold or fail to produce tax information to the DOR/DOA and then have such withheld information considered in a subsequent contested case hearing before the SBOE.

The SBOE was charged with determining whether the DOR erred by denying Appellee a refund on the grounds that it did not provide the actual sales tax data. It was not charged with determining de novo, without any consideration of the state of the record at the time of the assessment decision, whether Appellee was entitled to a refund. The SBOE’s role is limited to considering the factual record which was available to the DOR/DOA during the assessment process. The burden is on the taxpayers to provide the information necessary for DOR to prepare an accurate valuation of the properties and to prove at the contested case hearing before SBOE that the methodology used and valuations reached by DOR were not supported by substantial evidence available in the agency record.

Here, the DOR/DOA sought specific information from Appellee, including the amounts of actual sales tax collected by month and by county. Appellee did not provide that information at the time of the audit. Following the hearing, Appellee revealed the requested information did exist and it wanted to use the information to support its claim that it was entitled to a refund. By allowing the late produced information to be admitted into evidence in the contested case proceeding, the SBOE denigrated the entire assessment and audit process.

The SBOE erred by allowing Appellee to submit evidence that it did not make available to the auditors. The SBOE should have restricted its decision to the record existing at the time of the audit and assessment. Nevertheless, the SBOE was correct in ruling that Appellee (and ultimately, its Wyoming telephone customers) was entitled to a refund. Once it was clear the charges were not taxable and Appellee had collected the tax, the DOR/DOA was required to refund the excess tax to the taxpayer. Wyo. Stat. 39-15-109 (c) states: “Any tax, penalty or interest which has been erroneously paid, collected or computed shall either be credited against any subsequent tax liability of the vendor or refunded.” The use of the word “shall” in a statute makes the provision mandatory.

Wyo. Stat. 39-15-107(a)(iv) states that the DOR should use the best information available to determine an assessment of taxes when the taxpayer has not supplied sufficient information. There is no reason why, when it is clear as it was here that a taxpayer is entitled to a refund, the best information available to the DOR/DOA should not be used to calculate the refund/credit. The DOA had determined that the best information available to calculate the sales tax deficiency for the previous audit was the 911 and Customer Access Line Charge (CALC) ratio. By refusing to use the data available to it, the DOA/DOR expended significant time and taxpayer money in litigation when it was clear, as a matter of law, the taxpayer was entitled to a refund.

In one respect Appellee will endure the consequences of failing to provide that information because the amount of refund it will be entitled to using the estimate procedure is less (though not a great deal) than the amount it would have been entitled to had the actual sales tax data been used. The parties do not direct us to any other statutory penalties which may be imposed against a taxpayer that fails to provide data in its possession to the auditors. It may be worth the Wyoming Legislature’s time to study the issue to determine whether it believes the DOR/DOA has sufficient statutory authority to compel taxpayers to preserve information and provide it to the taxing authorities and whether some sort of statutory sanction should be imposed for the failure to do so. Such authority could, possibly, prevent a recurrence of this type of litigation which has resulted in a waste of time and taxpayer money.

The SBOE’s decision that Appellee is entitled to a refund is affirmed. The SBOE erred, however, by ordering the DOR to use the actual sales tax data which was not provided to the DOA during the audit process to determine the refund amount. The DOR/DOA should have used the best information available to it during the audit, i.e., the 911 and CALC ratio data, to estimate the amount to be refunded to Appellee. Therefore, the action is remanded for a recalculation of the refund amount in accordance with the estimate methodology and the information available to the DOA during the audit. These actions should be taken with haste so the proper amounts may be refunded to Wyoming customers who paid the tax in the first place and continue to bear the burden of the parties’ failure to act in the customers’ best interests.

Affirmed in part, reversed in part, and remanded for further proceedings consistent with this decision.













C.J. Kite delivered the opinion for the court.

Summary 2011 WY 76

Summary of Decision May 3, 2011


[SPECIAL NOTE: This opinion uses the "Universal Citation." It was given an "official" citation when it is issued. You should use this citation whenever you cite the opinion, with a P.3d parallel citation. You will also note when you look at the opinion that all of the paragraphs are numbered. When you need to provide a pinpoint citation to a quote the universal portion of the citation will use that paragraph number. The pinpoint citation in the P.3d portion will need to have the reporter page number. If you need assistance in putting together a citation from this, or any future opinion using the Universal Citation form, please contact the Wyoming State Law Library and we will provide any needed assistance]

Summaries are prepared by Law Librarians and are not official statements of the Wyoming Supreme Court

Case Name: Maverick Motorsports Group, LLC V. Department of Revenue

Citation: 2011 WY 76

Docket Number: S-10-0220

URL: http://wyomcases.courts.state.wy.us/applications/oscn/DeliverDocument.asp?CiteID=462107

Appeal from the District Court of Laramie County, Honorable Michael K. Davis, Judge

Representing Appellant (Petitioner): John M. Kuker and James M. Peterson of Romsa & Kuker, Cheyenne, Wyoming.

Representing Appellee (Respondent): Bruce A. Salzburg, Wyoming Attorney General; Michael L. Hubbard, Deputy Attorney General; Martin L. Hardsocg, Senior Assistant Attorney General; and William F. Russell, Senior Assistant Attorney General

Date of Decision: May 3, 2011

Facts: Appellant challenges a decision of the State Board of Equalization that certain sales to nonresident buyers were subject to Wyoming sales tax. The vehicles were transferred in three ways: most were picked up by the purchaser at one of the stores, some were delivered by a common carrier selected by the purchaser, and some were delivered by Appellant. Appellant would mail any documents necessary to title or register the vehicle to the buyer a few weeks after the sale. The SBOE agreed that Appellant had provided adequate proof and ruled that most of the sales where Appellant actually delivered the vehicles were “destination sales” where transfer of title or possession took place outside Wyoming and no sales tax was due. However, the majority of the sales involved customers who came to one of the stores, picked up the vehicle and then returned to their home state with the purchase. The SBOE found that possession of these vehicles, as well as those involving delivery by use of a common carrier selected by the buyer, were transferred to the buyer in Wyoming and therefore, Wyoming sales tax was due.

Issues: Whether sales of recreational vehicles were taxable in Wyoming because possession was transferred in Wyoming. Whether enforcement and collection of Wyoming sales taxes violate the Commerce Clause, Art. 1, § 8, of the United States Constitution.

Holdings: Prior to January 1, 2008, and during the time at issue here, Wyo. Stat. 39-15-101(a)(vii) (2005) defined a “sale” as “any transfer of title or possession in this state for consideration.” Pursuant to Wyo. Stat. 39-15-103(a)(i)(A) sales tax is imposed on the sales price of every retail sale of tangible personal property within the state. Wyo. Stat. 39-15-107(a)(i) and (b)(viii) requires sellers to collect and remit to the state the taxes imposed on sales of motorcycles and off-road vehicles. The Wyoming Sales and Use Tax Regulations in effect at the relevant time, provided that the point at which title or possession of tangible personal property passes to the purchaser would determine the location of the sale.

Appellant argues that the sales in question were nontaxable destination sales because neither title nor possession was transferred in Wyoming. Appellant contends that the sale documents show that the parties intended for change of possession to happen in the buyer’s home state and the buyer had only constructive possession until the vehicle actually arrived at the buyer’s residence.

The general rule is that title passes at the point of shipment controls unless the circumstances clearly demonstrate a contrary intent. The SBOE relied upon Wyo. Stat. Ann. § 34.1-2-401 (the U.C.C.) to determine that title passed to the buyer when the vehicle was physically delivered to the buyer or the buyer’s agent. Appellant argues that it was improper for the SBOE to rely on the Wyoming U.C.C. statute because the comment to this section precludes reliance on the U.C.C. for regulatory purposes However, it was appropriate for the SBOE to rely on the U.C.C. as an objective test to determine when title passed. There is no reason why, when a question arises under regulations as to contract interpretation, a court should not employ the U.C.C. as its frame of reference.

Appellant then asserts that even if the SBOE could use the U.C.C., the SBOE decision was still wrong because the parties had an express agreement that title would pass when the vehicle reached the buyer’s home state. The SBOE found that the sale documents did not determine the point of transfer. The statement on the invoices, “delivered out of state,” is not sufficient to overcome the fact that actual possession was transferred in Wyoming at the time of pick-up. The parties could have but did not use other language in the invoice to suggest that the transfer of possession would occur in another location, such as clauses dealing with risk of loss or responsibility for selection of carriers; this wording was missing from the invoices. An objective analysis indicates that transfer of possession occurred in Wyoming.

Additionally, Appellant contends that title was transferred to the buyer when the certificate of title or the manufacturer’s statement of origin (MSO) was mailed to the buyer or the buyer’s lender some weeks after the sale. Appellant uses the term “title” to mean the written documents that prove ownership. However, Wyoming has long recognized that “title” has a broader definition. The statutory use of the term “title” means “‘the union of all elements (as ownership, possession, and custody) constituting the legal right to control and dispose of property.” “Title” to a vehicle may be transferred, or passed, even though there is a failure to comply with code provisions concerning the certificate of title. The question is not when the buyer received his paperwork, but when he became the owner of the vehicle.

Appellant also argues that those customers who picked up their vehicles were acting as their own agent and only had constructive possession for delivery purposes; therefore, possession did not transfer from the seller to the buyer until the buyer arrived home. Appellant forwards the interesting argument that a person can be his own agent and have only constructive possession of an item that he controls. The contention that a person can act as his own agent presents several practical problems and is contrary to established law. A relationship of agency is established when two parties agree that one, the agent, shall act on behalf of and subject to the control of the other, the principal. Agency is the fiduciary relationship that arises when one person manifests assent to another person that the agent shall act on the principal’s behalf and subject to the principal’s control, and the agent manifests assent or otherwise consents so to act. This contemplates different entities for agent and principal. Furthermore, there is no logic to the assertion that a person in actual control of an object has only “constructive possession.”

The remaining transactions are those where delivery was made by a third-party carrier. The evidence was that Appellant might recommend a carrier; however, the customer ultimately chooses the carrier, and the contract is between the carrier and the customer. Under these facts, the carrier would be the agent of the buyer; and when possession was transferred to the carrier in Wyoming, sales tax was due.

Appellant argues that collection of a sales tax on these vehicle transactions also violates the Commerce Clause, Art. 1, § 8, of the United States Constitution. First, Appellant asserts that a Wyoming tax discriminates against or unduly burdens interstate commerce; and, second, unless Appellant is allowed a credit for sales or use taxes paid in other states, there is an unconstitutional multiple taxation of a single transaction. Appellant falls short with its argument since he fails to recognize that this is not an issue of an imposition of a tax; rather, the issue is a question of whether a sales tax, properly imposed, may be enforced and collected. Appellant had the obligation to collect the tax at the time of the sale. Tax credit provisions create a national system under which the first state of purchase imposes the tax. Wyoming is the first state of purchase, so it is entitled to impose the tax, and other states should allow a credit for the Wyoming tax. Appellant had a statutory obligation to collect the sales tax; and if it had done so, there would be a strong argument that the buyer’s home state would be required to grant a credit for the sales tax.

Substantial evidence supports the SBOE’s finding that transfer of possession and title of these vehicles occurred in Wyoming, and the levy of a sales tax on these transactions is appropriate. The actions of the SBOE in determining that the purchase of the various recreational vehicles at issue in this case constitutes a taxable event in Wyoming is affirmed. Additionally, the collection of sales taxes on these vehicles does not violate the U.S. Constitution, Art. 1, § 8, (the Commerce Clause).

D.J. Park delivered the opinion for the court.

Summary 2010 WY 122

Summary of Decision issued August 26, 2010

Summaries are prepared by Law Librarians and are not official statements of the Wyoming Supreme Court.

Case Name: Sinclair Oil Corp. v. Wyo. Dept of Revenue

Citation: 2010 WY 122

Docket Number: S-09-0231

W.R.A.P. 12.09(b) Certification from the District Court of Laramie County. The Honorable Thomas T.C. Campbell, Judge

Representing Appellant Sinclair: John A. Sundahl, Sundahl, Powers, Kapp & Martin, LLC, Cheyenne, Wyoming.

Representing Appellee Wyo. Dept of Revenue: Bruce A. Salzburg, Attorney General; Michael L. Hubbard, Deputy Attorney General; Karl D. Anderson, Senior Assistant Attorney General, Martin L. Hardsocg, Senior Assistant Attorney General.

Facts/Discussion: Effective July 1, 2004, the Wyoming Legislature provided a sales tax exemption for machinery used in manufacturing in Wyoming. It is undisputed that the tax exemption applied to two large pieces of machinery owned by Sinclair Oil Corporation. Sinclair claimed that the materials used to construct foundations for the machines also qualified for the tax exemption. Sinclair applied to the Dept. of Revenue for a refund of the sales tax it had paid on the foundation materials. The Department denied that application. Sinclair appealed to the State Board of Equalization, and the Board upheld the Department’s determination. Sinclair then appealed to the district court, which certified the case for direct review by the Court.
The task before the Court was to interpret the statute establishing the tax exemption, Wyo. Stat. Ann. § 39-15-105(a)(viii), along with related provisions, to determine whether the Board correctly applied the statute to the largely undisputed facts. Sinclair argued the reformer and hydrocracker are the basic units, but without foundations, neither piece of machinery could be operated safely and properly. The foundations fit the definition of an “adjunct or attachment necessary for the basic unit to accomplish its intended function.” The Department maintained that whether or not the foundations were attachments or adjuncts to the basic units, the foundations could not be considered “machinery” because they did not satisfy the initial phrase of the definition: “all tangible personal property.” The Court agreed with the Board that the statutes plainly provide that the tax exemption applies only to manufacturing machinery and unambiguously defined the term “machinery” to include only tangible personal property. The foundations are real property and not tangible personal property. The Board relied upon Hanover Compression where it had determined that the compressor facilities were real property because they were structures affixed to the land. In the instant case, the Board determined and the Court agreed that the concrete and related foundation materials were “articles” that had been “buried or embedded.”
Next, Sinclair asserted that if the foundations are real property, then it should not have paid sales tax on the foundation materials when it purchased them because sales tax applies only to tangible personal property and not to real property. The Court noted that personal property can be converted into real property. An article that is personal property can be converted to real property when it is buried or embedded as in the instant case.

Conclusion: The Board correctly concluded that the concrete and related materials were personal property when Sinclair purchased them. In Wyoming, sales or excise tax is levied on the retail price at the time of sale. Consequently, the concrete and related materials were subject to sales tax. Later, Sinclair buried and embedded the foundation materials, thereby converting them into real property. By the time the hydrocracker and reformer were bolted to the foundations, the foundations had become real property. They were therefore ineligible for the tax exemption for manufacturing machinery because they did not satisfy the definition of machinery which includes only tangible personal property.

Affirmed.

J. Burke delivered the decision.

C.J. Kite dissenting, joined by J. Voigt: In order to remain true to the legislative intent, the nature of the property should have been determined at the time of sale. At that time, the materials were tangible personal property and qualified for the exemption under § 39-15-105(a)(viii)(O). The Justices would have held that the Board erred by concluding that Sinclair was not entitled to an exemption from the excise tax for the foundation materials.

Link: http://tinyurl.com/2bbxutj .

[SPECIAL NOTE: This opinion uses the "Universal Citation." It was given an "official" citation when it was issued. You should use this citation whenever you cite the opinion, with a P.3d parallel citation. Please note when you look at the opinion that all of the paragraphs are numbered. When you pinpoint cite to a quote, you should cite to this paragraph number rather than to any page number. If you need assistance using the Universal Citation format, please contact the Wyoming State Law Library.]

Summary 2010 WY 48

Summary of Decision issued April 22, 2010

Summaries are prepared by Law Librarians and are not official statements of the Wyoming Supreme Court.

Case Name: Wyo. Dept. of Employment v. Jolley, Castillo, Drennon, LTD.

Citation: 2010 WY 48

Docket Number: S-09-0175

Appeal from the District Court of Natrona County, the Honorable David B. Park, Judge.

Representing Appellant Wyo. Dep’t of Employment: Bruce A. Salzburg, Wyoming Attorney General; Matthew J. Fermelia, Senior Assistant Attorney General; William L. Weaver, Senior Assistant Attorney General.

Representing Appellee Jolley, Castillo, Drennon, Ltd.: Stephenson D. Emory of Williams, Porter, Day & Neville, PC, Casper, Wyoming.

Facts/Discussion: The Department of Employment, Unemployment Insurance Commission (Commission) appealed the district court’s reversal of the Commission’s decision which found that Jolley, Castillo, Drennon, Ltd., d/b/a Sierra Engineering (Sierra) had payroll for services performed by employees subscribing it to unemployment tax under the Wyoming Employment Security Law (WESL).
The Commission’s decision incorporated many findings of fact made by the hearing officer and set forth dozens of its own, relating to many of the consultants in order to show that they were employees and not independent contractors because they did not meet the three prongs of the independent contractor test set forth in the statutes. The Court did not address all the findings because there were at least eight consultants who were undisputedly paid wages by Sierra for services performed in Wyoming between the years 2004 through 2006. There was no evidence in the record to support finding that they were independent contractors. In litigating the issue, Sierra treated its consultants as a class of workers however the statutes state it is the employer’s burden to prove that each individual consultant meets the elements of the statute.

Conclusion: The Court found the Commission’s decision that Sierra had payroll for services paid in Wyoming during the years 2004 through 2006 was supported by substantial evidence in the record and that Sierra failed to meet its burden of proving that all of its consultants were independent contractors. An audit remains to be performed by the UI Tax Division to determine precisely which consultants were in fact “employees” under the WESL and the amount of unemployment taxes Sierra owes for those “employees.” Having found that there was substantial evidence in the record to support the Commission’s decision, the district court was reversed, the Commission’s decision was affirmed and the case was remanded.

Reversed and remanded.

C.J. Voigt delivered the decision.

Link: http://tinyurl.com/2fd3ohm .

[SPECIAL NOTE: This opinion uses the "Universal Citation." It was given an "official" citation when it was issued. You should use this citation whenever you cite the opinion, with a P.3d parallel citation. Please note when you look at the opinion that all of the paragraphs are numbered. When you pinpoint cite to a quote, you should cite to this paragraph number rather than to any page number. If you need assistance using the Universal Citation format, please contact the Wyoming State Law Library.]