Charles & Irene Lowney v. Commissioner of Revenue (July 7, 2005)

COMMONWEALTH OF MASSACHUSETTS
APPELLATE TAX BOARD

CHARLES & IRENE LOWNEY	    v. 	COMMISSIONER OF REVENUE

Docket No. C266606			 	Promulgated:
						 	July 7, 2005
								

	This is an appeal filed under the formal procedure pursuant to G.L. c. 62C, § 39, from the refusal of the Commissioner of Revenue to abate room occupancy excises for the quarterly taxable periods ending September 30, 1996 through March 31, 1999, inclusive.
	Commissioner Scharaffa heard the appeal and was joined in the Decision for the appellee by Commissioners Gorton, Egan and Rose.
	These findings of fact and report are made at the request of the appellants pursuant to G.L. c. 58A, § 13 and 831 CMR 1.32.

	Timothy J. Burke, Esq. for the appellants.
	Andrew M. Zaikis, Esq. for the appellee.



FINDINGS OF FACT AND REPORT
	Based on exhibits and testimony offered into evidence at the hearing of this appeal, the Appellate Tax Board ("Board") made the following findings of fact.  
During the quarterly periods at issue, the quarter ending September 30, 1996 through the quarter ending March  31, 1999, inclusive, Charles and Irene Lowney ("appellants") owned and operated The Carleton Circle Motel ("motel") located in the Town of Falmouth ("town").  The motel, which is licensed by the town, is comprised of five different buildings.  There are a total of thirty-eight units, seventeen of which have kitchenettes.  
The appellants acquired the motel in 1986, which prior thereto had been a "mom-and-pop" operation.  According to Mr. Lowney, there are two types of renters.  Short-term renters are primarily summertime guests that rent rooms for short periods of time beginning on or about July 4th and ending on or about Labor Day of the same year.  For these guests, the appellants collected and remitted the Room Occupancy Excise and the Local Option Room Occupancy Excise ("room occupancy excises").  Mr. Lowney identified the second group of renters as long-term residents who rent during the "remainder of the year."  According to Mr. Lowney, these renters were charged a lesser monthly or weekly rent than the short-term renters based on their representation that their stay would be lengthy.  He further testified that these individuals were required to complete a long-term rental form and also pay a security deposit.  The appellants did not, however, offer into evidence any long-term agreements for periods in excess of ninety consecutive days nor did they offer proof of renters who actually stayed for periods in excess of ninety consecutive days.  
According to Mr. Lowney, when the appellants purchased the business in March of 1986, it was occupied mostly by long-term renters.  He further testified that at that time the former owners told him "for the first ninety days you're supposed to collect this [room occupancy excise] tax and then afterwards you don't have to -- they're counted as residents so you don't have to charge the tax anymore."  Accordingly, the appellants charged and collected the room occupancy excises for all rentals, including the first ninety days of the long-term rentals.  Beginning in 1993, the appellants changed their policy and stopped collecting the room occupancy excises from the long-term rentals -- after having failed to successfully criminally prosecute long-term renters for "defrauding an innkeeper."  Mr. Lowney testified that he was told by a judge (or a clerk magistrate), in Barnstable District Court, that he could not pursue criminal charges against delinquent long-term renters for defrauding him by failing to pay, because they were "residents."  Instead, it was suggested that he would have to pursue the matters in civil court.  Relying on the judge's comment that the long-term renters were residents, the appellants stopped charging and collecting the room occupancy excises from the so-called long-term renters.  
In April of 1999, the Audit Division of the Department of Revenue ("DOR") began an examination of the appellants' books and records for the quarterly periods at issue.  DOR sought to determine whether the appellants had collected and remitted the proper amount of room occupancy excises for the periods at issue.  As a result of the audit, DOR concluded that the appellants had not remitted room occupancy excises for all taxable room rentals.  On November 5, 1999, DOR issued to the appellants a Notice of Intention to Assess additional room occupancy excises, plus interest, and, on March 13, 2002, DOR sent to the appellants a Notice of Assessment for additional room occupancy excises, plus interest, in the total amount of $17,582.80.  No penalties were assessed.
On February 21, 2002, after a conference with the appellants, DOR's Office of Appeals determined that the appellants were liable for the room occupancy excises at issue.  The appellants timely filed an Application for Abatement on April 25, 2002, which was denied by the Commissioner of Revenue ("Commissioner") on November 15, 2002. Subsequently, on November 29, 2002, the appellants seasonably filed an appeal with the Board.  On the basis of these facts, the Board found that it had jurisdiction over this appeal.
On the basis of the evidence presented, the Board found that the appellants failed to prove that any renters entered into long-term agreements for periods in excess of ninety days.  The Board further found that the appellants failed to prove that any portion of the room occupancy excises assessed by the Commissioner was attributable to a particular renter's stay that exceeded ninety days.  Accordingly, the Board found that the appellants were responsible for charging and collecting the room occupancy excises as assessed by the Commissioner.




OPINION
In Massachusetts, an excise is imposed on: 
the transfer of occupancy of any room or rooms in a . . . motel in this commonwealth by any operator at the rate of five per cent of the total amount of rent for each such occupancy     . . . .(Emphasis added.)
 
G.L. c. 64G, § 3.  In addition, any city or town:
which accepts the provisions of this section [] to impose a local excise tax upon the occupancy of any room or rooms in a . . . motel located within such city or town . . . for each such occupancy . . . .

G.L. c. 64G, § 3A.  The term "occupancy" is defined as:
the use or possession, or the right to the use or possession, of any room or rooms in a . . . motel . . . for a period of ninety consecutive days or less, regardless of whether such use or possession is as a lessee, tenant, guest, or licensee.  (Emphasis added.)

G.L. c. 64G, § 1. 
In 1988, Commissioner issued a regulation entitled "Establishments Subject to the Room Occupancy Excise," intended to describe the factors that are relevant in determining taxpayers' liability for the room occupancy excises.  See 830 CMR 64G.1.1.  The regulation provides several examples, not meant to be exhaustive, which apply
the room occupancy excise statute to particular fact patterns.  Most relevant to the present appeal is Example 4, involving persons that rent a room at a motel for the "summer months" of a given year.  The regulation provides that: 
[f]or the first ninety consecutive days, the transfer of occupancy of the rooms is subject to the room occupancy excise.  Occupancy after the first ninety consecutive days is not subject to the excise.

830 CMR 64G.1.1(5).  (Emphasis added.)  
The Board found that the Commissioner's interpretation is in conformance with the statute.  Accordingly, if a renter stays at a motel for more than ninety consecutive days, the owner is required to collect the room occupancy excises for the first ninety days of the stay.  Thereafter, the owner is no longer required to collect and remit, from the particular renter, the room occupancy excises.
In the present appeal, the appellants maintained that they entered into long-term rental agreements for periods in excess of ninety days.  And, since the rentals were for a period of time in excess of the statutory ninety consecutive days, they did not collect the room occupancy excises from these renters.  Pursuant to the statute and the Commissioner's regulation, however, a motel owner is
required to collect the room occupancy excises from all renters for the first ninety consecutive days of their stay.  After such time, a motel owner need not collect the room occupancy excises.  Therefore, the appellants were required to collect the room occupancy excises from all renters for the first ninety days, regardless of their ultimate length of stay.
The burden of proof is upon the appellants to prove their right as a matter of law to abatement of the tax. M & T Charters, Inc. v. Commissioner of Revenue, 404 Mass. 137, 140 (1989); Stone v. State Tax Commission, 363 Mass. 64, 65-66 (1973); Staples v. Commissioner of Corps. and Taxation, 305 Mass. 20, 26 (1940).  "The venerable and 'fundamental rule as to burden of proof is, that whenever the existence of any fact is necessary in order that a party may make out [its] case . . . , the burden is on such party to show the existence of such fact.'"  Barrett v. Commissioner of Revenue, 1997 ATB Adv. Sh. 875, 880 (Docket No. 180959, September 25, 1997)(quoting Willet v. Rich, 142  Mass. 356, 357 (1886)). 



The appellants argued that they were not required to charge and collect any room occupancy excises from those renters that entered into rental agreements for periods in excess of ninety consecutive days.  The Board found, however, that regardless of the duration of the stay, a motel owner is required to collect the room occupancy excises for the first ninety days of any renters stay.  See  G.L. c. 64G, § 1; 830 CMR 64G.1.1(5).  Beginning on the ninety-first day, a motel owner is no longer required to collect the room occupancy excises.  Id.  
Therefore, the Board found that the appellants were required to collect the room occupancy excises from all renters for the first ninety days of their stay.  Further, the Board found that the appellants failed to offer evidence to prove that any portion of the room occupancy excises assessed by the Commissioner was attributable to a particular renter's stay that was in excess of ninety consecutive days, and therefore not subject to the room occupancy excises.





Accordingly, the Board found that the appellants were required to charge and collect the room occupancy excises as assessed by the Commissioner and issued a Decision for the appellee in this appeal.

					THE APPELLATE TAX BOARD

By:_____________________________Chair

   _____________________________Commissioner


   _____________________________Commissioner


   _____________________________Commissioner


   _____________________________Commissioner
					

A true copy,



Attest:_____________________________
  	    Assistant Clerk of the Board

ATB 2005-397