Lucille Bousquet v. Commissioner of Revenue (July 9, 2009)

COMMONWEALTH OF MASSACHUSETTS

APPELLATE TAX BOARD


  
LUCILLE BOUSQUET           v.	     COMMISSIONER OF REVENUE


Docket No. C293950				Promulgated:
      				 	July 9, 2009
		  				

This is an appeal under the formal procedure, pursuant to G.L. c. 58A, § 7 and G.L. c. 62C, § 39, from the refusal of the appellee, the Commissioner of Revenue ("Commissioner" or "appellee"), to abate cigarette excises for the quarterly periods ending June 30, 2005, September 30, 2005, December 31, 2005, and March 31, 2006 ("periods at issue").
 Chairman Hammond heard this appeal.  Commissioners Scharaffa, Egan, Rose, and Mulhern joined him in the decision for the appellee.  
	These findings of fact and report are made pursuant to a request by the appellant under G.L. c. 58A, § 13 and 831 CMR 1.32.

	Lucille Bousquet, pro se, for the appellant.
	
	Julie A. Flynn, Esq. and Timothy R. Stille, Esq. for the appellee.


FINDINGS OF FACT AND REPORT
	On the basis of an Agreed Statement of Facts and the testimony and exhibits offered into evidence at the hearing of this appeal, the Appellate Tax Board ("Board") made the following findings of fact.
	On August 10, 2007, the Commissioner issued to Lucille Bousquet ("appellant") a Notice of Failure to File cigarette excise returns on purchases of cigarettes over the Internet for the periods at issue.  The proposed assessment was $815.40 in tax, plus penalties and interest.  The appellant paid the proposed assessment in full under protest.  On August 23, 2007, the appellant timely filed an Application for Abatement.  By Notice of Abatement Determination dated December 21, 2007, the Commissioner denied the appellant's abatement application for the periods at issue.  The appellant timely filed her appeal with the Board on February 4, 2008.  On the basis of these facts, the Board found that it had jurisdiction to hear and decide this appeal.
	 During the periods at issue, the appellant, a Massachusetts resident, purchased approximately fifty-four cartons of cigarettes from the Internet web-site Smartsmoker.com.  The cigarettes were delivered to the appellant in the Commonwealth.  No Massachusetts excise was paid on the sales of these cigarettes.  At the time of the purchases, the appellant was the spouse of an active duty member of the U.S. Army Reserve.  Therefore, the appellant argued, the cigarette purchases at issue were exempt from the Massachusetts cigarette excise as "sales to the military."  See, Administrative Procedure 114.1 ("AP 114.1").	 
For the reasons explained in the following Opinion, the Board found and ruled that the subject sales were not exempt as "sales to the military."  Accordingly, the Board found that the cigarette excise was properly assessed to the appellant and issued a decision for the appellee in this appeal.

OPINION
	The sole issue in this appeal is whether cigarettes purchased over the Internet by a spouse of a member of the U.S. Army Reserve are exempt from the Massachusetts cigarette excise.
	Massachusetts residents who purchase cigarettes from out-of-state vendors that have not paid the Massachusetts cigarette excise must remit the excise to the Commissioner.  G.L. c. 64C, § 5A.  See also Department of Revenue Directive 02-14 ("Massachusetts residents and entities are required to pay the cigarette excise upon all cigarettes that they acquire from any source that do not already bear a Massachusetts excise stamp.")
In the present appeal, the appellant, a Massachusetts resident, conceded that: she purchased fifty-four cartons of cigarettes from an out-of-state Internet site; the cigarettes were delivered to the appellant in the Commonwealth; and the cigarettes did not display the Massachusetts excise stamps.  
The appellant asserted, however, that her purchases of the cigarettes at issue were exempt from the Massachusetts cigarette excise tax as "sales to the military," in accordance with AP 114.1.  The relevant language of AP 114.1 provided that, "sales to the Federal Government and the military and cigarettes shipped out of Massachusetts are exempt from tax and need not be stamped."  Therefore, the appellant argued that because she is the spouse of a member of the military, her purchases of cigarettes are exempt from taxation.
There is no specific statutory language which provides an exemption for the Federal government from the Massachusetts cigarette excise.  Rather, as a matter of constitutional law, a state is prohibited from taxing the Federal government or its instrumentalities.  See United States v. Benton, 772 F. Supp. 453, 457 (1990)(citing McCulloch v. Maryland, 17 U.S. (4 Wheat.) 316, 4 L.Ed. 579 (1819)) ("it is unconstitutional for a state to directly tax the United States or one of its instrumentalities").  There is, however, no corresponding constitutional prohibition from taxing individuals in the military.  See e.g. 3-D Amusements, Inc. v. Commissioner of Revenue, Minn. T.C. March 24, 1989 ("use of amusement machines by individual military personnel was not exempt from state sales tax as sales to the federal government and its agencies or instrumentalities").  
The Supreme Judicial Court has "frequently recognized that an exemption from taxation 'is a matter of special favor or grace,' and that statutes granting exemptions from taxation are therefore to be strictly construed."  Macy's East, Inc. v. Commissioner of Revenue, 441 Mass. 797, 804 (2004) citing State Tax Commission v. Blinder, 336 Mass. 698, 703 (1958) ("an exemption [is] . . . to be recognized only where the property falls clearly and unmistakably within the express words of a legislative command").  The burden is on the taxpayer to demonstrate entitlement to an exemption claimed. South Boston Savings Bank v. Commissioner of Revenue, 418 Mass. 695, 698 (1994).  
There is no statutory language exempting members of the military, much less spouses of members of the military, from the cigarette excise.  Accordingly, the only reasonable conclusion to draw from the language of AP 114.1 is that sales to the Federal Government, including branches of the military, as opposed to individual members of the military, are exempt from the cigarette excise.  A broader reading of AP 114.1 to exempt members of the military, or their spouses, would be inconsistent with the cigarette excise statute and, therefore, not entitled to deference in construing the statute.  See AA Transportation Company v. Commissioner of Revenue, Mass. ATB Findings of Fact and Reports, 2007-1210, 1219, aff'd 454 Mass. 114 (2009); Bloomingdales v. Commissioner of Revenue, Mass. ATB Findings of Fact and Reports 2003-163, 196, aff'd, 63 Mass. App. Ct. 1110 (2005).  

Based on the foregoing, the Board found and ruled that the appellant was not entitled to an exemption from the cigarette excise.  Accordingly, the Board issued a decision for the appellee in this appeal.

   APPELLATE TAX BOARD




		  		   By: 				_____	____
  Thomas W. Hammond, Jr., Chairman

A true copy,

Attest:		______	_____		
	        Clerk of the Board

 The Board notes that the current version of AP 114.1 eliminates the reference to the military and provides only that "[s]ales of cigarettes to the Federal government and cigarettes shipped out of Massachusetts are exempt from tax and need not be stamped."

ATB 2009-652