Daimler Chrysler Corporation v. Commissioner of Revenue (April 12, 2007)

COMMONWEALTH OF MASSACHUSETTS

APPELLATE TAX BOARD



DAIMLER CHRYSLER    	   v.	 COMMISSIONER OF REVENUE
CORPORATION

Docket No. C275784				 Promulgated:
							 April 12, 2007				


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 to abate sales taxes for the period commencing July 1, 1998 and ending July 31, 2004 ("period at issue").    
Former Chairman Foley heard the appeal and on June 27, 2006, Commissioners Scharaffa, Egan, Rose, and Gorton issued a decision for the appellee.  
These findings of fact and report are made at the request of the appellee pursuant to G.L. c. 58A, § 13 and 831 CMR 1.32.

Rosemary A. Macero, Esq. for the appellant.

Kevin M. Daly, Esq. for the appellee.



FINDINGS OF FACT AND REPORT
	On the basis of oral arguments, as well as uncontested facts presented in pleadings and a Stipulation of Facts with attached exhibits, the Appellate Tax Board ("Board") made the following findings of fact.  
	Daimler Chrysler Corporation ("appellant") manufactures automobiles, some of which it sells to its authorized dealers in Massachusetts. These dealers, in turn, market, sell and lease the vehicles to consumers.  The appellant does not collect or remit sales tax on the sale or lease of motor vehicles in Massachusetts, nor was it a party to any original contract for sale of a motor vehicle to a Massachusetts retail customer. The appellant is not a registered vendor in Massachusetts.
Pursuant to G.L. c. 90, § 7N1/2 ("Lemon Law"), the appellant repurchased certain vehicles from Massachusetts consumers who had purchased the vehicles from the appellant's authorized dealers. The repurchase payments included amounts equivalent to the sales taxes paid by the purchasers, as well as other incidental costs associated with the sales, which were initially borne by the purchasers.      
On or about February 27, 2004, the appellant filed an Application for Abatement, Form CA-6, ("Application") with the Commissioner of Revenue ("Commissioner") requesting a refund of sales taxes associated with its vehicle repurchases during the period at issue. The appellant did not strike out the pre-printed language, contained within brackets on the Application, which grants consent for the Commissioner to act on the Application after six months of its filing. Thus, the appellant gave its consent for the Commissioner to act on its Application more than six months from February 27, 2004. 
By a notice entitled "No Abatement Involved Notice" dated May 18, 2004 ("Notice"), the appellee informed the appellant that:
the Massachusetts Department of Revenue (DOR) has completed review of your Application for Abatement of sales tax on various Lemon Law repurchases of vehicles occurring between July 1, 1998 and December 31, 2003.

Your application may not be considered for review or determination for the following reasons: [emphasis added]

The Notice goes on to state that a "Lemon Law" payment from a manufacturer is not a "rescission" of a sale between a vendor and retail customer and that a manufacturer is not a "taxpayer" entitled to an abatement of sales tax paid by a retail customer.  The Notice refers to, and states that it includes a copy of, an October 24, 2002 letter which had been sent by "DOR counsel" to the appellant in which "DOR's position" was previously made known to the appellant.  The Notice is not signed, but bears the typed closing "Very truly yours, Customer Service Bureau."
	On August 18, 2004, the appellant filed its Petition Under Formal Procedure ("Petition") with the Board and on August 20, 2004, served the Commissioner with a copy of the Petition. On April 28, 2005, the Commissioner filed a motion to dismiss the appellant's Petition arguing that the Petition was not filed timely and the Board lacked jurisdiction to hear the appeal. For the reasons discussed in the following Opinion, on August 26, 2005, the Board denied the Commissioner's motion. 
	For reasons also explained in the Opinion, the Board found that the appellant filed its Petition prematurely and without having previously filed sales tax returns, but that these facts did not impair the Board's jurisdiction to hear the appeal. The Board further found, however, that the appellant is not a "person aggrieved" by the assessment of the sales taxes at issue or by the refusal of the Commissioner to abate the taxes. Accordingly, the Board issued a decision for the appellee. 


OPINION
Massachusetts imposes a sales tax on "sales at retail in the commonwealth, by any vendor, of tangible personal property. . . ."  G.L. c. 64H, § 2.  This excise, calculated "at the rate of five percent of the gross receipts of the vendor," is typically paid by the vendor to the Commissioner.  Id.  With regard to the sale of motor vehicles, however, the excise is "paid by the purchaser to the registrar of motor vehicles. . . ." G.L. c. 64H, § 3(c).
General Laws c. 62C, §§ 37 and 39 govern the abatement process. Section 37 requires that a "person aggrieved by the assessment of a tax" file a timely application for abatement with the Commissioner; and § 39 requires that a "person aggrieved by the refusal of the commissioner to abate" a tax file an appeal with the Board "within 60 days after the date of notice of the decision of the commissioner," or within six months of the deemed denial of the application for abatement. General Laws c. 62C, § 38 also relates to the abatement process, and provides that no tax may be abated unless a "person liable to taxation," upon whom a tax was assessed, files the appropriate tax return "at or before the time of bringing his application for abatement."
The principal questions before the Board in the present appeal are whether the appellant has met the various requirements of these sections and is entitled to abatement of the sales taxes at issue.

Timeliness of Petition with the Board
	General Laws c. 62C, § 37 provides, in pertinent part, that "[t]he commissioner shall give notice to the applicant of his decision upon the application" for abatement.  In Administrative Procedure 627.11, the Commissioner states that "[t]he taxpayer will be notified of approval, partial denial or full denial of the application for abatement."  
In this appeal, the Notice does not notify the appellant of the Commissioner's "decision" on its Application, nor does it indicate that the Application was denied in full or in part.  Rather, it states only that the Application "may not be considered for review or determination."  A fair reading of this phrase indicates only that the Commissioner declined to make a decision on the appellant's Application.
As previously noted, taxpayers have sixty days after "the date of notice of the decision of the commissioner" to file an appeal with the Board.  G.L. c. 62C, § 39.  In RHI Holdings, Inc. v. Commissioner, ATB Findings of Fact and Reports 1998-375, aff'd 51 Mass. App. Ct. 681 (2001), the Board held that the sixty-day appeal period under § 39 did not begin to run from the date of a faulty notice of decision.  In RHI, the Commissioner issued a Notice of Partial Abatement dated May 13, 1993 advising the taxpayer that its abatement application was "denied in part" and that "any amount not abated is hereby denied" but listing no dollar amount abated. Id. at 384.  
Subsequently, the Commissioner issued two checks which reflected the tax years for which the abatement was made, but provided no indication of whether the amounts constituted tax only or tax plus interest. Id. After an exchange of correspondence, the Commissioner provided, some five months after the Notice of Partial Abatement, the amount of tax and interest abated and his determination that any amounts over the deficiency assessment at issue could not be abated. Id. at 385.
The Commissioner moved to dismiss RHI's appeal to the Board on the ground that the appeal was filed more than sixty days after the date of the Notice of Partial Abatement. On these facts, the Board held that the May 13, 1993 notice failed to provide the taxpayer with "sufficient information" upon which to make a considered decision as to whether to appeal the commissioner's action." Id. at 387. Accordingly, because RHI "did not receive adequate notice of the Commissioner's actions" until five months after the Notice of Partial Abatement, the Board ruled that it had jurisdiction over the appeal and denied the motion to dismiss. Id. at 382.
The present appeal involves somewhat different circumstances.  RHI did not know the details of the Commissioner's actions concerning the amounts abated. In contrast, in this appeal the Commissioner informed the appellant of his "position" in the Notice and in an "information letter" previously sent to the appellant by "DOR counsel." There could be no confusion over the amount abated because there was no partial abatement involved. However, there could be confusion as to the implications of the Commissioner's refusal to consider the Application for "review or determination." Further, there could easily be confusion as to whether the Notice constituted a denial or decision by the Commissioner given that it states the Commissioner has "completed review" of the Application and articulates reasons for the Commissioner's "position" that "no abatement [is] involved," while simultaneously notifying the appellant that its Application "may not be considered for review or determination." In fact, as previously noted, one may reasonably infer that the phrase "may not be considered for review or determination" amounts to a refusal to make a decision relating to the appellant's Application. 
Adding to the Notice's ambiguity is that it contains no indication that the determination is "final." Nor is there any information concerning the appellant's right to appeal the determination to the Board.  
Further, the Notice is unsigned, other than the printed notation, "Very truly yours, Customer Service Bureau."  General Laws c. 14, § 3 gives the Commissioner the authority to "authorize an official of the department to exercise in his name any power or perform in his name any duty which is or shall be assigned to him by any provision of law."  See Commissioner of Revenue v. Demoulas Super Markets, Inc., 412 Mass. 181, 184 (1992) (Commissioner's authority to delegate his powers is well established).  The statute speaks of delegation to "an official," not to a Bureau within the Department.  
In Waban, Inc. d/b/a/ BJ's Wholesale Club v. Commissioner of Revenue, ATB Findings of Fact and Reports 1997-472, the Board ruled that the assessment at issue was invalid because there was insufficient evidence to establish that the Department of Revenue employee who signed an Instruction to Bill was an individual to whom the Commissioner had delegated the power to assess a tax.  Further, in Interface Group-Nevada, Inc. v. Commissioner of Revenue, ATB Findings of Fact and Reports 1997-931, the Board ruled that the assessment at issue was invalid where, as here, no signature appeared on the operative document:  "The absence of a signature on the relevant warrant or any other competent document forecloses on this record a finding of an assessment duly made by a Department employee, whose delegation and scope of authority can be established."  Id. at 940.
Given the manifest uncertainty as to whether the Notice reflects a decision of the Commissioner regarding the appellant's Application, and the lack of a signature on the Notice by an official to whom the authority to act on applications had been delegated, the Board found the Notice to be invalid. Accordingly, the Board found and ruled that the Notice did not constitute notice of the Commissioner's decision within the meaning of G.L. c. 62C, § 37, and did not begin the sixty-day appeal period under G.L. c. 62C, § 39.
Having determined that the Notice did not trigger the sixty-day appeal period, the Board must consider the impact of the appellant's having filed its Petition with the Board prior to a valid "refusal of the commissioner to abate." G.L. c. 62C, § 39. Further, the appellant filed its Application on February 27, 2004, and consented to the Commissioner acting on the Application beyond six months from the date of filing. By filing its Petition with the Board and serving the Commissioner with a copy of the Petition, the appellant constructively withdrew its consent for the Commissioner to act beyond the six month time frame, resulting in deemed denial of the Application on August 27, 2004. The appellant, however, filed its Petition prematurely on August 18, 2004, prior to the deemed denial date. 
In Becton, Dickinson and Company v. State Tax Commission, 374 Mass. 230 (1978), the Court held that a taxpayer's premature filing of an abatement application, prior to the issuance of a Notice of Assessment, was not fatal to the Board's jurisdiction:
"It is well settled in similar cases, where a statute required action within a certain time 'after' an event, that the action may be taken before that event. Such statutes have been construed as fixing the latest, but not the earliest, time for the taking of the action.  Tanzilli v. Casassa, 324  Mass. 113, 115 (1949) [citations omitted].  Moreover, it is a general policy of the law to prevent loss of valuable rights, not because something was done too late, but rather because it was done too soon.

Becton, Dickinson, 374 Mass. at 234.  
	In Stanley Home Products, Inc. v. Commissioner of Revenue, ATB Findings of Fact and Reports 1986-128, the Board, adopting the reasoning articulated by the Court in Becton, Dickinson, found that premature filing of a Petition would not deprive the Board of jurisdiction. Id. at 136. Applying the principles of Beckton, Dickinson and Stanley Home Products to the present appeal, the Board found and ruled that the premature filing of the appellant's Petition was not fatal to the Board's jurisdiction. 


Tax Return as a Prerequisite to an Abatement

The Commissioner also argues that the Board lacks jurisdiction over the present appeal because  the appellant did not file sales tax returns relating to the period at issue, a claimed prerequisite to obtaining an abatement pursuant to G.L. c. 62C, § 38. Section 38 provides, in pertinent part, that "[n]o tax assessed on any person liable to taxation shall be abated unless the person assessed shall have filed, at or before the time of bringing his application for abatement, a return as required by this chapter for the period to which his application relates. . . ."
As support for his position, the Commissioner cites Commissioner of Revenue v. Pat's Supermarket, 387 Mass. 309 (1982), in which the Court considered the application of § 38 in the context of an entity that sold both sandwiches, which were admittedly subject to sales tax, and "party platters," the taxation of which was in dispute. The taxpayer, which had not filed sales tax on meals returns prior to filing its application for abatement, argued that it was not a "person liable to taxation" within the meaning of § 38, and therefore not required to file a return, because the party packs at issue were not taxable. Noting that the taxpayer's argument was "sound as far as it [went]," the Court rejected the argument as incomplete, concluding that the taxpayer was a "person liable to taxation" and required to file a return under § 38 based on its concession of "liability for taxation on the sale of its sandwiches." Id. at 310.
In the present appeal, the appellant is not a vendor within the meaning of G.L. c. 64H, and has no liability to collect or remit sales tax to the Commonwealth. These facts, in sharp contrast to those examined in Pat's Supermarket, provide no basis to conclude that the appellant was a "person liable to taxation" within the meaning of G.L. c. 62C, § 38. See Commissioner of Revenue v. Fashion Affiliates, 387 Mass. 543 (1982)("as to any period for which no tax was due at all, a return need not be filed as a condition precedent to receiving an abatement.")
Thus, the Board found that the appellant was not a "person liable to taxation" as contemplated by G.L. c. 62C, § 38, and filing a return was not a prerequisite to an abatement. 

Standing
In the present appeal, the appellant's authorized dealers sold vehicles to purchasers who were responsible for payment of the applicable sales taxes to the Registrar of Motor Vehicles. Ultimately, the vehicles in question were returned by the purchasers pursuant to operation of the Lemon Law, and the appellant, which had manufactured the vehicles, refunded the purchase price and reimbursed the purchasers for amounts equivalent to the sales taxes as well as other incidental costs associated with the sales.
The appellant notes that the purchasers have been made whole by its reimbursement, while the appellant has been compelled to bear the economic burden of the sales taxes. The appellant therefore concludes that it qualifies as an aggrieved party within the meaning of G.L. c. 62C, §§ 37 and 39, and is entitled to pursue abatement of the sales taxes in question.  
A person cannot be "aggrieved" by an assessment of tax unless the person was also the one assessed.  See e.g., J & B Leasing Co. v. Commissioner of Revenue, ATB Findings of Fact and Reports 1985-228, 232. "Thus, pursuant to [§§ 37 and 38], it is the person assessed who is entitled to file an abatement application."  Household Retail Services, Inc. et al. v. Commissioner of Revenue, ATB Findings of Fact and Reports 2005-23, 36, aff'd. 448 Mass. 226 (2007).
In determining that a purchaser had no basis for abatement of a sales tax, the Supreme Judicial Court has ruled that the "person aggrieved" by the imposition of a tax is not the party that bears its economic burden, but rather the one charged with its legal incidence. Supreme Council of the Royal Arcanum v. State Tax Commission, 358 Mass. 111, 112-13 (1970).   
In instances in which a vendor is charged with the legal incidence of the sales tax, the Board has consistently denied abatement of the tax to a purchaser on the ground that the vendor, and not the purchaser, was the "person aggrieved" by the tax.  See, e.g., Harvard Business School Association v. Department of Revenue, ATB Findings of Fact and Reports 1986-233, 238 (ruling that exempt-entity purchaser could not claim a sales tax exemption, because the legal incidence of tax fell upon the vendor); Household Retail Services, ATB Findings of Fact and Reports 2005 at 37 (ruling that an entity which provides financing for consumer purchases, including payment of the amount of the tax to vendor, was not the "person aggrieved").  
In the present appeal, the Board found that the legal incidence of the sales tax did not fall upon the appellant, which had no obligation to collect or remit the tax. While the appellant may accurately claim that it ultimately bore the economic burden of the taxes at issue, the Board found and ruled that the appellant was not the person against whom the taxes were assessed and is not a "person aggrieved" by the refusal of the Commissioner to abate the taxes.  
Finally, the appellant argues that any action which denies it standing to seek the abatement in question constitutes an impermissible deprivation of its due process
rights. The Board found, however, that this argument is not tenable. Prior to requiring repurchase or replacement of a vehicle and reimbursement of various incidental costs including sales tax, the Lemon Law provides for "state-certified, new car arbitration" to ascertain whether a vehicle has been made to conform to applicable warranties in a timely fashion. G.L. c. 90, § 71/2N (6). If a manufacturer is not satisfied with the outcome of arbitration, it may appeal to superior court. Id. These provisions clearly satisfy the due process requirements that notice and a hearing be provided prior to governmental deprivation of property. See, e.g., Walter R. Leger v. Commissioner of Revenue, 421 Mass. 168 (1995) (citing United States v. James Daniel Good Real Property, 510 U.S. 43, 51 (1993); Fuentes v. Shevin, 407 U.S. 67, 80 (1972)).
"'Since the remedy by abatement is created by statute, the [board] has no jurisdiction to entertain proceedings for relief by abatement begun at a later time or prosecuted in a different manner than is prescribed by the statute.'"  Commissioner of Revenue v. A.W. Chesterton Co., 406 Mass. 466, 467-68 (1990) (quoting Assessors of Boston v. Suffolk Law School, 295 Mass. 489, 492 (1936)).

Because the appellant is not a "person aggrieved" within the meaning of G.L. c. 62C, §§ 37 and 39, no abatement may be granted to the appellant. Accordingly, the Board issued a decision for the appellee. 



					THE APPELLATE TAX BOARD



By:____________________________________
    Thomas W. Hammond, Jr., Chairman



A true copy,


Attest:_____________________________
  	     Assistant Clerk of the Board 

 

  General Laws c. 58A, § 6, which discusses the Board's jurisdiction to decide appeals, provides that consent may be withdrawn at any time during pendency of an application for abatement. Unless the application was previously acted upon by the commissioner, it is deemed to be denied on the date of such withdrawal or after six months from the date of filing, whichever is later. Id.   
  

ATB 2007-270