S054754, Opinion — M&S Market, Inc. v. Dept. of Rev.

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# Submitted on the record March 7, judgment of Tax Court affirmed April 17, 2008

M&S MARKET, INC.,
Appellant,
U.
DEPARTMENT OF REVENUE,
Respondent.
(TC 4757; SC S054754)
182 P3d 852

CJS, Taxation § 1246.

En Banc
On appeal from the Oregon Tax Court .*

Henry C. Breithaupt, Judge.
Michael Mills, Salem, filed the brief's for appellant.

Joseph Laronge, Assistant Attorney General, Salem, filed
the brief for respondent. With him on the brief was Hardy
Myers, Attorney General.

KISTLER, J.

The judgment of the Tax Court is affirmed.

\* 19 OTR 207 (2007).

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## KISTLER, J.

The issue in this case is whether the Department of
Revenue (department) is estopped from seeking to dismiss
taxpayer's untimely appeal. The Tax Court ruled, on sum-
mary judgment, that taxpayer had not proved that the
department was estopped and entered judgment in the
department's favor. We affirm the Tax Court's judgment.

Because this case arises on the department's motion
for summary judgment, we state any disputed facts in the
light most favorable to taxpayer. On January 7, 2005, the
department issued three Notices of Assessment to taxpayer.
Each notice stated that taxpayer had purchased tobacco
products from Lil Brown Smoke Shack without paying any
tobacco tax. The notices set out the amount of the tax, penal-
ties, and interest that taxpayer owed and explained the
department's basis for calculating those amounts. Finally,
each notice stated:

"Oregon law requires all tax due be paid on or before the
due date of the return. This notice includes charges for pen-
alty and/or interest. IF YOU DISAGREE OR ONLY HAVE
CONCERNS ABOUT THE PAYMENTS MADE OR THE
PENALTY AND/OR INTEREST CHARGES, PLEASE
CONTACT THE DEPARTMENT OF REVENUE [at a spec-
ified location]. IT IS POSSIBLE THAT AN ADJUSTMENT
CAN BE MADE WITHOUT HAVING TO FILE AN
APPEAL.

"If you have other disagreements or concerns, you may file
an appeal.

"HOW TO APPEAL A NOTICE OF ASSESSMENT TO
THE OREGON TAX COURT.

"IF YOU DISAGREE WITH THIS NOTICE OF ASSESS-
MENT, YOU HAVE THE RIGHT TO APPEAL TO THE
OREGON TAX COURT. You must appeal to the Magistrate
Division of the Oregon Tax Court within 90 days from the
date of the Notice of Assessment. [The notice then explains
how and where to file the appeal.]

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"IF YOU DO NOT APPEAL ON TIME, YOUR APPEAL
RIGHTS EXPIRE, AND THE ADJUSTMENTS ARE
FINAL."

After receiving the notices of assessment, Ellen
Bewly, taxpayer's licensed tax consultant, wrote the depart-
ment on January 21, 2005, that taxpayer disagreed with the
assessments and asked for the information on which the
department had relied. In February, Fred Nichol, an auditor
with the department, called Bewly. During their conversa-
tion, Bewly said that taxpayer had not bought tobacco prod-
ucts from Lil Brown Smoke Shack and asked Nichol what
support the department had for its assessments. Nichol told
her that the department's computer showed that taxpayer
had made the purchases. He said that he would get the
underlying documentation and forward it to taxpayer for its
review and response. Bewly did not receive the documenta-
tion before April 6, 2005, the last day on which taxpayer
could file a timely appeal from the notices of assessment.

Sometime before April 6, 2005, Lal Sidhu, one of tax-
payer's owners, also called Nichol and told him, as Bewly had
done, that the assessments were incorrect. He reiterated that
taxpayer had never bought tobacco products from Lil Brown
Smoke Shack and had no record of issuing any payments or
credits to Lil Brown Smoke Shack. Nichol told Sidhu that he
would check the documentation for the information in the
department's computer records and send that documentation
to Sidhu for his review. Nichol, however, did not send the doc-
umentation to Sidhu until July 29, 2005.

On June 9, 2005, Sidhu sent the department a letter
stating that taxpayer was "appealing and disputing" the
department's decision that it owed taxes, penalties, and
interest for purchasing tobacco products from Lil Brown
Smoke Shack. On July 29, 2005, Nichol responded, consis-
tently with the notices of assessment, that taxpayer had to
appeal to the Magistrate Division of the Oregon Tax Court,
not to the department. Nichol also explained that the depart-
ment had based the assessments on information obtained as
a result of a search warrant executed on Lil Brown Smoke
Shack. In his letter, Nichol enclosed "[i]nformation regarding

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[taxpayer's] address on [Lil Brown Smoke Shack's computer]
system and regarding invoices for purchases by [taxpayer]."

On August 22, 2005, Sidhu sent another letter to the
department stating that taxpayer was "appealing" from the
notices of assessment. Nichol faxed Sidhu information
regarding the appeals process and, on September 15, 2005,
the department wrote Sidhu reviewing its understanding of
their communications and stating that the department had
not received notice that taxpayer had filed an appeal with the
Oregon Tax Court.

On September 23, 2005, taxpayer filed an appeal
with the Magistrate Division of the Tax Court. The depart-
ment moved to dismiss taxpayer's appeal as untimely, and
the Magistrate Division granted the motion. Taxpayer
appealed to the Regular Division of the Tax Court. On the
department's motion for summary judgment, the Regular
Division ruled that taxpayer's September 23, 2005, appeal
was untimely and that the department was not estopped
from asserting otherwise. The Tax Court entered judgment
against taxpayer. Taxpayer has appealed that judgment to
this court.

ORS 305.280(2) provides that "[a]n appeal * * * from
any notice of assessment * * * issued by the Department of
Revenue [regarding certain taxes] shall be filed within 90
days after the date of the notice."1 There is no dispute that
taxpayer filed its appeal more than 90 days after the date on
the notices of assessment. The only question that the parties
have raised on appeal is whether the department's actions
estop it from claiming that taxpayer's appeal was untimely.
To establish that the department is estopped, taxpayer must
prove:

" '(1) [the department made] a false representation; (2) it
[was] made with knowledge of the facts; (3) the [taxpayer]
must have been ignorant of the truth; (4) it must have been
made with the intention that it should be acted upon by the

1 Taxpayer does not dispute that ORS 305.280(2) applies to tobacco taxes. See
ORS 323.623(1) (providing for an appeal from imposition of tobacco taxes "in the
time and manner provided in ORS 305.404 to 305.560"); ORS 305.560(1) (providing
that an appeal may be taken by filing a complaint in the Magistrate Division within
the time allowed under ORS 305.280(2)).

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[taxpayer]; (5) the [taxpayer] must have been induced to act
upon it[.]'"

Welch v. Washington County, 314 Or 707, 715-16, 842 P2d
793 (1992) (quoting and applying the standard from Coos
County v. State of Oregon, 303 Or 173, 180-81, 734 P2d 1348
(1987), against a taxing authority).

The primary dispute in this case centers on whether
the department made a false or misleading representation.
See Pilgrim Turkey Packers v. Dept. of Rev., 261 Or 305, 493
P2d 1372 (1972) (holding the department was estopped
because an ambiguity in a form would have led a reasonable
person to file the form with the wrong entity). As we under-
stand taxpayer's argument, it rests on the premise that tax-
payer reasonably understood from the notices of assessment
that, if it sought an adjustment from the department, it could
defer filing an appeal as long as it was in the process of nego-
tiating an adjustment. Building on that premise, taxpayer
notes that Nichol never told Bewly or Sidhu otherwise and
that Nichol's failure to provide the underlying documenta-
tion sooner resulted in taxpayer's failure to file a timely
appeal. It follows, taxpayer concludes, that the department is
estopped.

We begin with the premise of taxpayer's argument-
that it reasonably understood from the notices of assessment
that it need not file an appeal as long as it was negotiating an
adjustment with the department. On that issue, the relevant
portions of each notice divide into two parts. The first part of
the notices invited taxpayer to seek an adjustment of certain
matters with the department. Each notice explained that,
"[i]f you disagree or only have concerns about the payments
made or the penalty and/or interest charges, please contact
the Department of Revenue [at a specified location]. It is pos-
sible that an adjustment can be made without having to file
an appeal." (Some capitalization omitted.) Although those
sentences invited taxpayer to seek to resolve certain dis-
agreements informally, neither sentence told taxpayer that it
could defer filing an appeal until after any negotiations
regarding an adjustment were concluded. The last sentence
held out the possibility that taxpayer might be able to avoid
having to file an appeal, but it did not address when an

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appeal, if one were necessary, should be filed. The second
part of the notices addressed that issue.

That part was captioned: "HOW TO APPEAL A
NOTICE OF ASSESSMENT TO THE OREGON TAX
COURT." Beneath that caption, each notice stated, "IF YOU
DISAGREE WITH THIS NOTICE OF ASSESSMENT, YOU
HAVE THE RIGHT TO APPEAL TO THE OREGON TAX
COURT." Each notice then stated that "[y]ou must appeal to
the Magistrate Division of the Oregon Tax Court within 90
days from the date of the Notice of Assessment." Each notice
set out where the appeal should be filed. Finally, each notice
added, "IF YOU DO NOT APPEAL ON TIME, YOUR
APPEAL RIGHTS EXPIRE, AND THE ADJUSTMENTS
ARE FINAL."

The two parts of the notices, read together, are clear:
Although taxpayer could seek an informal adjustment from
the department, taxpayer must appeal to the Tax Court
within 90 days of the notice of assessment to preserve any
disagreement that it might have with the department. If tax-
payer did not appeal "on time," taxpayer's appeal rights
would expire, and any adjustments that the department may
or may not have made would become final.

In arguing that a reasonable person could draw a
different conclusion, taxpayer contends that the sentence-
"[i]f you disagree or only have concerns about the payments
made or the penalty and/or interest charges, please contact
the Department of Revenue"-is ambiguous and thus mis-
leading. In taxpayer's view, the phrase "[i]f you disagree" is
not limited to disagreements over the "the payments made or
the penalty and/or interest charges" but also includes dis-
agreements over the assessment itself.

Taxpayer's argument misses the mark. Even if the
ambiguity that taxpayer perceives exists, that ambiguity
does not advance its argument. The ambiguity that taxpayer
identifies goes to what matters are subject to an adjustment.2

2 We note that the next sentence in the first part of each notice states that, "[i]f
you have other disagreements or concerns, you may file an appeal." That sentence
implies that some disagreements are not subject to adjustment but, as tax-
payer argues, does not specify which disagreements are and are not subject to
adjustment. Indeed, the sentence is awkward and confusing in that respect. As

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It does not go to when an appeal should be filed. The second
part of the notices made clear that, whether a matter is sub-
ject to adjustment or not, taxpayer still had to file an appeal
within 90 days after the date of the notice of assessment. We
thus disagree with taxpayer's argument that it reasonably
understood from the notices of assessment that it did not
have to file an appeal as long as negotiations were ongoing.
Far from being ambiguous on that point, the notices of
assessment were clear that taxpayer needed to file an appeal
within 90 days from the date of the notices or it would lose its
right to appeal the notices of assessment.

Taxpayer advances two other arguments in support
of its claim that the department is estopped. It notes that,
when Nichol spoke with Bewly and Sidhu, he did not tell
them that taxpayer needed to file an appeal within 90 days.
Taxpayer also notes that Nichol did not send Bewly or Sidhu
the underlying documentation until after the 90 days to
appeal had passed. Taxpayer's arguments, as we understand
them, depend on the premise that the notices of assessment
were ambiguous and thus misleading; that is, Nichol's failure
to remind Bewly and Sidhu that taxpayer needed to appeal
within 90 days matters only if the notices of assessment were
misleading on that point. Similarly, Nichol's lengthy delay in
getting the underlying documentation to taxpayer matters
only if taxpayer reasonably understood that it need not file
an appeal as long as it was seeking to obtain an adjustment.
The notices, however, were neither ambiguous nor mislead-
ing as to when taxpayer needed to file an appeal. It follows
that neither Nichol's silence nor his delay adds anything to
taxpayer's estoppel claim. The Tax Court correctly concluded
that the department was not estopped from asserting that
taxpayer's appeal was untimely.

The judgment of the Tax Court is affirmed.

explained above, however, any ambiguity concerning which disagreements are
subject to adjustment does not advance taxpayer's point that the notices were mis-
leading as to when it had to file an appeal if there were a disagreement.