250 So. 3d 567
Ala. Civ. App.2017Background
- 84 Lumber operates a store in Northport and delivered goods across Tuscaloosa County; it recorded delivery addresses on invoices but used zip codes to determine which local taxing authority to pay.
- From 2008–2013 84 Lumber filed five consolidated circuit-court actions challenging local tax assessments (and one refund denial), interest, and penalties assessed by Northport, Tuscaloosa, and the Tuscaloosa County Special Tax Board.
- The taxing authorities audited by sampling three months in each audit period (excluding winter months), extrapolated jurisdictional allocations from those months, and assessed underpayments (and interest/penalties) principally against Tuscaloosa and the county while finding Northport overpaid.
- The circuit court granted summary judgment for the taxing authorities; 84 Lumber appealed multiple consolidated appeals to the appellate court.
- The appellate court dismissed two appeals for lack of finality or because the challenged assessment was only preliminary; it dismissed Northport as an appellee in one appeal as misjoined.
- On the merits for the remaining appeals, the court held the taxing authorities improperly relied on sampling where invoices covering the assessment periods were available and remanded for further proceedings.
Issues
| Issue | Plaintiff's Argument (84 Lumber) | Defendant's Argument (Taxing authorities) | Held |
|---|---|---|---|
| Appealability of CV-07-1122 (2150876): whether judgment was final | Trial court did not resolve interest claim on refund; appeal not final but 84 Lumber treated it as appealable | Judgment not final as not all claims disposed | Appeal 2150876 dismissed for lack of final judgment |
| Appealability of CV-08-900285 (2150878): appeal from assessment that was preliminary | 84 Lumber treated the assessment as final and appealed | City: assessment was preliminary under Taxpayers’ Bill of Rights; no right to appeal | Appeal 2150878 dismissed; circuit court orders voided and to be vacated |
| Use of sampling to allocate sales among taxing jurisdictions | Sampling was improper because 84 Lumber maintained invoices covering the periods and sampling extrapolation was speculative | Sampling is reasonable and practical given volume; auditors randomly selected months | Sampling improper where the taxing authority could have used the most accurate and complete information reasonably obtainable (the available invoices); summary judgment for taxing authorities reversed and remanded |
| Validity of assessed interest and penalties tied to those assessments | Interest/penalties invalid if underlying assessments are unsupported by proper methodology | Interest/penalties appropriate given underpayments | Because assessments reversed, related interest and penalties also reversed and remanded for further proceedings |
Key Cases Cited
- State v. Mims, 249 Ala. 217, 30 So.2d 673 (Ala. 1947) (discusses adequacy of taxpayer bookkeeping and limits on sampling-based assessments)
- State v. T.R. Miller Mill Co., 272 Ala. 135, 130 So.2d 185 (Ala. 1961) (recordkeeping requirements for taxpayers)
- State v. Ludlam, 384 So.2d 1089 (Ala. Civ. App. 1980) (permitting test-period sampling where business conduct was substantially similar across periods)
- General Motors Corp. v. Kilgore, 853 So.2d 171 (Ala. 2002) (summary-judgment standard on appeal)