Chandler's-Boise LLC v. Idaho State Tax Commission
162 Idaho 447
| Idaho | 2017Background
- Chandlers-Boise, LLC operated a restaurant and automatically added service charges to certain group, banquet, and room-service bills during May 1, 2007–May 31, 2010 (Audit Period); those charges were retained by employees.
- The Idaho State Tax Commission’s audit treated those automatically added charges as taxable because the bills did not state the customer could decline the charge, per the Pre-2011 Tax Commission rule (IDAPA 35.01.02.043.04.C).
- The Bureau issued a deficiency; after protest and modification the Commission upheld a remaining deficiency, and Chandlers filed for judicial review in district court.
- The district court granted summary judgment for the Commission, reasoning the Pre-2011 Rule applied during the Audit Period and the 2011 legislative amendment exempting gratuities was not retroactive to the Audit Period.
- On appeal the Idaho Supreme Court affirmed: (1) statutory exemptions claimed by Chandlers (I.C. § 63-3613(b)(4) and (b)(6)) did not apply to restaurant gratuities; (2) the 2011 Amendment changed the law rather than merely clarifying it and was not applicable to the Audit Period; and (3) the Commission was awarded appellate costs and attorney’s fees.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether I.C. § 63-3613(b)(4) (labor/install) or (b)(6) (service/finance charges) exempt automatic service charges from sales tax | Chandlers: those subsections encompass service-related charges and thus exempt the automatic charges from the sales price | Commission: (b)(4) targets contractor/install charges and (b)(6) targets financial charges; neither covers restaurant gratuities | Court: Held the statutory text and context limit (b)(4) and (b)(6); they do not exempt the restaurant charges |
| Whether the Pre-2011 Tax Commission rule conflicted with other rules (mixed transactions) so it should not govern | Chandlers: Pre-2011 Rule conflicted with IDAPA Rule 11 and wrongly taxed mandatory charges | Commission: Rule 11 and Pre-2011 Rule are consistent because services for furnishing/preparing/serving food were taxable pre-2011 | Court: Held no conflict; Pre-2011 Rule validly governed taxation of these service charges during Audit Period |
| Whether the 2011 legislative amendment exempting gratuities is clarifying and applies retroactively to the Audit Period | Chandlers: Amendment merely clarified existing law and should be applied retroactively to cover the Audit Period | Commission: Amendment changed the law (distinguishing owner vs. server income), had explicit effective date Jan 1, 2011, and thus does not apply earlier | Court: Held amendment changed the law and its retroactive effect began Jan 1, 2011 only; it does not apply to the Audit Period |
| Whether the Commission is entitled to costs and attorney’s fees on appeal | (implicit) Chandlers argued its positions were reasonable and not groundless | Commission: Chandlers’ arguments were groundless; fees permissible under statutory and appellate rules | Court: Held Chandlers’ positions were groundless and awarded appellate costs and attorney’s fees to the Commission |
Key Cases Cited
- Gracie, LLC v. Idaho State Tax Comm’n, 237 P.3d 1196 (Idaho 2010) (standard for reviewing Tax Commission decisions and district court de novo posture)
- Jayo Dev., Inc. v. Ada Cnty. Bd. of Equalization, 345 P.3d 207 (Idaho 2015) (statutory amendments not applied retroactively absent clear legislative intent)
- Stonecipher v. Stonecipher, 963 P.2d 1168 (Idaho 1998) (example of an amendment construed as clarifying when it effectuates the same statutory purpose)
- Intermountain Health Care, Inc. v. Bd. of Cnty. Comm’rs of Madison Cty., 710 P.2d 595 (Idaho 1985) (legislative amendment presumed to change meaning from pre-amendment version)
- A & B Irr. Dist. v. Idaho Dep’t of Water Res., 284 P.3d 225 (Idaho 2012) (statutory amendments are not retroactive unless expressly declared)
- State v. Barnes, 987 P.2d 290 (Idaho 1999) (specific statute controls over general statute)
- Mead v. Arnell, 791 P.2d 410 (Idaho 1990) (recognition of legislative authority over administrative rule processes)