CARRION CORPORATION, Petitioner-Appellant,† v. Wisconsin DEPARTMENT OF REVENUE, Respondent-Respondent.
No. 92-1775
Court of Appeals of Wisconsin
Submitted on briefs April 2, 1993.—Decided September 9, 1993.
507 N.W.2d 356 | 179 Wis. 2d 254
†Petition to review denied.
For the respondent-respondent the cause was submitted on the brief of James E. Doyle, attorney general, and Peter C. Anderson, assistant attorney general.
Before Eich, C.J., Gartzke, P.J., and Sundby, J.
EICH, C.J. Carrion Corporation appeals from an order affirming a decision of the Wisconsin Tax Appeals Commission. The commission upheld a sales and use tax assessment against Carrion (formerly known as Adelman Laundry and Cleaners, Inc.) in connection with sales of the assets of its commercial and retail laundry divisions. The Department of Revenue audited Carrion‘s sales and use taxes returns for the period January 1, 1979, to February 18, 1983, and assessed additional taxes against the company. Carrion appealed the assessment to the commission and then to the circuit court, and the department‘s action was affirmed in both instances.
We reject each of Carrion‘s challenges to the commission‘s decision and affirm the order.
Prior to February 1983, Carrion was in the laundry and dry-cleaning business, operating both commercial and retail divisions. Its commercial division was engaged primarily in serving hospitals and nursing homes through a pickup and delivery service. The retail division handled laundry and dry-cleaning accounts for hotels and restaurants and served the general public through several retail outlets and truck routes.
In early 1982, Carrion was experiencing serious financial difficulties. By midyear, it was in substantial default on loans from First Wisconsin National Bank of Milwaukee and, under pressure from the bank, changed its leadership and moved to sell its laundry business and liquidate its assets.
On January 17, 1983, Carrion sold its retail division to D.S. Nicholas of Wisconsin, Inc., for $1,401,618.04—$40,000 of which was paid in cash and the remainder to be paid over time pursuant to a promissory note. Of this price, $602,553 was allocated to tangible personal property. Nicholas never paid any of the principal of the promissory note.
Approximately one month later, on February 18, 1983, Carrion sold its commercial division to Tousey Laundry Corp. for $600,000. $400,000 of the sales price was allocated to tangible personal property, and the entire amount was to be paid pursuant to a promissory note.
While, as indicated, Nicholas never made any principal payments — and Tousey paid only $200,000 to $300,000 on its note — First Wisconsin provided full credit to Carrion on both notes.
Less than an hour before finalizing the Nicholas sale on January 17, Carrion attempted to surrender its seller‘s permit to the department.2 It assumed that, by
Carrion filed sales and use tax returns for the period during which the division sales occurred and they were audited by the department. The audit culminated with the issuance of a sales and use tax assessment against the company for $66,908.81, plus interest and penalties. The department also assessed $30,126.65 in sales taxes on the sale of the retail division‘s tangible personal property, $22,905 in sales taxes on the sale of the commercial division‘s tangible personal property, $5,883.34 in sales taxes on the sale of $145,850 worth of miscellaneous equipment between October 1981 and October 1982, and $7,993.82 in use taxes on Carrion‘s out-of-state purchases of $197,805 worth of tangible property. The department also imposed a twenty-five percent penalty on the last two items, pursuant to
Carrion petitioned the department for a redetermination of the assessment, and the matter remained pending for several years. The petition was finally denied in 1988 and, as we have indicated, the company‘s appeals to the commission and the circuit court were rejected.
On appeal, we review the decision of the agency, not that of the circuit court. Wisconsin Pub. Serv. Corp. v. Public Serv. Comm‘n, 156 Wis. 2d 611, 616, 457 N.W.2d 502, 504 (Ct. App. 1990). Our review of the commission‘s findings of fact is governed by
If the agency‘s action depends on any fact found by the agency in a contested case proceeding, the court shall not substitute its judgment for that of the agency as to the weight of the evidence on any disputed finding of fact. The court shall, however, set aside agency action . . . if it finds that the agency‘s action depends on any finding of fact that is not supported by substantial evidence in the record.
Substantial evidence is that degree of evidence which would allow a reasonable mind to reach the same conclusion as the agency. Madison Gas & Elec. Co. v. Public Serv. Comm‘n, 150 Wis. 2d 186, 191, 441 N.W.2d 311, 314 (Ct. App. 1989).
The appeal also involves review of the commission‘s interpretation and application of statutes — issues of law which we generally review de novo. We do, however, accord varying degrees of deference to an administrative agency‘s interpretation of a statute it has been legislatively charged to administer. Lisney v. LIRC, 171 Wis. 2d 499, 505, 493 N.W.2d 14, 16 (1992); West Bend Educ. Ass‘n v. WERC, 121 Wis. 2d 1, 11-12, 357 N.W.2d 534, 539 (1984). Thus, we will defer to the agency‘s interpretation of such a statute when that interpretation “is of long standing” or “entails its exper
And while the degree of deference owed to such interpretations has variously been described in the cases as “great weight,” id. at 13, 357 N.W.2d at 540, “due weight” or “great bearing,” Beloit Educ. Ass‘n v. WERC, 73 Wis. 2d 43, 68, 242 N.W.2d 231, 243 (1976), we believe the most recent statements on the subject by the supreme court have solidified the rule to provide that in cases where deference is appropriate under the standards just discussed, the deference to be accorded the agency‘s interpretation — however it may be characterized — is this: “[W]e will affirm the [agency‘s] interpretation of the statute if it is reasonable, even if another conclusion would be equally reasonable.” DILHR v. LIRC, 161 Wis. 2d 231, 245, 467 N.W.2d 545, 550 (1991); see also Lisney, 171 Wis. 2d at 506 n.3, 493 N.W.2d at 16. Stated conversely, “[a] court does not . . . give deference to an agency‘s interpretation of a statute when the court concludes that the agency‘s interpretation directly contravenes the words of the statute, is clearly contrary to legislative intent, or is otherwise unreasonable or without rational basis.” Id. at 506, 493 N.W.2d at 16.3
Occasional Sales Exemption
In Wisconsin, persons and business organizations in the business of selling personal property or services are subject to the state sales tax under
Thus, anyone who continues to make sales in a business — after the business has been sold — cannot qualify for the occasional sale exemption on the sale of business assets. And, we noted in Fiedler Foods, Inc. v. DOR, 142 Wis. 2d 722, 726-27, 419 N.W.2d 311, 313 (Ct. App. 1987), a seller liquidating its business must “surrender [its] seller‘s permit prior to closing the sale” if it wishes to avoid paying tax on the sale.
The commission‘s ruling that Carrion‘s sales of its assets did not qualify as “occasional sales” under
Carrion argues that that is not enough: that the issue is not whether it held, or was required to hold, a seller‘s permit during the period in question, but whether it was “actively operating” as a seller at that time. But
There is evidence in the record that in January and February Carrion filed sales and use tax returns reporting taxable receipts for both months: $77,442 in January and $2,088.20 in February.
Carrion contends, however, that there is no evidence that any taxable sales were made after January 15, relying on the testimony of two of its witnesses who testified that after January 17, 1983, Carrion‘s customers consisted only of institutions which were exempt from sales tax. However, none of Carrion‘s witnesses was able to explain the source of the January and February receipts or what they in fact represented, if they did not represent taxable sales in those months; and Carrion concedes that it is unable to establish what those receipts represented. Based on that inability, the commission determined that Carrion‘s evidence was insufficient to rebut the presumption that taxable sales were made during that period and thus the company had “failed to prove that it did not hold or was not required to hold a seller‘s permit on January 17, 1983 or subsequent thereto.” Carrion has similarly failed to establish on appeal that the commission‘s determination is either unreasonable or lacks support in the record.
We also agree with the department that Carrion is incorrect in maintaining that the evidence of its continued taxable sales was comprised solely of its filing of the February return showing $2,088.20 in taxable receipts. As noted above, Carrion sold its commercial division assets on February 18, 1983 — approximately one month after it sold the retail division assets. The sale documents listed Carrion‘s commercial customers, including the University Club, and Carrion acknowl
In affirming the department‘s assessment, the commission stated that: “No credible explanation was provided for [the February] sales other than a mistake in reporting them as taxable. An admission against one[‘s] self requires more evidence than an unexplained mistake with no testimony from the preparer or other valid evidence to support a . . . theory of mistake.”
Carrion indeed attempted to surrender its seller‘s permit immediately prior to the January 17, 1983, retail division asset sale. However, the commission could reasonably conclude on the evidence before it that the company‘s continued taxable sales after that date rendered the attempted surrender ineffective, with the result that at the time of both the retail and commercial division sales, the company held, or was required to hold, a seller‘s permit. It is a harsh result but, as we have noted above, the test is whether the commission‘s determination has a rational basis. If it does — and we so conclude here — “[the] reviewing court will sustain [the] agency‘s view even though [an] alternative view may be equally reasonable.” Fiedler Foods, 142 Wis. 2d at 728, 419 N.W.2d at 314.4
As we have noted above, the purchasers of the two laundry divisions did not pay the notes executed in connection with the sale. Nicholas made no principal payments on the note given for the purchase of the retail division, and Tousey failed to pay between $100,000 and $200,000 of the total principal due on the note for the commercial division. Carrion argues that because the notes were not paid in full, it should not be subject to tax liability on the portions of the purchase price that were never paid.
In support of the argument Carrion refers us to
Assessment of Commercial Division Assets
Carrion next argues that the department‘s assessment of the amount of tangible personal property included in the sale of the commercial division erroneously overstated the purchase price by $58,100. We disagree.
The department‘s auditor valued the tangible personal property included in the sale of the commercial division at $458,100. He testified that he arrived at that value after inspecting and analyzing various documents associated with the sale, including an asset-by-asset calculation of the value of the property based on written interoffice communications concerning the sale between Carrion‘s two principal officers. Carrion, on the other hand, points to Tousey‘s asset purchase agreement, which allocates $400,000 of the sales price to tangible personal property and $55,000 to real estate.
The commission found, however, that “[t]he best credible evidence on [the] issue was supplied by the Department auditor‘s testimony” and explained why it believed that was so. The commission also noted that Carrion was unable to offer evidence as to whether trade fixtures were included in the “real estate” allocation in the agreement and thus could not effectively counter the auditor‘s allocation.
Whether the department auditor‘s figures were accurate is a factual issue turning on the commission‘s
“Taxpayer-In-Fact”
Carrion next argues that it should be relieved of any liability for the taxes because First Wisconsin was the real party in interest in the transaction and should be liable for any taxes assessed.
As noted above, First Wisconsin was a substantial creditor of Carrion and took certain steps to protect its interests when the company‘s business began to fail. Carrion claims that, by these actions, the bank took actual “control” of the business and thus became the “taxpayer-in-fact” during the period covered by the assessment. Thus, says Carrion, the bank, not it, should be responsible for any taxes incurred during that time. It bases the argument on the bank‘s actions in directing Carrion to replace its corporate leadership and to liquidate its assets, and it asserts that, among other things, the bank “ran” the laundry business by “monitoring [its] activities,” “determin[ing] which bills would be paid,” and “negotiat[ing] the terms of the sale . . . to Nicholas and order[ing Carrion] to accept the deal.” The factual assertions, however, are not accompanied by any reference to the record, and, as we have often said, it is not our duty to “sift and glean the record . . . to find facts to support an alleged error.” Zintek v. Perchik, 163 Wis. 2d 439, 482–83, 471 N.W.2d 522, 539 (Ct. App. 1991). We do not address arguments unsubstantiated by references to the record. Dieck v. Antigo School Dist., 157 Wis. 2d 134, 148 n.9, 458 N.W.2d 565, 571 (Ct. App. 1990), aff‘d, 165 Wis. 2d 458, 477 N.W.2d 613 (1991).
Even so, the commission determined that, whatever influence the bank may have asserted as a secured creditor of Carrion, such influence did not “transform [it] into the seller” with respect to liability for the assessed taxes, and that Carrion had failed to prove that the bank should be held responsible for the taxes in Carrion‘s place. The commission found that, despite the fact that Carrion may have acquiesced in the bank‘s wishes on matters relating to the sale, “[t]here was no evidence presented that would convince this Commission that the secured creditor had been the actual seller.”
Again, the commission‘s factual determinations find support in the evidence and its conclusions based on that evidence are not unreasonable. That being so, we will not overturn its decision on the point.
Inclusion of Out-of-State Sales
Carrion next contends that of the $145,850 in sales of miscellaneous equipment included in the department‘s assessment, $99,835 of the total represented sales made to several out-of-state buyers and thus was not subject to the Wisconsin sales tax. The commission upheld the full assessment, stating that “[w]hile [Carrion] raises the issue that they could have been out of state sales, no credible evidence was presented at the hearing to support this [assertion].”
Carrion also argues briefly that we should nonetheless reverse on this point because the “auditor made no attempt to determine whether the taxable receipts reported . . . on its sales and use tax returns included the miscellaneous equipment sales.” It does not explain the argument further and thus provides us with no basis to overturn the commission‘s determination on the point. See Fritz v. McGrath, 146 Wis. 2d 681, 686, 431 N.W.2d 751, 753 (Ct. App. 1988) (appellate court does not consider arguments “broadly stated but never specifically argued“).
Finally, we note that the commission rejected Carrion‘s argument with the following finding:
The witnesses in testifying on behalf of [Carrion] had a lack of knowledge as to how the returns were prepared. No records were produced to show that the . . . audit with reference to miscellaneous equipment sales [was] in error. It is the burden of the taxpayer to show the Department incorrect. The taxpayer failed to do so.
The auditor testified in detail as to his methodology for tracing Carrion‘s reported taxable sales to the
Use Tax Assessment of Out-of-State Purchases
Carrion next challenges the department‘s assessment of use taxes on purchases of materials from out-of-state sellers in 1979 and 1980, claiming that the purchases should have been excluded from taxation pursuant to
This section [imposing the use tax] does not apply to tangible personal property purchased outside this state . . . which is brought into this state by a nondomiciliary for the person‘s own storage, use or other consumption while temporarily within this state when such property is not . . . used . . . in the conduct of a . . . business.... (Emphasis added.)
In its brief, Carrion cites authority for the proposition that taxes may be imposed only by clear and express language, and that any ambiguities as to applicability of the tax should be resolved against taxation,5 but it does not posit how or why
Carrion also suggests that the assessment was improper because the department‘s auditor did not review Carrion‘s invoices for the years in question, but “simply assumed” that because the out-of-state vendors had not charged sales taxes on purchases made in 1981 and 1982, and that no use tax had been paid on those purchases, the same would also be true with respect to the 1979 and 1980 purchases.
Carrion, however, never produced invoices for its 1979 and 1980 purchases, and the auditor testified that, because of the company‘s failure to produce the records, he relied instead on Carrion‘s purchase journals for the years in question as “the best evidence available” on the subject. We agree with the commission that because Carrion‘s vendors were not charging the tax in 1981 and 1982, and because Carrion could not produce invoices for 1979 and 1980 to show that the purchases in those years were treated differently, the auditor‘s testimony as to his reliance on the purchase journals for those years is sufficient to support the commission‘s findings in this regard.
The Penalty Assessment
Finally, Carrion challenges the commission‘s finding that Carrion failed to establish good cause for filing incorrect sales and use tax returns, thereby incurring a twenty-five percent penalty on the taxes due. The basis for the penalty is
If due to neglect an incorrect return is filed, the entire tax finally determined shall be subject to a penalty of 25% of the tax exclusive of interest or other penalty. A person filing an incorrect return shall have the burden of proving that the error or
errors were due to good cause and not due to neglect.
There is no question that Carrion filed incorrect sales and use tax returns. The company argues, however, that this failure was not due to neglect, pointing to the auditor‘s testimony that it had a workable system for reporting sales and use taxes and kept its records organized and in good condition. Again, Carrion does not elaborate or explain its argument, but we infer from its assertions that its position is that because it had a workable system in place for reporting the taxes, the incorrect returns must have been the result of an employee‘s excusable error and thus could not be considered “due to [its] neglect.” But Carrion does not attempt to explain the difference between “mistake” and “neglect,” nor does it put forth any explanation for the purported “mistake” from which we might determine that there was “good cause” for the failure to file a correct return.
The commission rejected Carrion‘s argument on the basis that Carrion had failed to present any evidence “to show that the incorrect returns were the result of good cause,” and the commission concluded, as it had on the other issues raised by Carrion, that the company had failed to meet its burden of establishing error in the department‘s assessment. Again, we agree.
By the Court.—Order affirmed.
SUNDBY, J. (dissenting). I dissent from the proposition that the taxpayer‘s sale of its business was a sale “at retail” which was subject to a retail sales tax under
“Occasional sales” includes: (a) Isolated and sporadic sales of tangible personal property . . . where the infrequency, in relation to the other circumstances . . . support[s] the inference that the seller is not pursuing a . . . business . . . as a vendor of personal property or taxable services. No sale of any tangible personal property or taxable service may be deemed an occasional sale if at the time of such sale the seller holds or is required to hold a seller‘s permit.... [Emphasis added.]
The commission concluded that the taxpayer had failed to prove that after its sale of its retail division, it had not continued to make retail sales. In its opinion the commission concluded that because the taxpayer had filed sales and use tax returns for January and February 1983, it admitted that it made taxable sales after
I submit that there was no reason for the commission to look beyond