33 N.C. App. 124 | N.C. Ct. App. | 1977
By its first five assignments of error, defendant contends that the trial judge erred in ordering that plaintiff is entitled
Generally, one who voluntarily pays a tax imposed by an unconstitutional law, and does not know that the law is unconstitutional, may not subsequently recover the tax paid. 84 C.J.S., Taxation, § 687, p. 1284; 72 Am. Jur. 2d, State and Local Taxation, § 1087, p. 349. See also Annots., 74 A.L.R. 1301 (1931), 48 A.L.R. 1381 (1927), and cases cited therein. Where payment of the tax is involuntary, however, it may be recovered by the taxpayer. Sneed v. Shaffer Oil & Refining Co., 35 F. 2d 21 (8th Cir. 1929); Tyler v. Dane County, 289 Fed. 843 (W.D. Wis. 1923), appeal dismissed, 266 U.S. 637, 69 L.Ed. 481, 45 S.Ct. 10 (1924); Manufacturer’s Casualty Insurance Co. v. Kansas City, 330 S.W. 2d 263 (Mo. App. 1959).
Problems most often arise in determining whether the payments of the tax were voluntary or involuntary. Payment is deemed involuntary when it is made to release the payor or his property from an actual, existing duress imposed by the payee. C. & J. Michel Brewing Co. v. State, 19 S.D. 302, 103 N.W. 40 (1905). “Duress is the result of coercion. It may exist even though the victim is fully aware of all facts material to his or her decision.” Link v. Link, 278 N.C. 181, 191, 179 S.E. 2d 697, 703 (1971). However, a mere mistake as to the constitutionality of the taxing statutes does not make the payment involuntary. “The weight of authority is to the general effect that a payment of taxes, with knowledge of all the facts, is not rendered involuntary by the fact that it was paid in the mistaken belief that the statute or ordinance under which it was levied was valid.” Manufacturer’s Casualty Insurance Co. v. Kansas City, supra, at 265.
Plaintiff made inquires “on more than one occasion” to the Department of Revenue to determine whether it could employ the alternate method of payment under G.S. 105-113.56A but was informed that such method was unavailable. Throughout the entire period in question, plaintiff continuously paid the tax pursuant to G.S. 105-113.51 and made no other effort to comply with the alternate method. Moreover, plaintiff did not pay the tax under protest as did the taxpayer in Food Stores, supra. Plaintiff maintains, however, that it could not have utilized the alternate method “. . . without violating North Carolina law, incurring civil and criminal sanctions and
Plaintiff nevertheless contends that it is entitled to a refund by virtue of G.S. 105-266.1 which provides in pertinent part:
“Refunds of overpayment of taxes.— (a) Any taxpayer may apply to the Commissioner of Revenue for refund of tax or additional tax paid by him at any time within three years after the date set by the statute for the filing of the return or application for a license or within six months from the date of payment of such tax or additional tax, whichever is later. The Commissioner shall grant a hearing thereon, and if upon such hearing he shall determine that the tax is excessive or incorrect, he shall resettle the same according to the law and the facts, and adjust the computation of tax accordingly. The Commissioner shall notify the taxpayer of his determination, and shall refund to the taxpayer the amount, if any, paid in excess of the tax found by him to be due.”
Plaintiff argues that G.S. 105-266.1 provides a remedy whereby unconstitutionally assessed taxes may be recovered by the taxpayer regardless of whether or not their payment was voluntary. We disagree.
Some states have enacted legislation which permits recovery of all unconstitutionally assessed taxes. Under these statutes, it is not necessary to determine whether the tax was paid voluntarily or involuntarily. E.g., Reynolds Fasterners, Inc. v. Wright, 197 So. 2d 295 (Fla. 1967); Bank v. Board of Supervisors, 168 Iowa 501; 150 N.W. 704 (1915); Schlesinger v. State, 195 Wis. 366, 218 N.W. 440 (1928). We do not believe, however, that G.S. 105-266.1 is so broad. G.S. 105-266.1 is a procedural statute. It does not set out when a taxpayer is entitled to a refund but only the steps by which a refund may be received.
Moreover, we do not find B-C Remedy Co. v. Unemployment Compensation Com., 226 N.C. 52, 36 S.E. 2d 733 (1946), cited by plaintiff, to be controlling in this case. In B-C, the plaintiff applied for a refund of tax erroneously paid on an employee’s salary. Application for a refund was made pursuant to a section of the North Carolina Unemployment Compensation Act which provided for an adjustment or refund where “. . . the Commission shall determine that such contributions or interest or any portion thereof was erroneously collected . . .” (Emphasis supplied.) Our Supreme Court stated:
“As a part of its defense, appellant suggests that there is no remedy for recovery of tax voluntarily paid. That could only be true where the statute fails to provide for a refund under such circumstances, and in a jurisdiction which would regard an action at law for its recovery as a suit against the State, without statutory authority for its institution. In view of the construction we give the statute, we do not find it necessary to discuss the point. The Act is broad enough in its phraseology to cover refund of money paid through mistake, without raising technical distinctions between voluntary and involuntary payments. There is no question that the item was erroneously collected or paid within the meaning of that term as used in the statute.” 226 N.C. at 55, 36 S.E. 2d at 735-36.
Thus, the statute involved in B-C, unlike G.S. 105-266.1, provided that the taxpayer was entitled to a refund whenever the tax was “erroneously collected.” The court’s interpretation of the statute was sufficiently broad to include both voluntary and involuntary payments. We do not believe, however, that G.S. 105-266.1 can be interpreted to entitle a taxpayer to a refund where the payment is made voluntarily. Having determined that plaintiff’s payment of the soft drink tax constituted voluntary payment, we are of the opinion, and so hold, that plaintiff did not qualify for a refund for the taxable years in question.
In view of our ruling, defendant’s other assignments of error are not discussed.
Reversed.