EXPEDIA, INC., еt al., Appellants/Cross-Appellees, v. DISTRICT OF COLUMBIA, Appellee/Cross-Appellant.
Nos. 14-CV-308, 14-CV-309.
District of Columbia Court of Appeals.
Argued Sept. 30, 2014. Decided July 23, 2015.
120 A.3d 623
BECKWITH, Associate Judge
Because the 2011 amendment to the Youth Act neither operates retroactively nor otherwise fits within the Calder categories, applying it to appellant did not violate the Ex Post Facto Clause. The trial court, therefore, properly denied Solomon‘s motion to dismiss the UPF charge.
III. Conclusion
The judgment of the Superior Court is Affirmed.
Todd S. Kim, Solicitor General, with whom Irvin B. Nathan, Attorney General for the District of Columbia at the time the briefs were filed, Loren L. AliKhan, Deputy Solicitor General, Mary L. Wilson, Senior Assistant Attorney General, Office of Solicitor General, Bennett Rushkoff, Chief, Public Advocacy Section, and Jimmy R. Rock, Assistant Attorney General, were on the brief, for appellee/cross-appellant.
Before BECKWITH and McLEESE, Associate Judges, and NEWMAN, Senior Judge.
BECKWITH, Associate Judge:
In the District of Columbia, sales tax is governed by
Having found that the OTCs are liable for the District of Columbia sales tax, we confront a second issue concerning the extent of that tax liability. The District argues that the OTCs are liable for tax on the entire amount they collect from their customers, including the “sales tax reimbursement” amount that the OTCs have been passing on to the hotels, which the hotels, in turn, remit to the District as the sales tax due on the amount the hotels earn on the deal. In reply, the OTCs argue that this “sales tax reimbursement” amount should be excluded from the taxable “sales price” by the plain text of
I. The Facts
Appellant OTCs operate websites that allow customers to search for, compare, book, and pay for travel reservations. In that respect, the OTCs serve as intermediaries between customers and a host of travel service providers, including car rental companies, airlines, and—importantly for this appeal—hotels. The OTCs’ primary business model for the sale of hotel rooms is known as the merchant model: a uniform, nationwide model that operates the same way, in all relevant respects, for all OTCs and in all jurisdictions, including in the District of Columbia. The OTCs have been using the merchant model to book hotel stays in the District since at least the late 1990s.
Under the merchant model, the OTCs contract with hotels for the right to sell hotel rooms to online customers at a “retail rate,” while paying the hotels that actually furnish the rooms some lower, negotiated “net rate.” In a typical merchant model transaction, a customer uses an OTC‘s website to search for and select
When charging the customer‘s credit card, the OTC collects an amount that consists of the net room rate that it will later forward to the hotel, a tax recovery charge, and a retail margin that the OTC keeps as profit. The tax recovery charge—which represents the sales tax due on the net room rate received by the hotel—is also forwarded to the hotel, which then remits it to the District. The District thus receives the sales tax due on the net rate paid to the hotel, but does not receive sales tax on the OTCs’ retail margins—that is, on the difference between (1) the total charges thаt the customer pays to the OTC and (2) the lower, net rate that the OTC forwards to the hotel.
When it charges the customer, the OTC does not isolate the “sales tax” as a separate amount, but instead calls the sales tax a “tax recovery charge,” which it combines with a “service fee.” As a result, the customer does not know how much sales tax has been paid on the transaction.
On March 22, 2011, the District brought suit to recover what it viewed as unpaid back sales taxes—those owed on the OTCs’ retail margins—as well as penalties and interest related to the OTCs’ merchant model sales in the District since 1998. On September 24, 2012, the Superior Court granted partial summary judgment to the District on the issue of the OTCs’ basic tax liability, holding that the District‘s “gross sales tax law has applied to Defendants [the OTCs] at all times.” The court also found that the OTCs had failed to state any sales tax amounts separately from the other retail charges, but reserved ruling on the tax effect of that finding. Then on December 9, 2013, the court resolved the tax effect of that ruling in favor of the OTCs, concluding that the sales tax amounts that the OTCs had been collecting from their customers and forwarding to the hotels should be excluded from the “sales price” on which the OTCs now owe sales tax, despite the fact that those sales tax amounts had not been stated separately. Both parties appealed.
II. The Sales Tax Law
Pursuant to
[a]ny transaction whereby title or possession ... of tangible personal property is ... transferred ... for a consideration, by a vendor to a purchaser, or any transaction whereby services subject to tax under this chapter are rendered for consideration or are sold to any purchaser by any vendor[.]
The sale or charge for any room or rooms, lodgings, or accommodations furnished to transients by any hotel, inn, tourist camp, tourist cabin, or any other place in which rooms, lodgings, or accommodations are regularly furnished to transients for a consideration.
The statute imposes tax only on the vendor, but requires that “reimbursement for the tax imposed upon the vendor shall be collected by the vendor ... from the purchaser on all sales the gross receipts from which are subject to tax imposed by this chapter so far as it can be done.”
[u]pon each sale of tangible personal рroperty or services, the gross receipts from which are taxable under this chapter, the reimbursement of tax to be collected by the vendor from the purchaser under the provisions of this chapter shall be stated and charged separately from the sales price and shown separately on any record thereof at the time the sale is made or evidence of sale issued or employed by the vendor.
Finally, there is a municipal regulation on the subject. 9 DCMR § 408, enacted in 19542 and entitled “Sales Price: Taxes, Interest, and Other Charges,” begins with the preface: “In addition to the provisions of the Act“—meaning the
Since the District filed this lawsuit on March 22, 2011, the District‘s sales tax statute has been amended several times. The D.C. Council inserted mention of “net charges and additional charges” as well as “room remarketer” into the definition of the taxable service in
The sale or charge, to include net charges and additional charges, for any room or rooms, lodgings, or accommodations furnished to transients by any hotel, room remarketer, inn, tourist camp, tourist cabin, or any other place in which rooms, lodgings, or accommodations are regularly furnished to transients for a consideration.
[A]ny person, other than the operator of a hotel, inn, tourist camp, tourist cabin, or any other place in which rooms, lodgings, or accommodations are regularly furnished to transients for a consideration, having any right, access, ability, or authority, through an internet transaction or any other means whatsoever, to offer, reserve, book, arrange for, remarket, distribute, broker, resell, or facilitate the transfer of rooms the occupancy of which is subject to tax under this chapter and also having any right, access, ability or authority to determine the sale or charge for the rooms, lodgings, or accommodations.
[i]f the occupancy of a room or rooms, lodgings, or accommodations is reserved, booked, or otherwise arranged for by a room remarketer, the tax imposed by this paragraph shall be determined based on the net charges and additional charges received by the room remarketer.
III. The Standard of Review
This court reviews summary judgment rulings de novo. Square 345 Ltd. P‘ship v. District of Columbia, 927 A.2d 1020, 1023 (D.C. 2007). The court is to “сonduct an independent review of the record ... in considering whether the motion was properly granted.” Id.
IV. The OTCs’ Liability for Sales Tax
The rules of statutory construction are well established in the District of Columbia. See District of Columbia v. Place, 892 A.2d 1108, 1111 (D.C. 2006). “The first step in construing a statute is to read the language of the statute and construe its words according to their ordinary sense and plain meaning.” Hospitality Temps Corp. v. District of Columbia, 926 A.2d 131, 136 (D.C. 2007) (citation and internal quotation marks omitted). The court must give effect to a statute‘s plain meaning when its words are clear and unambiguous. See District of Columbia v. Bender, 906 A.2d 277, 281-82 (D.C. 2006). Generally, “[w]hen the plain meaning of the statutory language is unambiguous, the intent of the legislature is clear, and judicial inquiry need go no further.” District of Columbia v. Gallagher, 734 A.2d 1087, 1091 (D.C. 1999). “The literal words of a
A special rule of construсtion applies to tax statutes, which under certain circumstances can tip the balance in favor of the taxpayer. In District of Columbia v. Acme Reporting Co., 530 A.2d 708, 712 (D.C. 1987) (quoting 3A Sutherland, Statutes and Statutory Construction § 66.01 (C. Sands, 4th ed. 1986)), this court made clear that “the settled rule [is] that tax laws are to be strictly construed against the state and in favor of the taxpayer,” if the statute in controversy is unclear and ambiguous. The Acme court tempered that presumption in the next three sentences, however, clarifying that:
At the same time, we are mindful of the maxim that “tax laws ought to be given a reasonable construction, without bias or prejudice against either the taxpayer or the state, in order to carry out the intention of the legislature and further the important public interests which such statutes subserve.” [Sutherland] § 66.02. Further, “[s]ince the obligation to pay taxes arises only by force of legislative action, the nature and extent of that liability is determined by the legislative meaning. Therefore, all the rules of statutory construction are relevant in the interpretation of revenue measures.” Id. § 66.03.
Acme, 530 A.2d at 712. In essence, then, interpreting tax laws is a three-step process: if the court is confronted with ambiguity on the face of the statute, step two is to turn to the legislative history and the other tools of reasonable statutory construction, and—if the ambiguity persists—step three is to construe the statute strictly against the state and in favor of the taxpayer, in accordance with the Acme rule. As the trial court explained: “Only if the statute remains ambiguous after resorting to all of the normal tools of statutory construction should the Court construe any remaining reasonable ambiguity against the District and in favor of the taxрayers.”
Following the rules of statutory construction in general and Acme in particular, the first step in resolving the OTCs’ contested sales tax liability is to determine whether the statutory language is plain and unambiguous. We begin our inquiry by considering the statutory text as it existed prior to the 2011 amendment, and then turn to the amendments to the extent necessary. “A statute is ambiguous when it is capable of being understood in two or more different senses by reasonably well-informed persons.” Sutherland,
As noted above, both the OTCs and the District read the pivotal text from
The District, on the other hand, reads the statute as imposing tax directly on the sale or charge for any room that is ultimately furnished by a hotel, which sounds exactly like the service that the OTCs provide. This reading is also plausible, because nowhere does the statute specify that the party responsible for the “sale or charge” needs to be the same party responsible for the “furnishing” and because the presence of the words “sale or charge” at the beginning of
Turning to an analysis of the statute‘s structure, purpose, and legislative history, we conclude that these considerations decisively favor the District‘s position. First, while the text of
As an initial matter, it is significant that the sales tax is imposed upon vendors for “the privilege of selling certain selected services,” rather than rendering or providing them. See
First, the OTCs contend that “the sale or charge” that appears at the beginning of
Despite the admittedly confusing definition of “sale” found in
(1) “Retail sale” and “sale at retail” mean the sale in any quantity or quantities of any tangible personal property or service ... taxable under the terms of this chapter.... For the purpose of the tax imposed by this chapter, these terms shall include, but not be limited to, the following:
(A)
(i) Sales of food or drink prepared for immediate consumption ...; and
(ii) Sales of food or drink when sold from vending machines;
...
(B) Any production, fabrication, or printing of tangible personal property on special order for a consideration;
(C) The sale or charge ... for any room ... furnished to transients by any hotel
...
(D) The sale of natural or artificial gas, oil, electricity, solid fuel, or steam;
In arguing that “one is a ‘vendor’ only if one exercises the taxable privilege of ‘furnishing’ rooms to transients for consideration,” the OTCs are following just that methodology: they are seizing on the only verb (or more precisely, participle) in
The noun “sale“—and not “prepare,” the verb (or, again, participle) that appears later in the provision—is the taxable activity in
The purpose of the sales tax statute—which is simply to tax the enumerated transactions, and to tax them in their entirety—overshadows fine points like the tense of the words.
Not only do the structure and purpose of the District‘s sales tax law evince Congress‘s intent to tax the full amount that customers pay for hotel rooms in the District of Columbia, but the legislative history confirms this result. Congress aimed to tax the amount that the purchaser pays for the enumerated service, and—in targeting the sale—sought to include ancillary or intermediary transactions. While Congress in the year 1949 did not contemрlate online travel companies matching customers with hotels using sophisticated information technology, it did know what a middleman was and did address the issue. We draw the same conclusion as the trial court, which reasoned:
The structure of the statute is clear: it is designed to tax the transaction by which the room is sold to the transient, not to a third party intermediary. The legislative history further supports that transactions where one party purchases an item and sells it virtually unchanged to the final purchaser, are taxable. In the Senate report on H.R. 3704, the Committee on the District of Columbia noted that the initial purchase was not intended to be included in the statutory definition of retail sales. S. Rep. No. 81-260, at 8, 1949 U.S.C.C.A.N. 1297, 1305 (“[Retail sales is] defined as to be inapplicable to sales where the purpose of the purchaser is to resell the property so transferred in the form in which bought by him.“)[.] This lends support to the Court‘s holding that ... it is the ... sale to the ultimate purchaser [that is taxable under
§ 47-2001(n)(1)(C) ].
Because we agree with the trial court‘s determination that
Moreover, the OTCs’ reading of the statute would leave many provisions of the District‘s sales tax law vulnerable to potential loopholes and, as the trial court recognized, could lead to the absurd result in which nobody would be liable for sales tax:
Nobody would be responsible for the retail sales tax under the OTCs’ model. The hotel has no contract with the purchaser until check-in. No monetary transaction ever occurs between the hotels and the ultimate purchaser and thus there is no sale, by the statutory definition, to tax. No tax would ever be due on either of the transactions, a result plainly at odds with the structure and history of the act.
In response, the OTCs point out that—as even the District concedes—the hotels have been remitting sales tax on the “net rates” they receive on the transactions. Thus, the hypothetical in which the hotels and the OTCs both dodge the sales tax has not been occurring, and it is not clear how it would work. There is no allegation that the OTCs are conspiring with or are somehow controlled by the hotels and if, for example, a hotel tried to evade the sales tax by transacting with itself and then remitting tax based only on a “net rate” that it calculated by removing some “convenience” or “booking” fee, then that would constitute a sham transaction that could be ignored under existing tax principles. See Black & Decker Corp. v. United States, 436 F.3d 431, 441 (4th Cir. 2006).
While the loophole that troubled the trial court does not appear to be gaping, we are unpersuaded by the OTCs’ contention that “[e]ven if the Superior Court‘s perceived loophole were nonetheless a viable concern, that loophole must be filled by the District Council, the legislative branch, not the courts.” Rather, as the District argues, the rules of statutory interpretation in general and Acme in particular require consideration of practical consequences when determining a reasonable construction of the District‘s sales tax law. Acme, 530 A.2d at 715 (stating that the “‘reasonableness of a construction can often be tested by considering the consequences of a different one‘“) (citation omitted). Regardless of the ease with which the OTCs and the hotels might conspire to lessen or eliminate the tax consequences of these sales, then, the OTCs’ interpretation—inserting a middleman between vendor and purchaser—would result in the District receiving sales tax on only part of transactions that Congress intended to tax in their entirety. We therefore agree with the District that “[w]hile the OTCs’ interpretation would allow retailers to avoid paying tax on some retail transactions—a result Congress surely did not intend—the District‘s interpretation avoids this problem: the tax is imposed on the charge to the customer.”
While there is no case law that controls this dispute, this court‘s precedents also favor the District‘s contention that the OTCs owe sales tax on their retail margins pursuant to
The parties also draw starkly different conclusions from this court‘s decision in Square 345 Ltd. P‘ship v. District of Columbia. In Square 345, this court addressed the question whether a hotel‘s so-called “attrition fees” are subject to sales tax as a retail sale of a hotel room. 927 A.2d at 1022. “Attrition fees” result when a group contracts with a hotel to make available a block of rooms at a given price until a certain date, typically so that the group‘s members can attend some event. Id. If the group‘s members do not reserve some agreed-upon minimum number of rooms, the group is responsible for the difference between the number of room nights actually used and the number of room nights guaranteed; that amount is called an attrition fee. Id. This court in Square 345—after observing that “the statute permits the District to tax the hotel ‘for the privilege of selling certain selected services,’ including the ‘sale of or charges for any room or rooms ... furnished to a transient by any hotel‘“—held that the attrition fee was subject to sales tax because the hotel “provides a [taxable] ‘service’ when it sets aside a room block for a group and its participants at a discounted rate for a specified period of time.” Id. at 1024.
The OTCs claim that the Square 345 opinion is inconsistent with the reading of the statute that this court announcеs today because Square 345 placed the tax burden on the hotel and did not turn the intermediary group into a “vendor” responsible for sales tax. We disagree. In Square 345, the hotel was, in a meaningful sense, “selling” the block of rooms to the group in exchange for receiving the guaranteed attrition fee. The Square 345 court explained this explicitly:
Once the group contracts for the room block, the group‘s participants obtain the right to reserve a room at the favorable rate. During the contractually specified period, no persons other than the group‘s participants are permitted to reserve the rooms set aside in the room block. This exclusive right to occupy the rooms, upon reservation, thereby renders the group‘s participants plainly within the definition of transients as provided by the Code. The statute does not require the transient to actually exercise his or her right to occupy in order for the service to be taxable; therefore, the attrition fee falls within the category of taxable events covered by
D.C. Code § 47-2002 .
Id. at 1024 (internal citations omitted). While both the OTCs here and the group that guaranteed the attrition fee there can be characterized as “intermediaries” in some sense, the reasoning from Square 345 does not apply to the OTCs operating pursuant to the merchant model. The District‘s argument in Square 345 highlights the differences between the two cases. There the District argued, in the alternative, that “the group” who enters into the contract with a hotel should be considered the transient because it makes the block reservation on behalf of its par-
Finally, the OTCs argue that the imposition of back sales taxes is unfair and foreclosed by the four affirmative defenses of laches, waiver, equal protection, and the statute of limitations. We disagree.
“Laches is the principle that equity will not aid a plaintiff whose unexcused delay, if the suit were allowed, would be prejudicial to the defendant.” Fed. Mktg. Co. v. Va. Impression Prods. Co., 823 A.2d 513, 525 (D.C. 2003). This jurisdiction, however, has accepted the principle of nullum tempus occurrit reipubliciae (“no time runs against the state“), by which neither laches nor statutes of limitations will constitute a defense to suit by the sovereign in the enforcement of a public right. See New 3145 Deauville, L.L.C. v. First Am. Title Ins. Co., 881 A.2d 624, 629 (D.C. 2005). The OTCs do point to a case in the District that has not followed the doctrine, but that exception is limited to zoning enforcement actions and the doctrine squarely aрplies in the tax collection context. See Stonewall Constr. Co. v. McLaughlin, 151 A.2d 535, 536 (D.C. 1959). And even assuming that laches were an available defense, the equitable remedy would not be appropriate here because “if the party interposing the defense of laches substantially contributes to the delay he is precluded from taking advantage of the defense.” Evans v. United States Fid. & Guar. Co., 127 A.2d 842, 848 (D.C. 1956). While the OTCs claim that the District has known about the alleged noncompliance for nine years and taken no action whatsoever, prejudicing the OTCs because they will not be able to seek reimbursement from past customers, the OTCs’ fairness argument is ultimately unavailing. It is clear from looking at the OTCs’ statements to inves-
Waiver is the unilateral, voluntary, and intentional relinquishment of a known right. In re Thomas, 740 A.2d 538, 547 (D.C. 1999). The OTCs’ waiver argument is closely related to their laches argument. In support of waiver, the OTCs point to the District‘s delay in bringing this case, its practice of accepting sales tax from the hotels based only on the “net rates,” and a quotation from an article in the Washington Business Journal in which a former Attorney General suggested that litigation against the OTCs would be a “waste of time.” Yet none of these three fairly evinces waiver. Allowing a defense of waiver based on the District‘s mere failure to bring the action earlier would eviscerate the principle of nullum tempus occurrit reipubliciae discussed above. And the fact that the District accepted sales tax indisputably owed to it on one part of a transaction in no way suggests waiver of a prospective claim for sales tax on another part of the transaction. And finally, the quotation from former Attorney General Peter Nickles was taken out of context. When considered in full, that statement makes clear that the District was keeping its options open:
[D.C. Attorney General] Nickles, however, said he is monitoring [similar sales tax] cases in other jurisdictions but would not take any action until a court delivers a “definitive decision.” Until then, he said, action is a waste of time. “This litigation is going to go on a very long time,” he said. “When it becomes clear there is a case we will decide whether to take action.”
Jonathan O‘Connell, D.C. Could Be Losing Hotel Taxes to Online Companies, Wash. Bus. J. (May 29, 2009).
The equal protection guarantees contained in the United States Constitution are violated when a law is not applied evenhandedly. Smith v. United States, 460 A.2d 576, 578 n.3 (D.C. 1983). The OTCs cite a number of cases that point to a “duty of consistency” that applies when the government is interpreting and applying tax laws to similarly situated taxpayers. These “duty of consistency” cases stand for the proposition that the government may not interpret a tax statute to apply to one taxpayer and not to a similarly situated one. As the trial court explained, however, there is no evidence that the District has ever found that its sales tax law does not apply to other OTCs’ merchant model transactions, and so this case does not really involve a claim of inconsistent application of a tax law. Rather, in identifying a small OTC that the District has not also sued for failure to pay sales taxes, the OTCs are effectively making a selectivе enforcement claim. “To support a defense of selective enforcement or discriminatory prosecution, appellant must show that the government‘s selection of it for prosecution has been based upon some form of invidious or otherwise impermissible form of discrimination, or is arbitrary and capricious.” Hospitality Temps, 926 A.2d at 140. No such improper motivation is alleged here. It does not violate equal protection principles for the District to make enforcement decisions based on whether successful litigation will yield sufficient revenue to make legal action worthwhile, which is what appears to have happened in this case.
Finally, the Superior Court properly rejected the OTCs’ statute of limita-
Like the trial court, we conclude that an analysis of the sales tax law‘s structure, purpose, and legislative history is sufficient to resolve the ambiguity that existed on the face of the law. Because ambiguity does not remain after the normal tools of statutory construction have done their work, the Acme ambiguity rule does not come into play. We hold that the OTCs, in their merchant model transactions, were engaging in “the sale or charge for any room ... furnished to transients by any hotel” within the meaning of
V. The § 47-2001(p)(2)(D) Exclusion
Given that we have found the OTCs liable for the District sales tax, the final issue in this case is whether they owe tax on the “sales tax reimbursement” amounts that they have been passing on to the hotels, ultimately to be remitted to the District as the tax due on the “net rate.” The trial court, granting summary judgment to the OTCs, concluded that they do not, because “[t]he amount of reimbursement of tax paid by the purchaser to the vendor under this chapter” is expressly excluded from the definition of “sales price” by
The dispute over the
The District‘s argument depends on a problematic reading of the statute. The statute does not make compliance with the separate statement requirement a prerequisite to the
As a whole,
(2) The term “sales price” does not include any of the following:
(A) Cash discounts allowed and taken on sales;
(B) The amount charged for property returned by purchasers to vendors upon rescission of contracts of sale when the entire amounts charged therefor are refunded either in cash or credit, and when the property is returned within 90 days from the date of sale;
(C) The amount separately charged for labor or services rendered in installing or applying the property sold, except as provided in subsection (n)(1) of this section;
(D) The amount of reimbursement of tax paid by the purchaser to the vendor under this chapter; or
(E) Transportation charges separately stated, if the transportation occurs after the sale of the property is made.
(Emphasis added). While Congress made subsection (E) conditional on there being a separate statement, it did not do the same for section (D). And it is precisely because section (D) does not depend on a separate statement that the District seizes upon the last three words, “under this chapter,” and uses those words to imply a link to the separate statement requirement found in
Upon each sale of tangible personal property or services, the gross receipts from which are taxable under this chapter, the reimbursement of tax to be collected by the vendor from the purchaser under the provisions of this chapter shall be stated and charged separately from the sales price and shown separately on any record thereof at the time the sale is made or evidence of sale issued or employed by the vendor.
(Emphasis added). Section 47-2009, then, requires the separate statement of any sales tax reimbursement amount collected “under ... this chapter,” but it does not use “under this chapter” as a catch-all term for ensuring absolute compliance with all of the chapter‘s requirements. Rather, it uses the phrase in its regular sense, clarifying which sales are being discussed. The phrase is used in much the same way in
The District‘s arguments to the contrary are unpersuasive. First, the District relies on a municipal regulation, 9 DCMR § 408.2, which states that the tax reimbursement amount is to be excluded from the sales price if the reimbursement amount is stated separately. 9 DCMR § 408.2. The problem with this argument is that the regulation does not say that the tax rеimbursement amount is to be excluded from the sales price only if stated separately. We acknowledge that 9 DCMR § 408.2 appears to be a completely superfluous provision, as its point is already
Yet context is critical, and a careful look at the structure of both the statute and the regulation counsels against implying an “only” as sometimes can and should be done pursuant to the expressio unius canon. To do so, we think, would cut against the thrust of 9 DCMR § 408 as a whole. Section 408 begins with the preface: “In addition to the provisions of the Act (
The trial court found that the OTCs “substantially complied” with the separate statement requirement, then, and the District‘s counterargument relies on a sort of all-or-nothing logic we cannot accept. Granted, there does not appear to be a bright line between a noncompliant reimbursement and something that is not a reimbursement at all. By the District‘s logic, though, a tax reimbursement amount that was understated by fifty cents, for example, would seem to be not merely noncompliant, but something other than a reimbursement “under this chapter.” In that example, much like this case, the customer would lack exact knowledge of the amount of reimbursement she has paid, but it is still farfetched to say that the reimbursement would therefore not be a reimbursement “under this chapter.”
As the District correctly points out, there is no general rule that substantial compliance is good enough when it comes to the formalistic and often technical requirements of the tax code, see Kleiboemer v. District of Columbia, 458 A.2d 731, 734 & n.4 (D.C. 1983), and there is also a general canon of construction directing that tax exemptions be narrowly construed. See, e.g., Antietam Hotel Corp. v. Comm‘r of Internal Revenue, 123 F.2d 274, 278 (4th Cir. 1941). These are both valid considerations, and we note that we do not read the trial court as creating a new doctrine or general rule of tax law. But at the end of the day, general maxims are not going to decide this specific question of statutory interpretation. In particular, this case asks us to decide between two meanings of the phrase “under this chapter,” and the choice appears to be between what we view as its ordinary use, meaning “under this chapter, as opposed to another” (or simply “here“), and an unusual use, meaning “in accordance with
pears to come from the Solicitor General‘s office rather than from the administrative agency to whose expertise we defer, “the interpretation does not reflect the agency‘s fair and considered judgment on the matter in question.” See id.
The District also makes a number of policy arguments, emphasizing that Congress focuses on the consumer‘s perspective when passing sales tax laws because the consumer might need the separately stated sales tax information to comply with his or her own tax obligations, and that Congress strives for consumer protection (noting that, elsewhere in the sales tax law, Congress made it a criminal offense for vendors to assure customers that the vendors will absorb the District sales tax). Some of these arguments justify the separate statement requirement, but they are not reasons to change the definition of “sales price” adopted by the tax code. Ultimately, many of these arguments rely on the logic that, since the OTCs were culpable in not complying with the separate statement requirement, then they do not “deserve” the
VI. Conclusion
For the reasons in this opinion, we affirm the judgment of the Superior Court.
So ordered.
McLEESE, Associate Judge, concurring in part and dissenting in part:
I agree with the court that the online travel companies (OTCs) are subject to sales tax in the District of Columbia, and I join Parts I through IV of the court‘s opinion. I respectfully dissent, however, from the court‘s holding in Part V of the opinion that the OTCs are not liable for sales tax based on the full amount the OTCs charged purchasers.
Under the applicable provisions, vendors are required to pay a tax based on their gross sales receipts.
The OTCs did not comply with the statutory requirement that vendors separately charge purchasers for tax reimbursement, instead imposing a single charge that referred to taxes and fees without indicating the exact amount of either. The District of Columbia contends that the OTCs therefore did not obtain proper tax reimbursement and thus are liable for sales tax based on the entire amount the OTCs charged purchasers. In my view, the District‘s interpretation of the applicable provisions is reasonable and entitled to deference from this court. See, e.g., Auer v. Robbins, 519 U.S. 452, 461-62 (1997) (agency‘s interpretation of its own regulations is controlling unless “plainly erroneous or inconsistent with the regulation“); although agency‘s interpretation was advanced in legal brief, that did not undermine deference, where there was “no reason to suspect that the interpretation does not reflect the agency‘s fair and considered judgment on the matter in question“) (internal quotation marks omitted); District of Columbia Dep‘t of Env‘t v. East Capitol Exxon, 64 A.3d 878, 880-81 (D.C. 2013) (“It is well established that this court affords deference to an agency‘s interpretation of the statute and regulations it is charged by the legislature to administer, unless its interpretation is unreasonable or is inconsistent with the statutory language or purpose. This deference stems from the agency‘s presumed expertise in construing the statute it administers. When, as here, the construction of an administrative regulation rather than a statute is in issue, deference is even more clearly in order.“) (citations and internal quotation marks omitted).
The court does not explicitly address whether the District‘s interpretation of the applicable statutory provisions is entitled to deference or whether 9 DCMR § 408.2 should be upheld as long as the regulation reflects a reasonable interpretation of the applicable statutory provisions. The court does conclude, however, that the District‘s interpretation of § 408.2 is not entitled to deference, because that interpretation was not advanced at the outset of this litigation and is presented in a brief filed in this court by the Office of the Solicitor General. The Supreme Court has explained, however, that ”Auer ordinarily calls for deference to an agency‘s interpretation of its own ambiguous regulation, even when that interpretation is advanced in a legal brief....” Christopher v. SmithKline Beecham Corp., — U.S. —, 132 S. Ct. 2156, 2159 (2012). The District relied on the regulation in summary-judgment pleadings filed by the Office of the Attorney General, and I see no reason to doubt that the Office of the
In granting summary judgment in December 2012, the trial court ruled that the District waived this argument in a discovery response filed in February 2012. In opposing summary judgment in May 2012, however, the District clarified that it in fact was seeking to recover sales tax based on the full amount the OTCs charged purchasers, without any reduction for purported tax reimbursement. In the absence of any finding that the OTCs were prejudiced, I would not treat the argument as irretrievably lost based on a statement in a discovery response that was clarified before the trial court ruled on the summary-judgment motion. Cf., e.g., Brooks v. United States, 993 A.2d 1090, 1095 (D.C. 2010) (when exercising discretion in considering whether to grant request to withdraw prior waiver or stipulation, trial court may consider “various factors, including the stage of the proceedings, the importance of the testimony, inconvenience to the court, and prejudice to the [opposing party]“); Marshall v. District of Columbia, 391 A.2d 1374, 1378-79 (D.C. 1978) (trial court did not abuse discretion in permitting District to withdraw prior admission by default, given absence of prejudice to opposing party); Schrier v. Home Indem. Co., 273 A.2d 248, 251 (D.C. 1971) (reversing where trial court treated ambiguous language in stipulation as waiving defense).
On the merits, I agree with the District that 9 DCMR § 408.2 is better understood to mean that, unless the amount of tax reimbursement is stated separately from the sales price, vendors are not entitled to a reduction in tax based on a claim that some of the price to the purchaser was actually tax reimbursement. Two distinct canons of construction support this understanding of § 408.2. The first canon is “expressio unius est exclusio alterius, which embodies the common-sense principle that when a legislature makes express mention of one thing, the exclusion of others is implied.” Odeniran v. Hanley Wood, LLC, 985 A.2d 421, 427 (D.C. 2009) (internal quotation marks omitted). By expressly identifying only one circumstance in which vendors are entitled to a reduction for tax reimbursement, § 408.2 naturally tends to imply that vendors otherwise are not entitled to a reduction. “Although the expressio unius maxim must be applied with a considerable measure of caution, it is useful where the context shows that the draft[ers‘] mention of one thing does really necessarily, or at least reasonably, imply the preclusion of alternatives.” Id. (citation, ellipses, and internal quotation marks omitted). This seems to me such a case, particularly because, as the court acknowledges, a contrary reading of § 408.2 contradicts the “cardinal principle of statutory construction that a statute ought, upon the whole, to be so construed that, if it can be prevented, no clause, sentence, or word shall be superfluous, void, or insignificant.” Virginia v. Maryland, 540 U.S. 56, 74 (2003) (internal quotation marks omitted). See, e.g., Consumer Action Network v. Tielman, 49 A.3d 1208, 1213 (D.C. 2012) (“A basic principle is that each provision of the regulation should be construed so as to give effect to all of the regulation‘s provisions, not rendering any provision superfluous.“) (brackets and internal quotation marks omitted). The applicable statutes already provide that vendors are entitled to a reduction for separately stated tax reimbursement.
The court concludes, however, that the foregoing considerations are inadequate, because interpreting 9 DCMR § 408.2 to impose a limitation “would cut against the thrust of ... § 408 as a whole,” which the court describes as adding to the statutory list of exceptions to “sales price.” The principal difficulty with that conclusion is that § 408.2 is outside that thrust in any event, because even under the court‘s interpretation § 408.2 does not add to the statutory list of exceptions but instead pointlessly reiterates one statutory exception. Moreover, even if § 408.2 did point in a direction different from the other parts of § 408, that consideration would, in my view, be outweighed by the contrary considerations I have previously noted. In sum, § 408.2 provides for a reduction for tax reimbursement if the amount of tax reimbursement is separately stated. I do not think that that provision can reasonably be interpreted tо permit such a reduction even if the amount of tax reimbursement is not separately stated.
I also would conclude that, so construed, 9 DCMR § 408.2 is a reasonable interpretation of the applicable statutory provisions. Those provisions authorize a reduction for tax reimbursement and require that tax reimbursement be separately stated, but do not speak explicitly to what should happen if a vendor does not separately state the amount of tax reimbursement.
With respect to policy, the District persuasively argues that the separate-statement requirement serves important purposes, including ensuring that both parties to a sale understand the amount of sales tax involved, which can determine other tax obligations of the parties. See, e.g.,
Finally, even assuming that the doctrine of substantial compliance is applicable in the present context, I do not view the OTCs’ failure to provide any indication of the amount of reimbursement as constituting substantial compliance with the OTCs’ statutory obligations. Nor do I view the imposition of a tax on the full amount of the customers’ payments as an impermissible penalty.
In sum, I would hold that the OTCs are liable for tax based on the full amount of their customers’ payments, without reduction for purported tax reimbursement. I therefore respectfully dissent from the holding of Part V of the court‘s opinion affirming the contrary ruling of the trial court.