HARRAH'S BOSSIER CITY INV. CO. v. BridgesHARRAH'S BOSSIER CITY INV. CO. v. Bridges
This writ concerns whether the sales and use tax relief provisions aimed at horse racing facilities constitute “exemptions” or “exclusions” for the purposes of applying a tax suspension provision. Specifically, whether plaintiff, Harrah‘s Bossier City Investment Company, LLC (“Harrah‘s“), is excused from payment of sales and use taxes on purchases made for its racetrack and slot machine facility in Bossier City.
Simply put, we are called on to resolve two issues. First, whether
For the foregoing reasons, we find
FACTS AND RELEVANT PROCEDURAL HISTORY
In late 2002 Harrah‘s purchased Louisiana Downs, a racetrack in Bossier City. Harrah‘s immediately opened a temporary slot machine facility and hired a contractor to build a permanent facility. It drafted a document naming the contractor an “Agent of Tax Exempt Entity” and authorizing the general contractor to pass the designation on to subcontractors. The contractors made purchases totaling several million dollars without paying any sales or use tax.1
The Department of Revenue conducted an audit of Harrah‘s operations and determined the slot-related purchases were not tax exempt. The State presented Harrah‘s with a bill for approximately $2.3 million in back taxes from January 2003 through December 31, 2005. Harrah‘s paid the amount under protest, and has continued to pay monthly sales and use tax remittances under protest. Harrah‘s then filed suit to recover the monies it paid under protest.2 The State filed a reconventional demand seeking judgment against Harrah‘s in the amount of all taxes paid under protest, plus attorneys’ fees pursuant to
The parties filed cross-motions for partial summary judgment. The State‘s motion for partial summary judgment urges “during the entire Audit Period [defined as January 1, 2003 to December 31, 2005] La. R.S. 4:168 was suspended, ineffectual, and null and void.” Harrah‘s cross-motion for summary judgment poses the following issue: “Do the provisions of La. R.S. 4:168 and La. R.S. 4:227 apply to purchases made by [Harrah‘s] for the improvement and operation of its Racetrack, including purchases related to the slot parlor and to the `common areas’ of the Racetrack?” Harrah‘s also filed a peremptory exception of prescription.
The trial court granted the State‘s motion for partial summary judgment, finding
The First Circuit reversed in a split decision. Harrah‘s Bossier City Investment Company, LLC v. Bridges, 2008-1727 (La.App. 1 Cir. 7/27/09), 22 So.3d 921. Judge Hughes, writing for the majority, held for Harrah‘s in finding “no ambiguity
Judge Guidry concurred in part and dissented in part. Although he agreed
Judge McDonald dissented: “I believe La. R.S. 4:168 and La. R.S. 4:227 provide for an exemption from the taxes. Once these exemptions were suspended by the Legislature pursuant to La. R.S. 47:302(Q) and (R) the taxes became due.” Id. at 934. Judge McDonald noted the “race track operators would be subject to sales, excise, and occupational taxes just like everyone else were it not for the action of the legislature.” Id. This, he reasoned, created an exemption, which is “a provision which exempts from tax a transaction which would, in the absence of exemption, otherwise be subject to tax.” Tarver v. World Ship Supply, Inc., 615 So.2d 423, 426 (La.App. 4 Cir.1993), writ denied, 616 So.2d 672 (La. 1993).
Finding the lower courts’ analysis of the tax relief provisions troubling, we granted the State‘s writ application at 2009-1916 (La. 11/25/09), 22 So.3d 166.
HISTORICAL DEVELOPMENT OF THE LAW
The primary issue before the Court is whether
Louisiana law has taken a special interest in horse racing since the Digest of 1808. Although the Digest generally forbade a cause of action for monies won through wagering, a specific exception was carved out for horse racing and other supposedly martial pursuits which the State saw fit to promote:
The law grants no action for the payment of what has been won at gaming or by a bet, except for games tending to promote skill in the use of arms, such as the exercise of the gun, foot, horse and chariot racing.
And as to such games, the judge may reject the demand when the sum appears to him excessive.
This statute, now codified as
The legislature occasionally enacted statutes regulating horse races and betting thereon, see, e.g., Acts 1908, no. 57; Acts 1920, no. 127, but it was not until 1940 that an attempt was made to comprehensively regulate the industry as a whole. Act 276 of 1940 created the Louisiana Racing Commission and set forth a statutory framework for the operation of race tracks, gambling parlors, and horse breeding facilities. It also imposed a schedule of licensing fees and other charges to be paid by the racetracks, and stated:
The license fees, commissions, and taxes imposed in this chapter shall be in lieu of all license, excise and occupational taxes to the State of Louisiana, or any parish, city, town, or other political subdivision thereof.
Acts 1940, No. 276, § 16.
The original version of what would become
In 1968, the Revised Statutes chapter regulating the horse racing industry underwent a total revision and renumbering. The amended (and now-current) version of
The license fees, commissions, and taxes imposed in this Part are in lieu of all other such licenses, sales, excise and occupational taxes to the state or to any parish, city, town, or other political subdivision thereof.
The only substantive change effected by the 1968 amendment is the added language expressly making the racetracks immune to sales tax.
Over the years numerous special statutes were enacted exempting particular transactions from the sales and use taxes.4 In 1986 the Legislature, faced with a budget crisis, enacted a “temporary” suspension of all exemptions to the sales and use taxes under
Q. Notwithstanding any other provision of law to the contrary, including but not limited to any contrary provisions of this Chapter, for the period July 1, 2002 through June 30, 2004, the exemptions to the tax levied pursuant to the provisions of this Section, except for those exemptions provided by
R.S. 39:467 and468 ,R.S. 47:305(A)(1) ,(B) ,(D)(1)(f) ,(j) ,(k) ,(l) ,(m) ,(s) , and(t) , and(G) ,305.1 ,305.2 ,305.3 ,305.8 ,305.10 ,305.14 ,305.15 ,305.20 ,305.25(A)(1) and(2) ,305.37 ,305.38 ,305.46 , and305.50 , andR.S. 51:1787 , shall be inapplicable, inoperable, and of no effect.
R. (1) Notwithstanding any other provision of law to the contrary, including but not limited to any contrary provisions of this Chapter, for the period July 1, 2004, through June 30, 2009, the exemptions to the tax levied pursuant to the provisions of this Section, except for those exemptions provided by
R.S. 39:467 and468 ,R.S. 47:305(A)(1) ,(B) ,(D)(1)(f) ,(j) ,(k) ,(l) ,(m) ,(s) , and(t) , and(G) ,305.1 ,305.2 ,305.3 ,305.8 ,305.10 ,305.14 ,305.15 ,305.20 ,305.25(A)(1) and(2) ,305.37 ,305.38 ,305.46 ,305.50 , and305.51 , andR.S. 51:1787 , shall be inapplicable, inoperable, and of no effect.
Notably,
In 1987, the legislature granted racetracks permission to operate OTB facilities. Acts 1987, No. 203. In 1990, the racetrack‘s sales tax immunity was extended to purchases related to the OTB operations:
The license fees, commissions, and taxes imposed upon an offtrack wagering facility in this Part are in lieu of all other such licenses, sales, excise, and occupational taxes to the state or to any parish, city, town, municipality, or other political subdivision thereof.
Despite the added income from the OTB parlors, racetracks continued to face increased competition from other newly legalized forms of gaming including lotteries, riverboat gaming, and land-based casinos. In response, the Legislature passed the Louisiana Pari-Mutuel Live Racing Facility Economic Redevelopment and Gaming Control Act of 1997 in order to “revitalize and rehabilitate” the State‘s live horse racing tracks.
ANALYSIS
I. Standard of Review
On a motion for summary judgment, this Court reviews the record de novo to determine whether there is any genuine issue of material fact, and whether the movant is entitled to judgment as a matter of law.
Here, the parties’ cross-motions for partial summary judgment present no material issue of disputed fact. The disputed issue in this case is one of statutory interpretation, which is subject to de novo review. Holly & Smith Architects, Inc. v. St. Helena Congregate Facility, Inc., 2006-0582, p. 9 (La.11/29/06), 943 So.2d 1037, 1045.
II. The Distinction Between Exclusions and Exemptions
As cogently explained by Judge McDonald in his dissent below, the “real issue in this case is whether the applicable statutes provide for an exemption or an exclusion. If an exemption, then the taxes are due; if an exclusion, they are not.” Harrah‘s, 22 So.3d at 934 (McDonald, J., dissenting).6 Although the question may be
Unfortunately, the Legislature has not provided a statutory definition of either an “exemption” or an “exclusion.”7 According to the leading Louisiana sales tax treatise, a “tax exemption is a provision that exempts from tax a transaction that would, in the absence of the exemption, otherwise be subject to tax. That is, there has been a statutory decision not to tax a certain transaction that is clearly within the ambit and authority of the taxing statutes to tax.” Bruce J. Oreck, Louisiana Sales & Use Taxation (2d ed.1996), § 3.1. An exclusion, on the other hand, “relates to a transaction that is not taxable because it falls outside the scope of the statute giving rise to the tax, ab initio. Transactions excluded from the tax are those which, by the language of the statutes, are defined as beyond the reach of the tax.” Id. Oreck‘s definitions have been widely adopted by Louisiana courts.8
There are also two seemingly contradictory jurisprudential maxims at play. Tax exemptions are strictly construed in favor of the State and “must be clearly and unequivocally and affirmatively established” by the taxpayer. Vulcan Foundry, Inc. v. McNamara, 414 So.2d 1193, 1197 (La.1982). Exclusions, on the other hand, are “construed liberally in favor of the taxpayers and against the taxing authority.” Wyesco of Louisiana, LLC v. East Feliciana Parish School Board, 2000-1322, p. 5 (La.App. 1 Cir. 9/28/01), 809 So.2d 401, 404, citing Tarver v. World Ship Supply, Inc., 615 So.2d 423, 426 (La. App. 4 Cir.1993), writ denied, 616 So.2d 672 (La.1993). In this case, however, both maxims favor Harrah‘s, who argues
III. Classification of La.Rev.Stat. §§ 4:168 and 4:227
It is a fundamental principle of statutory interpretation that when a “law is clear and unambiguous and its application does not lead to absurd consequences, the law shall be applied as written, and no further
This Court is the “ultimate arbiter of the meaning of the laws of this state.” Louisiana Municipal Association v. State, 2004-0227 (La.1/19/05), 893 So.2d 809, 836. However, we do not make the law, and our fundamental duty is to give effect to the legislature‘s intent in passing a statute. Detillier v. Kenner Regional Medical Center, 2003-3259, p. 35 (La.7/6/04), 877 So.2d 100, 103. “As the fundamental question in all cases of statutory interpretation is legislative intent, the rules of statutory construction are designed to ascertain and enforce the intent of the Legislature.” Black v. St. Tammany Parish Hospital, 2008-2670 (La.11/6/09) 25 So.3d 711. “A statute must be applied and interpreted in a manner that is logical and consistent with the presumed fair purpose and intent of the Legislature in enacting it.” Id. The principal rule is the “text of a statute is considered the best evidence of legislative intent or will.” State v. Williams, 2000-1725 (La.11/28/01), 800 So.2d 790, 800, citing Norman J. Singer, Statutory Construction (6th ed.2000) § 46:03.
It is strong evidence of the Legislature‘s underlying intent that its various Acts have consistently expressed a desire to support and promote the horse racing and breeding industries, and to ensure the ongoing financial solvency of the racetracks. Indeed, this is expressly designated as the “public policy of this state.” See
A. Statutory Analysis of §§ 4:168 And 4:227
With this background in mind, we consider the operative language of
The license fees, commissions, and taxes imposed in this Part are in lieu of all other such licenses, sales, excise and occupational taxes to the state or to any parish, city, town, or other political subdivision thereof.
By imposing certain license fees, commissions, and taxes “in lieu of” Louisiana‘s standard sales and use tax scheme, the Legislature effectively removed purchases made by the racetracks and OTB parlors from the ambit of the tax statutes. “Exclusionary provisions serve to designate those goods and transactions that fall outside
An exclusion removes a certain transaction from the scope of the tax, ab initio. Ferrara v. Secretary, Department of Revenue and Taxation, 96-806 (La.App. 5 Cir. 1/28/97), 688 So.2d 147, 149, writ denied, 692 So.2d 418; Kerr-McGee Corp. v. McNamara, 2000-0770 (La.App. 1 Cir. 6/22/01), 826 So.2d 1, 7. Racetracks have been excluded from all “excise taxes” (which include sales taxes) since 1940, eight years prior to enactment of this State‘s first sales tax law. Racetracks have therefore been outside the scope of the sales tax law since before there was a sales tax-an ab initio exclusion in its most literal sense.
This conclusion is buttressed by the enactment of the very statute that authorized favorable tax treatment for OTB parlors,
This interpretation would conflict with the settled rule of statutory interpretation that “every word, sentence, or provision in a law was intended to serve some useful purpose, that some effect is to be given to each such provision, and that no unnecessary words or provisions were employed.” Colvin v. Louisiana Patient‘s Compensation Fund Oversight Board, 06-1104, p. 6 (La.1/17/07), 947 So.2d 15, 19. Courts “are bound to give effect to all parts of a statute and to construe no sentence, clause, or word as meaningless and surplusage if a construction giving force to and preserving all words can legitimately be found.” Id. at 19-20. To adopt the State‘s proposed interpretation would render
B. The Tax Exemption Budgets
Each year, the Department of Revenue drafts a “Tax Exemption Budget” pursuant to
Harrah‘s urges we rely on the Tax Exemption Budgets as an administrative construction of the law. Although courts may give due consideration to the administrative construction of a law, we are certainly not bound by them. Jurisich v. Jenkins, 1999-0076, p. 8 (La.10/19/99), 749 So.2d 597, 602. Moreover,
The State cites to Traigle v. Fairgrounds Corp., 288 So.2d 409 (La.App. 4 Cir.1974), and Ford New Holland, Inc. v. City of Bossier City, 36,544 (La.App. 2 Cir. 12/11/02), 835 So.2d 862, both of which refer to
In Traigle, the court held the Fairgrounds is not required to pay sales taxes on purchases it makes from vendors, but it is required to charge sales tax on goods it sells to its customers. Traigle, 288 So.2d at 410. In Ford New Holland, the court was called on to determine whether a party could avoid paying sales and use tax on its purchase of tractors if those tractors were later leased to Louisiana Downs. Ford New Holland, 835 So.2d at 862. In both cases, the reference to
The State also relies on this Court‘s recent decision in World Trade Center Taxing District v. All Taxpayers, 2005-0374 (La.6/29/05), 908 So.2d 623. There, the dispute involved a statute imposing a special hotel occupancy tax specific to the World Trade Center “in lieu of” the generally applicable Orleans Parish hotel occupancy taxes. Id. at 633, quoting
First, in World Trade Center this Court was called upon to decide whether the statute created an exemption or a suspension. Id. at 633-34. It contains no discussion of the distinction between an
Moreover, the State‘s argument that World Trade Center controls because it interpreted a statute containing the same “in lieu of” language as
IV. Scope of Exclusion
The secondary issue concerns the scope of the exclusions set forth in
Preliminary, the State urges this issue, which was raised in Harrah‘s crossmotion for summary judgment, is not properly before this Court. The district court granted the State‘s motion for summary judgment and therefore pretermitted ruling on Harrah‘s cross-motion. The Court of Appeal, in a footnote and without any meaningful analysis, took up the question and found slot-related purchases within the ambit of the exclusion:
This holding also applies to Harrah‘s slot machine casino, opened pursuant to
LSA-R.S. 27:351 et seq. , the “Louisiana Pari-mutuel Live Racing Facility Economic Redevelopment and Gaming Control Act,” which was enacted specifically to authorize slot machine gaming at eligible live horse racing facilities. SeeLSA-R.S. 27:353 . See alsoLSA-R.S. 33:9561 .
Harrah‘s, 22 So.3d at 931 n. 11.
According to the State, only those issues considered and ruled upon by the district court are appropriate for appellate review, and the appellate court erred in even considering the issue. The State cites Ayers
The State also cites Fields v. State, 98-0611 (La.7/8/98), 714 So.2d 1244, in which we remanded plaintiffs’ due process claim because it “was not addressed by the trial court nor was it sufficiently briefed or presented to this court for us to make a determination.” Id. at 1249. Certainly this Court has discretion to defer ruling on an issue which has not been raised, argued, and briefed. However, we find the scope of the tax exclusion has been properly raised and sufficiently briefed, and it is in the best interests of judicial efficiency to address it here.
The question presented by Harrah‘s motion for partial summary judgment is: “Do the provisions of
Of interest, we note this question has been addressed by the Third Circuit in Boyd Racing, LLC v. Fruge, 2008-581 (La.App. 3 Cir. 11/5/08), 996 So.2d 659, writ denied, 999 So.2d 780. Boyd Racing operates Delta Downs in Calcasieu Parish, which opened a slot machine casino in February 2002. Boyd Racing argued
By its own terms,
La. R.S. 4:168 creates a trade-off for horse racing facilities. In exchange for the payment of the taxes and fees imposed for its horse racing activities, the facilities do not have to pay state and local use taxes. In this respect, we find the language of the statute determinative of the issue before us. The statute specifically says that the fees “imposed in this Part are inlieu of” State and local sales and use taxes.
The statute allowing the horse racing facilities to operate slot machine casinos appears in Title 27. In furtherance of the legislation‘s stated goals of furthering the horse breeding industry, the statute does provide for significant contributions to the purses for horse races and to horsemen‘s groups from the net proceeds of the slot machine casino. But Title 27 contains no trade-off provision similar to
La. R.S. 4:168 . The Act did not create any new burdens for Boyd Racing under Title 4, Chapter 4, Part I. As such, we find thatLa. R.S. 4:168 does not apply to excuse Boyd Racing from paying sales and use taxes associated with the operation of a slot machine casino authorized under Revised Statutes Title 27.
The court likewise rejected the claim that the horse racing facility and slot facility were one single entity, and ”
We agree with the appellate reasoning in Boyd Racing. When the Legislature originally passed the act that would later become
As noted in Boyd Racing, the Louisiana Pari-Mutuel Live Racing Facility Economic Redevelopment and Gaming Control Act of 1997 contains a comprehensive list of regulations and fees regarding the racetrack‘s operation of slot machine parlors. The Legislature could have expressly extended the racetrack‘s tax exclusion to the slot machine parlor, but did not. We must assume this omission was intentional, and it is not the function of this Court to extend preferential tax treatment in the absence of a specific mandate from the Legislature.
A review of the legislative history reflects that the originally proposed version of the Louisiana Pari-Mutuel Live Racing Facility Economic Redevelopment and Gaming Control Act of 1997 contained a specific tax exemption for slot machines:
§ 371. Preemption of local laws and taxes
Slot machines, the operation of which are licensed pursuant to this Chapter, are exempt from taxes, fees, and licensing restrictions imposed by any governmental entity.
This proposed section was removed entirely prior to the bill‘s enactment. The Legislature considered exempting purchases of slot machines from sales and use taxation, but decided not to. This is strong evidence of a clear legislative intent that the slot gaming facilities would be subject to tax.
Harrah‘s argues “Sections 168 and 227 apply to all sales taxes, and thus to all purchases of a Title 4 Licensee.” (Emphasis in original). We find this contention is simply untenable. Taken to its logical end, it would permit Harrah‘s to operate any kind of a business—a grocery, a fashion boutique, a home improvement supply store—and avoid sales and use taxes on purchases made for each of those businesses. It is the clearly expressed intent of the legislature to encourage the “business of horse racing” and the “breeding and ownership of race horses in the State.”
This principle is amply demonstrated in Traigle v. Fairgrounds Corp., 288 So.2d 409 (La.App. 4 Cir.1974). In Traigle, the Fairgrounds refused to collect sales taxes from patrons for purchases of items such as food, programs, and parking. Id. at 410. The Fourth Circuit held, although
In the alternative, Harrah‘s argues its racing and slot gaming operations are “inextricably intertwined” because they are owned by one corporation in one facility, and there is significant “regulatory overlap” between the two operations. This argument, while more plausible than Harrah‘s previous claim, still must fail. Horse races and slot machines have very little in common other than they are both forms of gaming. Although there is some regulatory overlap, it is not so substantial as to make the two operations “inextricably intertwined.” It is abundantly clear one can operate a racetrack without a slot facility, or a slot facility without an attached racetrack. Slots are permitted not only at horse tracks but at riverboat casinos and a land-based casino (operated by one of Harrah‘s sister companies), and it is well settled that the casinos’ purchases of slot machines are subject to sales tax. Showboat Star Partnership v. Slaughter, 2000-1227 (La.4/3/01), 789 So.2d 554. Harrah‘s points to no compelling reason why slot machines it buys to install at a racetrack are excluded from sales tax, while the slot machines it buys at a casino are not. If Harrah‘s believes this should be the law, its requests must be directed at the Legislature, not at this Court.
What of the purchases made for the Bossier facility‘s “common areas,” such as the parking lot and the restaurant, which may be used by either racetrack patrons or by slot patrons? The record on this issue is scanty, and insufficient for resolution on summary judgment. On remand the trial court will be required to make factual findings regarding the proper apportionment of those expenditures. Any portion of the “common area” expenditures more closely related to the track will not
V. Harrah‘s Prescription Claim
Finally, Harrah‘s urges the district court erred in denying its exception of prescription. We find no error in the court‘s ruling. Prescription was suspended as soon as Harrah‘s filed suit: “The prescription running against any state tax, license, excise, interest, penalty, or other charge shall be suspended by.... The filing of any pleading, either by the secretary or by a taxpayer, with the board of tax appeals or any state or federal court.”
CONCLUSION
To recap, we present three central holdings. First,
Because the record before us is necessarily limited by the procedural posture of a motion for partial summary judgment, this opinion does not dispose of all the issues in this case. We therefore remand this case to the district court for further proceedings.
DECREE
For the foregoing reasons, the court of appeal‘s grant of partial summary judgment in favor of Harrah‘s is affirmed in part and reversed in part. The case is remanded to the district court for further proceedings consistent with this opinion.
AFFIRMED IN PART AND REVERSED IN PART AND REMANDED TO DISTRICT COURT.
Notes
A Louisiana sales tax treatise suggests yet another possibility: the “in lieu of” language creates a “credit mechanism” allowing the tracks to offset any license fees, commissions, or taxes paid to the Racing Commission against any fees or taxes that would otherwise be due. Bruce J. Oreck, Louisiana Sales & Use Taxation (2d ed.1996), § 9.4 n. 42. However, neither party raises this argument, and we do not address it here.
The State urges us to adopt this broad definition, which includes both exemptions and exclusions under the umbrella term “exemption.” The definition of “exemption” in
Exemptions; Protection of Bonds. Except when bonds secured thereby have been authorized, the legislature may provide for the exemption or exclusion of any goods, tangible personal property, or services from sales or use taxes only pursuant to one of the following:
(1) Exemptions or exclusions uniformly applicable to the taxes of all local governmental subdivisions, school boards, and other political subdivisions whose boundaries are not coterminous with those of the state.
(2) Exemptions or exclusions applicable to the taxes of the state or applicable to political subdivisions whose boundaries are coterminous with those of the state, or both.
(3) Exemption