Lerner New York, Inc. Versus Newell D. Normand, Sheriff, and Ex-Officio Tax Collector for Jefferson Parish; Jefferson Parish Sheriff's Office, Bureau of Revenue and Taxation, Sales and Use Tax Division

LERNER NEW YORK, INC. NO. 19-CA-350

VERSUS FIFTH CIRCUIT

NEWELL D. NORMAND, SHERIFF, AND COURT OF APPEAL
EX-OFFICIO TAX COLLECTOR FOR
JEFFERSON PARISH; JEFFERSON PARISH STATE OF LOUISIANA
SHERIFF'S OFFICE, BUREAU OF REVENUE
AND TAXATION, SALES AND USE TAX
DIVISION

ON APPEAL FROM THE BOARD OF TAX APPEALS
STATE OF LOUISIANA
NO. L00393

December 26, 2019

JOHN J. MOLAISON, JR.
JUDGE

Panel composed of Judges Robert A. Chaisson,
Hans J. Liljeberg, and John J. Molaison, Jr.

AFFIRMED IN PART, AND REMANDED WITH INSTRUCTIONS.
JJM
RAC
HJL

COUNSEL FOR PLAINTIFF/APPELLEE,
LERNER NEW YORK, INC.
Andre B. Burvant
Matthew A. Mantle
John F. Fletcher

COUNSEL FOR DEFENDANT/APPELLANT,
JOSEPH P. LOPINTO, III, SHERIFF AND EX-OFFICIO TAX COLLECTOR
FOR THE PARISH OF JEFFERSON, SUCCESSOR IN OFFICE TO FORMER
JEFFERSON PARISH SHERIFF NEWELL NORMAND
Kenneth C. Fonte

MOLAISON, J.

This is an appeal from a judgment of the Louisiana Board of Tax Appeals

(“Board”) taken by petitioner, Lerner New York, Inc. (“Lerner”), concerning a

request for a refund of $147,967.00 of sales taxes paid under protest pursuant to a

Rule for Taxes filed by the tax collector for Jefferson Parish (“Collector”) for the

period of January 1, 2010 through April 30, 2017. The Board rendered judgment

granting partial relief to Lerner and partial relief to the Collector. Both parties

have appealed. For the following reasons, we affirm the judgment in part, and

remand the matter to the Board with instructions as set forth in this opinion.

PROCEDURAL HISTORY

On May 8, 2017, following an audit in September of 2016, the Collector

filed a Rule for Taxes demanding sales taxes, plus interest and penalties totaling

$147,576.09 collected by Lerner from online sales to customers in Jefferson Parish

for the period of January 1, 2010 through April 30, 2017. The petition alleges that

Lerner made a “false and bad faith claim” that it was not required to file Jefferson

Parish sales tax returns on these sales because it qualified as a Direct Marketer

under La. R.S. 47:302(K)(5).

In response, Lerner paid $147,967.00, representing the assessment of sales

taxes, plus interest and penalties, under protest. Lerner filed a petition to the Board

seeking to recover the taxes paid under protest. In the petition, Lerner alleged that

it filed timely sales tax returns for sales taxes collected from in-store purchases in

its stores in Jefferson Parish. Lerner also alleged it paid the sales taxes collected

on its remote online sales to customers in Louisiana to the Louisiana Department

of Taxation (“Department”) “in good faith pursuant to La. R.S. 47:302(K).”

The Collector answered the petition and filed a reconventional demand

reasserting a demand for taxes and making the same claims as set forth in the Rule

for Taxes. Lerner filed an answer to the reconventional demand seeking the refund

19-CA-350 1

of the sales taxes paid under protest and an award of reasonable attorney fees and

costs. Lerner also filed a motion for partial summary judgment asserting

prescription as to taxes for the period of January 1, 2010 through November 30,

2013. That motion was denied.

After a hearing on the merits of the main claim, the Board rendered a

judgment on January 8, 20191 finding that Lerner is liable to the Collector for sales

taxes collected from online sales in Jefferson Parish, and improperly remitted to

the Department via Direct Marketer Returns for the tax periods of January 1, 2010

through April 30, 2017. The Board also determined that Lerner is not entitled to a

credit under La. R.S. 47:337.86(A)(1), but ruled that Lerner is entitled to a credit

under La. R.S. 47:337.86(E)(1) in the amount of $45,191.14. In that judgment, the

Board also ruled in favor of the Collector for the taxes due, interest, penalties and

attorney’s fees at a rate of 10% on the amount due after the application of the

credit. Finally, the Board ruled that the parties had fifteen days to submit a

proposed money judgment with calculations in accordance with the judgment and

declared the judgment was not final or appealable.

After receiving the proposed judgments from the parties, the Board rendered

a final judgment on April 16, 2019. That judgment denied Lerner a credit under

La. R.S. 47:337.86(A)(1), but gave Lerner a credit under La. R.S. 47:337.86(E)(1)

in the amount of $45,223.69. The judgment also found Lerner liable to the

Collector for sales taxes in the amount of $84,611.29, interest in the amount of

$27,861.41 and penalties in the amount of $21,152.82. The judgment also awarded

the Collector $13,362.55 in attorney’s fees. Finally, the judgment ordered the

refund of $46,202.61 of the taxes paid under protest plus interest, based on direct

marketer sales tax distribution to the Collector by the Department.

1
Although the judgment indicates it was signed on January 8, 2018, it appears the correct date is January
8, 2019.

19-CA-350 2

The Collector filed a timely appeal in which he argues the Board erred as a

matter of law by granting Lerner a credit pursuant to La. R.S. 47:337.86 (E)(1),

and, in the alternative, if a credit is allowed, an incorrect amount was awarded.

Lerner filed an answer to the appeal and assigns eight errors relating to the Board’s

determination that it was not entitled to a full refund of taxes paid under protest,

that it was not entitled to a credit under La. R.S. 47:337.86(A)(1), and challenging

the award of attorney fees, interest and penalties to the Collector. Lerner also

challenges the interim judgment denying its motion for partial summary judgment

on the prescription issue.

FACTS

Lerner is a national retail outlet selling women’s clothing that maintains

brick and mortar stores in Jefferson Parish, and also sells merchandise online

through its website. Lerner collects sales taxes from both in-store and online

customers. The taxes at issue herein relate solely to the online sales to customers

in Jefferson Parish.

Lerner maintains a third-party database that captures the online sales and

computes the sales tax based on the shipping address. The information is retrieved

monthly and sent to its sales tax preparers. One of the reports generated relates to

e-commerce sales taxes collected throughout the entire state, categorized by parish.

The sales taxes collected through e-commerce sales statewide were reported and

paid to the State of Louisiana on a Direct Marketer Sales Tax Return (“DMR”) for

each of the months in question. Sales taxes collected in the brick and mortar stores

located in Jefferson Parish were reported and paid to the Collector.

Mr. Thomas Magaldi, the Tax Director of Lerner, testified that EisnerAmper

prepares the tax returns for Lerner. He explained that online sales taxes collected

are reported on a DMR. Mr. Magaldi stated that an audit by the Louisiana

Department of Revenue for the sales taxes reported for the years 2015 through

19-CA-350 3

2017 was just concluded. The audit resulted in no change, no deficiency, and no

under payment. Mr. Magaldi also stated that Lerner filed two affidavits with the

Department seeking to get a refund of the Jefferson Parish portion of the direct

marketer sales tax on the theory that the taxes were paid to an incorrect taxing

authority pursuant to La. R.S. 47:337.86. The refund was denied.

Ms. Andria Siciliano, a director of EisnerAmper, the company that prepares

the tax returns for Lerner, testified at the hearing. Ms. Siciliano explained that her

company took over preparation of Lerner’s DMR remittances from Vertex in

January of 2016. She reviewed the returns Vertex prepared previously that were

reported on the DMR. Since this was the first time she prepared reports in

Louisiana, she read and researched the applicable statutes. Ms. Siciliano also

called the state for guidance, but could not get a definitive answer on whether

Lerner’s online sales should be reported in this manner. Based on what was

historically done and her interpretation of applicable law, Ms. Siciliano reported

and remitted the online sales taxes on a DMR to the State of Louisiana. She

testified that she signed the return and believed it to be in compliance with law.

Michelle Galland, Assistant Director of Income Tax in the Policy Services

Division of the Louisiana Department of Revenue, testified that the Department

keeps records of the amount of taxes collected through the DMR remittances. The

Department also keeps records of the amount of taxes distributed from the DMR to

the parishes. Ms. Galland explained that the state collects income taxes, consumer

use taxes and direct marketer’s sales taxes. After the state takes its share of the

taxes, the remainder is distributed to the parishes throughout the state according to

population.

19-CA-350 4

ASSIGNMENTS OF ERROR

Collector

1) The trial court erred as a matter of law by granting Lerner a credit
pursuant to La. R.S. 47:337.86(E)(1) for misappropriated Jefferson Parish
sales taxes belonging to Collector unlawfully used by it to pay Direct
Marketer Sales Taxes contrary to the requirements and prohibitions of
La. R.S. 47:302(K)(5).

2) The amount of the credit awarded to Lerner is contrary to Law.

Lerner

1) The Board erred in ruling that Lerner is liable to the Collector for any
additional taxes or related amounts relating to Lerner’s online sales into
Jefferson Parish during the Sales Tax Periods.

2) The Board erred in ruling that Lerner improperly remitted the taxes
relating to Lerner’s online sales into the Parish to the Department via the
Direct Marketer Returns as such remittances were proper under the
applicable tax statutes.

3) The Board erred in separately ruling that the proper prescriptive period in
this case was ten (10) years under the judicial doctrine announced in
Sabine Pipe & Supply v. McNamara, instead of the standard
constitutional and statutory three-year prescriptive period.

4) The Board erred in separately ruling that Lerner is not entitled to full
relief under the statutory safe harbor immunity provision in La. R.S.
47:337.86(E)(1) for the entire amount of taxes at issue.

5) The Board erred in separately ruling that Lerner is not entitled to a credit
under La. R.S. 47:337.86(A)(1).

6) The Board erred in separately ruling that Lerner is liable to the Collector
for interest and penalties.

7) The Board erred in finding that Lerner could not have continued to remit
the sales taxes on Direct Marketer Returns “absent gross negligence of
bad faith after September 2016” based solely on the fact that the
Collector began an audit of Lerner in September 2016.

8) The Board erred in separately ruling that Lerner is liable to the Collector
for attorney’s fees. In the alternative, the Board erred in the calculation
of attorney’s fees.

19-CA-350 5

LAW AND ANALYSIS

The issues presented herein require two standards of review. Issues relating

to the applicability and interpretation of the statutes is by de novo review. Glob.

Constr. & Equip., L.L.C. v. Rathborne Properties, L.L.C., 18-169 (La. App. 5 Cir.

5/29/19), 274 So.3d 837, 841, writ denied, 19-01096 (La. 10/8/19). However,

factual issues require a manifest error or clearly wrong standard of review. Rosell

v. ESCO, 549 So.2d 840 (La. 1989).

Use of Direct Marketer Returns

In its first two assignments of error, Lerner argues it should be entitled to a

full refund of the taxes paid in protest because it properly paid the taxes to the

Department on the DMR remittances. Lerner argues that it acted in good faith and

that the DMR is appropriate for remitting taxes collected on online sales. Lerner

reasons that La. R.S. 47:302(K)(5) restricts use of the DMR to online sales un-

attributable to any particular instate store location, but does not necessarily

disqualify an entire class of online sellers from using the DMR to account for taxes

on non-store sales. As support for its position, Lerner points out that the

Department has audited its DMR remittances twice and in both instances expressly

approved of Lerner’s use of that reporting and remittance method for online sales.

The Collector maintains that Lerner misappropriated Jefferson Parish sales

taxes belonging to the Collector and unlawfully used the funds to pay direct

marketer sales taxes contrary to the requirements and prohibitions of La. R.S.

47:302(K)(5). The Collector interprets the statute to apply exclusively to online

dealers with no physical presence in the parish. Lerner argues the statute is

ambiguous and should be construed in favor of the taxpayer and against the taxing

authority.

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,

19-CA-350 6

the law shall be applied as written, and no further interpretation may be made in

search of the intent of the legislature.” La. C.C. art. 9, McLane Southern, Inc. v.

Bridges, 11-1141 (La. 1/24/12), 84 So.3d 479, 483, rehearing denied 3/9/12. This

principle applies to tax statutes. Id. Words of a law must be given their generally

prevailing meaning. La. C.C. art. 11. When the words of a law are ambiguous, their

meaning must be sought by examining the context in which they occur and the text

of the law as a whole. La. C.C. art. 12. The meaning of words or phrases may be

ascertained by the words and phrases with which they are associated. Caldwell v.

Janssen Pharm., Inc., 2012-2447 (La. 1/28/14), 144 So.3d 898, 908, citing,

Pumphrey v. City of New Orleans, 05-0979 (La. 4/4/06), 925 So.2d 1202, 1211.

We do not find the statute ambiguous. The language of La. R.S.

47:302(K)(5) can be interpreted merely by applying the normal meaning of the

words. La. R.S. 47:302(K)(5) provides:

The tax levied under this Subsection shall be levied and
collected only from vendors who qualify as a “dealer” in this state
solely by virtue of engaging in regular or systematic solicitation of a
consumer market in this state by the distribution of catalogs,
periodicals, advertising fliers, or other advertising, or by means of
print, radio, or television media, including but not limited to television
shopping channels, by mail, telegraphy, telephone, computer database,
cable, optic, microwave, or other communication system. A vendor
who qualifies as a dealer in this state as provided in R.S. 47:301(4) is
prohibited from collecting the tax imposed under this Subsection in
lieu of collecting the sales and use tax imposed by a political
subdivision of this state which tax is remitted directly to the political
subdivision.(emphasis added)2

La. R.S. 47:301provides in pertinent part:

(4)“Dealer” includes every person who manufactures or produces
tangible personal property for sale at retail, for use, or consumption,
or distribution, or for storage to be used or consumed in a taxing
jurisdiction. “Dealer” is further defined to mean:
(a) Every person who imports, or causes to be imported, tangible
personal property from any other state, foreign country, or other
taxing jurisdiction for sale at retail, for use, or consumption, or

2
The final sentence of the statute was added by the legislature in 2016 and became effective March 14,
2016. However, our analysis and conclusion is the same under either version of the statute.

19-CA-350 7

distribution, or for storage to be used or consumed in a taxing
jurisdiction.
(b) Every person who sells at retail, or who offers for sale at retail, or
who has in his possession for sale at retail, or for use, or consumption,
or distribution, or storage to be used or consumed in the taxing
jurisdiction, tangible personal property as defined herein.
...
(h) Any person engaging in business in the taxing jurisdiction.
“Engaging in business in the taxing jurisdiction” means and includes
any of the following methods of transacting business: maintaining
directly, indirectly, or through a subsidiary, an office, distribution
house, sales house, warehouse, or other place of business or by having
an agent, salesman, or solicitor operating within the taxing jurisdiction
under the authority of the seller or its subsidiary irrespective of
whether such place of business, agent, salesman, or solicitor is located
in such taxing jurisdiction permanently or temporarily or whether
such seller or subsidiary is qualified to do business in such taxing
jurisdiction, or any person who makes deliveries of tangible personal
property into the taxing jurisdiction other than by a common or
contract carrier.
We find that Lerner is a “dealer” for purposes of La. R.S.

47:302(K)(5), and is not solely a dealer by virtue of engaging in solicitation

of a consumer market by distribution of catalogs, etc. as required by that

statute. Thus, we conclude that Lerner improperly paid the sales taxes

collected on online sales to Jefferson Parish customers to the Department on

a DMR in lieu of payment to the Collector. It is undisputed that Lerner

maintained a physical presence in Louisiana. It is not a vendor who

qualifies solely by virtue of engaging in online sales. Lerner owns physical

stores in Jefferson Parish and is a dealer as defined by La. R.S. 47:301.

Thus, La. R.S. 47:302(K)(5) is inapplicable. Accordingly, we find the Board

correctly found that Lerner is liable to the Collector for sales taxes collected

from online sales in Jefferson Parish, and improperly remitted to the

Department on the DMR remittances for the tax period of January 1, 2010

through April 30, 2017. These assignments are without merit.

19-CA-350 8

Credits

The Collector’s first and second assignments of error and Lerner’s

assignments of error numbers four and five address what, if any, credit

Lerner is entitled to for its incorrect payment of taxes on the DMR

remittances. The Board ruled that Lerner is not entitled to a credit pursuant

to La. R.S. 47:337.86(A)(1)3. However, the Board gave a partial credit to

Lerner pursuant to La. R.S. 47:337.86(E)(1)4 in the amount of $47,223.49

for the tax periods July 1, 2010 through May 31, 2017.

The Collector argues that Lerner is not entitled to any credit under

either provision of La. R.S. 47:337.86 because Lerner is not a taxpayer, and

does not fall within the ambit of protection expressed by the objective of that

statute which is to shield a person from being taxed twice for the same

transaction.

Lerner argues it is entitled to a full relief under the statutory safe

harbor immunity provision of La. R.S. 47:337.86(A)(1). Lerner reasons that

it acted in good faith and paid a “similar tax” to a “similar taxing authority”,

and is entitled to a full credit pursuant to La. R.S. 47:337.86(A)(1).

We do not find Lerner’s argument for a credit under La. R.S.

47:337.86(A)(1) convincing. That provision requires that a taxing authority

grant the taxpayer a credit against the sales or use tax previously paid by the

3
La. R.S. 47:337.86(A)(1) provides: A credit against the sales and use tax imposed by any taxing
authority of the state shall be granted to a taxpayer who paid monies, whether or not paid in error, absent
bad faith, based upon a similar tax, levy, or assessment upon the same tangible personal property in a
taxing jurisdiction of this state or another state. The credit granted herein shall be applicable only when a
similar taxing authority is seeking to impose and collect a similar tax, levy, or assessment from a taxpayer
upon the same tangible personal property for which the taxpayer has paid a similar tax, levy, or
assessment to a similar taxing authority.
4
La. R.S. 47:337.86(E)(1) provides: Notwithstanding any other law to the contrary, no person shall be
taxed with respect to a particular event more than once, provided that the person collecting and remitting
taxes can produce to the collector documentary evidence to show a good faith effort to recover taxes paid
to the incorrect taxing authority.

19-CA-350 9

taxpayer to a similar taxing jurisdiction on the same article of personal

property. A clear reading of that provision shows that it grants a credit to “a

taxpayer” for taxes paid on the “same tangible personal property for which

the taxpayer has paid a similar tax.” Lerner is not a taxpayer and its online

customers who are taxpayers only paid sales tax once on their purchases.

Further, “similar taxing authority” is defined as “a political

subdivision having and performing the same governmental functions as the

political subdivision seeking to impose the sales or use tax.” La. R.S.

47:337.86(E)(2)(b). As the Board recognized in its reasons for judgment,

the Department is not a political subdivision of the state and as such is not a

“similar taxing authority.” On a de novo review, we find the Board correctly

applied the law when it denied a credit pursuant to La. R.S. 47:337.86(A)(1).

Therefore, we find no merit in Lerner’s fifth assignment of error.

Our review of the Board’s decision to grant a credit pursuant to La.

R.S. 47:337.86(E)(1) presents the initial issue of whether that provision

actually provides for a credit. The Collector argues the Board misinterpreted

and misapplied that provision by ruling that it does provide for a credit. The

Collector argues that the provision merely provides a defense to a person

who has already paid a sales tax levied on that person by one taxing

authority against the claim of another taxing authority attempting to tax that

person for the same transaction. The Collector reasons that the defense is

conditioned upon the proof that the collecting dealer makes a good faith

effort to recover the taxes remitted to the wrong taxing authority, but does

not create any rights in favor of the errant dealer to a credit.

Further, the Collector argues, in the alternative, that if a credit is

applicable, it should exclude any tax payment from the audit in September of

2016 through March 2017. That argument is based on the theory that

19-CA-350 10

Lerner’s activities were not “absent gross negligence or bad faith” once it

was notified of the Collector’s position in the September, 2016 audit. The

Collector also alleges the actions of Lerner’s tax preparers constitute fraud.

The Collector maintains that Lerner knowingly and deliberately engaged in a

misappropriation of the Collector’s funds by filing false tax returns with the

Department.

Lerner counters that the law clearly provides that no person should be

taxed twice for the same event, provided the person collecting and remitting

taxes can produce documentary evidence to show a good faith effort to

recover taxes paid to an incorrect taxing authority. Lerner argues that it

made two good faith attempts to secure a refund from the Department for

taxes remitted on the DMR remittances. Further, Lerner argues that it

cannot be found to be in bad faith after the audit because the interpretation

of the appropriateness of the use of DMR remittances was not yet

determined.

In its reasons for judgment, the Board pointed out that La. R.S.

47:337.86(E)(1), unlike section (A)(1), applies when taxes are paid to an

“incorrect” rather than a “similar” taxing authority. La. R.S.

47:337.86(E)(1) provides:

E. (1) Notwithstanding any other law to the contrary, no person shall
be taxed with respect to a particular event more than once, provided
that the person collecting and remitting taxes can produce to the
collector documentary evidence to show a good faith effort to recover
taxes paid to the incorrect taxing authority.
Citing Billeaudeau v. Opelousas Gen. Hosp. Auth., 17-735 (La. App.

3 Cir. 2/7/18), 239 So.3d 306, 313, writ denied, 18-338 (La. 5/25/18), 243

So.3d 565, the Board further stated:

It also follows an imperative that “Notwithstanding any other
law to the contrary…” which is generally used for emphasis to give
explicit effect to the provisions as written. Although it is awkward
drafting considering the defining of the term appears in a later

19-CA-350 11

subparagraph of the same subsection, the Legislature could have
chosen to employ its explicitly defined term “similar taxing authority”
in Paragraph 1, but it did not do so. The Board must assume that the
legislature acted deliberately.

The Board also noted that Lerner was required to produce documentary

evidence to show a good faith effort to recover taxes paid to the incorrect

taxing authority. The Board found that Lerner provided such evidence by its

formal written requests and the Department’s denial for a refund of taxes

paid on the DMR remittances. The Board found that evidence sufficient to

meet the requirements for a credit pursuant to La. R.S. 47:337.86(E)(1).

The record shows that Lerner applied for a refund from the

Department on February 9, 2018. When it did not receive a response from

the Department, Lerner submitted a second refund request on April 13,

2018. On August 7, 2018, the Department denied the refund request. That

evidence supports the Board’s ruling.

We also find the Board’s interpretation of the applicable law to be

correct as explained in the well-reasoned reasons for judgment. We agree

with the Board that the credit allowed Lerner is in accordance with the

provisions of La. R.S. 47:337.86(E)(1), and that Lerner has met the

requirements of that statute. Accordingly, we find the Board was correct in

ruling that Lerner is entitled to a credit under La. R.S. 47:337.86(E)(1).

However, we find the amount of the credit is incorrect.

Both parties argue that the amount of credit and refund allowed by the

Board is incorrect. Lerner asserts the credit applied by the Board under La.

R.S. 47:337.86(E)(1) should have resulted in a full credit for all taxes paid to

the Department on the DMR remittances. Lerner disputes the Board’s

reasoning that it is entitled only to a partial credit.

19-CA-350 12

Applying Lerner’s reasoning, it would get a full credit for taxes

remitted to the Department, thereby paying nothing of the taxes owed to the

Collector. This would cancel out any liability Lerner has to the Collector for

taxes collected in Jefferson Parish from online sales. As the Board correctly

noted, giving a full credit for all taxes paid on the DMR remittances would

permit Lerner to pay taxes owed to the Collector to the Department instead,

an outcome that is prohibited by La. R.S. 47:302(K)(5).

The Collector argues that the Board should have limited the credit to

only the Jefferson Parish sales tax that Lerner collected and remitted on the

DMRs, rather than the amount actually distributed to the Collector based on

the population of the parish. The Board ruled that the refund to Lerner

should not be limited in this manner. We find that reasoning to be sound.

The amount distributed to the parishes is based on statewide

remittances and distributed by population, thus the amount the Collector

received from the state was increased by the taxes paid by Lerner on the

DMR remittances. The Board reasoned that, because the Collector received

DMR distributions based on Lerner’s remittances covering all parishes, the

credit should not be limited to only that portion originating from taxes paid

in Jefferson Parish. We agree and find no error in that ruling.

The Collector also argues the credit should exclude any portion of the

distributions received by the Collector for the tax periods beginning with

February of 2016. The Board considered this argument and dismissed it

upon a finding that there is no evidence in the record to establish a date of

distribution. We find no manifest error in that finding of fact. Having made

that finding, the Board concluded the dispute about allocation of the credit to

individual tax periods is moot. The Board also pointed out that the payment

19-CA-350 13

under protest included the entire assessment including tax, penalties and

interest.

In another argument concerning the amount of the credit given, the

Collector argued that he is entitled to an offset of the credit in the amount of

collections commissions he was deprived of pursuant to La. R.S.

13:5523(B)(2).5 That statute provides that the Collector shall receive an

11% commission of sales taxes he collects. The Board denied that request

relying on La. R.S. 47:302(K)(7)(a)(ii).6 The Board determined that statute

does not provide for an offset for the Collector’s commission. We find this

to be error.

The Collector is entitled to the statutorily provided commission on the

taxes collected and remitted to the Department in error. However, the

commissions are only due on the amount of tax collected, not on the entire

amount distributed to Jefferson Parish by the Department. While the

Collector is entitled to a commission on the taxes collected in this matter, to

additionally award a commission by means of a reduction in the credit for

5
La. R.S. 13:5523(B)(2) provides: In addition, the sheriff of the parish of Jefferson shall collect all sales
taxes levied by the Jefferson Parish Council and/or the Jefferson Parish School Board, for which
collection he shall receive as compensation, eleven percent of the aggregate amount of sales taxes
collected by the sheriff and levied by the Jefferson Parish Council, and nine and one-half percent of the
aggregate amount of sales taxes collected by the sheriff and levied by the Jefferson Parish School Board.
6
La. R.S.47:302 provides in pertinent part:

K. An additional tax shall be levied as follows:
…
(7)(a) From the current collections of the tax collected under this Subsection, the secretary shall make the
following distributions:
…
(ii) All monies remaining after satisfaction of the requirements of Item (i) of this Subparagraph shall be
distributed quarterly to the central local sales and use tax collector or, if none, the parish governing
authority according to population. The central local sales and use tax collector or the parish governing
authority shall at no charge distribute the tax proceeds received from the secretary to each political
subdivision within the parish which levies a sales and use tax or receives a portion of the proceeds of a
parishwide sales and use tax levy, in accordance with each such political subdivision's pro rata share of
local sales and use tax receipts collected on all other transactions subject to local sales and use taxes
during the most recent state fiscal year for which data is available within thirty days of receipt of the
proceeds.
…

19-CA-350 14

taxes paid to the state and distributed to Jefferson Parish according to

population, rather than taxes actually due, is inappropriate. Therefore, we

remand the matter to the Board for a determination of the correct amount of

offset to the credit in accordance with this opinion.

Finally, the Collector argues the Board’s finding of no specific

evidence of bad faith in Lerner’s filings prior to the September 2016 audit is

manifestly erroneous. Given the testimony and documentary evidence

presented in the matter and discussed herein, we do not find that factual

finding of the Board to be manifestly erroneous.

Upon review of the factual findings regarding the credit, we find no

manifest error. Further, on a de novo review, we find no error in the Board’s

application of law to the facts in these assignments except its denial of an

offset owed the Collector for his commission against Lerner’s credit.

Prescription

In its third assignment of error, Lerner asserts the trial court erred in

denying its motion for partial summary judgment based on prescription.

Although typically asserted through the procedural vehicle of the

peremptory exception, the defense of prescription may also be raised by

motion for summary judgment. Hogg v. Chevron USA, Inc., 09-2632 (La.

7/6/10), 45 So.3d 991, 997. When prescription is raised by motion

for summary judgment, review is de novo, using the same criteria used by

the district court in determining whether summary judgment is appropriate.

Id.

Summary judgment is designed to secure the just, speedy, and

inexpensive determination of an action. La. C.C.P. art. 966. Summary

judgment shall be granted if the pleadings, depositions, answers to

interrogatories, and admissions, together with the affidavits, if any, admitted

19-CA-350 15

for purposes of the motion for summary judgment, show that there is no

genuine issue of material fact and that the mover is entitled to judgment as a

matter of law. Id.

The only issue on review as to the denial of the partial summary

judgment is whether the Collector’s action is barred in part by a three year

prescriptive period. After conducting a de novo review, we find the Board

was correct in ruling that a ten year prescriptive period is applicable. Thus,

we find the Board correctly denied Lerner’s motion for summary judgment.

The Board relied on Sabine Pipe & Supply Co. v. McNamara, 411

So.2d 1167 (La. App. 1st Cir. 1982), writ denied, 414 So.2d 1254 (La.

1982), for its decision to apply the ten year prescriptive period. In Sabine,

the plaintiff, a Texas company, failed to remit use taxes collected from

Louisiana residents to the Department. The Department made a claim which

the plaintiff argued was prescribed by the three year prescriptive period

provided for collection of taxes. The Sabine court ruled that the action was

not a suit against the taxpayer to collect taxes, which is barred after three

years, but rather an action to require a fiduciary to turn over the taxes

collected, triggering the ten year prescriptive period. Accordingly, in the

matter before us, the Board found that the Collector is not barred by the

three year prescription from requiring its fiduciary to turn over to it sums

collected on its behalf.

The Collector argues that the three year prescriptive period cited

above applies only to actions against a taxpayer to collect taxes, and not to a

claim to recover unremitted sales taxes collected by a dealer from its

customers. The Collector reasons that the collection of taxes as

contemplated by the Constitution and the Louisiana Constitution and the

Uniform Local Sales Tax Code (ULSTC) has already taken place. It

19-CA-350 16

occurred when Lerner collected the taxes from its customers. The Collector

takes the position that Lerner is a fiduciary which has a statutory duty to

collect sales tax from the taxpayer and remit the funds to the proper taxing

authority. In short, Lerner is an agent or fiduciary of the collector. Under

this theory, the action is a personal one subject to a liberative prescription

period of ten years pursuant to La. C.C. art. 3499.7

It is clear from both the ULSTC that actions to collect sales taxes

prescribe three years after the thirty-first day of December in the year in

which they are due. La. Const. Art. VII § 16, La. R.S. 47:337.67(A). Lerner

argues the prescriptive period in this matter is the standard three year

prescriptive period as set forth in the Constitution and the ULSTC, rather

than the ten year prescriptive period applied by the Board. Based on this

assertion, Lerner maintains that any claim for sales tax amounts due prior to

December 31, 2013 has prescribed.

Lerner is not a taxpayer as referenced in either the Constitution or the

ULSTC provisions setting a three year prescriptive period. “The sums of

money collected by the dealer for payment of sales and use taxes imposed by

the taxing authority shall be and remain the property of the taxing authority

and deemed held in trust for the taxing authority.” La. R.S. 47:337.17(I).

Lerner collected taxes on behalf of the Collector. The taxes collected by

Lerner are property of the Collector from the time they are collected from

the customers. Therefore, Lerner is in possession of money belonging to the

Collector and that money is held in trust for the Collector.

7
La. C.C. art. 3499 provides: Unless otherwise provided by legislation, a personal action is subject to a
liberative prescription of ten years.

19-CA-350 17

Lerner argues the Board improperly extended the rule announced in

Sabine to include a dealer who actually remitted all of the collected taxes,

but to the wrong taxing authority. Whether the dealer who holds the taxes

failed to remit them or remitted them to the wrong taxing authority does not

alter the fact that the taxes collected by the dealer are the property of the

proper taxing authority, or that the dealer is the fiduciary of the taxing

authority. This factual distinction does not change Lerner’s status from

agent or fiduciary to taxpayer. The fiduciary duty of a dealer to remit taxes

collected is an independent obligation from the obligation of a consumer to

pay taxes.

For these reasons, we find the Board correctly applied the ten year

prescriptive period and denied the motion for partial summary judgment.

This assignment of error is without merit.

Interest and penalties

In assignments of error numbers six and seven, Lerner challenges the

Board’s assessment of interest and penalties pursuant to La. R.S.

47:337.86(E)(2)(a), which reads as follows:

The collector shall not impose penalties or interest on taxes
erroneously paid or remitted to another taxing authority unless the
erroneous payment or remittance was the result of gross negligence or
due to intentional conduct of bad faith on the part of the dealer that
collected and remitted the taxes or on the part of the taxpayer that paid
the taxes. In instances where a legitimate disagreement exists as to
which taxing authority is owed, the involved taxing authorities shall
resolve the dispute among themselves through any legal means
provided by law, including the filing of a rule or petition against the
other taxing authority in the manner provided for in R.S. 47:337.101.

This provision does not provide penalty relief to a party who remitted

taxes to another taxing authority as a result of gross negligence. The Board

made a factual finding that Lerner continued to remit taxes to the

Department on a DMR after it was informed of the error in September of

19-CA-350 18

2016, and that this constituted evidence of bad faith precluding it from

claiming protection from penalties. Upon a review of that factual finding,

we find no manifest error. These assignments of error are without merit.

Attorney’s fees

In its final assignment of error, Lerner argues the Board erred in awarding

attorney’s fees to the Collector, or in the alternative, the Board erred in its

calculation of attorney’s fees. The Board awarded attorney’s fees in the amount of

$13,212.03 using a calculation of 10% of the taxes due after application of the

credit allowed.

Attorney’s fees were awarded pursuant to La. R.S. 47:337.13.1.8 That

statute authorizes an award of attorney’s fees to the Collector for assistance in the

collection of taxes owed. Lerner argues the Collector is not entitled to attorney’s

fees because its positions are “substantially justified.” Since we have found no

merit in any argument contesting the Board’s rulings in this matter, we dispute that

Lerner positions are substantially justified.

Finally, Lerner argues in the alternative that the Board erred by awarding an

amount based on the gross amount of tax due. We find no merit in this argument.

8
La. R.S. 47:337.13.1 provides in pertinent part:

A. (3) A taxpayer shall not be subject to the payment of attorney fees unless the local collector is the
prevailing party entitled to reimbursement of attorney fees and costs as provided for in Subsection B of
this Section.

B. (1) Except as otherwise provided for in Paragraph (A)(3) of this Section, the prevailing party in a
dispute, contest, or other controversy involving the determination of sales and use tax due shall be entitled
to reimbursement of attorney fees and costs, not to exceed ten percent of the taxes, penalties, and interest
at issue, unless the position of the non-prevailing party is substantially justified. The prevailing party is
defined as the party which has substantially prevailed with respect to the amount in controversy or
substantially prevailed with respect to the most significant issue or set of issues presented. A position is
substantially justified if it has a reasonable basis in law and fact. The reimbursement amount for attorney
fees and costs shall be subject to the discretion of the court or Board of Tax Appeals as to reasonableness.

(2) The provisions of this Subsection shall not apply to amounts timely paid under protest by the taxpayer
with a return that is not delinquent, or paid under protest to a vendor in accordance with law, as provided
for in Subsection A of this Section.

19-CA-350 19

The judgment of the Board is clear that the figure awarded was calculated on the

amount due after the credit was applied. This assignment of error is without merit.

For the foregoing reasons, we affirm the judgment of the Board denying the

motion for partial summary judgment on prescription. For the reasons assigned,

Lerner’s right to a credit under La. R.S. 47:337.86(E)(1) is affirmed, and the matter

is remanded to the Board solely for the purpose of calculating an offset for the

Collector’s commission in accordance with the views expressed in this opinion. In

all other respects, the April 16, 2019 judgment of the Board is affirmed.

AFFIRMED IN PART, AND REMANDED WITH INSTRUCTIONS.

19-CA-350 20

SUSAN M. CHEHARDY CURTIS B. PURSELL

CHIEF JUDGE CLERK OF COURT

MARY E. LEGNON
FREDERICKA H. WICKER
CHIEF DEPUTY CLERK
JUDE G. GRAVOIS
MARC E. JOHNSON
ROBERT A. CHAISSON SUSAN BUCHHOLZ
STEPHEN J. WINDHORST
FIRST DEPUTY CLERK
HANS J. LILJEBERG
JOHN J. MOLAISON, JR. FIFTH CIRCUIT
MELISSA C. LEDET
JUDGES 101 DERBIGNY STREET (70053)
DIRECTOR OF CENTRAL STAFF
POST OFFICE BOX 489
GRETNA, LOUISIANA 70054 (504) 376-1400

(504) 376-1498 FAX
www.fifthcircuit.org

NOTICE OF JUDGMENT AND CERTIFICATE OF DELIVERY
I CERTIFY THAT A COPY OF THE OPINION IN THE BELOW-NUMBERED MATTER HAS BEEN DELIVERED
IN ACCORDANCE WITH UNIFORM RULES - COURT OF APPEAL, RULE 2-16.4 AND 2-16.5 THIS DAY
DECEMBER 26, 2019 TO THE TRIAL JUDGE, CLERK OF COURT, COUNSEL OF RECORD AND ALL PARTIES
NOT REPRESENTED BY COUNSEL, AS LISTED BELOW:

19-CA-350
E-NOTIFIED
BOARD OF TAX APPEALS (CLERK)
KENNETH C. FONTE (APPELLANT) MATTHEW A. MANTLE (APPELLEE)

MAILED
LOUISIANA BOARD OF TAX APPEALS JOHN F. FLETCHER (APPELLEE) ANDRE B. BURVANT (APPELLEE)
(DISTRICT JUDGE) ATTORNEY AT LAW ATTORNEY AT LAW
POST OFFICE BOX 3217 190 EAST CAPITAL STREET 201 ST. CHARLES AVENUE
BATON ROUGE, LA 70821 SUITE 800 51ST FLOOR
JACKSON, MS 39201 NEW ORLEANS, LA 70170