Toyota Motor Credit Corporation v. Kimberly Robinson, Secretary, Department of Revenue, State of Louisiana

STATE OF LOUISIANA

Ali COURT OF APPEAL

FIRST CIRCUIT

Cu NUMBER 2021 CA 0732

CH It

TOYOTA MOTOR CREDIT CORPORATION
VERSUS
KIMBERLY L. ROBINSON, SECRETARY, DEPARTMENT OF
REVENUE, STATE OF LOUISIANA

Judgment Rendered: MAY 9 9 2029

Appealed from the
Board of Tax Appeals
State of Louisiana

Docket Number 9748D
Tony Graphia, Cade R. Cole, and Frances “Jay” Lobrano, Board Members
Presiding
KREBKAK RK
William M. Backstrom, Jr. Counsel for Plaintiff/Second Appellant/
Baton Rouge, LA Appellee, Toyota Motor Credit Corporation
Christopher K. Jones Counsel for Defendant/First Appellant/
Antonio C. Ferachi Appellee, Kimberly Robinson, in her
Baton Rouge, LA capacity as Secretary for the Department
of Revenue

BEFORE: WHIPPLE, C.J., PENZATO, AND HESTER, JJ.

WHIPPLE, C.J.

In this tax appeal involving a claim for refund of overpayment of franchise
taxes, both parties appeal the judgment of the Board of Tax Appeals (“the BTA”)
granting in part and denying in part each of the parties’ cross-motions for summary
judgment, ordering a partial refund of franchise taxes, and dismissing all other
claims. For the following reasons, we affirm.

FACTUAL BACKGROUND

The facts in this matter were stipulated to by the parties and, thus, are not in
dispute. Toyota Motor Credit Corporation (“TMCC”), a California corporation, is
engaged in various lines of business, all of which it directs and manages from its
headquarters in Torrance, California. TMCC’s business at issue herein is its Retail
Finance line of business, through which it acquires and services Retail Installment
Contracts (“RICs”) from independent motor vehicle dealers, thus receiving and
collecting interest income from those RICs. A RIC is a finance agreement between
an applicant/buyer of a motor vehicle and the originating motor vehicle dealer in
connection with the sale of a motor vehicle by the dealer to the applicant/buyer.
As such, the motor vehicle dealer negotiates the terms of the RIC with the
applicant/buyer. TMCC is not a motor vehicle dealer and does not engage in the
business of selling new motor vehicles. Thus, TMCC is not a party to any RICs.
Rather, TMCC’s business involves acquiring RICs from independent motor
vehicle dealers after dealers have entered into them with their customers.

When a customer of a Toyota/Lexus motor vehicle dealer chooses to finance
the purchase of a vehicle from the dealer, the customer and the dealer complete a
“Credit Application,” which the dealer submits to a financing institution, such as
TMCC. When a Credit Application is submitted to TMCC by a motor vehicle
dealer located in Louisiana, or by a limited number of motor vehicle dealers in

Mississippi, the Credit Application is submitted electronically to a Credit Analyst

located at TMCC’s Louisiana Dealer Sales and Services Office (‘DSSO”). TMCC
operates thirty DSSOs in the United States, including the one in Louisiana.

Upon receipt of the Credit Application, TMCC either approves or denies the
Credit Application. Ifthe Credit Application is approved, the motor vehicle dealer
and the applicant may then decide to negotiate and enter into a RIC for the
purchase of the motor vehicle.

After entering into RICs with their customers, motor vehicle dealers often
offer to sell some or all of the RICs to various financing businesses, including
TMCC. Upon acquisition of a RIC, TMCC begins servicing the RIC, and the
buyer of the motor vehicle makes payments to TMCC under the terms of the RIC.

The “RICs at Issue” herein are those RICs originated by motor vehicle
dealers located in Louisiana and Mississippi that were subsequently submitted by
those dealers for review and consideration to TMCC’s Contract Analysts in its
Louisiana DSSO and then acquired by TMCC from those motor vehicle dealers.
Thus, the essential issues presented in this appeal are whether the computation of
TMCC’s Louisiana franchise tax obligation should include the value of the RICs at
Issue as property situated or used in Louisiana and/or whether the interest income
TMCC earned thereon as sales or other revenue is attributable to Louisiana.

PROCEDURAL HISTORY

On July 7, 2015, TMCC filed a Claim for Refund of Overpayment with the
Louisiana Department of Revenue (“the Department”), requesting a refund for an
alleged overpayment of its franchise taxes for the franchise tax period beginning
on April 1, 2005 and ending on March 31, 2006 (“the 2005 Refund Period”).!
TMCC sought a refund in the amount of $1,047,592.00, contending that for the

refund period at issue, it had “improperly” attributed all of the value of the RICs at

"At the request of the Department, TMCC also filed an amended Louisiana corporate
franchise tax form for the franchise tax period at issue, to accompany its refund claim.

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Issue and all interest income it received thereon to Louisiana in the calculation of
its Louisiana franchise tax obligation, where the value of the RICs at Issue and all
interest income received should have been attributed to TMCC’s commercial
domicile in California.2 By letter dated March 24, 2016, the Department denied
TMCC’s refund claim.

After the denial of its refund claim, TMCC filed a Petition for Review with
the BTA? The Department, through its Secretary, Kimberly L. Robinson, and
TMCC thereafter filed cross-motions for summary judgment, with the Department
seeking dismissal of all of TMCC’s refund claims and TMCC seeking judgment in
its favor awarding it the requested refunds. Following a hearing on the cross-
motions, the BTA signed a judgment dated February 10, 2021, granting in part and
denying in part TMCC’s motion and granting in part and denying in part the
Department’s motion.

Relying on its previous decision in GMAC Inc. v. Bridges, Docket Nos.
6998 - 7001, 7012, 7049, 7220, 7221 (La. B.T.A. 2014), 2014 WL 7642226, the
BTA concluded that because the value of the RICs at Issue should not have been
allocated to Louisiana as property situated or used in Louisiana in the calculation

of the apportionment of its franchise tax base, TMCC had made an overpayment of

°TMCC similarly filed Claims for Refund of Overpayment for the franchise tax period
beginning on April 1, 2006 and ending on March 31, 2007 (“the 2006 Refund Period”) and the
franchise tax period beginning on April 1, 2007 and ending on March 31, 2008 (“the 2007
Refund Period”), on the same basis that it sought a refund for the 2005 Refund Period.

Louisiana Revised Statute 47:1625(A)(1) provides that a taxpayer may appeal the
disallowance of its claim for refund to the BTA within 60 days from the date of mailing of the
notice of disallowance. The Department also denied TMCC’s Claims for Refund of
Overpayment for the 2006 and 2007 Refund Periods. TMCC likewise sought review of the
denial of those claims. Each of TMCC’s three Petitions for Review filed with the BTA was
assigned a separate docket number.

“The issues presented in GMAC similarly dealt with whether the value of retail
installment contracts acquired by GMAC from independent Louisiana GM dealers and the
interest GMAC earned thereon should have been allocated as property situated or used in
Louisiana and revenue attributable to Louisiana, respectively, in the determination of GMAC’s
Louisiana franchise tax liability. GMAC, 2014 WL 7642226 at *3-6. While informative as to
the BTA’s interpretation of the relevant statute and regulations, the BTA’s decision in GMAC
was never appealed to an appellate court and, thus, is not binding upon this court. See generally
McDonald’s Corporation v. Glennon, 355 So. 2d 1023, 1026 (La. App. 4" Cir.), writ denied, 357
So. 2d 1164 (La. 1978).

Louisiana corporate franchise taxes for the 2005 Refund Period in the amount of
$797,517.00. Accordingly, the BTA granted in part TMCC’s motion for summary
judgment, denied in part the Department’s motion for summary judgment, and
ordered the Department to refund TMCC that amount, together with interest.
However, again adhering to its earlier ruling in GMAC, and further concluding that
interest earned on the RICs at Issue was properly allocated as Louisiana sales or
revenue in the calculation of the apportionment of its franchise tax base, the BTA
granted in part the Department’s motion for summary judgment, denied in part
TMCC’s motion for summary judgment, and “denied and dismissed” TMCC’s
claim for all other amounts sought as a refund of overpayments of its 2005
franchise tax. From this judgment, both the Department and TMCC have appealed
to this court.°

On appeal, the Department lists five assignments of error, contending that
the BTA erred in: (1) granting TMCC a partial refund of franchise tax without the
requisite showing of clear and convincing evidence that an error occurred; (2)
determining that the business situs of the RICs at Issue was California, based on a
limited analysis of TMCC’s “use” of the RICs at Issue after acquisition; (3)
determining that the business situs of the RICs at Issue was California without
consideration of TMCC’s continuous course of business in Louisiana, including

the required pre-contract analyses of credit, lender activities, and continuous

*While TMCC filed three Petitions for Review addressing each of the three Refund
Periods separately, which were each assigned a different docket number and never consolidated
below, the BTA’s February 10, 2021 judgment addressed all three Refund Periods for which
TMCC sought a refund and collectively ordered a refund in the amount of $2,333,557.00, which
represented $797,517.00 for the 2005 Refund Period, $847,491.00 for the 2006 Refund Period,
and $688,549.00 for the 2007 Refund Period.

A copy of the BTA’s February 10, 2021 judgment was then filed into each of the pending
docket numbers before the BTA. Both TMCC and the Department filed separate appeals of the
BTA’s February 10, 2021 judgment as to each of the three refund periods. The present appeal
concems the 2005 Refund Period. The appeals relating to the 2006 Refund Period and the 2007
Refund Period are pending before this court and bear docket numbers 2021 CA 0733 and 2021
CA 0734 respectively. Upon motion of the parties, all three appeals were consolidated in this

court for purposes of argument and submission only, and each consolidated appeal is addressed
in a separate opinion, all rendered this date.

contact with Louisiana residents and vendors in servicing the RICs at Issue; (4)
granting TMCC a partial refund of franchise tax without the requisite showing of
clear and convincing evidence that the business situs for the RICs at Issue was
California and not Louisiana; and (5) failing to consider the RICs at Issue as “trade
accounts” or “trade notes receivable” under LSA-R.S. 47:606(A)(2)(c).

TMCC assigns two errors, contending that the BTA erred in: (1) holding that
TMCC’s interest receipts are from “[i]nterest on customers’ notes and accounts”
under LSA-R.S. 47:606(A)(1)(h) and, thus, were properly allocated to Louisiana in
the computation of TMCC’s Sales and Other Revenue Ratio; and (2) granting in
part the Department’s motion for summary judgment and denying in part TMCC’s
motion for summary judgment.

SUMMARY JUDGMENT PRECEPTS

A motion for summary judgment is a procedural device used to avoid a full-
scale trial when there is no genuine issue of material fact, Jones v. Anderson,
2016-1361 (La. App. 1“ Cir. 6/29/17), 224 So. 3d 413, 417. After an opportunity
for adequate discovery, a motion for summary judgment shall be granted if the
motion, memorandum, and supporting documents show that there is no genuine
issue as to material fact and that the mover is entitled to judgment as a matter of
law. LSA-C.C.P. art. 966(A)(3).

The initial burden of proof is on the mover. LSA-C.C.P. art. 966(D)(1).
When the mover will bear the burden of proof at trial, the burden of showing that
there is no genuine issue of material fact and that mover is entitled to judgment in
its favor remains with the mover. Only when the mover makes this showing does
the burden shift to the opposing party to present evidence demonstrating a material
factual issue remains or that the mover is not entitled to judgment as a matter of
law. See Action Oilfield Services, Inc. v. Energy Management Company, 2018-

1146 (La. App. 1* Cir. 4/17/19), 276 So. 3d 538, 541-542.

Nevertheless, if the mover will not bear the burden of proof at trial on the
issue that is before the court on the motion for summary judgment, the mover’s
burden on the motion does not require him to negate all essential elements of the
adverse party’s claim, action, or defense, but rather to point out to the court the
absence of factual support for one or more elements essential to the adverse party’s
claim, action, or defense. The burden is then on the adverse party to produce
factual support sufficient to establish the existence of a genuine issue of material
fact or that the mover is not entitled to judgment as a matter of law. LSA-C.C_P.
art. 966(D)(1).

Appellate courts review summary judgments de novo, using the same
standards applicable to the trial court’s determination of the issues, and ask the
same questions the trial court does in determining whether summary judgment is
appropriate. Cabana Partners, LLC v. Citizens Bank & Trust Co., 2018-0133 (La.
App. 1* Cir. 12/21/18), 269 So. 3d 986, 990. See also LSA-C.C.P. art. 966(A)(3).

LOUISIANA CORPORATE FRANCHISE TAX

Article VII, section 1 of the Louisiana Constitution vests the power of
taxation in the legislature. Pursuant to this authority, the legislature enacted the
Louisiana corporate franchise tax, LSA-R.S. 47:601 ef seq. Louisiana’s
corporation franchise tax statute, as applied to foreign corporations, taxes the
corporation’s privilege of enjoying, in a corporate capacity, the ownership or use
of its capital, plant, or other property in this state, the corporation’s privilege of
exercising and continuing its corporate charter in Louisiana, and the corporation’s
use of its corporate form to do business in this state. Colonial Pipeline Company v.
Agerton, 289 So. 2d 93, 100 (La. 1974). As such, “[e]very foreign corporation,
exercising its charter, or qualified to do business or actually doing business in this

state, or Owning or using any part or all of its capital, plant, or any other property

in this state” is obligated to pay an annual franchise tax on its “taxable capital.”
LSA-R.S. 47:601(A) & 602.6

A corporation’s taxable capital for purposes of determining its Louisiana
franchise tax is computed on the basis of a ratio obtained by taking the
“arithmetical average” of: (1) the ratio that its net sales and other revenue
attributable to Louisiana (the numerator) bears to its total net sales and other
revenue (the denominator), hereinafter referred to as “the Sales and Other Revenue
Ratio”, and (2) the ratio that the value of its property or assets situated or used in
Louisiana (the numerator) bears to the value of all of its property and assets
wherever situated or used (the denominator), hereinafter referred to as “the
Property Ratio.” LSA-R.S. 47:606(A)(1) & (2).

REFUND OF OVERPAYMENT OF TAXES
While vested with the power to tax, the legislature must also “provide a

complete and adequate remedy for the prompt recovery of an illegal tax paid by a
taxpayer.” LSA-Const. art. VII, § 3(A); Jazz Casino Company, L.L.C. v. Bridges,
2016-1663 (La. 5/3/17), 223 So. 3d 488, 492. Pursuant to LSA-R.S. 47:1621 —
1627, taxpayers are afforded a procedure for the refund of overpayments of taxes
that were paid voluntarily and without protest. Bannister Properties, Inc. v. State,
2018-0030 — 2018-0033 (La. App. 1% Cir. 11/2/18), 265 So. 3d 778, 788, writ
denied, 2019-0025 (La. 3/6/19), 266 So. 3d 902. An overpayment of taxes
includes a “payment of tax ... when none was due” or “the excess of the amount of
tax ... paid over the amount due.” LSA-R.S. 47:1621(A).

If the Department denies the taxpayer’s refund claim, the taxpayer may

SLouisiana Revised Statutes 47:601(A) and 602 were amended by Louisiana Acts 2004,
1* Extraordinary Session, No. 2, section 1, effective J anuary 1, 2006, for taxable years beginning
after December 31, 2005. La. Acts 2004, No. 2, § 4. Thus, those amendments are not pertinent
to the 2005 Refund Period. Moreover, those amendments are not at issue in the consolidated

appeals before this panel addressing TMCC’s clams for refunds for the 2006 and 2007 Refund
Periods.

appeal the denial to the BTA. Jurisdiction to resolve tax-related disputes is granted
to the BTA, which is authorized to hear and decide disputes and render judgments.
LSA-R.S. 47:1625; St. Martin v. State, 2009-0935 (La. 12/1/09), 25 So. 3d 736,
741. The BTA functions as a trial court in finding facts and applying the law. St.
Martin, 25 So. 3d at 740.

Jurisdiction for judicial review of decisions of the BTA is vested solely with
the appellate courts. LSA-R.S. 47:1435. The appellate court’s review of a
decision of the BTA is rendered on the record made before the BTA and is limited

to facts on record and questions of law. Bannister Properties, Inc., 265 So. 3d at

785. With regard to questions of law, the judgment of the BTA should be affirmed
if it has correctly applied the law and adhered to the proper procedural standards.
However, if the BTA’s judgment is not in accordance with law, it may be reversed
or modified, with or without remanding the case. Bannister Properties, Inc., 265
So. 3d at 785.
DISCUSSION
Whether the Value of the RICs at Issue Should be Allocated to Louisiana in
IMCC’s “Property Ratio” in Computing TMCC’s Franchise Tax Liability
(The Department’s Assignments of Error Nos. 1 —5)

The Department challenges that portion of the BTA’s judgment granting in
part TMCC’s motion for summary judgment and awarding it a partial refund of
franchise taxes due to TMCC’s error in computing its Property Ratio in
determining its franchise tax liability for the 2005 Refund Period. According to
the Department, TMCC failed to meet its burden of proving entitlement to
judgment in its favor granting a refund because the value of the RICs at Issue was
properly allocated to Louisiana in TMCC’s Property Ratio. Through its
assignments of error, the Department raises three primary issues: (1) what is the
appropriate burden of proof for TMCC to establish its entitlement to a refund; (2)

whether the RICs at Issue are properly considered “trade notes and trade accounts,”

such that TMCC failed to meet its burden of proving that they should not be
allocated to Louisiana in its Property Ratio; and (3) if, in fact, the RICs at Issue are
“other” notes and accounts, rather than “trade notes and trade accounts,” whether
TMCC met its burden of establishing that the business situs of the RICs at Issue
was not Louisiana, such that they should not be allocated to Louisiana in its
Property Ratio.

Because TMCC would have the burden of proof at a trial of establishing its
entitlement to a refund, in order to demonstrate its entitlement to summary
judgment, TMCC had to establish that there was no genuine issue of fact and that it
was entitled to judgment in its favor. See Action Oilfield Services, Inc., 276 So.
3d at 541-542. Because the facts herein were stipulated by the parties, TMCC had
the burden of proving that under the established facts, it was entitled to a refund as
a matter of law.’

In its first and fourth assignments of error, the Department contends that the
BTA did not hold TMCC to the appropriate burden of proof and that, under the
appropriate burden of proof, TMCC failed to establish its entitlement to judgment
as a matter of law. The Department asserts that TMCC has a heightened burden
because tax statutes providing for tax refunds are strictly construed against the
taxpayer. Additionally, it argues that if a taxpayer cannot prove entitlement to a
refund under any of the provisions of LSA-R.S. 47:1621(B), as it asserts TMCC
cannot, then a refund may only occur if the overpayment is proven by clear and
convincing evidence.

Louisiana Revised Statute 47:1621(B) sets forth the instances in which the
Department shall make a refund of overpayments, including, as pertinent herein,

where “[t]he overpayment was the result of an error, omission, or a mistake of fact

"TMCC filed as an exhibit to its motion the parties’ “Consolidated Joint Stipulation of
Facts” and the exhibits attached thereto.

10

of consequence to the determination of the tax liability, whether on the part of the
taxpayer or the secretary.” LSA-R.S. 47:1621(B)(3). Subsection (C) of LSA-R.S.
47:1621 further provides that “[nJotwithstanding the provisions of Subsection B,
where it is determined that there is clear and convincing evidence that an
overpayment has been made, the secretary shall make a refund, subject to
conditions or limitations provided by law.”

In its motion for summary judgment, TMCC sought judgment in its favor
granting a refund on the basis that it had erroneously allocated the value of the
RICs at Issue to Louisiana in computing its Property Ratio when calculating its
franchise tax liability pursuant to LSA-R.S. 47:606. Additionally, in the
Consolidated Joint Stipulation of Facts, the parties stipulated that TMCC was
seeking a refund of alleged overpayment and that, if the value of the RICs at Issue
should not have been allocated to Louisiana in computing TMCC’s Property Ratio
(ie., included in the numerator of TMCC’s Property Ratio), TMCC made an
overpayment of franchise tax for the tax refund period at issue.

Clearly, if it is determined that the value of the RICs at Issue should not
have been allocated as property situated or used in Louisiana in computing
TMCC’s Property Ratio, TMCC’s allocation of the RICs at Issue as such was “an
error ... of consequence to the determination of [its] tax liability” under LSA-R.S.
47:1621(B)(3). See generally Sasol North America, Inc. v. Louisiana Department
of Revenue, 15-569 (La. App. 3" Cir. 2/10/ 16), 184 So. 3d 902, 906, writ denied,
2016-0482 (La. 5/2/16), 206 So. 3d 878.

Moreover, while the Department is correct that statutes providing for tax
exemptions or tax refunds should be strictly construed against the taxpayer,
Bannister Properties, Inc., 265 So. 3d at 791, the determination of whether TMCC
is entitled to a refund for overpayment of its franchise taxes involves the

interpretation and application of LSA-R.S. 47 :606, a statute imposing a franchise

11

tax, to the undisputed facts herein.® Taxing statutes are to be interpreted liberally
in favor of the taxpayer and against the taxing authority, and where a tax statute is
susceptible of more than one interpretation, the interpretation less onerous to the
taxpayer is to be adopted. Barfield v. Bolotte, 2015-0847 (La. App. 1% Cir.
12/23/15), 185 So. 3d 781, 785, writ denied, 2016-0307 (La. 5/13/16), 191 So. 3d
1058. As such, words defining things to be taxed should not be extended beyond
their clear import. Barfield, 185 So. 3d at 785. For these reasons, we disagree that
LSA-R.S. 47:606 must be strictly construed against TMCC. Further, to the extent
the Department asserts in assignments of error numbers one and four that the clear
and convincing standard applies to LSA-R.S. 47:1621(B), we find no merit in this
argument.

Turning to the merits of the Property Ratio issue, in its fifth assignment of
error, the Department asserts that the RICs at Issue meet the definition of “trade
notes receivable” as set forth in LSA-R.S. 47:606(A)(2)(c), such that they were
properly allocated as property situated or used in Louisiana in TMCC’s Property
Ratio, and that the BTA erred in concluding otherwise.

As stated above, the Property Ratio for purposes of determining franchise
tax is the value of the taxpayer’s property and assets situated or used in Louisiana
in relation to the value of all of the taxpayer’s property and assets, wherever

situated or used. LSA-R.S. 47:606(A)(2). Regarding the allocation of property

*We note that the cases relied upon by the Department in this regard are all factually
distinguishable and, thus, inapplicable in that they involve interpretation of various tax
exemptions. See Sherwood Forest Country Club v. Litchfield, 2008-0194 (La. 12/ 19/08), 998
So. 2d 56 (interpreting a constitutional exemption of property owned by certain associations
from ad valorem taxes); Mallard Bay Drilling, Inc. v. Kennedy, 2004-1089 (La. 6/29/05), 914
So. 2d 533 (interpreting a sales tax exemption); Whitten Foundation v. Granger, 2004-0934R
(La. App. 1° Cir. 11/3/06), 950 So. 2d 720, writ denied, 2006-2828 (La. 2/2/07), 948 So. 2d 1080
(interpreting an exemption from ad valorem taxes); and Johnson _v. New Orleans Charities
Building Corporation, 2000-2772 (La. App. 1° Cir. 2/15/02), 812 So. 2d 741 (interpreting an
exemption from ad valorem taxes). Bannister is also distinguishable because it concerned the
interpretation of LSA-R.S. 47:1621(F) and whether the taxpayer was entitled to a refund
pursuant to this provision. Bannister, 265 So. 3d at 788. In Bannister, the parties stipulated that
the taxpayer overpaid its franchise taxes; therefore, the interpretation and application of LSA-
R.S. 47:606 was not at issue.

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and assets to Louisiana or elsewhere, LSA-R.S. 47:606(A)(2) provides, in pertinent
part, as follows:

The various classes of property and assets shown below shall be
allocated within and without Louisiana on the bases indicated:

(b) Cash in banks and temporary cash investments shall be allocated
to the state in which they have their business situs, or in the absence
of a business situs, to the state in which is located the commercial
domicile of the taxpayer.

(c) Trade accounts and trade notes receivable shall be allocated by
reference to the transactions from which the receivables arose, on the
basis of the location at which delivery was made in the case of sale
of merchandise or the location at which the services were performed
in case of charges for services rendered.

(d) Investments in and advances to a parent or subsidiary shall be
allocated as provided in Subsection B of this Section.

(e) Notes and accounts other than those notes and accounts described

under items (b) through (d) above shall be allocated to the state in

which they have their business situs, or in the absence of a business

situs, to the state in which is located the commercial domicile of the

taxpayer.

In support of its motion for summary judgment, TMCC contended that the
RICs at Issue were not “[t]rade accounts and trade notes receivable” pursuant to
LSA-R.S. 47:606(A)(2)(c), but, rather, were “other” notes and accounts pursuant to
LSA-R.S. 606(A)(2)(e) and that the RICs at Issue had a business situs outside of
Louisiana. Contrariwise, the Department, in opposing TMCC’s motion, contended
that regardless of whether the RICs at Issue were classified as “tirade accounts
and trade notes receivable” or “other” notes and accounts, the value of the RICs at
Issue was properly allocated to Louisiana.

The term “[t]rade accounts and trade notes receivable” is not defined in
LSA-R.S. 47:606(A)(2)(c). However, the Department has promulgated regulations

defining which notes and accounts qualify as “[t}rade accounts and trade notes”

and the basis for allocating such property to a particular state, in pertinent part, as

follows:

13

Trade accounts and trade notes receivable are construed to mean

only those accounts and notes receivable resulting from the sale of

merchandise or the performance of services for customers in the

regular course of business of the taxpayer. Such accounts and

notes shall be allocated to the location at which the merchandise was

delivered or at which the services were performed resulting in the

receivable. ...
LAC 61:1.306.A.2.c? (emphasis added). On appeal, the Department contends that
the RICs at Issue are “trade notes receivable” because they “relate to TMCC’s
business of lending money to persons for their use in purchasing vehicles or
providing financing to Louisiana automobile dealers” and, thus, “are the result of
the financing services performed by TMCC in this state.”

However, we note that, according to the Consolidated Joint Stipulation of
Facts, TMCC is not a motor vehicle dealer and does not engage in the business of
selling new motor vehicles. As such, TMCC clearly is not a party to the RICs at
Issue at their inception, which, instead, are entered into and binding between motor
vehicle dealers and their buyers. Rather, TMCC’s business involves the
acquisition, ownership, and servicing of RICs that have been executed by the
selling motor vehicle dealers and their customers, the buyers of motor vehicles,
and then later offered for sale by motor vehicle dealers. Thus, the RICs at Issue
did not “result[] from the sale of merchandise ... [to] customers in the regular

course of business of the taxpayer [TMCC],” but, instead, result from the sale of

merchandise, i.e., motor vehicles, in the regular course of business of the motor

*Pursuant to the authority granted in LSA-R.S. 47:15] 1, to promulgate rules and
regulations in accordance with the Administrative Procedure Act, LSA-R.S. 49:950 et seq., the
Secretary of the Department amended this regulation in 2006, as promulgated in the Louisiana
Register on March 20, 2006, near the end of the 2005 Refund Period at issue herein. See La.
Reg. 32:415 (2006). A mule promulgated under the Administrative Procedure Act, LSA-R.S.
49:949 et seq., “shall be effective upon its publication in the Louisiana Register, said publication
to be subsequent to the act of adoption, except that if a later date is required by statute or
specified in the rule, the later day is the effective date.” LSA-R.S. 49:954(B)(1). However, the
amendments to the Department’s regulation were non-substantive, stylistic changes that do not
impact any holdings herein.

14

vehicle dealers from whom TMCC later purchased the RICs at Issue.!? See LAC
61:1.306.A.2.c (emphasis added).

Nonetheless, the Department argues on appeal that the BTA’s reliance on its
earlier decision in GMAC was misplaced because, in that decision, the BTA did
not address the “performance of services” component of “[t]rade accounts and
trade notes receivable,” see GMAC, 2014 WL 7642226 at *4-5, and, further, the
RICs at Issue “are the result of financing services performed by TMCC in this
state,” in that “I'MCC provides financial services to persons who are seeking to
purchase automobiles as well as to automobile dealerships who [sic] desire to
reduce their debt load by the sale of such contracts.” However, as set forth in the
Consolidated Joint Stipulation of Facts, TMCC does not lend money to the buyers
of motor vehicles through the RICs at Issue, which, again, are executed by motor
vehicle dealers and their customers; thus, TMCC cannot be deemed to have
provided financial services to those purchasers. Rather, to the extent that it
acquires the RICs at Issue from motor vehicle dealers to assist them in reducing
their debt load, TMCC may provide financial services to the motor vehicle dealers,
but those financial services do not “result” in the RICs at Issue, which have
previously been executed between motor vehicle dealers and their customers as the
result of the sale of motor vehicles.

Moreover, any review of Credit Applications by TMCC on behalf of the
motor vehicle dealers prior to confection of a RIC cannot be said to result in the
RICs at Issue. Instead, as the parties stipulated, all negotiations as to the terms of
the sale of the motor vehicle, including, for example, price, down payment, and
trade-in credit, and as to the terms of the RICs themselves, take place between the

motor vehicle dealers and their customers. TMCC does not review, approve, or

Indeed, the terms under which TMCC acquires the RICs at Issue is governed by a

separate agreement, entitled Retail Sales Financing Agreement, entered into between TMCC and
each Louisiana Toyota/Lexus motor vehicle dealer.

15

disapprove any RIC prior to its execution by the motor vehicle dealer and its
customer. As such, the RICs at Issue “result” from negotiations between the motor
vehicle dealers and their customers, leading to the sale of a motor vehicle and
financing of same. Additionally, the RICs at Issue clearly did not “result” from
any servicing of the RICs at Issue by TMCC after it acquired the fully executed
RICs from selling motor vehicle dealers.

Accordingly, on de novo review, we find no error by the BTA in its
determination that the RICs at Issue were not “trade accounts” or “trade notes
receivable” pursuant to LSA-R.S. 47:606(A)(2)(c) and LAC 61:1.306.A.2.c and,
thus, find no merit to the Department’s fifth assignment of error. As such, the
RICs at Issue qualify as “other’ notes and accounts pursuant to LSA-R.S.
47:606(A)(2)(e), whose allocation is dependent upon an analysis of where they
have their “business situs” or, in the absence of a business situs, where the
commercial domicile of TMCC is located.

In support of its motion for summary judgment, TMCC contended that the
RICs at Issue were “other” notes and accounts with a business situs outside of
Louisiana because once TMCC acquires the RICs at Issue, and thus can “use”
them, TMCC’s only use of the RICs at Issue was at its commercial domicile in
California. Conversely, in its opposition to TMCC’s motion, the Department
contended that even if the RICs at Issue were classified as “other” notes and
accounts,” their value nonetheless should have been allocated as Louisiana sales
and other revenue because those RICs at Issue had indeed obtained a business situs
in Louisiana. On appeal, the Department asserts, through its second, third, and
fourth assignments of error, that the BTA erred in concluding that under either the
“business situs” test or the “commercial domicile” test, the value of the RICs at
Issue was not to be allocated to Louisiana.

As noted by the Louisiana Supreme Court, because, by their very nature,

16

intangible assets and property rights have no physical location, even though
represented by “paper evidences,” being merely relationships between persons that
the law recognizes “by attaching to them certain sanctions enforceable in the
courts,” the problem of determining their situs, or the state having jurisdiction to
tax them, is complex. United Gas Corporation v. Fontenot, 241 La. 488, 498, 129
So. 2d 748, 752 (1961). The Department’s regulations offer guidance in the
determination of business situs of “other” notes and accounts and the commercial
domicile of the taxpayer for computing the Property Ratio, in pertinent part, as
follows:

Notes and accounts receivable other than temporary cash
investments, trade notes and accounts, and advances to a parent or
subsidiary, shall be allocated to the state in which they have their
business situs if they have been so used as to have acquired a
business situs. In the absence of a business situs for such assets,
notes and accounts receivable other than temporary cash
investments, trade notes and accounts, and advances to a parent or
subsidiary shall be allocated to the state in which the commercial
domicile of the taxpayer is located. See § 306.A.1.gl'"! relative to
business situs and commercial domicile.

LAC 61:1.306.A.2.e.

Used in connection with the taxpayer’s business is construed to mean
use of a continuing nature in the regular course of business and does
not include the mere holding of the instrument at a location of the use
of the property as. security for credit. Business situs must be
established on the basis of facts, indicating precisely the use to which
the securities have been put and the manner in which the taxpayer
conducts its business.

LAC 61:1.306.A.1.g.ii (emphasis added).'?

Commercial Domicile is in that state where management decisions are
implemented which is presumed to be the state where the taxpayer
conducts its principal business and thereby benefits from public

Prior to the 2006 amendment to this regulation, which amendment was promulgated in
the Louisiana Register on March 20, 2006, near the end of the Refund Period at issue, section
306.A.1.g had been designated as section 306.A.1.h. La. Reg. 32:415 (2006). However, because
the substance of the regulation was not changed, we refer to it herein by its current designation
for ease of reference.

"This portion of the regulation was similarly re-designated from section 306.A.1.h.ii to
section 306.A.1.g.ii, by amendment promulgated on March 20, 2006, near the end of the Refund
Period at issue. La. Reg. 32:415 (2006). Because the substance of this portion of the regulation
was not changed, we refer to it herein by its current desi gnation for ease of reference.

17

facilities and protection provided by that state. .
LAC 61:1.306.A. L.g.iii.

The parties stipulated that TMCC’s commercial domicile is in California.
Thus, the RICs at Issue are to be allocated to California unless they have obtained
a business situs of their own. According to the Consolidated Joint Stipulation of
Facts, TMCC’s Retail Finance line of business involves “the acquisition,
ownership, and servicing of the RICs and receiving and collecting interest income
from the RICs.”'* Thus, we will consider each of these activities separately in
determining whether TMCC’s use of the RICs at Issue in Louisiana was “of a
continuing nature in the regular course of [TMCC’s] business” such that the RICs
at Issue obtained a business situs in Louisiana, subjecting their value to Louisiana
franchise taxes. LAC 61:1.306.A.2.e; LAC 61:1.306A_.L¢. ii.

In carrying out its Retail Finance line of business, the process by which
TMCC acquires the RICs at Issue involves several steps. As mentioned above, as
a preliminary matter before a RIC is ever confected between a Toyota/Lexus motor
vehicle dealer and its customer, the motor vehicle dealer and the customer
complete a Credit Application, which may or may not be completed on a form
created by TMCC. Toyota/Lexus motor vehicle dealers may then choose to submit
the Credit Application to TMCC for review. When the motor vehicle dealer
submits a Credit Application to TMCC or to competing finance companies, the
motor vehicle dealer is looking for a lender with the best interest rate and loan
terms for its customer. Toyota/Lexus motor vehicle dealers are under no

obligation to submit Credit Applications to TMCC and often submit them to

This subsection of section 306 was likewise re-designated from section 306.A.1.h.iii to
section 306.A.1.g.iii, by amendment promulgated on March 20, 2006, near the end of the Refund
Period at issue. While a portion of this subsection was amended substantively, the relevant

portion quoted above was not amended. For ease of reference, we also refer to its current
designation.

“TMCC also engages in wholesale finance and retail leasing, but any income or
properties related to those lines of business are not at issue herein.

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competing financing businesses. For Louisiana and a limited number of
Mississippi Toyota/Lexus motor vehicle dealers, this preliminary credit review
does occur in Louisiana at TMCC’s Louisiana DSSO. Once a Credit Application
is electronically submitted to TMCC’s Louisiana DSSO, a Credit Analyst performs
the required review under procedures developed by TMCC at its headquarters in
California. After a Credit Application is “approved” by TMCC, either through
“auto-approval” by TMCC’s software system or by the Credit Analyst, the motor
vehicle dealer and its customer may then decide to negotiate and enter into a RIC
for the purchase of a motor vehicle.

Thus, this credit review process appears to aid the Toyota/Lexus dealer in its
decisions as to whether to provide financing to its customer and whether to provide
such financing under terms approved by TMCC or by another competing financing
company, and also serves the purpose of aiding TMCC in its later decision-making
process as to whether to purchase a RIC if actually confected by the dealer and its
customer and then offered for sale to TMCC. However, at this preliminary stage
of review of the Credit Application, the potential RIC has not yet come into
existence and, thus, cannot be said to be “used” by TMCC in the course of its
Retail Finance business.

After a Toyota/Lexus motor vehicle dealer and its customer do enter into a
RIC for the purchase of a motor vehicle, the motor vehicle dealer may then choose
to offer to sell the RIC to TMCC, and in that event, TMCC conducts its “due
diligence” review with respect to the RIC. Where a dealer decides to submit a RIC
to TMCC for acquisition, the RIC and other required documentation are submitted
to TMCC’s Contract Analysts at one of TMCC’s DSSOs. As pertinent to this case,
TMCC’s decision-making process as to whether to purchase the RICs at Issue
undisputedly was conducted by Contract Analysts in TMCC’s Louisiana DSSO,

under the following procedure. Upon receipt of a RIC at Issue, a Contract Analyst

19

reviews the RIC at Issue in accordance with the procedures created at TMCC’s
headquarters in California. Once a Contract Analyst completes review of the RIC
at Issue, the Contract Analyst decides whether TMCC will acquire or reject the
RIC. Where TMCC has already approved the applicant’s Credit Application and
the motor vehicle dealer has offered to sell the RIC to TMCC, it is routine, but not
required, for TMCC to acquire the RIC. With regard to TMCC’s purchase of
RICs, each Louisiana Toyota/Lexus motor vehicle dealer is required to enter into a
Retail Sales Financing Agreement with TMCC, which governs the terms and
conditions of the purchase of RICs by TMCC from these dealers.

Clearly, TMCC’s decision-making process as to whether to purchase the
RICs at Issue was conducted in Louisiana, with its Contract Analysts utilizing the
RICs at Issue in the decision-making process, albeit under procedures developed
by TMCC in California. Thus, as to TMCC’s business of acquiring RICs, the
RICs at Issue were used by TMCC for review in conducting its due diligence in
deciding whether to acquire the RICs. However, TMCC was not using the RICs at
Issue as the owner thereof at this stage of TMCC’s acquisition decision-making
process, such that the RICs at Issue were not the property of TMCC at this stage of
its business activities.

Turning to TMCC’s ownership of RICs, upon the transfer of ownership of a
RIC from a Toyota/Lexus motor vehicle dealer, a TMCC Contract Analyst records
the RIC in TMCC’s retail system. Once the acquired RIC is recorded in TMCC’s
retail system, the Contract Analyst sends the RIC and all supporting documentation
to a third-party provider for scanning and shredding. TMCC retains and maintains
the scanned electronic copies of all acquired RICs at one of its three Customer
Service Centers (“CSCs”), none of which are located in Louisiana. Thus, as to
TMCC’s ownership of the RICs at Issue, other than the initial recording of the

RICs at Issue into TMCC’s retail system and forwarding them to a third-party

20

provider for further processing, no other activities were conducted at TMCC’s
Louisiana DSSO.

Finally, regarding TMCC’s servicing of the RICs at Issue, once the Contract
Analyst records the RICs at Issue into TMCC’s retail system, the system begins to
automatically issue billing statements to those buyers, which bills are mailed on a
monthly basis to the buyers. This retail system likewise is located and maintained
outside of Louisiana. TMCC thereafter manages and services the RICs at Issue at
one of its CSCs outside of Louisiana, and TMCC’s representatives at the CSCs
have all future contact with the buyers, including, for example, service calls,
account collections and administration. All payments on the RICs at Issue are
made either to a lockbox in Illinois or through electronic banking services. No
payments are received at the Louisiana DSSO. Moreover, all lockbox and
electronic payments are deposited in bank accounts maintained by TMCC at its
commercial domicile in California.

Additionally, TMCC commonly securitizes RICs it has purchased, including
the RICs at Issue. However, all activities relating to the securitization of RICs
acquired by TMCC, including the RICs at Issue, also occur outside of Louisiana.

At times, a buyer may default on an RIC at Issue. Each RIC is secured by
the motor vehicle purchased by the buyer. Thus, in the case of default by a buyer
on a RIC at Issue, if a motor vehicle securing the RIC at Issue is physically located
in Louisiana at the time of default, a representative at one of TMCC’s CSCs
attempts to contact the buyer by phone to reach a solution to the default and get the
buyer back into compliance with the payment terms of the RIC at Issue. If the
CSC representative is unable to reach a solution to the buyer’s default, the

representative sends a letter to the buyer to notify the buyer of the default and of

21

TMCC’s intention to exercise its rights and remedies.'> For those RICs at Issue
executed in Louisiana, TMCC could then proceed with repossession of the motor
vehicle after seven days, under Louisiana law. Because only an individually
licensed repossession agent is authorized to take possession of a defaulting buyer’s
financed vehicle in Louisiana, TMCC contracts with authorized third parties to
seize the financed vehicle. This procedure does not require the filing of any
pleading in a Louisiana court. Moreover, for the Refund Period at issue, TMCC
did not file any lawsuits in Louisiana against defaulting buyers.

After the vehicle has been repossessed, a CSC representative mails a notice
to the defaulting buyer of its plan to sell the repossessed vehicle and files a notice
of repossession with the Recorder of Mortgages in the Louisiana parish where the
vehicle is located and with either the city court constable or marshal or the sheriff
of the parish where the defaulting buyer resides. TMCC will then sell the
repossessed vehicle at a private auction outside of Louisiana. Once the vehicle is
sold at auction, a CSC representative mails a notice of surplus or deficiency to the
defaulting buyer at the buyer’s last known address, and TMCC then engages third-
party collection agencies to pursue collection of any deficiency under Louisiana
law.'© None of TMCC’s DSSOs, including the Louisiana DSSO, is involved if
there is a default by the buyer.

Under the facts stipulated above, following TMCC’s purchase of the RICs at
Issue, its activities in Louisiana related to its use of the RICs at Issue primarily
involved limited activities in instances of default, while many actions taken by
TMCC related to defaulted RICs at Issue also took place outside of Louisiana.

Thus, other than the initial activity of recording the RICs at Issue into TMCC’s

‘For the RICs at Issue, Louisiana law controls TMCC’s legal rights for those RICs
executed in Louisiana, and, likewise, Mississippi law controls for those RICs executed in
Mississippi.

©The parties did not stipulate to the percentage of the RICs at Issue that have gone into
default and required repossession and sale at auction.

22

retail system and some actions related to repossession and collection of any
deficiency following sale at auction as to only those RICs at Issue that have gone
into default, the majority of TMCC’s business activities related to servicing the
RICs at Issue occurs outside of Louisiana.

On de novo review, considering all of TMCC’s business activities related to
the RICs at Issue, which occurred in more than one state, and mindful that any
doubt or ambiguity as to the authority to tax must be resolved in favor of the
taxpayer, United Gas Corporation v. Fontenot, 241 La. 564, 579-580, 129 So. 2d
776, 781 (1961), we conclude that the RICs at Issue cannot be said to have
acquired a business situs in Louisiana because there was no “use of a continuing
nature” in Louisiana “in the regular course” of TMCC’s Retail Finance line of
business. See LAC 61:1.306.A.2.e. While TMCC’s business in this state involved
the acquisition of the RICs at Issue and limited activities related only to those RICs
at Issue that went into default, its use of the RICs at Issue extended well beyond
those activities, with the vast majority of its use, and its “use of a continuing
nature,” of the RICs at Issue occurring outside of Louisiana. Thus, we find no
merit to the Department’s argument in assignments of error numbers two, three,
and four that the “business situs” of the RICs at Issue was Louisiana.

Accordingly, we find no error in the BTA’s conclusion that the RICs at Issue
were “other” notes and accounts pursuant to LSA-R.S. 47:606(A)(2)(e) that had
not acquired a business situs in Louisiana. Thus, the RICs at Issue should not have
been allocated as property located or used in Louisiana in computing TMCC’s
Property Ratio (i.¢., included in the numerator of TMCC’s Property Ratio) for the
determination of its franchise tax liability for the 2005 Refund Period. Because the
overpayment at issue was “the result of an error, omission, or a mistake of fact of
consequence to the determination of the tax liability’ pursuant to LSA-R.S.

47:1621(B)(3), TMCC was entitled to a refund in the stipulated amount of

23

$797,517.00 for its erroneous calculation related to its Property Ratio for the 2005
Refund Period.

Whether the Interest Earned on the RICs at Issue Should Be Allocated to
Louisiana in TMCC’s Sales and Other Revenue Ratio in Computing TMCC’s
Franchise Tax
(TMCC’s Assignments of Error Nos. 1 & 2)

Turning now to TMCC’s appeal, TMCC contends that the BTA erred in
granting in part the Department’s motion for summary judgment, denying in part
its motion for summary judgment, and dismissing in part TMCC’s refund claim as
to franchise taxes paid pursuant to its erroneously calculated Sales and Other
Revenue Ratio.'’ Through its two assignments of error, TMCC argues that the
interest it earned on the RICs at Issue should not have been allocated to Louisiana
in the calculation of its Sales and Other Revenue Ratio for the Refund Period at
issue.

A taxpayer’s Sales and Other Revenue Ratio for purposes of determining
franchise tax is the “ratio that the net sales made to customers in the regular course
of business and other revenue attributable to Louisiana bears to the total net sales
made to customers in the regular course of business and other revenue.” LSA-R.S.
47:606(A)(1). Regarding the allocation of sales and other revenue to Louisiana or

elsewhere, LSA-R.S. 47:606(A)(1) provides, in pertinent part, as follows:

For the purposes of this Subsection net sales and other revenues
attributable to Louisiana shall be determined as follows:

Ce

(h) Interest on customers’ notes and accounts shall be attributed to the
state in which such customers are located.

(1) Other interest and dividends shall be attributed to the state in which
the securities or credits producing such revenue have their situs,
which shall be at the business situs of such securities or credits, if they
have been so used in connection with the taxpayer’s business as to

'’The denial of a motion for summary judgment is an interlocutory judgment and is
appealable only when expressly provided by law. However, where there are cross motions for
summary judgment raising the same issues, this court can review the denial of a summary
judgment in addressing the appeal of the granting of the cross motion for summary judgment.
Pelle v. Munos, 2019-0549 (La. App. 1° Cir. 2/ 19/20), 296 So. 3d 14, 18 n.2.

24

acquire a business situs, or, in the absence of such a business situs
shall be at the commercial domicile of the corporation.

LSA-R.S. 47:606(A)(1)(h) & (1).

In support of its motion for summary judgment and on appeal, TMCC
contends that the interest earned on the RICs at Issue should not have been
allocated to Louisiana under either LSA-R.S. 47:606(A)(1)(h) or (i). Specifically,
TMCC asserts that the interest on the RICs at Issue is not “[i]nterest on customers’
notes and accounts” pursuant to LSA-R.S. 47:606(A)(1)(h) because the “customer”
in each of the RICs at Issue (and, thus, the “customer” paying the interest) was not
TMCC’s customer, but instead was the customer of the selling motor vehicle
dealer. Thus, TMCC contends that the interest on the RICs at Issue was instead
“To]ther interest” under LSA-R.S. 47:606(A)(1)(i), and because the RICs at Issue
do not have a business situs in Louisiana, the interest thereon should not be
allocated to Louisiana in its Sales and Other Revenue Ratio.

The Department, on the other hand, contends that the interest on the RICs at
Issue was properly allocated as Louisiana sales and other revenue pursuant to
LSA-R.S. 47:606(A)(1)(h) because such a determination is consistent with the
plain language of the statute, applicable regulations, and pertinent jurisprudence.
The Department further asserts that TMCC’s argument that LSA-R.S.
47:606(A)(1)(h) would apply only if the customers who entered into the RICs at
Issue were TMCC’s direct customers is wholly without merit.

As to the allocation rule in LSA-R.S. 47:606(A)(1)(h) that “[i]nterest on
customers’ notes and accounts shall be attributed to the state in which such
customers was located,” the Department promulgated regulations, providing
further instruction regarding this allocation, in pertinent part, as follows:

f. Interest on Customers’ Notes and Accounts

i. Interest on customers’ notes and accounts can generally be
associated directly with the specific credit instrument or account upon

25

which the interest is paid and shall be attributed to the state at which
the goods were received by the purchaser or services rendered. ...

LAC 61:1.306.A.1.£.8

We find the language of both LSA-R.S. 47:606(A)(1)(h) and LAC
61:1.306.A.1.f to be clear, and, contrary to TMCC’s argument on appeal, there is
nothing in the language of either the statute or the corresponding regulation
requiring that the customer obligated on the note, and, as such, making the interest
payments, be the direct customer of the current holder of the note.

Additionally, TMCC notes that the Department’s regulations related to the
Property Ratio define “trade accounts” and “trade notes receivable” as only those
resulting from the sale of merchandise or the performance of services for
customers in the regular course of business of the taxpayer and argues that LSA-
R.S. 47:606(A)(1)(h) and LAC 61:1.306.A.1.£ should be similarly construed.
However, the Department clearly chose not to limit “customers? notes and
accounts” for determination of the Sales and Other Revenue Ratio in the same
manner. Moreover, allocation of interest income as set forth in the statute and
regulation results in a fair allocation of revenue earned by a taxpayer in this state.
It also accurately represents the state in which the customer purchased the goods
and entered into the note obligating the customer to pay such interest, thus
representing the state from which the interest revenues were derived and to which
those revenues should be attributable. While taxing statutes are to be liberally
construed in favor of the taxpayer, when a tax law is clear and unambiguous and its

application leads to no absurd consequences, the law shall be applied as written.

Barfield, 185 So. 3d at 785.

‘Pursuant to 2006 amendment of LAC 61:1.306, this section of the Department’s
regulation was re-designated from LAC 61:1.306.A.1.g to its current designation of LAC
61:1.306.A.1.£, and a portion of subsection of (i) was amended. La. Reg. 32:415 (2006).
However, the relevant portion quoted above was not amended, and for ease of reference, we
likewise refer to its current designation.

26

Accordingly, on de novo review, we conclude that the interest on the RICs at
Issue was “[i]nterest on customers’ notes and accounts” as contemplated by LSA-
R.S. 47:606(A)(1)(h) and, thus, constitutes “other revenue attributable to
Louisiana” in the computation of TMCC’s Sales and Other Revenue Ratio
pursuant to LSA-R.S. 47:606(A)(1). None of the grounds for a refund of
overpayment set forth in LSA-R.S. 47:1621(B) or (C) have been established. For
these reasons, we find no merit to TMCC’s argument that the BTA erred in
granting in part the Department’s motion for summary judgment, denying in part
TMCC’s motion for summary judgment, and dismissing TMCC’s claim for refund
of franchise taxes it paid pursuant TMCC’s computation of its Sales and Revenue
Ratio for the Refund Period at issue considering the stipulations herein.

CONCLUSION

For the above and foregoing reasons, we affirm the portions of the February
10, 2021 judgment of the Board of Tax Appeals: (1) granting in part and denying
in part the Department of Revenue’s (“the Department’s”) motion for summary
judgment seeking dismissal of Toyota Motor Credit Corporation’s (“TMCC’s”)
claims for a refund of franchise tax paid for the franchise tax period of April 1,
2005 through March 31, 2006 (“the 2005 Refund Period”); (2) granting in part and
denying in part TMCC’s motion for summary judgment as to its claims for a
refund of franchise tax paid for the 2005 Refund Period; (3) decreeing that the
value of the Retail Installment Contracts at Issue (“RICs at Issue”) for the 2005
Refund Period is not allocated to Louisiana and not included in the numerator of
TMCC’s Property Ratio in the calculation of the apportionment of its franchise tax
base; (4) further decreeing that all interest earned on any RICs at Issue for the 2005
Refund Period was properly included in the numerator of TMCC’s Sales and Other
Revenue Ratio in the calculation of the apportionment of its franchise tax base; (5)

further decreeing that TMCC made an overpayment of its Louisiana corporation

27

franchise tax for the 2005 Refund Period in the amount of $797,517.00 (which
represents the amount of franchise tax paid for the 2005 Refund Period resulting
from the allocation of the value of the RICs at Issue to Louisiana in the computing
of TMCC’s Property Ratio); and (6) ordering the Department to refund TMCC that
amount together with interest thereon at the rates and for the periods provided in
LSA-R.S. 47:1624(A).

Costs of this appeal, in the amount of $5,229.50, are assessed equally
between the parties.

AFFIRMED AS TO THE 2005 REFUND PERIOD.