Trunkline Lng Company, LLC v. Calcasieu Parish School System, Sales & Tax Use Dept.

STATE OF LOUISIANA
COURT OF APPEAL, THIRD CIRCUIT

15-1062

TRUNKLINE LNG COMPANY, LLC

VERSUS

CALCASIEU PARISH SCHOOL SYSTEM, SALES & USE TAX
DEPARTMENT

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APPEAL FROM THE
LOUISIANA BOARD OF TAX APPEALS, NO. L00029
HONORABLE CADE R. COLE, LOCAL TAX JUDGE

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JOHN D. SAUNDERS
JUDGE

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Court composed of Sylvia R. Cooks, John D. Saunders, and Phyllis M. Keaty,
Judges.

AFFIRMED.

Cooks, J., concurs.

David R. Kelly
David R. Cassidy
Nicole F. Gould Frey
Breazeale, Sachse & Wilson, LLP
P. O. Box 3197
Baton Rouge, LA 70821
(225) 387-4000
COUNSEL FOR PLAINTIFF/APPELLANT:
Trunkline LNG Company, LLC

Russell Joseph Stutes, Jr.
Stutes & Lavergne, LLC
600 Broad Street
Lake Charles, LA 70601
(337) 433-0022
COUNSEL FOR DEFENDANT/APPELLEE:
Calcasieu Parish School System, Sales & Use Tax Department

SAUNDERS, Judge.

This is a taxation case related to how large a refund the taxpayer is entitled

to receive. The taxpayer was originally assessed excessively in some months,

while deficiently in others. After having paid the total amount it owed according

to the original audit, the taxpayer requested a refund. Although the tax collector

and taxpayer agree that the taxpayer is entitled to a refund, they do not agree as to

whether the taxpayer is allowed a set-off between the excessive amounts it paid in

some months against the deficient amounts it paid in other months. Were the

taxpayer entitled to a set-off, it would have no underpaid taxes subject to the

statutorily permitted 15% interest since its payment of the amount originally

assessed.

The Board of Tax Appeals (BTA) found that the taxpayer was not entitled to

a set-off resulting in there being some tax periods where the taxes paid were

insufficient while other periods where the taxes paid were excessive. As such, the

BTA reduced the taxpayer’s refund accordingly. The taxpayer appeals. We affirm.

FACTS AND PROCEDURAL HISTORY:

The Calcasieu Parish School Board (CPSB) conducted an audit of Trunkline

LNG Co., LLC (Trunkline) for the taxable period of January 1, 2007, through

December 31, 2009. As a result of that audit, Trunkline paid, without protest,

$1,371,553.05 on April 30, 2013. Shortly thereafter, Trunkline alleged

overpayments and filed a refund claim. Trunkline’s claim for refund was denied

by CPSB.

On September 4, 2014, Trunkline filed a petition with the BTA for

overpayment of taxes. After reducing its claim for refund considerably prior to

trial, Trunkline claimed entitlement to a refund of $99,674.73.

The BTA found that Trunkline was entitled to a refund of $14,367.59. The

basis for this finding was that Trunkline’s refund amount was lowered due to the

interest accruing on the months that Trunkline paid insufficient taxes at a much

higher rate than the interest accruing on the months that Trunkline paid excessive

taxes. Trunkline appeals and asserts two assignments of error.

ASSIGNMENTS OF ERROR:

1. The BTA committed reversible error in ruling that interest of
15% per annum [] continued to accrue on taxes even though
they had been paid.

2. The BTA abused its discretion in excluding the testimony of
Johnny Bailey, a CPSB representative, who admitted Trunkline
owed no additional taxes after the April 30, 2013 payment.

ASSIGNMENT OF ERROR NUMBER ONE:

Trunkline’s first assignment of error is that the BTA erred by finding that

interest continued to accrue on taxes even though those taxes had been paid. We

disagree.

A tax is not a debt in the usual and ordinary sense of that word.
It is not a contract between two parties, but the imposition of a tax is
the positive act of the government, binding upon the inhabitants, and
does not require their individual or personal consent to enable it to be
enforced. Taxes are not demands against which a set-off is admissible
. . . . They are to be regarded not as a debt, but as a contribution
required from the citizen for the support of government.
Considerations of public policy require that a tax of one year should
not be compensated by an overpayment of a previous year. The taxes
of each year are laid to meet the exigencies of that year. If they could
be reduced by a deduction of such sums as had been already
wrongfully demanded and paid, the revenues requisite for the support
of government might be diminished so largely as to occasion public
detriment. But outside of this public policy, as a matter of law, taxes
are not such demands as admit of a plea in compensation.

City of New Orleans v. Davidson, 30 La.Ann 541, 541-42 (La.1978) (citation

omitted). “Before refunding any overpayment, the collector may first determine

whether the taxpayer who made the overpayment owes any other liability under

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any ordinance administered by him. If such be the case, the collector may credit

the overpayment against such liability and notify the taxpayer of the action taken.”

La.R.S. 47:337.78 (emphasis added). Calcasieu Parish Tax Ordinance Section

6.01 (emphasis added) states that “[t]he taxes levied under this Ordinance shall be

due and payable by all dealers monthly on the first day of the month.”

In the case before us, the original audit by CPSB of Trunkline mistakenly

assessed sales taxes with a due date for certain items on the month those items

were ordered by Trunkline. On April 30, 2013, Trunkline paid an amount equal to

the amount of what it believed to be all outstanding taxes due in the erroneous,

original audit. Thereafter, Trunkline filed for a refund and the original audit was

corrected.

The corrected audit changed the month that taxes became due to when the

items ordered by Trunkline were actually received by it rather than when they were

ordered. The corrected audit increased the amount of taxes due for some months,

while lowering the amount of taxes due for others. The changes lowered the total

amount Trunkline owed in sales taxes. Thus, the parties agree that Trunkline is

owed a refund. The central issue in this case is the amount of Trunkline’s refund.

CPSB contends that the 15% interest rate charged when monthly sales taxes

are unpaid continued to accrue for unpaid taxes for the months that Trunkline was

found to have underpaid under the corrected audit while the 2-3% interest rate

accrued for the refund amount CPSB owed Trunkline for the months that it was

found to have overpaid. This, according to CPSB and BTA’s ruling, reduces

Trunkline’s refund.

Trunkline emphatically disagrees, arguing that interest could not accrue on

taxes that it already paid. Trunkline contends that it already paid all of the taxes it

was assessed by CPSB. This is not accurate.
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As is clear from Calcasieu Parish Ordinance § 6.01, the tax periods are

monthly. On April 30, 2013, Trunkline paid what it mistakenly believed to be all

outstanding taxes due. However, after the errors in the original audit were

corrected, Trunkline owed additional taxes for some months. Contrarily, Trunkline

was owed a refund for excess taxes that it paid for earlier months. Trunkline’s

argument relies on the premise that it has the option to set-off what it owes to

CPSB on later months with the overpayments it made for earlier months.

Trunkline does not point to any legal basis for entitlement to set-of, nor does

Louisiana law give Trunkline this option.

As such, the 15% interest rate on outstanding taxes Trunkline owes to CPSB

has been running since those taxes became due. All the while, the 2-3% interest

rate on the outstanding refund that CPSB owes to Trunkline has been running since

the refund was owed. This is the reasoning that the BTA used, and we find no

error in that reasoning. Accordingly, this assignment of error is without merit.

ASSIGNMENT OF ERROR NUMBER TWO:

In its second assignment of error, Trunkline asserts that the BTA abused its

discretion in excluding the testimony of Johnny Bailey, a CPSB representative,

who asserted that Trunkline owed no additional taxes after the April 30, 2013

payment. We find no merit to this assertion.

“The trial court has vast discretion in determining whether to exclude or

allow evidence, and its decisions will not be overturned in the absence of an abuse

of discretion.” Allen v. PHI, Inc., 15-461, p. 2 (La.App. 3 Cir. 12/9/15), 181 So.3d

890, 893 (citing Bellsouth Telecomms., Inc. v. City of Lafayette, 05-1478, 05-1505

(La.App. 3 Cir. 1/5/06), 919 So.2d 844).

Here, the BTA excluded the testimony of Johnny Bailey because he was not

listed by Trunkline as a witness. Trunkline listed “any witness called by the
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opposing party” in the pretrial order. Bailey was on CPSB’s witness list in the

pretrial order, but CPSB did not call him as a witness. When Trunkline attempted

to call Bailey as a witness, CPSB objected because he did not appear on

Trunkline’s witness list. The BTA excluded Bailey’s testimony but Trunkline

proffered that testimony.

Trunkline argues that excluding Bailey’s testimony caused it to suffer

manifest prejudice because Bailey would testify that it did not owe any taxes after

its payment on April 30, 2013. We do not agree.

An employee’s opinion as to whether taxes are owed is not binding on the

entity charged with collecting taxes unless collecting those taxes would cause a

manifest injustice to the taxpayer. See Showboat Star Partnership v. Slaughter,

00-1227 (La. 4/3/01), 789 So.2d 554. In Showboat, our supreme court ruled that a

written statement by a Department of Revenue official stating that certain property

was exempt from sales tax was not binding on the Department absent manifest

prejudice. As stated in Showboat, “no detriment is incurred when the party’s only

injury is that it must pay taxes legitimately owed under the correct interpretation of

the law.” Id., at 563(quoting Valencia Energy Co. v. Arizona Dep’t of Revenue,

191 Ariz. 565, 959 P.2d 1256, 1268-69 (1998)).

Here, we have found that the correct interpretation of the law occurred in

this case. We also find that Trunkline did not suffer manifest injustice by the BTA

excluding Bailey’s testimony. Further, Bailey’s opinion that Trunkline owed no

taxes after April 30, 2013, is not binding on CPSB. Accordingly, this assignment

of error is without merit. The BTA did not abuse its vast discretion in excluding

Bailey’s testimony.

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CONCLUSION:

Appellant, Trunkline LNG Co., LLC, raises two assignments of error. We

find no merit in either assignment. Accordingly, we affirm the judgment and

assess all costs of these proceedings to Trunkline LNG, Co., LLC.

AFFIRMED.

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