Department of Taxation v. Daimler-Chrysler Services North America, LLC

Maupin, J.,

dissenting:

I dissent to the result reached by the majority. In my view, as stated by Justice Hardesty, DaimlerChrysIer qualifies as a retailer under Chapter 372 of the Nevada Revised Statutes. Also, in my view, DaimlerChrysIer was the entity/person who actually paid the entirety of the sales taxes to the Nevada Department of Taxation under NRS 372.700. Thus, DaimlerChrysIer is entitled to bad-debt relief under NRS 372.365(5).

Hardesty, J.,

dissenting:

In my view, the district court correctly concluded that the bad-debt statute, NRS 372.365(5), in the Nevada Sales and Use Tax Act, applies to providers of installment retail credit.

“[Questions of statutory construction, including the meaning and scope of a statute, are questions of law, which this court reviews de novo.”1 When the language of a statute is unambiguous, this court gives that language its ordinary meaning unless it is clear that this meaning was not intended.2

NRS 372.365(5) provides as follows:

5. If a retailer:
(a) Is unable to collect all or part of the sales price of a sale, the amount of which was included in the gross receipts reported for a previous reporting period; and
*550(b) Has taken a deduction on his federal tax return pursuant to 26 U.S.C. § 166(a) for the amount which he is unable to collect,
he is entitled to receive a credit for the amount of sales tax paid on account of that uncollected sales price. The credit may be used against the amount of sales tax that the retailer is subsequently required to pay pursuant to this chapter.

DaimlerChrysler satisfies each of the four elements summarized by the majority to qualify for bad-debt relief under NRS 372.365(5). Neither the statute nor its application in this case is ambiguous. The majority does not dispute DaimlerChrylser’s claim that it was unable to collect all or part of the sales price, that the sales in question were included in the retailer’s gross receipts reported to the Department, or that it took a deduction for the uncol-lectible amount on its federal income tax return. To' reach its result, however, the majority concludes that DaimlerChrysler is not a retailer under the Sales and Use Tax Act.

NRS 372.055(l)(c) defines retailers to include “[e]very person” making more than two retail sales during any 12-month period.3 NRS 372.040 defines “person” under this statutory scheme as including, among others, assignees. The majority asserts that these statutory definitions are not specifically tailored to the bad-debt statute. However, NRS 372.015 makes clear that “the definitions given in NRS 372.020 to 372.095, inclusive, govern the construction of” the Sales and Use Tax Act. Further, this court presumes that the Legislature is aware of the relevant statutory scheme when it enacts a piece of legislation.4 Because the bad-debt statute is part of Chapter 372 and incorporates terms such as “retailer” that are defined elsewhere within Chapter 372, it appears clear that the Legislature intended these terms to be interpreted in accordance with these definitions.

In its reasoning, the majority ignores the “plain meaning” rule of statutory interpretation for the term “retailer” and argues two rather new, if not unsupported, concepts. Its first concept can best be called the distance rule. Under this rule, the majority contends that if the definitions are found at the beginning of a chapter (not *551unusual for most of our laws), they are somehow “not specifically tailored to the bad-debt provisions contained later in the Act.”5 This rationale expressly contradicts NRS 372.015. Further, I know of no case that suggests that this court can modify or disregard a definition based on its location in a chapter of the NRS from the statute under review.

The second concept used by the majority can best be described as the “piling on” or “bootstrapping” of definitions concept. Here, the majority criticizes DaimlerChrysler for using several broad definitions to distort uncontested facts or defeat clear statutory directives. However, the majority has failed to identify what uncontested facts are being distorted or how a statutory directive is defeated by the use of statutory definitions applicable to all statutes in the same chapter. Neither of these novel concepts has been used by this court in the past to interpret statutes, and I would strongly urge my colleagues against doing so in the future. These approaches to statutory interpretation subject the laws of this state to uncertainty and unpredictability when we should be trying to achieve just the opposite outcome.

I can perceive no discernable difference between NRS 372.365(5) and Washington’s bad-debt statute at issue in Puget Sound National Bank v. Department of Revenue,6 The statutory scheme addressed in Puget Sound entitled retail sellers to “a credit or refund for sales taxes previously paid on debts which are deductible as worthless for federal income tax purposes,”7 defined “sellers” as “person[s]”8 making retail sales, and defined a “person” as including an “assignee.”9 Within that framework, the Washington Supreme Court determined that third-party financing entities, given rights under retail credit assignment agreements, were eligible to claim bad-debt sales tax refunds.10

The majority notes that a number of other jurisdictions have refused to extend bad-debt relief to third-party financing entities.11 *552However, a careful examination of the statutes in each of the other states shows that they are quite different from our statutory scheme. The differences are best described by the Court of Appeals of Tennessee in Suntrust Bank, Nashville v. Johnson, when it noted,

Two other jurisdictions, Nevada and Washington, have construed their bad debt sales tax credit statutes to permit the as-signee of the automobile dealer to receive a credit or refund when the purchaser subsequently defaults on the retail installment contract. However, in both jurisdictions, the statutory definitions of “dealer” or “retailer” and “person” were broad enough to include an assignee of a dealer or retailer.12

The majority also argues that our bad-debt statute provides for relief in the form of a credit, not a refund. As a consequence, the majority concludes that the “use of the credit device for relief structurally eliminates third-party lenders from its protection.”13 Once again, the majority either ignores or overlooks the express language in the bad-debt statute.14 The final sentence in that statute omitted from the majority opinion reads, “The credit may be used against the amount of sales tax that the retailer is subsequently required to pay pursuant to this chapter.” This language makes clear that the retailer may apply the bad-debt relief credit to future sales tax obligations. But the choice belongs to the retailer and in no way creates any statutory structure prohibiting a retailer from demanding a refund of the bad-debt credit.

Going further, NRS 372.700, relied upon by the majority, does not, by its plain language, compel the result sought by the Department. NRS 372.700 provides as follows:

A judgment may not be rendered in favor of the plaintiff in any action brought against the Department to recover any amount paid when the action is brought by or in the name of an assignee of the person paying the amount or by any person other than the person who paid the amount.

(Emphasis added.) This language is ambiguous in the context of the true nature of the transactions involved in this case. Thus, I would construe NRS 372.700 in accord with legislative intent and to avoid reaching an absurd result. To explain, the original retail sales transactions included a contemporaneous assignment of the installment contracts to DaimierChrysler. DaimierChrysler funded these purchases, including the sales tax, and the dealer forwarded *553the tax payment to the Department. Despite the fact that the dealer physically forwarded the tax payment to the Department, I would conclude that DaimlerChrysler, under NRS 372.700, was “the person who paid the amount” of the taxes on the underlying vehicle contracts.

The Department further contends that the dealers, having received the full amount financed from DaimlerChrysler, incurred no losses due to bad debts and, thus, enjoyed no refund rights. The Department then reasons that DaimlerChrysler could not ascend to rights unavailable to its assignor. I disagree. Rights under the installment contracts between the purchasers and the dealers were assigned to DaimlerChrysler. Those rights included the rights generally available to creditors under installment sales agreements. In short, the dealers sold their rights in the event of purchaser default to DaimlerChrysler.

The majority’s formalistic interpretation of the bad-debt statute fails to account for the reality of the modern marketplace, in which third-party vehicle financing arrangements are the norm.15 The Department’s position likewise runs counter to the apparent intent of the Legislature in passing the bad-debt statute: to alleviate the tax burden of entities that paid the full sales tax due on behalf of a purchaser who later defaults on the loan.16 Certainly, the circumstances of this case justify DaimlerChrysler’s eligibility for bad-debt relief.

CONCLUSION

NRS 372.365(5) entitles DaimlerChrysler to bad-debt relief. DaimlerChrysler did not receive a discount in its purchase of vehicle financing contracts but paid the full amount financed, including the full amount of sales tax. Therefore, DaimlerChrysler should receive tax relief proportionate to the sales tax remaining on the defaulted contracts. Accordingly, I would affirm the district court’s decision to grant DaimlerChrysler’s petition for judicial review.

City of Reno v. Reno Gazette-Journal, 119 Nev. 55, 58, 63 P.3d 1147, 1148 (2003).

Harris Assocs. v. Clark County Sch. Dist., 119 Nev. 638, 641-42, 81 P.3d 532, 534 (2003).

The NRS 372.055 definition of “retailer” includes two other categories of sellers or persons. The majority references the first of these as “[ejvery seller who makes any retail sale or sales of tangible.personal property.” However, this reference is not applicable because “seller” is defined at NRS 372.070 “as every person engaged in the business of selling tangible personal property.” Although DaimlerChrysler sells repossessed vehicles on occasion, it does not rely on the NRS 372.070 “seller” definition to come within the bad-debt statute.

See City of Boulder v. General Sales Drivers, 101 Nev. 117, 118-19, 694 P.2d 498, 500 (1985) (“It is presumed that in enacting a statute the legislature acts with full knowledge of existing statutes relating to the same subject.”).

See majority opinion ante p. 547.

868 P.2d 127, 129 (Wash. 1994).

Wash. Rev. Code § 82.08.037.

Id. § 82.08.010(2).

Id. § 82.04.030.

See Puget Sound, 868 R2d at 132.

See, e.g., DaimlerChrysler v. Weiss, No. 04-284, 2004 WL 2904685 (Ark. Dec. 16, 2004); Weiss v. American Honda, No. 04-617, 2004 WL 2904680 (Ark. Dec. 16, 2004); Chrysler Financial Co., L.L.C. v. Wilkins, 812 N.E.2d 948 (Ohio 2004); In re Appeal of Ford Motor Credit Co., 69 P.3d 612 (Kan. 2003); DaimlerChrysler v. State Tax Assessor, 817 A.2d 862 (Me. 2003); Department of Revenue v. Bank of America, 752 So. 2d 637 (Fla. Dist. Ct. App. 2000); General Motors Acceptance v. Jackson, 542 S.E.2d 538 (Ga. Ct. App. 2000); Suntrust Bank, Nashville v. Johnson, 46 S.W.3d 216 (Tenn. Ct. App. 2000).

46 S.W.3d at 225 (citing Puget Sound, 868 P.2d at 130; 2000-08 Op. Att’y Gen., 2000 WL 246660, *2 (withdrawn)).

See majority opinion ante p. 547.

NRS 372.365(5).

The Department, citing Shetakis Distributing v. State, Department Taxation, 108 Nev. 901, 907, 839 P.2d 1315, 1319 (1992), urges this court to undertake strict interpretation of the statute because relief afforded under the statute is analogous to a tax exemption. I would decline to utilize this method of interpretation because it would produce an unreasonable result in this case, namely providing a windfall to the State. See Hughes Properties v. State of Nevada, 100 Nev. 295, 297, 680 P.2d 970, 971 (1984).

The Department asserts that legislative history bars DaimlerChrysler’s claim for bad-debt relief and relies on committee minutes discussing A.B. 535, the bill that amended the bad-debt statute in 1997. See A.B. 535, 69th Leg. (Nev. 1997). Specifically, the Department refers to a comment by a lobbyist, stating that the bill’s fiscal note did not account for third-party credit. I find this comment and other commentary on the bill insufficient to establish any legislative intent to bar bad-debt relief to financial institutions in this case.