concurring in part and dissenting in part. I agree with the majority opinion to the extent that it finds no basis in the record for assessing sales tax on the “sales for resale.” I also agree with that part of the opinion holding that the appellant owes sales tax for three years based on the receipts which he furnished the department. However, I do not agree with extending the three year statute of limitations or in upholding the arbitrary income tax assessment.
This is a clear case of overreaching on the part of the tax collectors. The conduct of the appellant in this case should be considered in light of his perception that the efforts of the Department of Finance and Administration to conduct an audit of his taxes began as a direct result of Jones’ participation in litigation against the Arkansas Attorney General, which successfully challenged the Attorney General’s position in the Arkansas National Guard.
The record in this case reveals that Jones, pursuant to the agreement between himself and the Department, brought in his sales receipts for several years and he included a summary of each year’s receipts on a sheet attached to the outside of these records. It is quite clear that the tax collectors only looked at one bundle for one year and out of it they based their assessment on only a small sample of these. They found his cover sheets to be accurate on the selected samples they examined. The original assessment was levied partially upon the fact that they found a $35,000 savings account in the name of Jones. Subsequently, it developed that it was not even the same Jones. Therefore, they graciously dropped this item as a basis for the estimated assessments.
During one of the hearings one of the tax collectors informed the appellant that all the department had to do was make one telephone call and the property would be subject to levy again. The Department of Finance and Administration employee stated: “That writ of execution can be issued again by a phone call which I can make from that office in there. I mean we are back where we were to start.” What could be more threatening? Power is a heady thing and must of necessity be subject to review. Appellant, acting as his own counsel spoke about his records during the hearing in the Revenue Department, when he stated: “This is all my books and records for the year 1977. It’s never been open. These papers have never been audited yet they say that they have been audited. They agreed to audit my papers.” The response from the state’s attorney: “We believe there was no need to go through everyone of those for that same purpose, so we used a sample.. . . We agreed to do an audit and we did an audit based on the sample. We didn’t agree to examine each and every invoice, as we regularly do not examine each and every invoice on any audit that we do except in very rare circumstances.”
The state had seized his property and the appellant had been thrown in jail for contempt for refusing to furnish his records. The state subsequently agreed to drop the unrealistic tax assessments against him, if he would drop the lawsuits he had against them. The appellant agreed not to challenge the constitutionality of the Arkansas tax laws in return for the state agreeing to do a normal audit and collect whatever tax and penalty his records revealed he owed.
The original assessment against appellant included unemployment taxes due to the employment of three persons. Proof revealed the appellant did not have any employees at all. This is but one more example of the tax collector’s cold-blooded handling of this case.
The assessment by the state of income taxes allegedly due from the appellant had even less foundation in the record than did the sales tax assessment for “sales for resale.” In fact, the reasoning behind the assessment of income tax is completely void of information concerning the appellant’s standard of living. The income tax assessment was based entirely on standardized tables promulgated by the Internal Revenue Service. Moreover, since the majority finds no support in the record for the $800.00 added to the Department’s estimated gross monthly sales based on sales for resale (a figure equal to H of the total estimated sales), this reduction in total sales should be accordingly reflected in the appellant’s estimated yearly income (almost $15,000) and income taxes. The majority opinion fails to identify the year, nature, or amount of the respective taxes owed by the appellant. I think the following question and answer is representative of the whole process here. The appellant, serving as his own counsel, asked the state’s witness: “Then you made no eifort in fact in seeing that these were accurate figures? They are purely speculation, is that correct, sir?” State’s witness: “Yes.” This, in my opinion, accurately describes the entire procedure by the state against this citizen. The taxpayers of the state of Arkansas have a right to expect more consideration from their servants.
The tax collectors never at one time contacted the appellant during the audit here in question. Most of his records were never inspected, yet they were declared insufficient. The chief argument for assessing the income tax is that Jones simply could not have lived on the amount of income he reported. His reported income for the past several years was approximately $150 a month. Up until 1976 his wife was gainfully employed outside the home. Also, the taxpayer’s father, who had independent income, lived with him. The fact is that three people were living out in the country on a known income of about $650 per month. The property was owned by the appellant and his wife and there were no mortgages to pay. Many three member families living in the setting described above would actually be able to save money. I know a great many elderly people here in the city of Little Rock who live on not much more than $200 per month. They do not eat well and perhaps don’t sleep well either, but nevertheless they survive. There is nothing in this record that supports the finding that appellant could not live on the reported income. Obviously the appellant and his wife are frugal. They should not be penalized for being independent and willing to live inexpensively.
It is amazing to me that this Court, in Ragland v. Travenol Laboratories, Inc., 286 Ark. 33, 689 S.W.2d 349 (1985), held that the statute in question here, Ark. Stat. Ann. § 84-4715(e) (Repl. 1980), did not operate retroactively and that the state was limited to three years in collecting such taxes, yet holds in the present case that the six year statute applies retroactively. The majority avoids this issue by stating that we will not consider arguments raised for the first time on appeal. However, the record reflects that the issue of the three year statute of limitations was unequivocally presented to the trial court in the appellant’s direct testimony:
What is the fact that I learned, that Act 401 of 1979 did not go into effect until January 1,1980. It alters the fact of that statutorily, the Department of Finance is limited to three years on audits. ... Yet, it is also a fact that the Department of Finance and Administration is holding certificates of indebtedness against Jones’ estate in the amount of approximately One Hundred Forty-Three Thousand Dollars in violation of A) the retrospective concept of law, by applying Act 401, 1979 to the years 1976, 1977, 1978 and 1979 in the instant case, thereby depriving Jones of the use of his property, denying him constitutional guaranteed rights and B) the statutory three year limit is found at Ark. Stat. Ann. 844715A. [Emphasis added.]
The appellant argued that Act 401 of 1979 should not be applied retroactively, and that the applicable statute of limitations was therefore three years. This is exactly the conclusion reached by this Court in Travenol. We have previously held that the legislature intended to allow three years in which the Commissioner could commence a challenge to the sufficiency of an income tax return. Ragland v. Alpha Aviation Company, Inc., 285 Ark. 182, 686 S.W.2d 391 (1985).
Jones is apparently a fiercely independent man, and obviously a dissenter. Nevertheless, he is entitled to the same rights as other citizens. It seems to me that the Boston Tea Party was carried out by the likes of Theodore Jones. He may be a thorn in the side of tax collectors but he still deserves equal and fair treatment under the law. I do not think he has been treated fairly.
This case is a clear example of the strong hand of the government reaching into the lives and trampling upon the rights of individuals in order to reach a result desired by the government. It seems that all sight is lost of the fact that the Constitution was adopted by the people and for the protection of the rights of the people. This taxpayer struck a deal with the state and the state reneged. He had little choice but to sign the agreement — he had already spent some time in jail and all of his property had been seized. In doing so, the government had of course seized appellant’s wife’s property as well. Arbitrary, capricious, vindictive, and speculative are the best words to describe the actions of the state in this case. The income tax assessment is completely unfounded by the evidence in the record. I would reverse the assessments except with respect to the three years’ sales taxes.
Hickman, J., joins in this opinion.