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SOAH DOCKET NO. 304-22-1284.70
CPA HEARING NO. 116,430
RE: Monthly Auto Sales, Inc.
TAXPAYER NO: **************
AUDIT OFFICE: **************
AUDIT PERIOD: January 1, 2014 THROUGH June 30, 2017
Sel Fin -Mot Veh Sls/RDT
BEFORE THE COMPTROLLER
OF PUBLIC ACCOUNTS
OF THE STATE OF TEXAS
GLENN HEGAR
Texas Comptroller of Public Accounts
PERRY HEITMAN
Representing Respondent
**************
Representing Petitioner
COMPTROLLER’S DECISION
This decision is considered final on October 14, 2022, unless a motion for rehearing is timely filed; this date of finality is calculated based on the Administrative Procedure Act (APA).[1] The failure to timely file a motion for rehearing may result in adverse legal consequences.
Administrative Law Judge (ALJ) Trevor Moore of the State Office of Administrative Hearings (SOAH) issued a Proposal for Decision (PFD) that includes Findings of Fact and Conclusions of Law. SOAH served the PFD on each party and each party was given an opportunity to file exceptions and replies with SOAH in accordance with SOAH’s rules of procedure. The ALJ recommended that the Comptroller adopt the PFD as written.
After review and consideration, IT IS ORDERED that the PFD is adopted as written.
The result from this Decision is Attachment A. The ALJ’s letter to the Comptroller is Attachment B. The PFD as written is Attachment C. Attachments A, B, and C are incorporated by reference.
Attachment A reflects a liability.[2]
The total sum of the tax, penalty, and interest is due and payable 20 days after a comptroller’s decision becomes final.[3] If such sum is not timely paid, an additional penalty of 10 percent of the taxes due will accrue.
SIGNED on this 19th day of September 2022.
GLENN HEGAR
Comptroller of Public Accounts
By: Lisa Craven
Deputy Comptroller
Attachment A, Texas Notification of Hearing Results
Attachment B, ALJ’s letter to the Comptroller
Attachment C, Proposal for Decision as written
ATTACHMENT C
SOAH DOCKET NO. 304-22-1284.70
TCPA DOCKET NO. 116,430
**************
Taxpayer No. **************
v.
TEXAS COMPTROLLER OF PUBLIC ACCOUNTS
BEFORE THE STATE OFFICE OF ADMINISTRATIVE HEARINGS
AMENDED PROPOSAL FOR DECISION
************** (Petitioner) seeks redetermination of a motor vehicle sales and use tax audit assessment made by the Tax Division (Staff) of the Texas Comptroller of Public Accounts (Comptroller). Petitioner contends Exam 2 of the audit is overstated due to the inclusion of assessments of vehicle sales where it applied for title and registration within 60 days of the sale and assessments for sales of motor vehicles that were repossessed by Petitioner. Petitioner also argues it has remitted tax on sales assessed in Exam 2 of the audit and, therefore, a credit should be applied. Staff agreed to make adjustments to Exam 2 and partial interest waiver, but contends no other adjustments are warranted. In this Amended Proposal for Decision, the Administrative Law Judge (ALJ) recommends that the audit be affirmed, except as agreed by Staff.
I. PROCEDURAL HISTORY, NOTICE, AND JURISDICTION
Staff referred this case to the State Office of Administrative Hearings (SOAH) and, on January 12, 2022, issued a Notice of Hearing by Written Submission. On January 21, 2022, ALJ Trevor Moore issued Order No. 1, which set the written submission hearing. Attorney Perry Heitman represented Staff. Petitioner was represented by ************** of COMPANY A. The contested case record closed on March 16, 2022.
The Proposal for Decision was issued on March 21, 2022, and on April 4, 2022, the parties filed Joint Exceptions to the Proposal for Decision, citing several agreements that had not been identified previously. This Amended Proposal for Decision incorporates those agreements.
There are no issues of notice or jurisdiction; therefore, those matters are set out in the Findings of Fact and Conclusions of Law without further discussion.
II. REASONS FOR DECISION
A. Evidence
Staff submitted the pleadings the parties exchanged prior to referring the case to SOAH and provided the following exhibits:
1. Sixty-Day Letter;
2. Texas Notification of Audit Results;
3. Penalty and Interest Waiver Worksheet;
4. Audit Report; and
5. Audit Plan.
Petitioner submitted the following exhibits, attached to its pleadings:
1. Audit Exams;
2. Texas Title Application Receipts and Copies of Checks for Payment of Fees;
3. Exam 2 Summary;
4. AutoStar Report;
5. Summary of Repossessed Vehicles; and
6. Copies of Texas Motor Vehicle Tax Returns and COMPANY B Acceptance/COMPANY C.
B. Agreed Adjustments
Staff agreed the following transactions should be removed from Exam 2 or the audit:
Transaction Date |
Buyer Name |
Tax Amount |
12/30/15 |
INDIVIDUAL A |
$474.17 |
12/30/15 |
INDIVIDUAL B |
$705.74 |
4/11/16 |
INDIVIDUAL C |
$624.69 |
4/19/16 |
INDIVIDUAL D |
$638.87 |
5/4/16 |
INDIVIDUAL E |
$771.96 |
7/15/16 |
INDIVIDUAL G |
$508.33 |
1/12/17 |
INDIVIDUAL H |
$813.62 |
4/26/17 |
INDIVIDUAL J |
$903.75 |
7/10/17 |
INDIVIDUAL K |
$685.88 |
Total |
|
$6,127.01 |
Staff also agreed to waive accrued interest from April 1, 2020, through December 31, 2021.
C. Facts Demonstrated by the Evidence
During the period at issue, Petitioner operated a used car dealership in CITY, Texas, and was permitted for seller-financed motor vehicle sales tax. In October 2017, Staff initiated a motor vehicle sales tax compliance audit for the period January 1, 2014, through June 30, 2017. A detailed examination and adjustments were made for tax collected but not remitted (Exam 1), motor vehicle titles registered more than 60 days after the date of sale (Exam 2), and motor vehicle promissory notes sold to third-party finance companies (Exams 3 and 4). On March 5, 2018, Staff issued a Texas Notification of Audit Results to Petitioner, assessing a liability that consisted of tax, penalty, and accrued interest. Petitioner requested redetermination of the assessment.
Petitioner does not dispute the title transfers for the vehicles assessed in Exam 2 were completed more than 60 days after the date of sale, but contends it applied for the title registrations for 37 of the vehicles prior to the deadline and, therefore, the registrations were timely. Petitioner also maintains 115 of the sales assessed in Exam 2 were vehicles that were repossessed by Petitioner, and Petitioner should not be liable for the tax due on the unpaid balance at the time of the repossession. Petitioner also argues it has collected and remitted sales tax on some of the sales assessed in Exam 2 and, therefore, a credit should be applied to account for that tax.
D. ALJ’s Analysis and Recommendation
A tax is imposed on every retail sale of every motor vehicle sold in this state. Tex. Tax Code §§ 152.001(1), .021(a). The tax is imposed on the total consideration paid or to be paid for a motor vehicle. Id. § 152.002(a). A retail sale completed by a motor vehicle dealer in which the seller collects all or part of the total consideration in periodic payments and retains a lien on the motor vehicle until all payments have been received is defined as a seller-financed sale. Id. § 152.001(15).
A seller engaged in seller-financed motor vehicle sales must keep a lienholder’s copy of the receipt for title application, registration, and motor vehicle tax issued by a county tax assessor‑collector (CTAC). Id. § 152.0635(b)(1). Additionally, a seller engaged in seller-financed motor vehicle sales must keep a ledger or other document containing a complete record of the payment history for that motor vehicle that includes: the name and address of the purchaser; the total consideration; the amount of the down payment received at the time the motor vehicle is sold; the date and amount of each subsequent payment; the date of sale; and the date of any repossession. Id. § 152.0635(b)(2). Generally, the seller of a motor vehicle shall report and pay the tax imposed on a seller‑financed sale to the Comptroller on the seller’s receipts from the seller-financed sales in the same manner as sales tax is reported and paid under Chapter 151. Id. § 152.047(a).
A dealer who makes a seller-financed sale must apply to the appropriate CTAC to title and register the motor vehicle by filing an Application for Texas Title and/or Registration no later than the 45th day after the date the motor vehicle is delivered to the purchaser. Id. § 152.069(a); 34 Tex. Admin. Code § 3.74(c)(1)(A). A dealer making a seller‑financed sale must also collect and remit motor vehicle tax on the total consideration for the motor vehicle at the time the Application for Texas Title and/or Registration is presented to the CTAC or collect and remit the motor vehicle tax to the Comptroller as the payments are received. 34 Tex. Admin. Code § 3.74(c)(1)(B)(i), (ii). If the seller fails to apply for title and registration for a motor vehicle sold in a seller‑financed sale by the 60th day after the date the motor vehicle is delivered to the purchaser, the seller is liable for all unpaid tax on the total consideration. Tex. Tax Code § 152.047(f); 34 Tex. Admin. Code § 3.74(e)(5). In that instance, the dealer must remit all unremitted motor vehicle tax on the first seller-financed sales tax report due no later than the 20th day of the month following the end of the reporting period in which the expiration of the 60 days occurred. 34 Tex. Admin. Code § 3.74(e)(5).
Motor vehicle sales tax is due on each retail sale of a vehicle even if the vehicle was subsequently repossessed. See, e.g., Comptroller’s Decision Nos. 101,710 (2009), 46,212 (2007), 30,670 (1993), 28,003 (1992). Regarding dealers who make seller-financed sales, the Comptroller has specifically stated that dealers who fail to register the vehicles within 60 days of the sale owe tax on the full consideration even if the vehicles are repossessed within the 60-day period. See, e.g., Comptroller’s Decision No. 112,479 (2016); see also State Tax Automated Research (STAR) Document No. 9309L1257C04 (September 10, 1993).
In this case, there is no dispute regarding the sale of the vehicles at issue or the fact that the title transfers for those vehicles were completed beyond 60 days from the date of the sale. The ALJ concludes Staff met its prima facie burden to demonstrate motor vehicle tax was due on the sales price of the vehicles included in Exam 2, and Petitioner bears the burden of showing audit error by a preponderance of the evidence. See 34 Tex. Admin. Code § 1.26(e).
Petitioner contends the title and registration applications for 37 vehicles included in Exam 2 were submitted on or before 60 days from the date of the respective sales. In support of its contention, provided copies of checks for registration fees made out to the Tarrant County Tax Assessor-Collector, Ron Wright. Petitioner argues these checks are dated within 60 days of the related sales at issue and were submitted on the stated date along with the Application for Texas Title and/or Registration for each vehicle. Petitioner acknowledges the “Effective Date” per the Title Application Receipts for each of the titles is after the 60-day deadline but argues this was due to delays in the CTAC’s office, delays that are not within Petitioner’s control. The ALJ agrees in part.
Petitioner is correct that the date a title transfer is completed by a CTAC is outside a dealer’s control and does not necessarily represent the date the dealer applied for title and registration. However, there is no testimony or other documentary evidence to support the contention that the checks made out to the CTAC were dated and submitted on the same day along with the applications at issue. The ALJ finds that the dates on the checks written by Petitioner, standing alone, do not establish, by a preponderance of the evidence, the date that the application for title and registration was submitted. Therefore, Petitioner has not provided sufficient evidence to demonstrate that it complied with the terms of Texas Tax Code § 152.047(f) and its contention should be denied, except as agreed by Staff.
Petitioner also argues that most of the vehicles assessed in Exam 2 were repossessed by Petitioner after the sale and, if tax is due, it should not be based on the unpaid balance due on the sale. The ALJ disagrees. As established, the motor vehicle sales tax was due on the sales assessed in Exam 2, and the fact that those vehicles may have been repossessed by Petitioner does not affect the amount of tax due on those sales. See Texas Tax Code § 152.047(f); see also Comptroller’s Decision No. 112,479 (2016); STAR Document No. 9309L1257C04 (September 10, 1993). Petitioner’s contention regarding repossessed vehicles should be denied, except as agreed by Staff.
Petitioner also argued that, in the time since the audit, it has collected and remitted tax on some of the vehicles assessed in Exam 2. Petitioner provided a spreadsheet that Petitioner contends reflects up-to-date payment information to support this contention. However, Petitioner has not provided tax reports or other evidence to demonstrate that the tax has been remitted to the Comptroller or that tax was included in Petitioner’s tax returns. Therefore, Petitioner’s evidence is insufficient to demonstrate audit error and the contention should be denied, except as agreed by Staff.
III. FINDINGS OF FACT
1. During the periods at issue, ************** (Petitioner) operated a used car dealership in CITY, Texas, and was permitted for seller-financed motor vehicle sales tax.
2. In October 2017, the Tax Division (Staff) of the Texas Comptroller of Public Accounts (Comptroller) initiated a motor vehicle sales tax compliance audit for the period January 1, 2014, through June 30, 2017.
3. A detailed examination and adjustments were made for tax collected but not remitted (Exam 1), motor vehicle titles registered more than 60 days after the date of sale (Exam 2), and motor vehicle promissory notes sold to third-party finance companies (Exams 3 and 4).
4. On March 5, 2018, Staff issued a Texas Notification of Audit Results to Petitioner, assessing a liability that consisted of tax, penalty, and accrued interest.
5. Petitioner requested redetermination of the assessment.
6. Staff referred the matter to the State Office of Administrative Hearings (SOAH).
7. On January 12, 2022, Staff issued a Notice of Hearing by Written Submission. The notice contained a statement of the nature of the hearing; a statement of the legal authority and jurisdiction under which the hearing was to be held; a reference to the particular sections of the statutes and rules involved; and a short, plain statement of the factual matters asserted, or an attachment that incorporated by reference the factual matters asserted in the complaint or petition filed with the state agency.
8. On January 21, 2021, the Administrative Law Judge issued Order No. 1, which set the written submission hearing.
9. Staff agreed to make adjustments to Exam 2 of the audit and to waive accrued interest from April 1, 2020, through December 31, 2021.
10. The contested case record closed on March 16, 2022.
IV. CONCLUSIONS OF LAW
1. The Comptroller has jurisdiction over this matter. See Tex. Tax Code ch. 111.
2. SOAH has jurisdiction over matters related to the hearing in this matter, including the authority to issue a proposal for decision with findings of fact and conclusions of law. See Tex. Gov’t Code ch. 2003.
3. Staff provided proper and timely notice of the hearing. See Tex. Gov’t Code ch. 2001; Tex. Tax Code § 111.009.
4. A tax is imposed on every retail sale of every motor vehicle sold in this state. Tex. Tax Code §§ 152.001(1), .021(a).
5. The tax is imposed on the total consideration paid or to be paid for a motor vehicle. Tex. Tax Code § 152.002(a).
6. A retail sale completed by a motor vehicle dealer in which the seller collects all or part of the total consideration in periodic payments and retains a lien on the motor vehicle until all payments have been received is defined as a seller-financed sale. Tex. Tax Code § 152.001(15).
7. A seller engaged in seller-financed motor vehicle sales must keep a lienholder’s copy of the receipt for title application, registration, and motor vehicle tax issued by a county tax assessor-collector. Tex. Tax Code § 152.0635(b)(1).
8. A seller engaged in seller-financed motor vehicle sales must keep a ledger or other document containing a complete record of the payment history for that motor vehicle that includes: the name and address of the purchaser; the total consideration; the amount of the down payment received at the time the motor vehicle is sold; the date and amount of each subsequent payment; the date of sale; and the date of any repossession. Tex. Tax Code § 152.0635(b)(2).
9. Generally, the seller of a motor vehicle shall report and pay the tax imposed on a seller‑financed sale to the Comptroller on the seller’s receipts from the seller-financed sales in the same manner as sales tax is reported and paid under Chapter 151. Tex. Tax Code § 152.047(a).
10. A dealer who makes a seller-financed sale must apply to the appropriate county tax assessor-collector (CTAC) to title and register the motor vehicle by filing an Application for Texas Title and/or Registration no later than the 45th day after the date the motor vehicle is delivered to the purchaser. Tex. Tax Code § 152.069(a); 34 Tex. Admin. Code § 3.74(c)(1)(A).
11. A dealer making a seller‑financed sale must collect and remit motor vehicle tax on the total consideration for the motor vehicle at the time the Application for Texas Title and/or Registration is presented to the CTAC or collect and remit the motor vehicle tax to the Comptroller as the payments are received. 34 Tex. Admin. Code § 3.74(c)(1)(B)(i), (ii).
12. If a motor vehicle seller fails to apply for title and registration for a motor vehicle sold in a seller‑financed sale by the 60th day after the date the motor vehicle is delivered to the purchaser, the seller is liable for all unpaid tax on the total consideration. Tex. Tax Code § 152.047(f); 34 Tex. Admin. Code § 3.74(e)(5).
13. A dealer must remit all unremitted motor vehicle tax on the first seller-financed sales tax report due no later than the 20th day of the month following the end of the reporting period in which the expiration of the 60 days occurred. 34 Tex. Admin. Code § 3.74(e)(5).
14. Motor vehicle sales tax is due on each retail sale of a vehicle even if the vehicle was subsequently repossessed. See, e.g., Comptroller’s Decision Nos. 101,710 (2009), 46,212 (2007), 30,670 (1993), 28,003 (1992).
15. Dealers who fail to register the vehicles within the 60-day period will owe tax on the full consideration even if the vehicles are repossessed within the 60-day period. See, e.g., Comptroller’s Decision No. 112,479 (2016); see also State Tax Automated Research Document No. 9309L1257C04 (September 10, 1993).
16. Staff met its prima facie burden to demonstrate motor vehicle tax was due on the sales assessed in Exam 2.
17. Petitioner bears the burden of showing audit error by a preponderance of the evidence. 34 Tex. Admin. Code § 1.26(e).
18. Petitioner’s evidence is insufficient to establish audit error, except as agreed by Staff.
19. The audit assessment should be affirmed, except as agreed by Staff.
SIGNED April 27, 2022.
TREVOR MOORE
ADMINISTRATIVE LAW JUDGE
STATE OFFICE OF ADMINISTRATIVE HEARINGS
ENDNOTES:
[1] The date calculated is 25 days after this decision is signed. See APA, Tex. Gov’t Code § 2001.146(a); S.B. 1095, Acts 2017, 85th Leg. For additional guidance, refer to the Frequently Asked Questions Related to Motions for Rehearing, found here: http://comptroller.texas.gov/taxes/publications/96-1789.pdf
[2] At present, insufficient information is available to determine which items and amounts are disputed or undisputed for purposes of Tex. Tax Code, Ch. 112. In the absence of this information, the Comptroller will assume the entire amount of the assessment, as it appears in Comptroller’s Decision Attachment A, the Notification of Hearing Results, remains in dispute. If Petitioner intends to sue the comptroller to dispute an amount of tax, penalty, or interest assessed in a deficiency redetermination or jeopardy determination under Tex. Tax Code, Ch. 111, Petitioner is required to file a motion for rehearing that “states the specific grounds of error and the disputed amounts associated with the grounds of error.” Tex. Tax Code § 112.201(a)(3). Petitioner should refer to Tex. Tax Code, Ch. 112, for further guidance regarding a suit after redetermination.