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SOAH DOCKET NO. 304-23-00423.70
CPA HEARING NO. 118,612
RE: **************
TAXPAYER NO: **************
AUDIT OFFICE: **************
AUDIT PERIOD: July 1, 2017 THROUGH August 31, 2020
Sel Fin -Mot Veh Sls/RDT
BEFORE THE COMPTROLLER
OF PUBLIC ACCOUNTS
OF THE STATE OF TEXAS
GLENN HEGAR
Texas Comptroller of Public Accounts
JANICE CAHALANE
Representing Respondent
**************
Representing Petitioner
COMPTROLLER’S DECISION
This decision is considered final on January 9, 2023, 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 amended PFD. The ALJ recommended that the Comptroller adopt the Amended PFD as written.
After review and consideration, IT IS ORDERED that the Amended PFD is adopted as written.
The result from this Decision is Attachment A. The ALJ’s letter to the Comptroller is Attachment B. The Amended 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. If such sum is not timely paid, an additional penalty of 10 percent of the taxes due will accrue.
SIGNED on this 14th day of December 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, Amended Proposal for Decision as written
ATTACHMENT B
State Office of Administrative Hearings
Kristofer S. Monson
Chief Administrative Law Judge
December 5, 2022
**************
**************
RE: SOAH Docket: 304-23-00423.70
TCPA Hearing No.: 118,612
Dear Parties:
Please be advised that Staff filed exceptions to the Proposal for Decision (PFD) in this matter on November 8, 2022. Staff filed exceptions on November 14, 2022. Petitioner did not file a response.
In its exceptions, Staff proposed edits to clarify and correct the applicable law cited. The ALJ agrees with Staff’s exceptions and has amended the PFD with regard to the suggested amendments. This change does not constitute a substantive amendment that would afford the parties an opportunity to file exceptions.
A copy of the Amended PFD is enclosed. The ALJ recommends that the Amended PFD be adopted as written.
Sincerely,
Trevor Moore
Presiding Administrative Law Judge
ATTACHMENT C
SOAH DOCKET NO. 304-23-00423.70
CPA HEARING NO. 118,612
**************
TAXPAYER NO: **************
v.
TEXAS COMPTROLLER OF PUBLIC ACCOUNTS
BEFORE THE STATE OFFICE OF ADMINISTRATIVE HEARING
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 the audit is overstated due to the inclusion of assessments of vehicle sales where the registrations were delayed and could not be completed within 60 days of the sale. In this Amended Proposal for Decision, the Administrative Law Judge (ALJ) recommends that the assessment be affirmed.
I. NOTICE, JURISDICTION, AND PROCEDURAL HISTORY
Staff referred this case to the State Office of Administrative Hearings (SOAH) and, on September 9, 2022, issued a Notice of Hearing by Written Submission. On the same day, ALJ Trevor Moore issued Order No. 1, which set the written submission hearing. Janice Cahalane represented Staff, and Petitioner was represented by ************** of COMPANY. The contested case record closed on November 7, 2022, and the Proposal for Decision was issued on November 8, 2022. On November 14, 2022, Staff filed its exceptions to the PFD. Petitioner did not file a response.
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
Petitioner did not submit evidence for the hearing. 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.
B. Agreed Adjustments
Staff did not agree to make adjustments to the assessment.
C. Facts Demonstrated by the Evidence
During the period at issue, Petitioner operated a used car dealership in CITY, Texas, and was permitted to collect tax on seller-financed motor vehicle sales. In August 2020, Staff initiated a motor vehicle sales tax compliance audit for the period July 1, 2017, through August 31, 2020. A detailed examination was completed for Exam 101, resulting in adjustments for seller-financed vehicle sales in which Petitioner failed to timely apply for title and registration. On January 11, 2021, Staff issued a Texas Notification of Audit Results to Petitioner, assessing a tax and accrued interest. Penalty was waived. Petitioner requested redetermination of the assessment.
Petitioner cited 11 vehicle sales that remain in contention. He does not dispute that he applied for title and registration for the vehicles more than 60 days after the date the motor vehicle was delivered to the purchaser, but he contends there were circumstances such as delayed inspections and delayed transfers of title from the former owners that prevented timely applications. Therefore, Petitioner argues, the applications for title and registration should be considered timely and the tax assessments for the cited vehicles should be deleted from the audit.
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).
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 the motor vehicle was delivered to the purchaser. 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 101, 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 11 vehicles were submitted outside the 60-day deadline due to delays in getting inspections for the vehicles and delays in receiving titles from the former vehicle owners. However, the ALJ finds neither of the situations described by Petitioner provides an exception to the requirement that a seller-financer submit the applications for title and registration on or before the 60-day deadline. 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.
In his pleadings, Petitioner cites several of the 11 vehicles as “charge off” or “repo charged off.” Though not specifically argued by Petitioner, it should be noted that the fact that a vehicle may have been repossessed 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). 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 date the motor vehicle was delivered to the purchaser owe tax on the total 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).
III. FINDINGS OF FACT
1. During the period at issue, ************** (Petitioner) operated a used car dealership in CITY, Texas, and was permitted for seller-financed motor vehicle sales tax.
2. In August 2020, the Tax Division (Staff) of the Texas Comptroller of Public Accounts (Comptroller) initiated a motor vehicle sales tax compliance audit for the period July 1, 2017, through August 31, 2020.
3. A detailed examination was completed for Exam 101, resulting in adjustments for seller-financed vehicle sales in which Petitioner failed to timely apply for title and registration.
4. On January 11, 2021, Staff issued a Texas Notification of Audit Results to Petitioner, assessing a liability that consisted of tax and accrued interest. Penalty was waived.
5. Petitioner requested redetermination of the assessment.
6. Staff referred the matter to the State Office of Administrative Hearings (SOAH).
7. On September 9, 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 September 9, 2022, the Administrative Law Judge issued Order No. 1, which set the written submission hearing.
9. The contested case record closed on November 7, 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 (CTAC). 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. Dealers who fail to register the vehicles within the 60-day period will owe tax on the total 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).
15. Staff met its prima facie burden to demonstrate motor vehicle tax was due on the sales assessed in the audit.
16. Petitioner bears the burden of showing audit error by a preponderance of the evidence. 34 Tex. Admin. Code § 1.26(e).
17. Petitioner’s evidence is insufficient to establish audit error.
18. The audit assessment should be affirmed.
SIGNED DECEMBER 5, 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.