DaimlerChrysler Services North America, LLC v. State Tax Assessor
817 A.2d 862, 2003 ME 27, 2003 Me. LEXIS 32 (2003)
Rule of Law:
A statutory tax credit for sales tax paid on accounts charged off as worthless is a grant of legislative grace available exclusively to the original retailer who collected and remitted the sales tax to the state, and this right is not assignable to a third-party assignee of the retail installment contract.
Facts:
- DaimlerChrysler financed retail vehicle purchases through the acquisition of retail installment contracts.
- For each transaction, the vehicle seller entered into a retail installment contract with the purchaser, and the seller then assigned the contract, without recourse, to DaimlerChrysler.
- The amount financed included the purchase price and the legally required sales tax of the vehicle, after any down payment and trade-in allowance.
- The seller (the original dealer) was legally required to pay the vehicle sales tax to the State.
- When purchasers failed to make payments to DaimlerChrysler, DaimlerChrysler took various collection steps.
- After exhausting collection efforts, DaimlerChrysler determined the outstanding amounts on these contracts to be worthless and formally charged them off for internal accounting and tax purposes.
- Between 1995 and 2001, DaimlerChrysler was not a registered retailer in Maine and did not file sales and use tax returns with the State.
Procedural Posture:
- In early 2000, DaimlerChrysler filed a claim with the State Tax Assessor for a refund of sales tax that had been paid on vehicle sales on accounts DaimlerChrysler charged-off as worthless.
- The State Tax Assessor denied the refund request, stating that DaimlerChrysler was not a retailer.
- The Assessor subsequently denied DaimlerChrysler’s request for reconsideration of the denial.
- DaimlerChrysler filed a petition for judicial review in the Superior Court (Kennebec County), which was submitted on stipulated facts and exhibits.
- The Superior Court granted judgment in favor of the State Tax Assessor.
- DaimlerChrysler appealed the judgment of the Superior Court to the Maine Supreme Judicial Court.
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Issue:
Does 36 M.R.S.A. § 1811-A, which provides a credit for sales tax paid on accounts charged off as worthless, allow an assignee of a retail installment contract to claim such a credit, even if the assignee did not originally pay the sales tax or make retail sales?
Opinions:
Majority - Calkins, J.
No, 36 M.R.S.A. § 1811-A does not allow an assignee like DaimlerChrysler to claim a credit for sales tax paid on accounts charged off as worthless, as the credit is limited to the retailer who originally paid the sales tax and is in a position to file subsequent tax reports. The court based its reasoning on a strict interpretation of the statutory language and the nature of tax credits. First, the statute explicitly provides for a 'credit against the tax due on a subsequent report,' not a refund. Only retailers, who are obligated to collect and remit sales taxes monthly and file periodic reports, have an ongoing tax liability against which such a credit can be applied. The Legislature's choice to use 'refund' in a similar gasoline tax statute (§ 2906-A) demonstrates a deliberate distinction. Second, the requirement that the credit be taken 'on a subsequent report' refers to the monthly sales tax reports filed by retailers, which non-retailers do not file. Third, while the statute uses passive voice for many verbs, the only explicitly named actor is the 'retailer,' leading to the logical interpretation that the retailer is the intended actor for all aspects of the credit (e.g., tax paid by the retailer, accounts charged off by the retailer, credit taken by the retailer). Fourth, this interpretation is consistent with the long-standing and reasonable construction by the Maine Revenue Service, the agency charged with administering the statute, which has always limited the credit to the retailer who paid the sales tax. Fifth, DaimlerChrysler's status as an assignee of the retail installment contracts does not transfer the statutory right to a tax credit. Tax credits are considered grants of legislative grace and are not assignable as contractual rights in the absence of explicit contractual or statutory language. The assignment to DaimlerChrysler only transferred rights 'in and to this contract,' which does not encompass a statutory tax benefit. Finally, DaimlerChrysler does not meet the definition of a 'retailer' because, despite 'assignee' being included in the definition of 'person,' DaimlerChrysler did not make retail sales itself. Moreover, DaimlerChrysler failed to demonstrate that it had any present sales tax liability against which it could take a credit, as it was not registered as a retailer for the relevant period and did not file sales tax reports.
Analysis:
This case establishes a narrow interpretation of statutory tax credit provisions, emphasizing that such benefits are grants of legislative grace strictly limited to the entities and conditions specified by the legislature. It reinforces the principle that courts will defer to reasonable interpretations of ambiguous tax statutes by the administering agency. The ruling significantly impacts finance companies and assignees of retail contracts, making it clear that general principles of assignment law typically will not transfer statutory tax credits unless explicitly provided for by statute or contract. Future entities seeking similar tax benefits will face a high burden to prove they are 'unmistakably within the spirit and intent of the statute' as an original taxpayer, rather than a subsequent assignee.
