Comdisco, Inc. v. SECRETARY OF LA. DEPT. OF REVENUE AND TAXATION

Citations: 647 So. 2d 341; 93 La.App. 1 Cir. 1695; 1994 La. App. LEXIS 2685; 1994 WL 544316Docket: 93 CA 1695

Court: Louisiana Court of Appeal; October 7, 1994; Louisiana; State Appellate Court

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In *Comdisco, Inc. v. Secretary of the Louisiana Department of Revenue and Taxation*, Comdisco, Inc. appealed a use tax assessment for a Cessna/Citation III airplane leased to Entergy Services, Inc. The timeline reveals that Comdisco purchased the airplane in December 1986, leased it immediately, and brought it to Louisiana in April 1987. In July 1989, the Louisiana Department of Revenue and Taxation notified Comdisco of the tax obligation, requesting completion of a questionnaire to assess the tax liability. After receiving no response, the Department sent a follow-up in August 1989 and later issued a proposed assessment in November 1989 for the taxable period beginning December 1986.

Comdisco contended that the airplane was exempt from the tax under the interstate commerce exception, a position first formally noted during its response to the Department's December 1989 correspondence. The Department reiterated its stance in March 1990, allowing Comdisco 60 days to petition for redetermination. Comdisco filed such a petition on June 18, 1990, arguing that the airplane had not “come to rest” in Louisiana and that the tax violated interstate commerce principles. 

After a hearing in June 1991, the Board upheld the assessment, which was later affirmed by the trial court. Judicial review of the Board's decision is limited to the record established before it, requiring acceptance of the Board's factual findings unless they are manifestly erroneous. Legal questions are affirmed if the Board correctly applied the law and followed proper procedures.

The Department is empowered by Louisiana Revised Statute 47:1562 to estimate tax, penalties, and interest when a taxpayer fails to file a report or miscalculates their liability. The Department sought necessary information from Comdisco as early as July 1989, issuing questionnaires before a proposed assessment in November 1989. Despite requests for details on when the property was brought into Louisiana, Comdisco did not respond. The Department, knowing the plane was purchased by Comdisco and leased to Entergy in December 1986, reasonably assumed the property entered the state at that time, especially given the three-year limitation for tax assessments. Mary Mhire from the Sales Tax Division indicated that the Department did not seek a waiver of this limitation due to insufficient facts and time constraints. Comdisco did not challenge the assessment date before it was finalized. Under Revised Statute 47:1563, Comdisco had fifteen days to protest the assessment in writing but did not raise the date issue during ongoing correspondence. The Department's date choice was based on the plane's purchase and lease details. Comdisco also claimed an exemption under Revised Statute 47:305 E, citing the interstate commerce exception, but the tax pertains to Comdisco's act of bringing the property into Louisiana for leasing, not the lessee's use. The tax does not target interstate commerce nor apply to property permanently outside the state. Comdisco previously avoided sales tax in the state of purchase, arguing it would be taxed in its domicile state, yet now seeks to evade Louisiana taxation while engaged in interstate commerce. Louisiana maintains the right to tax as it is Comdisco's domicile state, with no other state claiming permanent jurisdiction.

The property in question, if exempt from taxation, would lead to a general exemption for similar properties. The Board of Tax Appeals and the trial court found no legal or factual errors in affirming the tax assessment, resulting in the trial court’s judgment being upheld. Judge Fogg dissented, arguing that the majority's reliance on La. R.S. 47:1562, which allows for estimating the taxable period when a taxpayer fails to file required returns, is flawed. Fogg contended that the statute's language is clear and unambiguous, and should be applied as written without further interpretation. The Department assessed a use tax against Comdisco under La. R.S. 47:302(A)(2), and the assessment must include details such as the taxpayer's name, amount due, type of tax, and taxable period according to La. R.S. 47:1564. Following the assessment, the taxpayer receives a written notice and has 60 days to pay or appeal. The jurisdiction of the Board of Tax Appeals is limited to the terms of the assessment, which in this case specified December 1986 as the taxable period. However, evidence indicated that Comdisco likely incurred use taxes in April 1987, when the airplane entered Louisiana, and the Department's argument for the adequacy of the December assessment was deemed without merit, as the Department could have assessed for a longer period to avoid ambiguity.

The Department of Revenue had alternative procedures to enforce tax collection against Comdisco, such as filing a suit instead of using an assessment approach. By opting for assessment, the Department restricted the Board of Tax Appeals' jurisdiction to review only transactions occurring in December 1986, despite the use tax for Comdisco's airplane not being applicable until April 1987 when the plane first entered Louisiana. Consequently, the Board erred in upholding the assessment for December 1986, as there was no tax due for that period. The majority's reliance on *Northwest Airlines v. Minnesota* to justify the tax levy on Comdisco was questioned. Comdisco, incorporated in Delaware and domiciled in Illinois, had not received a specific notice of assessment before a proposed assessment in November 1989, which totaled $267,824, including penalties and interest. A "Petition to Review Decision of Board of Tax Appeals" was filed against the Secretary of the Louisiana Department of Revenue. Mary Mhire from the Department testified about sending a questionnaire to Comdisco multiple times, although only two letters were reflected in the court's records. Comdisco did not complete the questionnaire before assessment, providing an incomplete response only after the fact. The trial court ruled that penalties and interest should not apply for periods when the airplane was not in the state, challenging the Department's ability to estimate both the amount due and the taxable period based on La. R.S. 47:1562.