Price v. Secretary, Department of Revenue & Taxation

Citations: 664 So. 2d 802; 95 La.App. 3 Cir. 877; 1995 La. App. LEXIS 3435; 1995 WL 714800Docket: No. 95-877

Court: Louisiana Court of Appeal; December 5, 1995; Louisiana; State Appellate Court

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J. Michael Price and Pamela Price are suing Ralph Slaughter, Secretary of the Louisiana Department of Revenue and Taxation, to determine the amount of withholding and sales taxes, interest, and penalties owed by Concept Computer Center of Calcasieu, Inc. and/or J. Michael Price for March 1988 to December 1989. They also seek the return of garnished wages from Pamela Price, along with damages and attorney fees. J. Michael Price, former president of Concept Computer, was personally assessed for part of the corporation's tax debt under La.R.S. 47:1561.1(A). The Department garnished Pamela Price’s wages in collection efforts. The trial court ruled to remove tax assessments against Mr. Price for withholding taxes after April 1989 and ordered the Department to account for collections related to that period. Additionally, it mandated reimbursement of $1,227.44 to Ms. Price. 

Concept Computer had delinquent state sales taxes and agreed on September 30, 1988, to a payment plan covering specific tax periods, making a down payment of $1,000 and committing to twenty-nine weekly installments of $1,000. The business ceased operations after selling its assets on April 27, 1989. On July 25, 1990, the Department notified Mr. Price of his tax liability. Notices of assessment were issued, detailing balances owed for sales and withholding taxes, with warnings that these assessments would become final in sixty days, potentially leading to asset seizures. The Department has appealed the trial court's decision.

A procedure was outlined for the addressee to avoid distraint actions, which were initiated by the Department on November 20, 1990, with warrants addressed to J. Michael Price. The adjusted amounts owed were $2,378.94 in sales taxes and $9,945.75 in withholding taxes. On April 14, 1994, the Department issued a notice of levy to Ms. Price's employer, listing amounts due of $13,221.31 for sales taxes from December 1989 and $2,589.94 for July 1988. Ms. Price was unaware of the garnishment until it affected her paycheck, resulting in $1,227.44 garnished by the trial date. Revenue auditor Cheryl Kees could not explain the December 1989 sales tax garnishment, suggesting the larger amount related to unpaid withholding taxes. During the November 9, 1994 trial, Kees noted Mr. Price's outstanding liabilities of $21.20 for March 1988 and $1,843.97 for July 1988 sales taxes, with no clarity on the reduction of the November 1990 warrant amount. The sales tax obligations were part of a prior installment agreement, raising questions about the crediting of $31,000. Mr. Price acknowledged liability for certain withholding taxes but disputed others, claiming Concept Computer had no employees post-April 27, 1989, and noted a lack of accounting for payments to the Department when queried. The Department argued that the Prices lacked legal grounds to pursue action against it due to failure to utilize available predeprivation remedies. The relevant statutes authorize tax collection through assessment and distraint, and taxpayers may appeal assessments within sixty days to the Board of Tax Appeals.

A taxpayer has thirty calendar days to file a petition in district court for review of a decision by the Board, as per La.R.S. 47:1434. If an appeal to the Board of Tax Appeals is not filed within sixty days, the tax assessment becomes final and collectible through distraint and sale (La.R.S. 47:1565(B)). However, an assessment by the Secretary of the Department can be contested if found to be based on an error of fact or law, which only the Secretary can determine (La.R.S. 47:1565(F)(1)-(2)). Taxpayers may also pay under protest and sue for recovery of disputed taxes, but this option is unavailable after filing a petition with the Board, when an assessment is final, or if a related suit is pending (La.R.S. 47:1561).

In this case, the Prices did not appeal the assessments issued on September 19, 1990, nor did they pay under protest. Instead, they filed suit in district court over four years later. Consequently, they lacked the right to challenge the assessments, and the district court lacked subject matter jurisdiction. The trial court referenced Ortlieb Press, Inc. v. Mouton to argue that a 'final' assessment is still subject to review, asserting that denying judicial review violates Louisiana's constitutional right to access courts. It also cited Ogburn v. City of Shreveport, emphasizing that judicial review of administrative decisions is part of due process rights. The court concluded that the legislature did not intend to eliminate all judicial review after sixty days post-assessment. Ortlieb indicated that a taxpayer could seek relief even after an assessment is final, but this was based on previous law, whereas the current La.R.S. 47:1561 explicitly prohibits proceeding under payment under protest after an assessment becomes final. The court also referenced Loe v. McNamara, which upheld that procedural due process was satisfied through the administrative appeal process and subsequent judicial review.

The trial court's judgment to annul the sales tax assessments against the plaintiffs and mandate the removal of withholding tax assessments after April 1989 is reversed. The plaintiffs correctly filed suit in district court regarding garnishment issues. Judicial scrutiny is warranted when there is a claim of deprivation of a constitutional right or if agency actions exceed their constitutional authority. Ms. Price’s wages were garnished to satisfy her husband Mr. Price’s sales tax obligation from community property, as permitted under La.Civ. Code art. 2345. La.R.S. 47:1569 allows the Collector to enforce tax collection through distraint and sale, including the garnishment of wages. The court finds Mr. Price's tax liability could be satisfied with community property, rejecting the plaintiffs' argument that he was not a "taxpayer" under La.R.S. 47:2(4). The officer-director liability statute allows for various collection remedies, including assessment and distraint. Ms. Price did not receive notice of the garnishment until her paycheck. Citing Shel-Boze, Inc. v. Melton, the court held that prior notice to one spouse suffices regarding community property obligations, which was reaffirmed in Hebert v. Unser. The court distinguished these cases from Magee v. Amiss, where the wife’s due process rights were violated due to lack of notice regarding the sale of community property.

The Hebert court emphasized that under Louisiana law (La.Code Civ. P. arts. 2291 et seq., 2331 et seq., and 2371 et seq.), notice to the judgment debtor is essential for a valid seizure and sale of community property, which must also include both spouses. In contrast, in garnishment cases, only the garnishee-employer must be notified, not the debtor (La.Code Civ. P. arts. 2411-2412 and La.R.S. 13:3923). Consequently, Ms. Price was not entitled to notice regarding the garnishment of Mr. Price's tax assessments. However, the garnishment involved sales tax liability from December 1989, for which Mr. Price was never assessed. The absence of such an assessment constituted a violation of the plaintiffs’ due process rights, as property was seized without prior notice. The wages garnished for that sales tax liability were mistakenly paid into the State Treasury. According to La.R.S. 47:1481, individuals may claim refunds for funds erroneously deposited, and the Board of Tax Appeals has the authority to grant refunds even without adherence to the payment-under-protest statute (La.R.S. 47:1576). The court recognized that tax collection laws are unique (sui generis) and thus could not order the reimbursement of the erroneously paid taxes or award damages and attorney fees related to the wrongful garnishment, as no remedies exist under tax law for such claims. Ultimately, the court reversed the trial court's judgment and assigned the costs of the appeal to the Prices. Additionally, La.R.S. 47:1561.1(A) allows for personal liability of corporate officers or directors for taxes, penalties, and other fees if they willfully fail to remit taxes they are responsible for.