Funvestment Group, LLC v. Robyn A. Crittenden, in Her Official Capacity as Commissioner of the Georgia Department of Revenue ( 2022 )

FIRST DIVISION
BARNES, P. J.,
BROWN and HODGES, JJ.
NOTICE: Motions for reconsideration must be
physically received in our clerk’s office within ten
days of the date of decision to be deemed timely filed.
https://www.gaappeals.us/rules
June 23, 2022
In the Court of Appeals of Georgia
A22A0193. FUNVESTMENT GROUP, LLC v. CRITTENDEN.
BARNES, Presiding Judge.
This appeal seeks to overturn a superior court’s judgment in favor of Robyn A.
Crittenden, in her official capacity as the Commissioner of the Georgia Department
of Revenue (the “Department”),1 and against Funvestment Group, LLC (the
“Taxpayer”). The contested ruling rejected the Taxpayer’s claim that the amount it
paid to lease certain of its business equipment is exempt from sales and use taxation.
For the reasons explained below, the judgment is affirmed in part and vacated in part.
These facts are undisputed. The Taxpayer operates a business where children
can drive miniature vehicles along an indoor track and learn about driving safety. At
1
During the course of this litigation, Commissioner Crittenden replaced former
Commissioner David M. Curry. See OCGA § 9-11-25 (d) (1).
its business, the Taxpayer also offers an arcade room, party rooms for group events,
a restaurant, and a lab equipped with touchscreen computers and simulators. The
Taxpayer leases certain of its business equipment – relevant here, its “coin operated
amusement machines” a/k/a “COAMs” – from another entity, (non-party) Tiny
Towne International, LLC. In leasing its COAMs during the relevant period, the
Taxpayer was contractually obligated to pay Tiny Towne “10 percent [ ] of the total
gross revenue after deductions for state master license, state sticker fees and refunds[]
and 10 [percent] of other gross income generated by [the Taxpayer’s] business.”
The primary question in this appeal is whether the amount paid to lease the
COAMs is exempt from taxation by OCGA § 48-8-3 (43):
The sales and use taxes levied or imposed by this article shall not apply
to: . . . [g]ross revenues generated from all bona fide coin operated
amusement machines which vend or dispense music or are operated for
skill, amusement, entertainment, or pleasure which are in commercial
use and are provided to the public for play which will require a permit
fee under Chapter 27 of title 50.
2
Regarding the procedural background, the Taxpayer filed a petition with the
Georgia Tax Tribunal2 seeking reprieve from the Department’s assessment of sales
and use tax on payments made for leasing the COAMS.3 On cross-motions for
summary judgment, each party contended that OCGA § 48-8-3 (43) was plain and
unambiguous such that application thereof rendered the result it urged. The Tax
Tribunal entered a decision in the Taxpayer’s favor, concluding that “OCGA § 48-8-3
(43) exempts [the Taxpayer] . . . from paying sales and use tax on its lease payments
to Tiny Towne[.]”
2
The Georgia Tax Tribunal is an independent, specialized agency created by
the General Assembly “to resolve disputes between the [D]epartment and taxpayers
in an efficient and cost-effective manner.” OCGA § 50-13A-2. See also OCGA §§
50-13A-1 (“This chapter shall be known and may be cited as the ‘Georgia Tax
Tribunal Act of 2012.’”); 50-13A-3 (“As used in this chapter, the term ‘tribunal’
means the Georgia Tax Tribunal established by Code Section 50-13A-4 which shall
be an independent and autonomous division within the Office of State Administrative
Hearings operating under the sole direction of the chief tribunal judge.”); 50-13A-4
(creating the Georgia Tax Tribunal).
3
The parties agreed that the charges for customer operations of the COAMs
were not subject to sales and use tax, and that the Department did not assess
additional tax on those transactions.
3
Pursuant to OCGA § 50-13A-17,4 the Department sought judicial review by the
Fulton County Superior Court. The court concluded that the Taxpayer could not
utilize that statutory exemption, determining that the exemption applies “to revenue
generated from plays of COAMs, but does not apply to lease transactions of
COAMs.” Among other things, the court reasoned:
[T]he plain language of the exemption means the COAM itself must
“generate” the revenue by “vend[ing] or dispens[ing]” music or public
play by inserting money. Because the leases do not constitute
remuneration for “vend[ing] or dispens[ing]”music or public play, the
exemption clearly applies only to the money inserted into the COAMs
for play, not leases of the COAMs themselves.
(Emphasis in original.) The court went on to ascertain that the Taxpayer’s “expansive
interpretation of OCGA § 48-8-3 (43) would lead to absurd results.” As the court saw
it, the Taxpayer’s position – which it summarized as “the lease payment it makes on
COAMS[,] where some percentage of the payment includes participation play
revenue[,] should be exempt from taxation simply because such payments are
partially made with money generated from participation play” – would lead to the
4
See OCGA § 50-13A-17 (a), (b) (providing that any party may appeal a final
decision of the Tax Tribunal to the Superior Court of Fulton County).
4
untenable circumstance that any subsequent transaction using revenue from COAM
participation plays would also be exempt. For example, the court elaborated: “Under
[the Taxpayer’s] interpretation, any purchase or lease of building, facilities, utilities,
supplies, fixtures, furniture, etc., would be exempt as long as the purchases or leases
were made with revenues from COAM participation plays.” Additionally, the court
cited Ga. Dept. of Revenue v. Owens Corning, 283 Ga. 489 (660 SE2d 719) (2008),
for the principle that “the interpretation of a statute by an administrative agency
which has the duty of enforcing or administering it is to be given great weight and
deference.” Id. at 490. Moreover, the superior court found that the legislative history
surrounding the taxation of COAMs showed legislative intent to “exempt gross
revenue generated from customers playing the machines, not leases.” Finally, the
superior court went on to hold that “[w]ithout proper evidence of the lease payments,
the Department may assess sales tax for the leases based on the sales price of the
COAMs.” In light thereof, the superior court reversed the Tax Tribunal’s decision,
and remanded the case for judgment to be entered in favor of the Department.
Dissatisfied with the superior court’s order, the Taxpayer procured this discretionary
appeal.
5
1. The Taxpayer contests the superior court’s determination that OCGA § 48-8-
3 (43) does not apply to their lease payments. “The interpretation of a statute is a
question of law, which is reviewed de novo on appeal.” Junior v. Graham, 313 Ga.
420, 423 (2) (870 SE2d 378) (2022); see Amazing Amusements Group v. Wilson, 353
Ga. App. 256, 256 (835 SE2d 781) (2019) (applying de novo standard of review,
where case turned on statutory interpretation and resolution of questions of law).
(a) The Taxpayer contends that the superior court erred “by giving the words
‘gross revenue’ an unnatural meaning which limit those words to revenue generated
from playing COAMs when the General Assembly did not include any words of
limitation.”
In support of this contention, the Taxpayer recites dictionary definitions of
“gross revenues”;5 discerns therefrom that the ordinary and everyday meaning of
“‘gross revenues’ does not limit [the exemption] to any particular source of revenue”;
and asserts that “[n]owhere in the plain language does OCGA § 48-8-3 (43) limit the
5
In particular, the Taxpayer recites that “gross revenues” is defined by Black’s
Law Dictionary (11th ed. 2019) as “Income from any and all sources; gross income
or gross receipts”; further, the Taxpayer recites that Merriam Webster Dictionary
defines “gross” as “consisting of an overall total exclusive of deductions” and
“revenue” as “the total income produced by a given source.”
6
. . . exemption to the transaction of playing COAMS.” The Taxpayer thus posits, “The
only natural reading of the exemption includes leased income in the gross revenues.”
Even accepting the Taxpayer’s premise concerning the applicable definition(s)
of “gross revenues,”6 we find no merit in the Taxpayer’s ultimate position, because
it disregards the express language requiring that the contemplated “gross revenues”
were “generated from all bona fide coin operated amusement machines which vend
or dispense music or are operated for skill, amusement, entertainment, or pleasure
which are in commercial use and are provided to the public for play.” OCGA § 48-8-3
(43).
When we consider the meaning of a statute, we must presume that the
General Assembly meant what it said and said what it meant. To that
end, we must afford the statutory text its plain and ordinary meaning, we
must view the statutory text in the context in which it appears, and we
must read the statutory text in its most natural and reasonable way, as an
ordinary speaker of the English language would.
6
See generally Smith v. Northside Hosp., 302 Ga. 517, 521 (1) (807 SE2d 909)
(2017) (consulting dictionaries as part of statutory interpretation); Abdel-Samed v.
Dailey, 294 Ga. 758, 763 (2) (755 SE2d 805) (2014) (consulting dictionaries as part
of statutory interpretation). And see, e. g., United States v. Williams, 5 F4th 1295,
1306 (III) (A) (11th Cir. 2021) (determining that “gross income” equated to “the full
amount, without any offset”) (citing Webster’s Third New International Dictionary
1002 (3d ed. 1993) and Black’s Law Dictionary 710, 767 (7th ed. 1999)).
7
(Citations and punctuation omitted.) Deal v. Coleman, 294 Ga. 170, 172-173 (1) (a)
(751 SE2d 337) (2013). Additionally, we are required “to avoid a construction that
makes some language mere surplusage.” Slakman v. Continental Cas. Co., 277 Ga.
189, 191 (587 SE2d 24) (2003).
Hence, we reject the Taxpayer’s argument that:
Nowhere in the plain language does OCGA § 48-8-3 (43) limit the sales
and use tax exemption to the transaction of playing COAMS. . . . [T]he
General Assembly chose not to limit the exemption. As the statute reads,
the exemption applies to all gross revenue including gross revenue from
the COAMS used to make lease payments.7
(Emphasis supplied.) Not only is the Taxpayer’s position contrary to the principles
noted above, the position fails to accord with these well-settled standards for
reviewing taxation statutes:
Taxation is the rule, and exemption from taxation is the exception. . . .
Exemption, being the exception to the general rule, is not favored; but
every exemption, to be valid, must be expressed in clear and
unambiguous terms, and, when found to exist, the enactment by which
7
Elsewhere in its brief, the Taxpayer claims that, contrary to the superior
court’s assertion, “[it] has never argued ‘that the lease payments it makes on COAMs
where some percentage of the payment includes participation play revenue should be
exempt from taxation simply because such payments are partially made with money
generated from participation plan.’” (Emphasis in brief.)
8
it is given will not be enlarged by construction, but, on the contrary, will
be strictly construed.
(Citation and punctuation omitted.) Owens Corning, 283 Ga. at 489 (reciting
principles for determining applicability of exemption set forth in § 48-8-3). The
statutory provision at issue here, OCGA § 48-8-3 (43), contains no clear and
unambiguous expression of an exemption applicable also to the Taxpayer’s lease
payments to Tiny Towne.
For the foregoing reasons, this challenge to the superior court’s judgment lacks
merit. See generally Spectera, Inc. v. Wilson, 294 Ga. 23, 26 (1) (a) (749 SE2d 704)
(2013) (“Where the language of a statute is plain and susceptible to only one natural
and reasonable construction, courts must construe the statute accordingly. In fact,
where the language of a statute is plain and unambiguous, judicial construction is not
only unnecessary but forbidden.”) (citation and punctuation omitted).
(b) Seeking to avoid such interpretation of the plain language of OCGA § 48-8-
3 (43), the Taxpayer advances the following arguments.
(i) The Taxpayer contends that the superior court committed reversible error
“when it found that the Tax Tribunal’s decision was erroneous as a matter of law
because it failed to accord deference to the Department in the interpretation of its
9
statutes.” In an attempt to support this contention, however, the Taxpayer misplaces
reliance on language only recently added to OCGA § 50-13A-14 (a).8 And at any rate,
because the pertinent language in OCGA § 48-8-3 (43) is “not ambiguous, we do not
reach the question of whether deference is appropriate[.]” City of Guyton v. Barrow,
305 Ga. 799, 804 (2) (828 SE2d 366) (2019) (noting that “[d]eference is not due
unless a court, employing traditional tools of statutory construction, is left with an
unresolved ambiguity”; and reiterating that an ambiguity exists only after a court has
exhausted all tools of construction) (citation and punctuation omitted).
(ii) In interrelated claims of error, the Taxpayer contends that the record does
not support the superior court’s finding that “the legislative history surrounding the
taxation of COAMs shows that it was the General Assembly’s intention to exempt
gross revenue generated from customers playing machines, not leases.” The Taxpayer
goes on to proffer its own discernment of legislative history to contend that the
8
Specifically, the Taxpayer cites the following language: “All questions of law
decided by the tribunal, including interpretations of constitutional, statutory, and
regulatory provisions, shall be made without any deference to any determination or
interpretation, whether written or unwritten, that may have been made on the matter
by the Department of Revenue[.]” OCGA § 50-13A-14 (a). Such language, however,
applies to “proceedings commenced before the Georgia Tax Tribunal or a superior
court of this state on or after [April 29, 2021].” Ga. L. 2021, p. 120, §§ 4, 5.
Proceedings in this case commenced in the superior court prior to that date.
10
General Assembly instead intended to exempt lease payments when it enacted OCGA
§ 48-8-3 (43).
According to the Taxpayer, OCGA § 48-8-3 (43) was enacted as part of
“wholesale changes to the way the [S]tate regulates and taxes COAMS.” As the
Taxpayer surmises, “[l]ocation licenses purchased by [COAM] lessees took the place
of collecting sales tax on revenue generated from playing COAMS and master
licenses took the place of collecting sales tax on revenue generated from leasing
COAMs.”9 The Taxpayer goes on to assert that legislative intent to exempt monies
paid to lease COAMS is demonstrated further by “the economic impact upon
thousands of small businesses in the COAM industry” that otherwise would be taxed
on such lease amounts. Morever, as the Taxpayer sees it, allowing the Department to
9
As the Taxpayer asserts,
The fact [that] the State ties the cost of the master license fee to the
[S]tate sales and use tax rate shows that the legislature intended OCGA
§ 48-8-3 (43) to exempt sales and use tax on lease payments because the
master license fee replaced and supplanted sales tax collected on COAM
leases. The legislature enacted OCGA § 48-8-3 (43) with the intention
it would apply to revenue generated from leasing COAMs because it
eliminated the old system of taxing them.
The Taxpayer’s assertions in this regard lack record citation and supporting case
authority.
11
tax the amount paid to lease COAMs after the COAM-lessee has already paid for a
location license amounts to “double taxation.”10
“[O]ur well established rules of statutory interpretation require courts to
ascertain the legislature’s intent in enacting the law in question.” (Citation,
punctuation, and emphasis omitted.) Star Residential, LLC v. Hernandez, 311 Ga.
784, 790 (2) (860 SE2d 726) (2021); see Abdel-Samed v. Dailey, 294 Ga. 758, 763
(2) (755 SE2d 805) (2014) (“In construing language used in a statute, . . . we also
must consider the context in which a phrase is used and the legislative intent behind
enactment of the statute.”). Here, we reject the Taxpayer’s challenge to the superior
court’s statutory interpretation, because OCGA § 48-8-3 (43) contains no language
that bears out the Taxpayer’s assessment that the legislators intended to exempt from
taxation the amount paid to lease COAMs; and “we discern that the absence of such
language was a matter of considered choice.” (Citation and punctuation omitted.)
Moosa Co. v. Dept. of Revenue, 353 Ga. App. 429, 433 (838 SE2d 108) (2020). See
10
See OCGA §§ 50-27-71 (a.1) (providing in pertinent part that “[e]very
location owner or location operator shall pay [to the Georgia Lottery] an annual
location license fee for each bona fide coin operated amusement machine offered to
the public for play”); 50-27-3 (9) (“As used in this chapter, the term: . . .
‘Corporation’ means the Georgia Lottery Corporation.”); 50-27-1 (“This chapter shall
be known and may be cited as the ‘Georgia Lottery for Education Act.’”).
12
Star Residential, 311 Ga. at 790 (2) (disapproving the interpretation of statute gleaned
from purported legislative intent, where “nothing in the language of [the statutory
provision]” indicated that the General Assembly intended such interpretation);
Malphurs v. State, 336 Ga. App. 867, 870-871 (785 SE2d 414) (2016) (rejecting
appellant’s assertion that the General Assembly intended to provide him a certain
protection and that the courts should thus read the statutory scheme to so protect him;
reiterating “that is not how legislative intent or laws work,” that instead, “[t]he
General Assembly enacts statutes, not a general intention”; that statutes have words,
which have meanings; and that “[i]t is those meanings that we interpret and apply, not
some amorphous general intention”).
Moreover, “we presume that statutes are enacted by the legislature with full
knowledge of the existing condition of the law and with reference to it.” (Citation and
punctuation omitted.) Dept. of Public Safety v. Ragsdale, 308 Ga. 210, 213 (839 SE2d
541) (2020). And although the Taxpayer believes that without an exemption for the
monies it paid to lease COAMs, it will be subjected to excessive taxation,
[t]he courts cannot construe [OCGA § 48-8-3 (43)] to force an outcome
that the legislature did not expressly authorize. The doctrine of
separation of powers is an immutable constitutional principle which
must be strictly enforced. Under that doctrine, statutory construction
13
belongs to the courts, legislation to the legislature. We can not add a line
to the law. [OCGA § 48-8-3 (43)] simply does not provide [an
exemption for the Taxpayer’s lease payments]. In order for [an
exemption to apply to such monies], the legislature would need to take
action[.]
(Citations, punctuation, and footnote omitted.) Turner v. Ga. River Network, 297 Ga.
306, 308-309 (773 SE2d 706) (2015); see Women’s Surgical Center v. Berry, 302 Ga.
349, 355 (2) (b) (806 SE2d 606) (2017) (noting that ‘[t]he Due Process Clause does
not empower the judiciary to sit as a superlegislature to weigh the wisdom of
legislation”) (citations and punctuation omitted); State v. Riggs, 301 Ga. 63, 67 (2),
n. 6 (799 SE2d 770) (2017) (noting that “[w]hen judges start discussing not the
meaning of the statutes the legislature actually enacted, as determined from the text
of those laws, but rather the unexpressed ‘spirit’ or ‘reason’ of the legislation, . . . we
venture into dangerously undemocratic, unfair, and impractical territory”) (citation
and punctuation omitted).
(iii) The Taxpayer contends that the superior court committed reversible error,
asserting that “the record does not support its finding that the Tax Tribunal’s
14
interpretation of OCGA § 48-8-3 (43) would lead to absurd results.”11 (Emphasis
supplied).
The Taxpayer’s claim of error is unavailing. Georgia has long recognized:
If the words of a statute . . . are plain and capable of having but one
meaning, and do not produce any absurd, impractical, or contradictory
results, then [the appellate court] is bound to follow the meaning of
those words. If, on the other hand, the words of the statute are
ambiguous, then [the appellate court] must construe the statute, keeping
in mind the purpose of the statute and the old law, the evil, and the
remedy.
(Citations and punctuation omitted.) Busch v. State, 271 Ga. 591, 592 (523 SE2d 21)
(1999). As relevant here, the words of the statutory provision are plain; notably, the
Taxpayer makes no assertion otherwise. As explained in Division 1 (a), supra, the
plain statutory language does not provide for an exemption additionally for amounts
paid to lease COAMs; and “[the Taxpayer] has failed to detail how the plain-language
11
The Taxpayer insists that it has never argued that the lease payments are
exempt only because they stem from the COAM participation play. As the Taxpayer
clarifies in its brief, it “maintain[s] that OCGA § 48-8-[3 (43)] exempts the lease
payments because the lease payments are ‘[g]ross revenues generated from all bona
fide coin operated amusement machines which . . . are in commercial use and are
provided to the public for play which will require a permit fee under Chapter 27 or
title 50.’” Even with this clarification, the Taxpayer’s position fails. See generally
Division 1 (a), supra.
15
reading is absurd or unworkable; further, the mere fact that the plain language . . . is
unfavorable to [the Taxpayer] does not in and of itself render it absurd or untenable.”
O’Connor v. Fulton County, 302 Ga. 70, 73 (1) (805 SE2d 56) (2017).
2. The Taxpayer contends that the superior court erred when it reversed the Tax
Tribunal’s decision without finding, as required by OCGA § 50-13A-17 (g), that
substantial rights of the Department had been prejudiced by that decision.
Pursuant to OCGA § 50-13A-17, which the superior court expressly cited in
its order, any party may appeal a final decision of the Tax Tribunal to the Superior
Court of Fulton County. See OCGA § 50-13A-17 (a), (b). Subsection (g) of that Code
section provides that the superior court defers to the Tax Tribunal’s factual findings;
that the court may affirm the Tax Tribunals’s judgment or remand the case for further
proceedings; and that, in addition,
[t]he [superior] court may reverse or modify the judgment if substantial
rights of the petitioner have been prejudiced because the tribunal
judge’s findings, inferences, conclusions, or judgments are: (1) In
violation of constitutional or statutory provisions; (2) In excess of the
statutory authority of the tribunal; (3) Made upon unlawful procedure;
(4) Affected by other error of law; (5) Clearly erroneous in view of the
reliable, probative, and substantial evidence on the whole record; or (6)
Arbitrary or capricious or characterized by abuse of discretion or clearly
unwarranted exercise of discretion.
16
(Emphasis supplied.) OCGA § 50-13A-17 (g). For reasons explained above, the
superior court correctly concluded that the Tax Tribunal’s decision was violative of
OCGA § 48-8-3 (43); hence, reversal of the Tax Tribunal’s decision was authorized
by OCGA § 50-13A-17 (g). This contention lacks merit.
3. The Taxpayer challenges the superior court’s determinations that the record
lacked proper evidence of the lease payments for the relevant period,12 and that the
Department could thus assess sales tax for the leases based on the sales price of the
COAMs.
The Tax Tribunal did not reach these issues, however, as it decided that OCGA
§ 48-8-3 (43) exempted the Taxpayer from paying tax on its lease payments to Tiny
Towne. Therefore, that portion of the contested superior court order is vacated. See
OCGA § 50-13A-17 (g) (providing for the reviewing court to affirm the tax tribunal’s
judgment, remand the case for further proceedings, or under certain circumstances,
reverse or modify the judgment; restricting the reviewing court from substituting its
judgment for that of the tax tribunal’s as to the weight of the evidence on questions
of fact). Accord Med. Center of Central Ga. v. Hosp. Auth., 340 Ga. App. 499, 507
(4) (798 SE2d 42) (2017) (summarizing the powers granted to the reviewing court by
12
The relevant period is from May 14, 2014 to March 31, 2016.
17
OCGA § 50-13-19 (h), then reversing orders entered by the superior court when
acting as a reviewing court, where the “issue [ruled upon] was outside the scope of
its review of the Department’s Final Decision”);13 Commissioner of Ins. v. Stryker,
218 Ga. App. 716, 717 (1) (463 SE2d 163) (1995) (explaining that the standard of
review applicable when the superior court is reviewing an administrative decision
prevents a de novo determination of evidentiary questions and leaves a determination
of whether the facts found by the administrative agency were supported by any
evidence) (citing OCGA § 50-13-19 (h)).
This case is thus remanded for proceedings not inconsistent with this opinion.
See generally Lathrop v. Deal, 301 Ga. 408, 433-434 (C) (801 SE2d 867) (2017) (“A
variety of claims related to the assessment and collection of state taxes may be
asserted by petition to the state tax tribunal, see OCGA § 50-13A-9, and final
judgments of the tax tribunal are generally subject to judicial review. See OCGA §
50-13A-17 (b).”).
Judgment affirmed in part and vacated in part. Brown and Hodges, JJ., concur.
13
OCGA § 50-13-19 (h) (providing that the reviewing court shall not substitute
its judgment for that of the administrative agency as to the weight of the evidence on
questions of fact, and providing further that the reviewing court may affirm the
agency’s decision, remand the case for further proceedings, or under certain
circumstances, reverse or modify the judgment).
18