Gelco Fleet Trust v. Nebraska Dept. of Rev. , 312 Neb. 49 ( 2022 )

Nebraska Supreme Court Online Library
www.nebraska.gov/apps-courts-epub/
09/23/2022 12:07 AM CDT
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Nebraska Supreme Court Advance Sheets
312 Nebraska Reports
GELCO FLEET TRUST v. NEBRASKA DEPT. OF REV.
Cite as 312 Neb. 49Gelco Fleet Trust, a Delaware statutory
trust, appellant, v. Nebraska Department
of Revenue and Tony Fulton, Nebraska
State Tax Commissioner, appellees.
___ N.W.2d ___
Filed July 22, 2022. No. S-21-616.
1. Administrative Law: Judgments: Appeal and Error. A judgment or
final order rendered by a district court in a judicial review pursuant to
the Administrative Procedure Act may be reversed, vacated, or modified
by an appellate court for errors appearing on the record.
2. ____: ____: ____. When reviewing an order of a district court under
the Administrative Procedure Act for errors appearing on the record, the
inquiry is whether the decision conforms to the law, is supported by com-
petent evidence, and is neither arbitrary, capricious, nor unreasonable.
3. Judgments: Statutes: Appeal and Error. Whether a decision conforms
to law and the interpretation of statutes are questions of law, in connec-
tion with which an appellate court reaches a conclusion independent of
that reached by the lower court.
4. Administrative Law: Words and Phrases. A decision is arbitrary when
it is made in disregard of the facts or circumstances and without some
basis which would lead a reasonable person to the same conclusion.
5. Words and Phrases. A capricious decision is one guided by fancy
rather than by judgment or settled purpose.
6. ____. The term “unreasonable” can be applied to a decision only if the
evidence presented leaves no room for differences of opinion among
reasonable minds.
7. Judgments: Appeal and Error. An appellate court, in reviewing a
district court judgment for errors appearing on the record, will not sub-
stitute its factual findings for those of the district court where competent
evidence supports those findings.
8. Statutes: Taxation. Statutory tax exemption provisions are to be strictly
construed.
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Nebraska Supreme Court Advance Sheets
312 Nebraska Reports
GELCO FLEET TRUST v. NEBRASKA DEPT. OF REV.
Cite as 312 Neb. 499. Taxation: Proof. The burden of establishing a tax exemption is placed
on the party claiming the exemption.
Appeal from the District Court for Lancaster County: Lori
A. Maret, Judge. Affirmed.
Jennifer D. Tricker, of Baird Holm, L.L.P., Michael Bowen,
of Ackerman, L.L.P., and Raye C. Elliott, of Ackerman, L.L.P.,
pro hac vice, for appellant.
Douglas J. Peterson, Attorney General, and L. Jay Bartel for
appellees.
Heavican, C.J., Cassel, Stacy, Funke, Papik, and
Freudenberg, JJ.
Cassel, J.
INTRODUCTION
After Gelco Fleet Trust (Gelco) paid sales tax on the pur-
chase price of a new vehicle, it filed a claim for a refund.
Gelco alleged that it overpaid sales tax because the amount due
should have been reduced by a credit for the value of a vehicle
that Gelco claimed to have “traded in” some 6 weeks earlier.
The Nebraska Department of Revenue (Department) denied
the claim, and the district court affirmed. After reviewing the
court’s order for errors appearing on the record, we find none.
Accordingly, we affirm the court’s judgment.
BACKGROUND
Facts
Gelco is a Delaware statutory trust that transacts business
in Nebraska. It purchases motor vehicles and then leases them
to customers in Nebraska. As a lessor, Gelco elected to pay
sales tax based on the cost of each vehicle to be registered in
Nebraska that it purchased. 1
1
See Neb. Rev. Stat. § 77-2703(1)(h) (Cum. Supp. 2020).
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Nebraska Supreme Court Advance Sheets
312 Nebraska Reports
GELCO FLEET TRUST v. NEBRASKA DEPT. OF REV.
Cite as 312 Neb. 49In August 2019, Gelco disposed of a 2015 Chevrolet
Equinox. A Nebraska certificate of title for the Equinox iden-
tified Gelco as seller and CTC of Virginia (CTC) as pur-
chaser. On the other hand, a request that title be mailed to an
Omaha auto auction identified the auction as the purchaser of
the Equinox sold by Gelco. A “Vehicle History Report” for
the Equinox showed that it was sold at an “Auto Auction”
on August 29. According to information from the Nebraska
Department of Motor Vehicles, “Dillons Auto” purchased the
Equinox from CTC on August 29.
In October 2019, Gelco purchased from CTC a 2020 GMC
Terrain. Gelco leased the Terrain to a Nebraska customer and
paid sales tax of $1,573.79 on the full purchase price. The bill
of sale from CTC to Gelco reflected an amount of $27,514.34
for the Terrain; an amount of $13,635.05 for the Equinox,
which was identified as “Trade-In Vehicles”; a total net taxable
amount of $13,879.29; and a tax amount due of $971.55. The
“Nebraska Sales/Use Tax and Tire Fee Statement” (Form 6) for
the purchase of the Terrain indicated that a vehicle had been
traded in. Sections on the form for information regarding the
trade-in vehicle were blank with the exception of the vehicle
identification number, which number did not match that of
the Equinox.
Claim and Department’s Decision
In September 2020, Gelco submitted a claim for refund of
sales tax to the Department. Gelco requested a credit to its
sales/use tax account of $749.93. It stated that the $1,573.79 in
sales tax assessed on the Terrain should have been reduced by
a credit of $749.93 for the Equinox, which had been “traded in
to the selling dealer at the time of sale.”
After initially crediting Gelco’s account with the amount of
the claim, the Department later notified Gelco that the claim
had been paid in error. The denial letter explained that the
trade-in vehicle must be taken in trade by the seller in the
same transaction as the purchase of a vehicle. The Department
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Nebraska Supreme Court Advance Sheets
312 Nebraska Reports
GELCO FLEET TRUST v. NEBRASKA DEPT. OF REV.
Cite as 312 Neb. 49reasoned that “[a] motor vehicle sold at auction is not taken in
trade by CTC . . . in the same transaction as the purchase of a
motor vehicle.”
The record from the Department is quite limited. Nowhere
does it appear that Gelco requested an evidentiary hearing
before the Department.
District Court Proceedings
Gelco filed a petition in the district court to appeal the
Department’s decision. In an answer, the Department alleged
that the Equinox was purchased at an auto auction by CTC
and then sold by CTC to Dillon’s Auto. According to the
Department, the sale of the Equinox and purchase of the
Terrain were two independent, distinct transactions and did not
meet the requirements of a trade-in under § 77-2703(1)(i) and
316 Neb. Admin. Code, ch. 1, § 020.03A (2017).
The district court affirmed the Department’s decision. After
setting out Nebraska statutes and sales tax regulations, the
court reasoned that both required a motor vehicle to be “‘taken
by a seller in trade’” as all or a part of the consideration
for a sale of another motor vehicle in order to qualify for a
trade-in credit.
The court determined that Gelco and CTC conducted two
separate sales transactions and that neither qualified for a
trade-in credit to be excluded from the sales price. According
to the court, the first sale occurred in August 2019 and CTC
held the consideration of $13,635.05 as a credit for Gelco,
which it later applied against the purchase of the Terrain. The
second sale occurred when CTC transferred title of the Terrain
to Gelco for consideration of $13,879.29 and the $13,635.05
credit. The court reasoned that “[i]n neither sale was the
Equinox ‘taken by [CTC] in trade as all or a part of the consid-
eration’ for the purchase of the Terrain.” The court concluded
that the credit for the Equinox did not qualify as a trade-in
credit because CTC resold the Equinox to Dillon’s Auto prior
to the sale of the Terrain to Gelco. Accordingly, the court
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Nebraska Supreme Court Advance Sheets
312 Nebraska Reports
GELCO FLEET TRUST v. NEBRASKA DEPT. OF REV.
Cite as 312 Neb. 49found that the Department properly included the $13,635.05
credit in the sales price and calculation of sales tax.
The court rejected Gelco’s argument that the bill of sale
demonstrated the sale of the Equinox and the purchase of
the Terrain occurred in the same sales transaction. It stated
that CTC incorrectly identified the credit as a “‘Trade-In
Amount’” and explained that the credit could not be a trade-in
credit because CTC did not take similar property or a motor
vehicle as all or a part of the consideration for the sale of the
Terrain. The court also pointed out that the Department did
not deny Gelco’s refund claim based on a temporal require-
ment, but, rather, denied it based on the determination that
the Equinox was sold in one transaction and the Terrain was
purchased in another transaction.
Gelco filed a timely appeal, which we moved to our docket. 2
ASSIGNMENTS OF ERROR
Gelco assigns that the court erred by (1) “holding that the
trade-in vehicle must have been physically traded in to the
seller on the same day as the purchase of the new vehicle
in order to qualify” and (2) “holding that the credit Gelco
received for the trade-in vehicle was not a ‘trade-in credit’
under Nebraska law.”
STANDARD OF REVIEW
[1,2] A judgment or final order rendered by a district court
in a judicial review pursuant to the Administrative Procedure
Act may be reversed, vacated, or modified by an appellate
court for errors appearing on the record. 3 When review-
ing an order of a district court under the Administrative
Procedure Act for errors appearing on the record, the inquiry
is whether the decision conforms to the law, is supported by
2
See Neb. Rev. Stat. § 24-1106(3) (Cum. Supp. 2020).
3
Moore v. Nebraska Acct. & Disclosure Comm., 310 Neb. 302, 965 N.W.2d
564 (2021).
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Nebraska Supreme Court Advance Sheets
312 Nebraska Reports
GELCO FLEET TRUST v. NEBRASKA DEPT. OF REV.
Cite as 312 Neb. 49competent evidence, and is neither arbitrary, capricious, nor
unreasonable. 4
[3] Whether a decision conforms to law and the interpreta-
tion of statutes present questions of law, in connection with
which an appellate court reaches a conclusion independent of
that reached by the lower court. 5
ANALYSIS
[4-6] Gelco assigns two reasons why the district court erred
in determining that Gelco was not entitled to a trade-in credit.
Both of Gelco’s assignments of error implicate the inquiry
where review is for errors appearing on the record—whether
the decision conforms to the law, is supported by competent
evidence, and is neither arbitrary, capricious, nor unreason-
able. 6 A decision is arbitrary when it is made in disregard of
the facts or circumstances and without some basis which would
lead a reasonable person to the same conclusion. 7 A capricious
decision is one guided by fancy rather than by judgment or
settled purpose. 8 The term “unreasonable” can be applied to a
decision only if the evidence presented leaves no room for dif-
ferences of opinion among reasonable minds. 9
Gelco’s first assignment of error, read strictly, challenges
a holding not made by the district court. Gelco asserts that
the court held a trade-in vehicle must be physically traded in
“on the same day” as a new vehicle purchase to qualify for
the trade-in credit. But the court said no such thing. Although
the court stated that the “trade-in and new vehicle purchase
must occur in the same transaction,” it did not require the
4
Id.5
See id.6
See id.7
In re Water Appropriation A-4924, 267 Neb. 430, 674 N.W.2d 788 (2004).
8
Id.9
See id.- 55 -
Nebraska Supreme Court Advance Sheets
312 Nebraska Reports
GELCO FLEET TRUST v. NEBRASKA DEPT. OF REV.
Cite as 312 Neb. 49transaction to occur on the “same day.” As assigned, this alle-
gation of error is without merit.
Read broadly and in conjunction with Gelco’s argument,
the assignment contends that the court erred in holding two
separate transactions occurred. In affirming the Department’s
decision, the court observed that the Department did not
deny the claim based on a temporal requirement. Instead,
the Department based its denial on a determination that the
Equinox was sold in one sales transaction and the Terrain was
purchased in another sales transaction.
On de novo review, the court also identified two transac-
tions. The court recalled that a sale is defined as “any transfer
of title or possession . . . of property for a consideration.” 10 It
found that one sale occurred when Gelco transferred title of
the Equinox to CTC for $13,635.05 in consideration, which
consideration was held by CTC as a “‘credit.’” It then found
that a second sale took place when CTC transferred title of the
Terrain to Gelco for the credit from the first sale and an addi-
tional amount of consideration.
[7] The court’s decision conforms to the law and is sup-
ported by the record. The record contained conflicting evi-
dence regarding the purchaser of the Equinox sold by Gelco.
One document—the certificate of title—showed that it was
CTC, but a different document identified an auto auction.
The court found that CTC was the purchaser, which finding
has support in the record. An appellate court, in reviewing
a district court judgment for errors appearing on the record,
will not substitute its factual findings for those of the district
court where competent evidence supports those findings. 11
Moreover, the record is clear that CTC sold the Equinox prior
to Gelco’s purchase of the Terrain from CTC. Rather than the
trade-in occurring at the time of sale as Gelco asserted in its
10
Neb. Rev. Stat. § 77-2701.33 (Reissue 2018).
11
Moore v. Nebraska Acct. & Disclosure Comm., supra note 3.
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Nebraska Supreme Court Advance Sheets
312 Nebraska Reports
GELCO FLEET TRUST v. NEBRASKA DEPT. OF REV.
Cite as 312 Neb. 49claim for a refund, the record supports the court’s determina-
tion that Gelco and CTC conducted two sales.
Further, the court’s decision is not arbitrary, capricious, or
unreasonable. The court’s reasoning demonstrates that its judg-
ment is grounded in the facts contained in the record and the
applicable law. Gelco’s argument lacks merit.
Gelco’s second assignment asserts that the court erred by
holding that the credit it received did not qualify as a trade-in
credit. Whether a credit is for a trade-in is consequential. This
is because a credit for a trade-in is excluded from the sales
price and is thus not subject to sales tax. 12
[8,9] By excluding certain items from the sales price,
§ 77-2701.35(3) has the effect of exempting amounts that
would otherwise be subject to sales tax. Thus, rules of statu-
tory construction applicable to exemptions apply. Statutory tax
exemption provisions are to be strictly construed. 13 The burden
of establishing a tax exemption is placed on the party claiming
the exemption. 14
In certain situations, Nebraska law excludes from the sales
price a credit for a trade-in. Credit is allowed for “[t]he value
of a motor vehicle . . . taken by any person in trade as all or
a part of the consideration for a sale of another motor vehicle
. . . .” 15 Here, the district court determined that the credit Gelco
received for the Equinox was not a “‘trade-in credit’” because
CTC resold the Equinox to Dillon’s Auto before CTC sold the
Terrain to Gelco. Under the circumstances, CTC did not take
the Equinox as all or part of the consideration for the purchase
of the Terrain, particularly when the record is silent regarding
12
See Neb. Rev. Stat. § 77-2701.35(1) and (3)(e) (Reissue 2018).
13
Ash Grove Cement Co. v. Nebraska Dept. of Rev., 306 Neb. 947, 947
N.W.2d 731 (2020).
14
Big Blue Express v. Nebraska Dept. of Rev., 309 Neb. 838, 962 N.W.2d
528 (2021).
15
§ 77-2701.35(3)(e)(ii).
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Nebraska Supreme Court Advance Sheets
312 Nebraska Reports
GELCO FLEET TRUST v. NEBRASKA DEPT. OF REV.
Cite as 312 Neb. 49any contemplation by the parties of the sale of another vehicle
at the time that Gelco sold the Equinox.
Although the subsequently completed bill of sale for the
Terrain identified the Equinox as a traded-in vehicle, the Form
6 did not. As the court recognized, the Form 6 for the Terrain
purchase did not include a trade-in allowance and the vehicle
identification number for the trade-in did not match that of
the Equinox. It is the Form 6, not the bill of sale, which
is the “certified statement of the transaction” referenced in
§ 77-2703(1)(i). 16
Gelco did not meet its burden to show that it was entitled
to a trade-in credit when it purchased the Terrain. The court’s
determination that Gelco’s sale of the Equinox did not qualify
for a trade-in credit conforms to the law, is supported by the
record, and is reasonable. Gelco’s second assignment of error
also lacks merit.
CONCLUSION
Upon our review for errors appearing on the record, we
conclude the district court’s determination conforms to the law,
is supported by competent evidence, and is neither arbitrary,
capricious, nor unreasonable. Accordingly, we affirm the judg-
ment of the district court.
Affirmed.
Miller-Lerman, J., not participating.
16
See § 020.03.