Outdoor Cap Co. v. Benton County Treasurer

Cite as 2014 Ark. 536
SUPREME COURT OF ARKANSAS
No. CV-14-40
OUTDOOR CAP CO., INC. Opinion Delivered December 18, 2014
APPELLANT
APPEAL FROM THE BENTON
V. COUNTY CIRCUIT COURT
[NO. CIV-2012-2387-4]
BENTON COUNTY TREASURER, HONORABLE JOHN RUSSELL
BENTON COUNTY ASSESSOR, AND SCOTT, JUDGE
BENTON COUNTY TAX
COLLECTOR AFFIRMED.
APPELLEE
KAREN R. BAKER, Associate Justice
This appeal arises from a dispute over a refund of ad valorem taxes. Appellant,
Outdoor Cap Co., Inc. (“Outdoor Cap”) was founded in 1976 and is a headwear company
with its headquarters and largest distribution center located in Bentonville, Arkansas, in
Benton County. Outdoor Cap has been paying ad valorem personal-property taxes in
Benton County since 1976. In 2011, Outdoor Cap sought a refund from the appellee,
Benton County Treasurer, Benton County Assessor, and the Benton County Tax Collector
(“Benton County”) of certain taxes which Outdoor Cap contended that it was entitled to
pursuant to Ark. Code Ann. § 26-26-1102 (Repl. 2012). Specifically, this appeal stems from
Outdoor Cap seeking a refund of certain taxes paid in 2008 and 2009 for a total of
$247,143.02. Benton County opposed the refund. The parties agree that Outdoor Cap is a
manufacturer and is entitled to the “manufacturer’s exemption” or the “Freeport exemption”
pursuant to Ark. Code Ann. § 26-26-1102. The parties dispute whether Outdoor Cap is
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entitled to a refund of the 2008 and 2009 taxes that Outdoor Cap asserts were exempt under
the “manufacturer’s exemption” and that the taxes were erroneously assessed.
After the Benton County Assessor’s Office denied Outdoor Cap’s request for a refund,
on October 4, 2012, Outdoor Cap filed a petition for tax refund in the County Court of
Benton County, and Benton County responded. On November 30, 2012, the County Court
denied Outdoor Cap’s petition for tax refund. On December 13, 2012, Outdoor Cap
appealed the denial to the Benton County Circuit Court. On January 2, 2013, Outdoor Cap
filed its complaint in the Benton County Circuit Court seeking reversal of the November 30,
2012 order and sought a refund of the alleged overpaid taxes. On January 11, 2013, Benton
County answered the complaint and again, opposed the tax refund. The parties filed
competing motions for summary judgment and timely responded and replied. On August 28,
2013, the circuit court conducted a hearing and on September 12, 2013, the circuit court
granted Benton County’s motion for summary judgment and denied Outdoor Cap’s motion
for summary judgment, finding that Outdoor Cap was not entitled to a refund of any portion
of the 2008 and 2009 personal-property taxes it had paid.
From that order, on January 10, 2014, Outdoor Cap timely appealed to the court of
appeals and on September 23, 2014, we assumed jurisdiction of this case. Outdoor Cap
presents three points on appeal: (1) whether the circuit court erred in finding that the
personal-property tax was not “exempt” from taxation; (2) whether the circuit court erred
in determining the personal property was not erroneously assessed; and (3) whether the circuit
court erred in applying the voluntary payment doctrine.
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I. Standard of Review
We have ceased referring to summary judgement as a “drastic” remedy and now
simply regard it as one of the tools in the trial court’s efficiency arsenal. Laird v. Shelnut, 348
Ark. 632, 641, 74 S.W.3d 206, 211 (2002). A summary judgment should be granted only
when the state of the evidence as portrayed by the pleadings, affidavits, discovery responses,
and admissions on file is such that the nonmoving party is not entitled to a day in court, i.e.,
when there is not any genuine remaining issue of material fact and the moving party is
entitled to judgment as a matter of law. Wallace v. Broyles, 332 Ark. 189, 961 S.W.2d 712
(1998). “Normally, on a summary-judgment appeal, the evidence is viewed most favorably
for the party resisting the motion and any doubts and inferences are resolved against the
moving party, but in a case where the parties agree on the facts, the appellate court simply
determines whether the appellee was entitled to a judgment as a matter of law.” City of Little
Rock v. Pfeifer, 318 Ark. 679, 887 S.W.2d 296 (1994).
Additionally, this case presents an issue of statutory interpretation. Issues of statutory
construction are reviewed de novo on appeal, and it is for the appellate court to determine
the meaning of a statute. Hodges v. Huckabee, 338 Ark. 454, 995 S.W.2d 341 (1999). The
appellate court is not bound by the circuit court’s interpretation, but in the absence of a
showing that the circuit court misinterpreted the law, the trial court’s interpretation will be
accepted as correct. Id. We construe the statute so that no word is left void, superfluous, or
insignificant, and we give meaning and effect to every word in the statute, if possible. Miller
v. Enders, 2013 Ark. 23, at 6–7, 425 S.W.3d 723, 726–27.
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II. Points on Appeal
A. Whether The Circuit Court Erred in Finding That the
Personal-Property Tax Was Not Exempt From Taxation
For its first point on appeal, Outdoor Cap contends that the circuit court erred in
finding that the personal-property tax was not “exempt” from taxation. Citing to Ark. Code
Ann. § 26-26-1102(b)(1)(A)–(B) (Repl. 2012) and Omega Tube & Conduit Corp. v. Maples,
312 Ark. 489, 850 S.W.2d 317 (1993), Outdoor Cap contends that its personal property is
subject to the manufacturer’s exemption, also known as the “Freeport” or “no situs” law.
Thus, it contends that the property at issue was exempt from taxation and that the tax at issue
was void and should be refunded.
Outdoor Cap first contends that the property is exempt from taxation pursuant to “the
manufacturer’s or Freeport exemption” Ark. Code Ann. § 26-26-1102(b)(1)(B). Because the
property is exempt, the tax must be rendered void because article 16, section 6, of the
Arkansas Constitution provides that all other laws outside of Arkansas’s Constitution which
exempt property from taxation are void. Accordingly, Outdoor Cap contends that the
property is not subject to taxation, is “exempt” from taxation, the taxes are void, and it is
entitled to a refund on the 2008 and 2009 years.
Benton County responds that the “manufacturer’s exemption” applies to the taxes at
issue, but does not create an “exemption” from taxation. Rather, the property is in transit
and will be taxed where the item is eventually sold. It further responds that the property is
not “exempt” from taxation and a valid tax. Rather than “exempt,” Benton County
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contends that Ark. Code Ann. § 26-26-1102(b)(1)(B) statutorily creates an exception for
property in transit to be taxed while being manufactured and the property does not attain “tax
situs” allowing it to be taxed in Arkansas. Stated differently, the statute does not create
exemption status for the property but creates an exception to attaining tax situs. Benton
County further responds that Omega Tube is controlling and that the circuit court correctly
denied the refund.
Outdoor Cap replies that based on Omega Tube the property at issue is free from
taxation by virtue of not acquiring “situs” in Arkansas and cannot be taxed, and thus a refund
is appropriate.
At issue is the circuit court’s September 12, 2013 order, in which the circuit court
held,
The personal property at issue here is not exempt. It is not to be assessed because it
acquires “no situs in this State.” ARK. CODE ANN. § 26-26-1102(b)(1)(B). If it
were to stay in Arkansas, acquire a situs, it would be assessed for taxation. The
Defendants have jurisdiction for — tax purposes. The Plaintiff’s error is not a deviation
from law.
It is well settled that every taxpayer is charged with knowledge of the law and
that a voluntary payment of personal property taxes which the law would not require
to be paid, does not provide a basis for a refund of personal property taxes paid by the
taxpayer. The Plaintiff paid the 2008 and 2009 personal property taxes as a result of its
own error, and therefore is not entitled to a refund of those tax payments. Rutherford
vs. Barnes, 312 Ark. 177, 847 S.W.2d 689 (Ark., 1993); and Omega Tube . . . , 850
S.W.2d 317, 312 Ark. 489( Ark., 1993).
The statute at issue, Ark. Code Ann. § 26-26-1102 provides in pertinent part:
(a) All real estate and tangible personal property shall be assessed for taxation in the
taxing district in which the property is located and kept for use.
(b)(1)(A) Tangible personal property in transit for a destination within this state shall
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be assessed only in the taxing district of its destination.
(B) Tangible personal property in transit through this state, including raw materials
from within or outside this state used in the manufacturing process and tangible
personal property manufactured, processed, or refined in this state and stored for
shipment outside the state, shall, for purposes of ad valorem taxation, acquire no situs
in this state and shall not be assessed for taxation in this state.
(C) The owner of tangible personal property in transit through this state and of
tangible personal property in transit for a destination within this state may be required,
by the appropriate county assessor, to submit documentary proof of the in-transit
character and the destination of the property.
In Omega Tube, we interpreted Ark. Code Ann. § 26-26-1102 which contained the
same language in our current statute, and the statute’s application to certain materials. We
held,
Given the ambiguity of the Statute, our understanding of the intent of the General
Assembly, and the interpretation and application given to § 26-26-1102 by officials,
we hold § 26-26-1102 exempts from ad valorem taxation raw materials shipped to
Arkansas for inclusion in tangible personal property manufactured, processed, or
refined here for shipment outside the state.
Omega Tube, 312 Ark. at 497, 850 S.W.2d at 321.
In Omega Tube, we also issued a supplemental opinion and denied Pulaski County’s
petition for rehearing, and we further explained our interpretation of Ark. Code Ann. § 26-
26-1102 and held:
Pulaski County argues our opinion is contrary to Ark. Const. art. 16, §§ 5 and 6. The
County, again citing Eoff v. Kennefick–Hammond Co., 80 Ark. 138 (1906), says we
misused the terms “exempt” and “exemption” as only certain property listed in the
Constitution may be “exempted” from taxation.
In the Eoff case, in addition to the Commerce Clause issue, we interpreted a statute
now codified as Ark. Code Ann. § 26-3-201 (Repl. 1992) which, in relevant part,
provides, “All property, whether real or personal, in this state; . . . shall be subject to
taxation.” We held property brought to Arkansas to use in construction of a railroad
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was not in transit but acquired a tax situs here. We did not have before us Act 269 of
1969 [Ark. Code Ann. § 26-26-1102 (Repl. 1992) ].
It was not our intention to declare the property in question “exempt” in the constitutional sense;
rather, according to § 26-26-1102, it does not attain a tax situs in Arkansas.
Id. at 499, 850 S.W.2d at 322 (emphasis added).
Accordingly, based on Omega Tube, we have previously examined this statute at issue
and held that the manufacturer’s exemption according to Ark. Code Ann. § 26-26-1102
means that the property does not attain a tax situs in Arkansas. We further held that the
property was not exempt in the constitutional sense. Thus, we agree with Benton County
that Omega Tube is on point. The property at issue here is not exempt but rather, as in Omega
Tube, the property does not attain a tax situs in Arkansas. Accordingly, based on our standard
of review, we affirm the circuit court on this first point.
B. Whether The Circuit Court Erred in Determining the
Personal Property Was Not Erroneously Assessed
For its second point on appeal, Outdoor Cap alternatively asserts that it is due a refund
of the taxes and that the circuit court erred in finding that the taxes were not erroneously
assessed. Outdoor Cap contends that the property at issue was erroneously assessed because
the property did not acquire tax situs in Arkansas and was misclassified as taxable property.
Outdoor Cap further contends that Ark. Code Ann. § 26-35-901 allows for refunds for
erroneously assessed property and its property falls within the definition of “erroneous
assessment” in Ark. Code Ann. § 26-28-111(c) and is therefore entitled to a refund.
Benton County responds that if Outdoor Cap’s property was erroneously assessed, it
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is entitled to a refund. However, Benton County contends that the property was not
“erroneously assessed” but rather, Outdoor Cap overvalued its property and failed to claim
a credit it was due for the tax period at issue. Stated differently, if Outdoor Cap had properly
identified its property as being in transit for the relevant time periods, it would not have
acquired tax situs and not been taxed. Benton County further responds that Ark. Code Ann.
§ 26-35-901 allows for refunds for “erroneously assessed” property and Ark. Code Ann. § 26-
28-111(c) defines “erroneous assessment,” which does not include the property at issue.
At issue is the circuit court’s order which states in pertinent part:
The Plaintiffs error in completing the personal property tax assessment form is
analogous to the tax payer’s error committed in the case of Ritchie Grocer Co. vs. City
of Texarkana, 30 S.W.2d 213, 182 Ark. 137 ( Ark. 1930). Ritchie Grocer Co. paid
personal property tax on its notes, credits, and accounts, and failed to reduce the value
of the property by the amount of notes, credits, and accounts it owed to others. In an
action seeking a refund, the Arkansas Supreme Court held that an “erroneous
assessment” was one which:
deviates from the law and is therefore invalid, and is a defect that is
jurisdictional in nature, and does not refer to the judgment of the assessing
officers in fixing the amount of the valuation of property. Id, at 214-215. If
appellant had listed notes, credits, and accounts with the assessor which it did
not own or control, then the assessment would have been erroneous. It,
however, owned the notes, credits, and accounts it listed, and overvalued them
by failing to deduct credits to which it was entitled. This failure did not
constitute an erroneous assessment of them under section 10180 of Crawford
& Moses’ Digest. Id. at p. 215.
...
The personal property at issue here is not exempt. It is not to be assessed because it
acquires “no situs in this State.” ARK. CODE ANN. § 26-26-1102(b)(1)(B). If it
were to stay in Arkansas, acquire a situs, it would be assessed for taxation. The
Defendants have jurisdiction for —tax purposes. The Plaintiff’s error is not a deviation
from law.
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Turning to the applicable statutes, Ark. Code Ann. §§ 26-35-901 and 26-28-111(c),
we first review Ark. Code Ann. § 26-28-111, “Manner of correcting errors.” Subsection (c)
provides:
(c) The provisions of this section shall be applicable only to the correction of actual
and obvious errors on the tax books and related records, with such errors being
restricted to extension errors, erroneous property descriptions, classifications, or
listings, and shall not be utilized to make any change in the valuation of any real or personal
property as shown on the tax books and related records other than a change in valuation
necessitated by the correction of actual and obvious errors as provided in this section.
In no case shall any reduction in the valuation of any real or personal property be
made, except such as shall have been ordered by the county equalization board, the
county court, the circuit court, or the Supreme Court, or be caused by the correction
of actual and obvious errors as provided in this section.
Id. (emphasis added).
Once an error has been identified, the error shall be corrected pursuant to Ark. Code
Ann. § 26-35-901, which provides:
(a)(1) When any person has paid taxes on any real property or personal property,
erroneously assessed, as defined and described in § 26-28-111(c), upon satisfactory
proof being adduced to the county court of this fact, the county court shall make an
order directed to the county treasurer refunding to the person the amount of tax so
erroneously assessed and paid.
(2) All erroneous assessment claims for property tax refunds shall be made
within three (3) years from the date the taxes were paid.
(b) The general fund of the county shall be reimbursed by transfer to it from funds of
the respective taxing units, and the amount contributed by each taxing unit shall be
the amount of the erroneous payment received by the taxing unit.
As both parties note, in Ritchie Grocer Co. v. City of Texarkana, 182 Ark. 137, 30
S.W.2d 213(1930), we interpreted the term “erroneous assessment” and the difference
between an “excessive assessment” and “erroneous valuation” by the taxpayer. In that case,
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we explained:
This court has defined the distinction between an excessive assessment and an
erroneous assessment as used in section 10180 of Crawford & Moses’ Digest. In the
case of Clay County v. Brown Lumber Co., 90 Ark. 413, 119 S.W. 251, 253, it was said
that “the term ‘erroneous assessment,’ as there used, refers to an assessment that
deviates from the law and is therefore invalid, and is a defect that is jurisdictional in its
nature, and does not refer to the judgment of the assessing officers in fixing the amount
of the valuation of the property. If the property paid on was exempt from taxation, or
if the property was not located in the county, or if the tax was invalid, or if there was
any clear excess of power granted, so as to make the assessment beyond the jurisdiction
of the assessing officer or board, then the provisions of Kirby’s Dig. § 7180 [Crawford
& Moses’ Digest, section 10180] give the owner a remedy for a refunding of such taxes
thus erroneously paid; but a remedy is not given by this section to the party aggrieved
by reason only of an excessive assessment or overvaluation of his property.” If appellant
had listed notes, credits, and accounts with the assessor which it did not own or
control, then the assessment would have been erroneous. It, however, owned the
notes, credits, and accounts it listed, and overvalued them by failing to deduct credits
to which it was entitled. This failure did not constitute an erroneous assessment of
them under section 10180 of Crawford & Moses’ Digest.
Ritchie Grocer Co., 182 Ark. at 138–39, 30 S.W.2d at 214.
Here, Outdoor Cap’s situation is analogous to Ritchie Grocer Co.’s. Outdoor Cap
failed to identify the property at issue as property that was “in transit” or eligible for the
manufacturer’s exemption and therefore overvalued its property. The property was not
erroneously assessed or misclassified by the the Benton County tax assessor and the failure to
properly classify the property as in transit rested with the taxpayer. Accordingly, based on our
standard of review, we cannot say the circuit court erred and we affirm the circuit court on
this second point.
C. Whether The Circuit Court Erred in Applying
the Voluntary Payment Doctrine
For its third point on appeal, Outdoor Cap contends that the circuit court erred in its
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application of the voluntary payment doctrine. Outdoor Cap asserts that Omega Tube does
not directly answer Outdoor Cap’s argument because, in that case, this court summarily
applied the voluntary payment doctrine in one sentence. Outdoor Cap further contends that
it is entitled to a tax refund for erroneously assessed taxes based on refunds available through
Ark. Code Ann. § 26-35-901(a). Finally, Outdoor Cap asserts that its payment of taxes was
not voluntary but was made under coercion because, if the taxes were not paid, Benton
County had the authority to take and sell Outdoor Cap’s property for failing to file and pay
taxes.
Benton County responds that the circuit court correctly applied the voluntary payment
doctrine because voluntarily paid taxes are not recoverable unless there is an exception where
a statute allows recovery. Benton County contends that because there was not an erroneous
assessment there is no statute that would allow for recovery. Benton County further responds
that Outdoor Cap did not present its coercion argument to the circuit court and the argument
is without merit because every taxpayer would have been “coerced” according to Outdoor
Cap’s argument because every taxpayer would be subject to penalties if its taxes weren’t paid.
Additionally, Benton County responds that Outdoor Cap’s argument is without merit because
every taxpayer is charged with knowledge of the law.
In the circuit court’s order regarding the voluntary payment, the circuit court held:
It is well settled that every taxpayer is charged with knowledge of the law and that a
voluntary payment of personal property taxes which the law would not require to be
paid, does not provide a basis for a refund of personal property taxes paid by the
taxpayer. The Plaintiff paid the 2008 and 2009 personal property taxes as a result of its
own error, and therefore is not entitled to a refund of those tax payments. Rutherford
vs. Barnes, 312 Ark. 177, 847 S.W.2d 689 Ark., 1993); and Omega Tube.
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In Rutherford v. Barnes, 312 Ark. 177, 847 S.W.2d 689 (1993), we explained the
doctrine of voluntary payment:
We have adopted in this state the common law rule that taxes voluntarily paid are not
recoverable. City of Little Rock v. Cash, 277 Ark. 494, 644 S.W.2d 229 (1982) cert.
denied 462 U.S. 1111(1983). Thompson v. Continental Southern Lines, Inc., 222 Ark.
108, 257 S.W.2d 375 (1953). In both Cash and Thompson, we quoted from Cooley,
The Law of Taxation, Ch. 20, § 1282, in establishing the common law rule:
It is well settled that if the payment of a tax is a voluntary payment, it cannot
be recovered back, except where a recovery is authorized by the provisions of
a governing statute regardless of whether the payment is voluntary or
compulsory. . . . Where voluntary payments are not recoverable, it is
immaterial that the tax or assessment has been illegally laid, or even that the law
under which it was laid was unconstitutional. The principle is an ancient one
in the common law, and is of general application. Every man is supposed to
know the law, and if he voluntarily makes a payment which the law would not
compel him to make, he cannot afterwards assign his ignorance of the law as
a reason why the State should furnish him with legal remedies to recover it
back. Ignorance or mistake of law by one who voluntarily pays a tax illegally
assessed furnishes no ground of recovery.
Cash, 277 Ark. at 503–504, 644 S.W.2d at 232; Thompson, 222 Ark. at 115, 257
S.W.2d at 379.
Rutherford, 312 Ark. at 179, 847 S.W.2d at 691.
Here, Outdoor Cap voluntarily paid its taxes for the years 2008 and 2009, and did not
claim a manufacturer’s exemption for those years. It is presumed to have known the law and
its rights under the law. Accordingly, we do not find error in the circuit court’s application
of the voluntary payment doctrine to Outdoor Cap’s refund. Therefore, we affirm the circuit
court on Outdoor Cap’s third point on appeal.
Affirmed.
Hall, Estill, Hardwick, Gable, Golden & Nelson, P.C., by: Robert K. Rhoads, for appellant.
Clark & Spence, by: George R. Spence, for appellees.
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