Graham v. Palmtop Properties, Inc.

ANDREWS, Presiding Judge,

dissenting.

It is uncontroverted that Palmtop did not obtain either a receipt or a certificate from the Commissioner showing that sales and use taxes owed by its predecessor gas station owner had been paid. Nor has Palmtop pointed to anything in the record showing that it asked either Sandy Springs Chevron (SSC) or the Hendrixes whether they owed any tax. These failures and omissions provide some evidence to support the Commissioner’s decision that Palmtop was indeed a successor to the tax liability of SSC and Hendrix under OCGA § 48-8-46.1 therefore dissent.

OCGA § 48-8-46 provides that

[i]f any dealer liable for any tax, interest, or penalty imposed by [Title 48, Chapter 8, Article 1 relating to sales and use taxes] sells out his business or stock of goods or equipment or quits the business, he shall make a final return and payment within 15 days after the date of selling or quitting the business. The dealer’s successor or assigns, if any, shall withhold a sufficient amount of the purchase money to cover the amount of the taxes, interest, and penalties due and unpaid until the former owner produces either a receipt from the commissioner showing that the taxes, interest, and penalties have been paid or a certificate from the commissioner stating that no sales and use taxes, interest, or penalties are due. If the purchaser of a business or stock of goods or equipment fails to withhold the purchase money as required by this Code section, he shall be personally liable for the payment of any sales and use taxes, interest, and penalties accruing and unpaid by any former owner or assignor. The personal liability of the purchaser in such a case shall not exceed the amount of the total purchase money. . . .

(Emphasis supplied.)

The record here shows that after being towed to SSC following a car breakdown, Mahendra Ganatra concluded that a convenience store and gas station business would be profitable there. Ganatra eventually purchased the property from the legal owner, Hendrix, for a total of $810,000, and then, after taking stick measurements of the amount of gasoline left in the station’s underground storage tanks, paid an additional $5,000 for that gasoline and $15,000 for the gasoline pumps and other equipment. Ganatra then incorporated Palmtop and applied for a sales tax registration number to operate a convenience store and gas station on the premises.

As the State points out, liability for a delinquent taxpayer’s unpaid sales and use taxes may attach to a purchaser of a “business or stock of goods or equipment.” (Emphasis supplied.) OCGA § 48-8-46. Although Palmtop makes much of the fact that it did not purchase SSC’s business, it bought the real estate and equipment forming the principal basis of that business, and then proceeded to operate the same kind of business on the property and with that equipment. Under these circumstances, I cannot conclude that the Commissioner erred when he found as a matter of fact that “Palmtop Properties was in the service station business after it acquired the property.” See Ciba Vision Corp. v. Jackson, 248 Ga. App. 688, 689 (548 SE2d 431) (2001) (courts review administrative decisions of Department of Revenue to determine whether there is “any evidence” to support the Department’s decision).

The Commissioner also concluded that SSC was an alter ego for Hendrix. The majority accepts this conclusion (p. 735), but holds that because SSC was never a “former owner or assignor” of the property, the State’s failure to record its lien should prevent us from piercing SSC’s corporate veil for the purpose of reaching Palmtop. Such reasoning transforms a wished-for conclusion—that Palmtop should not be held accountable for Hendrix’s taxes — into the premise leading to that conclusion.

OCGA § 48-8-46 mandates that only a purchaser who succeeds in obtaining a receipt or certificate from the commissioner can escape successor liability. Richards v. Blackmon, 233 Ga. 739, 741 (2) (213 SE2d 638) (1975). It is irrelevant that the State’s system for attaching tax liens malfunctioned here, since the only material inquiry is whether Palmtop fulfilled its obligations under the statute. See Miles v. Dept. of Revenue, 797 FSupp. 987 (S.D. Ga. 1992) (summary judgment properly granted to Commissioner despite purchasers’ claim that they were unaware of previous owner’s tax delinquencies). Other states have imposed successor liability, moreover, even when that successor has not taken the property from the owner who created the delinquency. See, e.g., Bates v. Director of Revenue, 691 SW2d 273 (Mo. 1985) (current owner who failed to withhold purchase money or to produce receipt and certificate from commissioner must pay taxes owed by prior owner who lost property in foreclosure).

Decided March 30, 2007. Thurbert E. Baker, Attorney General, Daniel M. Formby, Deputy Attorney General, Warren R. Calvert, Senior Assistant Attorney General, Lourdes Gonzalez de Mendoza, Frances C. Mulderig, Assistant Attorneys General, for appellant. Troutman Sanders, William M. Droze, T. Jerry Jackson, David F. Golden, for appellee.

The majority finally declines to hold Palmtop liable simply because the latter “took without [either] notice of a recorded lien or any apparent knowledge of improper dealings” between SSC and Hendrix (p. 736). The state of Palmtop’s knowledge was its own responsibility, however. As we held in another case rejecting a plea for “equity” by a successor who had failed to do what OCGA § 48-8-46 requires:

It was [Palmtop’s] duty to discover whether such taxes were due at the time it purchased the business, and, if it had complied with the statutory requirements which it is presumed to know, it would have been completely aware of the tax situation in regard to the business which it was purchasing.

(Punctuation omitted.) Collins v. Lesters, Inc., 225 Ga. App. 405, 408-409 (4) (484 SE2d 62) (1997), quoting Richards, supra at 741. Because only Palmtop can be held responsible for its lack of diligence and its failure to comply with OCGA § 48-8-46,1 respectfully dissent.

I am authorized to state that Presiding Judge Blackburn joins in this dissent.