ORDERS:
FINAL ORDER AND DECISION
STATEMENT OF THE CASE
This matter comes before this tribunal pursuant to S.C. Code Ann. § 12-60-470(F) (2000)
upon Petitioner’s (Taxpayer) request for a contested case hearing. Taxpayer, a brewpub located in
Columbia, South Carolina, seeks a refund of beer license taxes erroneously collected by Respondent
South Carolina Department of Revenue (Department) between October 1995 and August 1998. The
Department, however, contends that Taxpayer’s request for a refund for the period in question was
not timely filed under the relevant statute of limitations for such refunds and that its denial of
Taxpayer’s refund request should, therefore, be sustained. Based upon the evidence presented at the
hearing of this matter on December 4, 2003, and upon the applicable law, I find that the Department
properly denied Taxpayer’s request for a refund of beer license taxes paid between October 1995 and
August 1998.
FINDINGS OF FACT
Having carefully considered all testimony, exhibits, and arguments presented at the hearing
of this matter, and taking into account the credibility and accuracy of the evidence, I make the
following Findings of Fact by a preponderance of the evidence:
1.Taxpayer, a brewpub located in Columbia, South Carolina, opened for business in
October 1995 and began paying monthly beer license taxes imposed by the Department under Article
7, Chapter 21, of Title 12 of the South Carolina Code of Laws.
2.By an Order dated May 5, 2000, this tribunal determined, in a matter involving another
brewpub, that the beer license tax provisions of Article 7, Chapter 21, of Title 12, as they existed at
the time, did not apply to brewpubs.
See Foothills Brewing Concern, Inc. v. S.C. Dep’t of Revenue,
Docket No. 99-ALJ-17-0514-CC (S.C. Admin. Law Judge Div. May 5, 2000). This decision was
appealed to Circuit Court and was upheld by an Order issued by the Honorable James E. Lockemy
on May 16, 2001. See S.C. Dep’t of Revenue v. Foothills Brewing Concern, Inc., No. 00-CP-40-2161 (S.C. Ct. Com. Pl. May 16, 2001).
3.Upon learning of the Circuit Court decision, Taxpayer filed a claim for a refund with
the Department on October 12, 2001. Taxpayer’s claim sought the refund of all beer license taxes
paid by it between October 1995 and July 21, 2001. The Department allowed Taxpayer’s request
for the period between October 1998 and July 2001 and refunded $23,747.00 in taxes and interest
to Taxpayer. However, the Department determined that Taxpayer’s refund request was not timely
filed for tax periods prior to October 1998 and did not allow a refund for taxes paid between October
1995 and October 1998.
4.Taxpayer challenged the denial of its refund claim for taxes paid between 1995 and
1998 through the Department’s internal appeals process. By a Final Agency Determination dated
June 6, 2003, the Department allowed an additional refund amount for taxes paid for September
1998, but again denied any refund for taxes paid between October 1995 and August 1998 on the
ground that Taxpayer’s refund request was not timely filed for those periods. On July 3, 2003,
Taxpayer requested a contested case hearing before this tribunal to challenge the Department’s final
denial of its refund request for the period between October 1995 and August 1998.
CONCLUSIONS OF LAW
Based upon the foregoing Findings of Fact, I conclude the following as a matter of law:
“A refund of taxes is solely a matter of governmental grace, and any person seeking such relief
must bring himself clearly within the terms of the statute authorizing same.” Asmer v. Livingston,
225 S.C. 341, 344, 82 S.E.2d 465, 466 (1954) (citations omitted); TNS Mills, Inc. v. S.C. Dep’t of
Revenue, 331 S.C. 611, 618, 503 S.E.2d 471, 475 (1998); Guaranty Bank & Trust Co. v. S.C. Tax
Comm’n, 254 S.C. 82, 90, 173 S.E.2d 367, 370 (1970). Put another way, the right to recover taxes
from the state is purely statutory in nature, see C.W. Matthews Contracting Co. v. S.C. Tax Comm’n,
267 S.C. 548, 230 S.E.2d 223 (1976), and it is a right that should be narrowly construed. See Asmer
v. Livingston, 225 S.C. at 344, 82 S.E.2d at 466 (“[T]he weight of authority seems to be that such
[refund] statutes are to be strictly construed against the taxpayer.”).
The applicable refund statute in the case at hand is S.C. Code Ann. § 12-60-470 (2000). This
section grants the Department the authority to issue refunds to taxpayers and sets forth the
procedures for administering claims for refunds. Id. Among the procedural provisions of Section
12-60-470 is a statute of limitations for filing claims for a refund:
A taxpayer may seek a refund of any state tax by filing a written claim for refund with
the department. A claim for refund is timely filed if filed within the period specified
in Section 12-54-85 even though the time for filing a protest under Section 12-60-450
has expired and no protest was filed.
S.C. Code Ann. § 12-60-470(A) (2000) (emphasis added). The relevant “period specified in Section
12-54-85” is found at S.C. Code Ann. § 12-54-85(F) (Supp. 2002), which provides that:
Except as provided in subsection (D), claims for credit or refund must be filed within
three years from the time the return was filed or two years from the date the tax was
paid, whichever is later. If no return was filed, a claim for credit or refund must be
filed within two years from the date the tax was paid. A credit or refund may not be
made after the expiration of the period of limitation prescribed in this item for the
filing of a claim for credit or refund, unless the claim for credit or refund is filed by the
taxpayer or determined to be due by the department within that period.
S.C. Code Ann. § 12-54-85(F)(1) (Supp. 2002). Therefore, in order to be entitled to the refund it
seeks, Taxpayer must have brought itself squarely within the terms of these refund statutes by, among
other things, timely filing its claim for a refund.
Taxpayer has not, however, met this burden. Taxpayer is clearly entitled to, and has received
from the Department, a refund of beer license taxes paid between September 1998 and July 2001.
Taxpayer’s claim for a refund was timely filed with regard to these tax periods, which fall within three
years of October 12, 2001, the date on which Taxpayer filed its refund claim.
However, under the
plain terms of Sections 12-60-470(A) and 12-54-85(F), Taxpayer is not entitled to a refund for tax
periods prior to September 1998, as its refund claim was not timely filed with regard to those periods.
Taxpayer’s October 12, 2001 refund claim was filed more than three years after returns for those
taxes were filed and more than two years after those taxes were paid, and thus was not filed within
the statute of limitations provided in Section 12-54-85(F)(1). Because Taxpayer’s refund claim was
not timely filed for the period between October 1995 and August 1998, it is not entitled to, and the
Department may not pay, a refund for beer license taxes paid during that time.
See S.C. Code Ann.
§ 12-54-85(F)(1).
Moreover, Taxpayer has no recourse under S.C. Code Ann. § 12-60-470(G) (2000). This
section states that:
Even if a taxpayer has not filed a claim for a refund, if the department determines that
money has been erroneously or illegally collected from a taxpayer or other person, the
department, in its discretion, may, upon making a record in writing of its reasons,
grant a refund to the taxpayer or other person.
Id. However, this statute must not be read in isolation, but must be construed in conjunction with
the statute of limitations for refunds set up in Section 12-54-85(F). See TNS Mills, Inc. v. S.C. Dep’t
of Revenue, 331 S.C. 611, 620, 503 S.E.2d 471, 476 (1998) (“In construing statutory language, the
statute must be read as a whole, and sections which are part of the same general statutory law must
be construed together and each one given effect.”); see also S.C. Coastal Council v. S.C. State Ethics
Comm’n, 306 S.C. 41, 44, 410 S.E.2d 245, 247 (1991) (stating that a court should not consider a
particular clause being construed in isolation, but should read it in conjunction with the purpose of
the entire statute and the policy of the law). Construing these two statutory provisions together, it
becomes clear that the Department’s authorization pursuant to Section 12-60-470(G) to grant a
refund in the absence of a taxpayer’s claim is limited by the timeliness provision of Section 12-54-85(F), which applies to taxpayers and the Department alike. As noted above, Section 12-54-85(F)
states that “[a] credit or refund may not be made after the expiration of the period of limitation
prescribed in this item for the filing of a claim or refund, unless the claim for credit or refund is filed
by the taxpayer or determined to be due by the department within that period.” S.C. Code Ann. §
12-54-85(F)(1) (Supp. 2002) (emphasis added). Thus, under Sections 12-60-470(G) and 12-54-85(F), read in conjunction, the Department may only use its discretion to grant a refund to a taxpayer
who has not filed a claim if the Department makes a determination that the refund is due to the
taxpayer within the time limitations of Section 12-54-85. Here, the Department did not make such
a determination regarding Taxpayer’s tax payments for the period between October 1995 and August
1998 within the time for claiming a refund for those periods under Section 12-54-85. Accordingly,
Section 12-60-470(G) cannot provide Taxpayer with the refund it seeks.
Finally, Taxpayer argues that it is entitled to a refund based upon a line of United States
Supreme Court cases dealing with the appropriate remedy states must provide taxpayers who have
been subject to unconstitutional taxation. In making this argument, Taxpayer principally relies upon
a law review article, David F. Shores, Recovery of Unconstitutional Taxes: A New Approach, 12 Va.
Tax Rev. 167 (1992), and the United States Supreme Court’s decision in McKesson Corp. v. Div.
of Alcoholic Beverages & Tobacco, 496 U.S. 18 (1990), which struck down Florida’s liquor excise
tax due to discrimination against out-of-state producers. These authorities, however, do not support
Taxpayer’s argument. First, both the law review article and the Supreme Court case deal with
appropriate remedies to the collection of unconstitutional taxes. In the case at hand, the taxes
complained of by Taxpayer were invalidated based upon an interpretation of state tax laws, not upon
a determination that those taxes violated either the federal or state constitution. See Foothills
Brewing Concern, Inc. v. S.C. Dep’t of Revenue, Docket No. 99-ALJ-17-0514-CC (S.C. Admin.
Law Judge Div. May 5, 2000). Second, both the law review article and the McKesson opinion
recognize that a taxpayer’s ability to recover wrongfully collected taxes, including unconstitutionally
collected taxes, may be limited by “relatively short statutes of limitations applicable to such [refund]
actions.” McKesson, 496 U.S. at 45; see also Shores, supra, at 212 (“[I]t would seem that any
statute of limitations, no matter how short, would meet due process requirements.”). Therefore, even
if the authorities cited by Taxpayer are applied to this case, the “relatively short statute of limitations”
found in Section 12-54-85 can be properly applied to prohibit Taxpayer from collecting a refund for
the tax periods in question.
This tribunal recognizes that the denial of a refund to Taxpayer for wrongfully collected taxes
may appear harsh. However, such occasionally harsh results are an inherent consequence of placing
a statute of limitations on tax refunds, and their harshness must be weighed against the benefits
provided by such statutes of limitation. Courts have long recognized the mixed blessing of these
statutes of limitation. See, e.g., Rothensies v. Electric Storage Battery Co., 329 U.S. 296, 301-302
(1946); Webb v. United States, 66 F.3d 691, 694-95 (4th Cir. 1995). Nearly sixty years ago, the
United States Supreme Court noted that, because it “would be all but intolerable” to have a tax
system “under which there never would come a day of final settlement and which required both the
taxpayer and the Government to stand ready forever and a day” to litigate a tax matter, a statute of
limitation “is an almost indispensable element of fairness as well as practical administration” of tax
policy. Rothensies, 329 S.C. at 301. But, the Court went on to note that:
[Statutes of limitation] are by definition arbitrary, and their operation does not
discriminate between the just and the unjust claim, or the [avoidable] and unavoidable
delay. . . .
As statutes of limitation are applied in the field of taxation, the taxpayer
sometimes gets advantages and at other times the Government gets them. Both
hardships to the taxpayers and losses to the revenues may be pointed out.
Id. at 301-302. Section 12-54-85(F), the statute of limitation applied in this case, certainly creates
similar advantages and hardships, and yet, is considered an indispensable and necessary element in
the administration of South Carolina’s tax code.
Taxpayer has failed to bring itself squarely within the terms of the statutes authorizing the
refund it seeks. Under the plain terms of Sections 12-60-470 and 12-54-85, Taxpayer’s October 12,
2001 claim for a refund of wrongfully collected beer license taxes was not timely filed for taxes paid
between October 1995 and August 1998. Therefore, the Department properly denied Taxpayer’s
request for a refund for those tax periods.
ORDER
Based upon the Findings of Fact and Conclusions of Law stated above,
IT IS HEREBY ORDERED that Taxpayer’s request for a refund of beer license taxes paid
between October 1995 and August 1998 is DENIED.
AND IT IS SO ORDERED.
______________________________
JOHN D. GEATHERS
Administrative Law Judge
Post Office Box 11667
Columbia, South Carolina 29211-1667
December 18, 2003
Columbia, South Carolina |
