N.C. Dep't of Revenue v. Asphalt Emulsion Indus., LLC

N.C. Dep’t of Revenue v. Asphalt Emulsion Indus., LLC, 2026 NCBC 5.

STATE OF NORTH CAROLINA IN THE GENERAL COURT OF JUSTICE
SUPERIOR COURT DIVISION
WAKE COUNTY 24CV040734-910

NORTH CAROLINA DEPARTMENT
OF REVENUE,

Petitioner,

v. ORDER AND OPINION ON PETITION
FOR JUDICIAL REVIEW
ASPHALT EMULSION
INDUSTRIES, LLC,

Respondent.

1. This matter is before the Court on a Petition for Judicial Review filed by

petitioner North Carolina Department of Revenue (“DOR”). (ECF No. 3). DOR seeks

review of a Final Decision by Summary Judgment issued by an Administrative Law

Judge (“ALJ”) in favor of respondent Asphalt Emulsion Industries, LLC (“AEI”) on

21 November 2024 (the “Final Decision”). (ECF No. 17, R_015653–015661).

2. In the Final Decision, the two issues before the ALJ were (i) whether

AEI’s “transfers of finished emulsion product to affiliated entities were ‘sales’ subject

to North Carolina sales tax” (the “Transfers”), and (ii) whether AEI “is a ‘retailer’

for the purpose of the Sales and Use Tax Act.” (R_015653).

3. In resolving these issues, the ALJ granted in part and denied in part

each side’s cross-motions for summary judgment. As to the Transfers, the ALJ

determined that the Transfers of emulsion products and materials by AEI “to

members of its affiliated group are not subject to sales tax,” such that AEI is not

required to pay sales tax to DOR on those transfers under N.C. Gen. Stat. § 105-164.1,
et seq. (R_015659). The ALJ therefore granted AEI’s motion, and denied DOR’s

motion, for summary judgment as to that issue (the “Transfer Issue”). (R_015659).

4. As to AEI’s status as a “retailer” under the Sales and Use Tax Act, the

ALJ determined that AEI was a retailer under the statute and that AEI was required

to obtain a certificate of registration and to file sales and use tax returns during the

periods at issue as a result (the “Retailer Issue”). (R_015659). The ALJ thus granted

DOR’s motion, and denied AEI’s motion, for summary judgment as to the Retailer

Issue. (R_015659).

5. With its petition, DOR contends that the ALJ erred in granting AEI’s

motion, and denying DOR’s motion, for summary judgment as to the Transfer Issue

and asks the Court to reverse the Final Decision on that basis. (ECF No. 3 at 16

(requesting that the Court “set aside and reverse that portion of the Final Decision

which denies the Department’s motion for summary judgment”)). Conversely, AEI

contends that the ALJ’s Final Decision “was well-reasoned and correct, after a

thorough examination of the evidence presented before her” and that there were no

taxable events between AEI and its affiliates. (ECF No. 32 at 27).

6. Neither side contests the portion of the Final Decision granting DOR’s

motion and denying AEI’s motion for summary judgment as to the Retailer Issue.

(ECF No. 3 at 16; see generally ECF No. 11). Accordingly, that issue is not before the

Court, and this Order therefore addresses only that portion of the Final Decision

granting AEI’s motion and denying DOR’s motion for summary judgment with

respect to the Transfer Issue.
7. The Court held a hearing on the petition on 29 August 2025, (ECF No.

34), at which all parties were represented by their counsel of record.

8. Having considered the petition, all appropriate matters of record, and

the written and oral arguments of counsel for the parties, the Court determines that

summary judgment was appropriate and that the Final Decision should be

AFFIRMED as to the Transfer Issue.

North Carolina Department of Justice by Jonathan Neil Wike for
Petitioners North Carolina Department of Revenue

Carruthers & Roth, P.A. by Robert Young and Craig T. Almond for
Respondent Asphalt Emulsion Industries, LLC

Houston, Judge.

BACKGROUND

9. Sitting in an appellate capacity, the Court does not make findings of fact

but summarizes the case’s procedural history and certain undisputed background

facts for context. See Shepherd v. Consol. Jud. Ret. Sys., 89 N.C. App. 560, 562 (1988).

The Court’s ultimate determinations in this action would be the same if no

background were set out.

10. Petitioner DOR is a state agency responsible for administering and

collecting taxes imposed under N.C. Gen. Stat. § 105-164.1, et seq. (the “Tax Act”).

11. Respondent AEI is a single member North Carolina limited liability

company. (R_000051, 144). From at least 1 June 2015 through 31 May 2021 (the

“Audit Period”), 1 AEI operated a facility in Dunn, North Carolina, where its

1 Though DOR and the Final Decision at various times reference the audit period as 1 May

2015 through 31 May 2021, (ECF No. 28 at 1; R_015654 at ¶ 6), DOR’s Notice of Final
employees manufactured asphalt emulsion product (“Emulsion Product”), a

material used in road construction. (R_000138–39).

12. AEI’s sole member and parent company is Slurry Pavers, Inc. (“SPI”), a

Virginia corporation. (R_000016). SPI is a road paving and road construction

company based in Virginia that constructs roads, primarily in Virginia and North

Carolina. (R_000051).

13. In addition to AEI, SPI has several other wholly owned subsidiaries,

each of which is involved in SPI’s road paving and construction business. (R_000145).

SPI’s other subsidiaries include Whitehurst Paving Company, Inc. (“WPC”),

Morehead Asphalt Company, LLC (“MAC”), and Whitehurst Transport Company,

Inc. (“WTI”). (R_000145). All of the entities are treated as disregarded entities for

purposes of federal and state income tax purposes. (R_000144–45).

14. During the Audit Period, MAC acquired and produced base asphalt raw

materials. (R_000005). WTI or third-party transporters shipped those raw materials

from MAC to AEI, with AEI generally paying for hauling services. (R_000143–144).

In turn, AEI used the raw materials to produce Emulsion Product, which was then

shipped to SPI and WPC for use in road construction. (R_000137–47).

15. Each year, at SPI’s direction, AEI transferred the majority of its

Emulsion Product to SPI and WPC, (R_000146), though AEI also sold Emulsion

Product to unrelated third party during the Audit Period. (R_000146–147).

Determination reflects the “Tax Period” at issue as “6/1/15-5/31/21.” (R_000051). Regardless
of this discrepancy, which appears to be a scrivener’s error, the factual circumstances are
substantively the same, and, between the two, the specific date is not otherwise material for
purposes of this Order and Opinion.
16. AEI’s Transfers to its parent and affiliate were not negotiated or

bargained-for transfers and were instead made at the direction of SPI, as the parent

company, or WPC, an affiliate, with AEI transferring Emulsion Product at no cost.

(R_000146, 201–203).

17. AEI did not invoice SPI or WPC, and neither SPI nor WPC paid AEI the

hypothetical markup prices of the Emulsion Product being transferred as part of the

Transfers. No payment obligations were created, nor were purchase orders or bills of

sale issued. (R_000201–203). As AEI’s and SPI’s corporate designee affirmed, “AEI

essentially produces and gives the product to [SPI.]” (R_000201 at 72:18 and 72:25

(“That’s correct.”)).

18. In light of this process and the parties’ corporate structure, SPI

maintained accounting records for itself and its subsidiaries and affiliates in a

construction industry software program called Vista, which is operated by a single

accounting team responsible for each entity’s financial reporting. (R_000153,

R_000466–67, R_000473–75).

19. The Vista program is generally used to record accounting transactions,

including job cost, accounts payable, payroll, inventory, prices, revenue, accounts

receivable, and other information input by clerks at SPI. (R_000150–52).

20. For AEI’s and SPI’s purposes, Vista “records all accounting transactions

from job cost to accounts payable to payroll to accounts receivable to general ledger,”

plus inventory, prices, and revenue. (R_000150–51 at 21:24–22:11).
21. When AEI made Transfers to SPI and WPC, the transactions were

recorded in Vista, with Vista’s inventory and job cost figures immediately adjusted

for AEI. (R_000150–52, 201–03, 466–67, R_000473–74). However, AEI did not send

invoices to SPI or WPC or otherwise expect profit based upon those accounting

entries. (R_000201–03).

22. In the course of documenting those Transfers, an entry was generally

made in the Vista program to reflect a “due to”/“due from” dollar amount entry.

(R_000158–62, 201–03, 274–77). During the Audit Period (except the month of May

2021), the “due to”/“due from” amount listed in Vista for the Transfers was the

amount that AEI estimated SPI would have paid if it had purchased the finished

Emulsion Product from an unrelated third party (i.e., a hypothetical price based on a

purchase from someone other than AEI). (R_000201–03).

23. These hypothetical prices were not reported to DOR or used in

calculating tax returns and, instead, were maintained at least primarily, if not

entirely, 2 for internal bookkeeping, business management, and accounting purposes.

(R_000201–03). Because the hypothetical markup did not reflect actual amounts paid

or transferred, SPI and WPC did not pay the markup amount to AEI, and the

2 The overall Vista program was at times “used to process data entries for all of the SPI

entities in the group for both internal management reporting and external financial reporting
requirements.” (R_000217; see also R_00194)). DOR argues that, because the overall Vista
program as a whole could be used for external reporting, this necessarily means that the
hypothetical “due to”/“due from” entries—discrete data points in the system—were also used
for external reporting. (ECF No. 33 at 8). The otherwise unrebutted evidence of record,
however, indicates that the hypothetical markups were for internal accounting and
management purposes and were not reported to DOR or otherwise used for material external
purposes. (Compare R_0000168 (hypothetical amounts), with R_000153–55, 194 (Vista as a
whole)).
Emulsion Product was ultimately reported for tax purposes as being transferred at

cost rather than at the hypothetical markup amount. (R_000167–72, 178, 192, 197,

201–03, 274–275).

24. As a result, for purposes of paying sales and use tax and submitting tax

returns, AEI and SPI calculated “the cost of the internal transfers . . . and report[ed]

that to the North Carolina Department of Revenue.” (R_000169 (A: “[T]hat cost is

determined by the raw materials that go into it. And that is the number that we

record for sales tax purposes.”).

25. As a result, during the Audit Period, SPI (rather than AEI) ultimately

paid taxes on Emulsion Product based on these raw material costs and not based on

the higher amounts of the hypothetical markups recorded in Vista. (R_000052, 145–

46).

26. In light of the companies’ organizational structure, AEI received various

services and purported cash infusions from SPI at times, and SPI provided

centralized accounting and management services for AEI. (R_000430). Further, SPI

directly paid payroll expenses for AEI’s employees. (See R_000443).

27. SPI or its other subsidiaries also provided AEI with lump sums of cash

from time to time, though the lump sums of cash were not expressly tied to AEI’s

Transfers to SPI or WPC. (See R_15559; see also R_000288).

28. During the Audit Period, SPI included all its North Carolina business

activities and all the North Carolina business activities of its disregarded

subsidiaries, including AEI, in filing North Carolina sales and use tax returns or
reports under SPI’s Certificate of Registration. (R_000051–52). AEI was not

separately registered to pay sales and use taxes before the Audit Period, but it was

registered for such payments after the Audit Period. (R_000145–46).

29. Beginning around May 2021, the Vista “due to”/“due from” amounts

were updated to list only the cost to AEI of raw materials used to make the product

and to eliminate the hypothetical markup. (E.g., R_000281–83).

30. Thereafter, following an audit, DOR concluded that SPI “erroneously

treated [AEI] as a division” of SPI for sales and use tax purposes, that the Transfers

to SPI and WPC “were reduced to cost even though those transactions were recorded

in [AEI’s] accounting software reflecting a retail sale price plus tax,” and that AEI

therefore owed additional sales and use tax for the Transfers it made to SPI and WPC.

(R_000051–56). 3 In essence, DOR determined that, because the Transfers among

affiliated companies were documented by the hypothetical markup and because AEI

was a separate LLC (even if disregarded for purposes of federal and state income

taxes), sales and use taxes were due on those related-party Transfers. (R_000052).

31. DOR issued a Notice of Final Determination on 28 September 2023,

assessing substantial additional taxes against AEI for the Transfers, (R_000051–56),

and AEI timely filed a Petition for a Contested Tax Case Hearing before the Office of

Administrative Hearings on 20 November 2023, (R_000013–30).

3 In the Notice of Final Determination, DOR calculated $1,358,261.38 in state and county

taxes due, $814,956.84 in penalties, and interest through 20 October 2023 of $387,376.15,
totaling $2,560,594.37. (R_000024).
32. In the course of that contested case, the ALJ issued the Final Decision

on 21 November 2024. As noted above, the ALJ (i) granted AEI’s motion for summary

judgment as to the Transfers at issue and determined that they were not “sales”

within the meaning of the Tax Act, such that they were not taxable, and (ii) granted

DOR’s motion for summary judgment and determined that AEI is a “retailer” for

purposes of the Tax Act in light of its sales of Emulsion Product to third parties.

(R_015653–660).

33. Thereafter, DOR filed its petition in this action on 20 December 2024,

(ECF No. 3).

34. On 30 December 2024, the matter was designated as a complex business

case pursuant to § 7A-45.4(b)(1), and, on 21 February 2025, it was assigned to the

undersigned Business Court Judge. (ECF Nos. 1, 8).

35. Following full briefing by the parties and a hearing at which the parties

were represented by their counsel of record, this matter is now ripe for resolution.

ANALYSIS

I. Standard of Review

36. Review of a final decision of an administrative agency is governed by

N.C. Gen. Stat. § 150B-51.

37. For most administrative appeals, § 150B-51 provides that the reviewing

Superior Court may affirm the decision, remand it for further proceedings, or reverse

or modify it if the “substantial rights of the petitioners may have been prejudiced”

because the decision was “(1) [i]n violation of constitutional provisions; (2) [i]n excess
of the statutory authority or jurisdiction of the agency or administrative law judge;

(3) [m]ade upon unlawful procedure; (4) [a]ffected by other error of law; (5)

[u]nsupported by substantial evidence admissible under G.S. 150B-29(a), 150B-30, or

150B-31 in view of the entire record as submitted; or (6) [a]rbitrary, capricious, or an

abuse of discretion.” Id. § 150B-51(b).

38. Purported errors under subsections (1)–(4) are reviewed under a de

novo standard of review, while those under subsections (5)–(6) are reviewed under a

“whole record” standard of review. Id. § 150B-51(c).

39. However, in reviewing a petition for judicial review arising from a final

decision granting summary judgment, § 150B–51(d) applies. Id. § 150B-51(d). (“In

reviewing a final decision allowing judgment on the pleadings or summary judgment,

the court may enter any order allowed by G.S. 1A-1, Rule 12(c) or Rule 56.”).

40. In such a case, as here, the issue is “whether summary judgment was

properly granted,” and “the correct standard of review remain[s] de novo. Thus, the

question before the trial court [is] whether there [are] any genuine issues of material

fact and whether any party [is] entitled to judgment as a matter of law.” York Oil Co.

v. N.C. Dep’t of Env’t, Health & Nat. Res., 164 N.C. App. 550, 555 (2004) (citations

omitted); Krueger v. N.C. Crim. Just. Educ. & Training Standards Comm’n, 198 N.C.

App. 569, 576–77 (2009) (noting that the court “follow[s] § 150B–51(d) and appl[ies]

the standard established by Rule 56 of the Rules of Civil Procedure: whether ‘the

pleadings, depositions, answers to interrogatories, and admissions on file, together

with the affidavits, if any, show that there is no genuine issue as to any material fact
and that any party is entitled to a judgment as a matter of law’” (citation omitted));

Midrex Techs., Inc. v. N.C. Dep’t of Revenue, 2015 NCBC LEXIS 92, *15–16 (N.C.

Super. Ct. Oct. 7, 2015).

41. Here, DOR identifies various bases on which it contends that the Final

Decision was erroneous under § 150B–51(b). For example, DOR excepts to a number

of the ALJ’s recitations of undisputed facts (which DOR incorrectly frames as

“Findings of Fact”), 4 contending that they are erroneous, not supported by the record,

or are otherwise incomplete. (ECF No. 3 at 9–12). Similarly, DOR excepts to various

of the ALJ’s conclusions of law, contending that they were erroneous as a matter of

law. (ECF No. 3 at 12–16).

42. But under § 150B–51(d), the Court need not consider or resolve those

assertions. Even if the ALJ’s reasoning for granting summary judgment were

incorrect as DOR argues, 5 as a matter of law, the issue for this Court is “whether

there were any genuine issues of material fact and whether any party was entitled to

judgment as a matter of law.” York Oil Co., 164 N.C. App. at 555; Midrex Techs., 2015

NCBC LEXIS 92, at *15-16.

4 The ALJ did not make findings of fact but permissibly “summarize[d] material facts [she]
consider[ed] to be uncontested” in an “Undisputed Facts” section of the Final Decision.
(R_015654–56); see, e.g., Hyde Ins. Agency, Inc. v. Dixie Leading Corp., 26 N.C. App. 138, 142
(1975).
5 While DOR contends that the ALJ “got the wrong result for the wrong reasons,” (Hr’g Tr.

19:23–19:24 (Aug. 29, 2025)), the ALJ’s reasoning is irrelevant, and “[s]ummary judgment is
affirmed if correct on any ground, regardless of the [ALJ’s] reasoning.” City of Roanoke
Rapids v. Halifax Cnty., – N.C. App. –, 920 S.E.2d 417, 2025 N.C. App. LEXIS 648, *6 (2025)
(citation omitted); see also Shore v. Brown, 324 N.C. 427, 428 (1989).
43. Applying the summary judgment standard, the Court concludes that

there is not and was not a genuine issue of material fact and that AEI was entitled

to summary judgment as to the Transfer Issue. (R_015653).

44. In this proceeding, DOR contends that the ALJ incorrectly concluded

that AEI’s transfers were not supported by consideration and that, therefore, no

taxable sales occurred. (ECF No. 28 at 10–20). Specifically, DOR asserts that (i) the

“due to”/”due from” entries recorded in Vista constituted consideration received by

AEI, (ECF No. 28 at 11–15), (ii) SPI’s general provision of accounting services to AEI,

SPI’s payment of AEI’s payroll, and the general cash infusions made by SPI also

constituted consideration for Emulsion Product, (ECF No. 28 at 15–17), and (iii) the

Transfers are necessarily sales supported by consideration if they are not otherwise

gifts, (ECF No. 28 at 18–20).

45. Conversely, AEI argues that the Final Decision should be affirmed

because there was no consideration for the Transfers and, thus, no “sale.” (ECF No.

32 at 7–20). Specifically, AEI asserts that the “due to”/“due from” entries reflected

purely hypothetical markups, did not reflect actual sales, and were used only for

recordkeeping purposes. (ECF No. 32 at 11–16). Further, AEI notes that the general

cash infusions and various payments from SPI were not specifically tied to Emulsion

Product Transfers. (ECF No. 28 at 16–18).

II. Sales Under the Tax Act

46. The Tax Act imposes, among other things, state-level sales and use

taxes. N.C. Gen. Stat. §§ 105-164.1 et. seq.; see N.C. Dep’t of Revenue v. FSC II, LLC,
2023 NCBC LEXIS 16, *12 (N.C. Super. Ct. Jan. 30, 2023) (providing background

discussion of Tax Act), aff’d, 386 N.C. 110 (2024).

47. Under the Tax Act, the terms “Sale” and “Selling” mean, in relevant

part, “[t]he transfer for consideration of title, license to use or consume, or possession

of tangible personal property or certain digital property or the performance for

consideration of a service.” N.C. Gen. Stat. § 105-164.3(235) (emphasis added).

48. The term “consideration” is undefined in the Tax Act.

49. In such situations, “[u]ndefined words are accorded their plain

meaning so long as it is reasonable to do so,” and, in determining a word’s plain

meaning, North Carolina courts have “‘used standard, nonlegal dictionaries as a

guide.’” Midrex Techs., Inc. v. N.C. Dep’t of Revenue, 369 N.C. 250, 258 (2016)

(citations and internal punctuation omitted); Surgical Care Affiliates, LLC v. N.

Carolina Indus. Comm’n, 256 N.C. App. 614, 621 (2017) (“When a statute employs a

term without redefining it, the accepted method of determining the word’s plain

meaning is not to look at how other statutes or regulations have used or defined the

term—but to simply consult a dictionary.” (citation omitted)).

50. The ordinary meaning of compensation is generally (i) “recompense” or

“payment,” as in “a consideration paid for legal services,” or (ii) “the inducement to a

contract or other legal transaction”—“specifically: an act or forbearance or the

promise thereof done or given by one party in return for the act or promise of another.”

Consideration, § 6(a), Merriam-Webster, https://www.merriam-webster.com/

dictionary/consideration (last visited Jan. 20, 2026) (emphasis in original);
Consideration, § 8(a), Dictionary.com, https://www.dictionary.com/browse

/consideration (last visited Jan. 20, 2026) (defining “consideration” as “something that

suffices to make an informal promise legally binding, usually some value given in

exchange for the promise”); see also Consideration, Webster’s Third New International

Dictionary 484 (Philip B. Gove et al. eds. 2002) (similar definitions).

51. This meaning comports with the definition of consideration recognized

by our appellate courts in the context of contracts: any bargained-for “benefit, right,

or interest bestowed upon the promisor, or any forbearance, detriment, or loss

undertaken by the promisee.” Davis v. Woods, 286 N.C. App. 547, 562 (2022) (noting

also that, “[t]o constitute consideration, a performance or a return promise must be

bargained for” (citation and internal quotation marks omitted)).

52. In that context, “[a] performance or return promise is bargained for if it

is sought by the promisor in exchange for his promise and is given by the promisee in

exchange for that promise.” Chem. Realty Corp. v. Home Fed. Sav. & Loan Ass’n of

Hollywood, 84 N.C. App. 27, 30 (1987) (quoting Restatement (Second) of Contracts §

71).

53. This means that “the consideration and the promise bear a reciprocal

relation of motive or inducement: the consideration induces the making of the

promise and the promise induces the furnishing of the consideration,” such that “the

promise and the consideration must purport to be the motive each for the other, in

whole or at least in part[.]” Id. at 31 (citation omitted); see Albemarle Educ. Found.,

Inc. v. Basnight, 4 N.C. App. 652, 654 (1969) (discussing reciprocity requirement).
54. The undisputed evidence reflects that neither SPI nor WPC paid AEI

the hypothetical markup amounts for Emulsion Product Transfers or provided any

similar payment, promises, or other value with respect to the Transfers. Nonetheless,

DOR advances three primary arguments in support of its contention that there was

consideration for the Transfers or that the Transfers are otherwise subject to sales

tax. The Court addresses each of those arguments in turn.

a. Due To/Due From Entries in Vista

55. DOR first contends that the intangible “due to”/“due from” accounting

entries reflecting hypothetical markups in Vista constitute consideration, even

without a corresponding transfer of funds. Neither the ordinary meaning of the term

nor applicable case law supports DOR’s argument.

56. Accounts Receivable. As its primary line of argument at the hearing,

DOR contended that the entries themselves are “accounts receivable” that constitute

consideration for the Transfers. (Hr’g Tr. 5:20–11:11 (Aug. 29, 2025)).

57. The term “accounts receivable” is “‘ordinarily understood to be an

amount owed from one person to another usually arising from the sale of goods or

rendering of services and not supported by negotiable paper’” or a note, whether

“negotiable or not.” Guilford Mills, Inc. v. Powers, 327 N.C. 279, 281 (1990) (quoting

Moore & Van Allen v. Lynch, 61 N.C. App. 601, 602 (1983)) (determining, in a tax

case, that amounts owed to factors were not accounts receivable). For example, in

Moore & Van Allen, cited with approval by the Supreme Court, the Court of Appeals

determined that transactions shown on a balance sheet were accounts receivable
because they were “the recognition of revenues to be received” and that the taxpayer

“was owed something for” work it had done. Moore & Van Allen, 61 N.C. App. at 602

(emphasis added).

58. Here, however, the undisputed facts of the case are that neither AEI,

nor SPI, nor WPC ever agreed to create any reciprocal transfer obligation (whether

by payment, transfer of other goods, or otherwise) specifically in return for AEI’s

Transfers of Emulsion Product. There was nothing “owed” to AEI, and there were

undisputedly no revenues to be received. DOR’s argument that the accounting entries

constituted accounts receivable merely based on their labeling does not align with the

parties’ treatment of the hypothetical markup entries or the definition of an account

receivable.

59. Virginia Department of Revenue Letter. In further support of its

argument, DOR contends that this Court should adopt the reasoning in a decision by

the Virginia Department of Revenue 6 in which that agency determined that, under

Virginia law, “intercompany accounting entries to record transactions between

related but separate entities constitute a consideration for sales and use tax

purposes.” PD 16-84, Commonwealth of Virginia, 2016 WL 3226281, at *2 (Va. Dept.

Tax. May 17, 2016).

6 In a footnote, DOR cites in passing a South Carolina Department of Revenue letter for the

proposition that “a transfer of cash is not necessary for consideration to exist.” (ECF No. 28
at 13 n. 5 (citing Sales Between Related Entities (Sales and Use Tax), SC Private Letter
Ruling No. 04-3, S.C. Dept. Rev., 2004 WL 5460961, at *1)). The issue here, however, is not
merely the lack of a cash transfer specifically but the lack of any negotiated or bargained-for
exchange that is specific to the Transfers and the hypothetical markup, whether mutual
promises, tangible products, cash, or otherwise.
60. This Court, of course, is not bound by the self-interested, agency level

determinations of a neighboring commonwealth’s Department of Revenue and, in this

instance, does not find the decision persuasive. The Virginia Department of Revenue’s

letter decision was premised on Virginia’s sales tax statute, not North Carolina’s,

and, though the two have similarities, they are not identical. Compare Va. Code §

58.1-602, with N.C. Gen. Stat. § 105-164.3(235).

61. Moreover, state and federal agencies are not entitled to deference in

interpreting or construing applicable law, even in the context of ambiguous statutes.

Savage v. N.C. Dep’t of Transp., 388 N.C. 196, 202 (2025) (“Chevron deference is not

permissible when interpreting state law, and it never was.” (citations omitted)); see

Loper Bright Enters. v. Raimondo, 603 U.S. 369, 412 (2024) (overruling earlier

Chevron deference case law and noting that “[c]ourts must exercise their independent

judgment” in evaluating applicable law); see also Mitchell v. Univ. of N.C. Bd. of

Governors, 388 N.C. 341, 347 (2025) (noting that, while courts may consider an

agency’s interpretation of its own regulations, those interpretations are not binding

on courts).

62. And, most importantly, the Virginia Department of Revenue in large

part based its decision not on the legal definition or meaning of “consideration” but

on (i) a prior proceeding in which it treated “accounting entries that recorded [asset]

transfers [as] a consideration” with no substantive discussion of the reasoning, and

(ii) a mere possibility that the parties’ financial reporting might “produce more
appealing results for shareholders, potential investors and commercial lenders.” PD

16-84, Commonwealth of Virginia, 2016 WL 3226281, at *2.

63. In this matter, the undisputed evidence shows that AEI and SPI or WPC

did not (i) derive any material benefit from the hypothetical markups reflected in the

“due to”/“due from” entries, or (ii) bargain for or negotiate any promises, forbearances,

or other responsibilities or obligations specific to the Transfers and hypothetical

markups.

64. No Payment of “Due To”/“Due From” Amounts. It is undisputed that the

hypothetical markup amounts reflected in the “due to”/“due from” entries were never

paid, and there is no evidence that AEI expected to be paid, or that SPI or WPC

intended to pay, the amounts reflected by the markup entries. (Hr’g Tr. 7:23–25

(acknowledging that “[t]here is not” any competent evidence of record that those

amounts “were ever paid”)).

65. There is similarly no evidence that the Vista entries were used to obtain

third-party investors or to obtain similar value from the use of the entries. (Hr’g Tr.

44:1–47:8).

66. Thus, the Court concludes that the “due to”/“due from” entries alone do

not constitute or otherwise suffice as consideration.

b. Cashflow to/Services for AEI

67. DOR further contends that the various avenues of cashflow from SPI to

AEI, including payment of salaries and payroll and provision of inventory, and other

general “cash infusions,” constitute consideration for the Transfers. (ECF No. 28 at
15–17).

68. It is undisputed that SPI, as a parent company, provided cash infusions

to AEI, provided accounting services that encompassed AEI’s accounting needs, paid

payroll expenses for AEI’s employees, and otherwise largely treated AEI as a division

of SPI rather than as an independent entity. (See, e.g., R_000288, 430, 443, 15659).

69. If the matter before the Court were one involving an attempt to pierce

AEI’s corporate veil, such facts might support that remedy. See, e.g., State ex rel.

Cooper v. Ridgeway Brands Mfg., LLC, 362 N.C. 431, 441 (2008) (discussing

requirements for piercing). But piercing is not the issue before the Court. The matter

before the Court is whether there is a genuine issue of material fact as to the Transfer

Issue—i.e., as to whether the Transfers were “transfer[s] for consideration” and

otherwise met the definition of taxable “sales.” N.C. Gen. Stat. § 105-164.3(235)

(emphasis added).

70. The requirement that a transfer be “for” consideration necessarily

means that it is linked to the consideration. See For, §§ 3 and 8, Merriam-Webster,

https://www.merriam-webster.com/dictionary/for (last visited Jan. 20, 2026)

(“because of” or an “equivalence in exchange”); For, §§ 4 and 8, Dictionary.com,

https://www.dictionary.com/browse/for (last visited Jan. 20, 2026) (“in order to obtain,

gain, or acquire” or “in consideration or payment of; in return for”).

71. The record lacks any evidence that the Transfers were made at the

hypothetical markups “for” the separate cash infusions, the accounting services, or

other items or services provided by SPI to AEI. The undisputed facts demonstrate
that SPI, as a parent company, provided cash infusions to AEI, provided accounting

services that encompassed AEI’s accounting needs, paid payroll expenses for AEI’s

employees, and otherwise largely treated AEI as a division of SPI rather than as an

independent entity. (See, e.g., _000288, 430, 443, 15659).

72. Other than the facts that SPI was AEI’s parent company and ultimately

benefited from keeping AEI operational generally, there is no evidence that the cash

infusions, services, or support that SPI provided as a parent company were provided

“for” the specific Emulsion Product Transfers at the hypothetical markup rates.

73. As DOR conceded at the hearing, there is no evidence of an agreement,

understanding, negotiation, bargain, or other quid pro quo between the parties for

such transactions. (Hr’g Tr. 12:25–13:2 (“[W]e do not have evidence that they met and

said, ‘Is this for this?”); 10:2–10:3 (acknowledging lack of evidence and suggesting

that evidence of specific bargained-for exchanges is “unrealistic”)). DOR also does not

appear to argue that the cash infusion amounts were proportional to the Transfers.

74. Instead, DOR argues that the Transfers “couldn’t have been for

anything else,” such as keeping a subsidiary afloat, and that, even absent supporting

evidence, AEI must have been providing the Transfers in return for SPI’s generalized

cash infusions, accounting services, and other benefits. (Hr’g Tr. 11:8–11:11 (“We

submit that it couldn’t have been for anything else.”); see generally Hr’g Tr. 10:19–

17:21).

75. This argument and the undisputed facts do not align with the plain

language of the Tax Act or the meaning of the phrase “for consideration,” as necessary
to establish that there were taxable sales. N.C. Gen. Stat. § 105–164.3 (clarifying that

each “sale” is a “transfer supported by consideration”).

c. Presumption of Sale and Consideration

76. Finally, DOR argues that the Transfers are presumed not to be gifts and

that, if they are not gifts, they necessarily must be sales. (ECF No. 28 at 18–20). 7 The

Court disagrees.

77. Citing Tucker v. Mecklenburg Cnty. Zoning Bd. of Adjustment, 148 N.C.

App. 52 (2001), DOR relies on a false dichotomy: that a transfer must be either a gift

or a sale. (ECF No. 28 at 18–20).

78. But, in Tucker, the Court of Appeals simply quoted the dictionary

definitions of “sale” and “gift” in the context of determining whether a nonprofit dog

rescue organization was a commercial kennel that made “sales” of dogs by

transferring them to adoptive owners. Id. at 54. In affirming a zoning board’s

determination that adoptive families were not “equivalent to ‘storage for sale’ as set

forth in the definition of a commercial kennel,” the Court of Appeals compared the

definitions of “sale” and “gift” and noted that adoptive families were not required to

7 The ALJ determined that the Transfers were “distributions” from AEI, as an affiliate, to

SPI, as its parent company, a determination that DOR disputes. (R_015658–59). The Court
need not, and does not, reach this issue, which represented non-binding and non-
determinative dicta by the ALJ after determining no taxable sale occurred. DeLoy v.
Lekowski, – N.C. App. –, 921 S.E.2d 218 (2025) (“Statements and comments in an opinion
concerning some rule of law or legal proposition not necessarily involved nor essential to
determination of the case in hand are obiter dicta, and lack the force of an adjudication.”
(internal punctuation and citations omitted)); see GRE Props. Thomasville LLC v.
Libertywood Nursing Ctr., Inc., 235 N.C. App. 266, 274 (2014) (clarifying that dicta need not
be reviewed because it is “unnecessary to the Court’s determination that a genuine issue[] of
material fact” did or did not exist). As counsel for both sides appeared to concede at the
hearing, what the Transfers were is irrelevant; what they were not (i.e., taxable sales) is the
relevant determination for resolving the Transfer Issue on appeal.
give any money for adoption of dogs. Id. at 59. Thus, the court determined that the

adoptions were gifts and not sales because there was no exchange of money or similar

consideration. Id. The Tucker court did not, however, determine that a transfer of

tangible property necessarily must be either a gift or sale. See generally id.

79. Indeed, as DOR conceded at the hearing, “if the [Transfers a]re . . . not

gifts, there’s so many other things they could be,” (Hr’g Tr. 24:7–8), whether leases,

loans, pledges as collateral for secured transactions, or even distributions, as the ALJ

found.

80. Even without the limited dichotomy of a sale or gift, DOR argues that

this Court should follow the lead of Louisiana courts and infer that consideration

exists because “businesses do not generally give away their assets.” (ECF No. 28 at

19 (citing Columbia Gulf Transmission Co. v. Bridges, 28 So.3d 1032, 1042 (La. App.

1 Cir. 2009)).

81. A diligent search of North Carolina case law reveals no similar

presumption in this state, and the Court declines to adopt it here. Copeland v.

Amward Homes of N.C., Inc., 269 N.C. App. 143, 147–148 (2020) (Lower courts are

“not in the position to expand the law. Rather, such considerations must be presented

to our Supreme Court or our Legislature.” (quoting Shera v. N.C. State Univ.

Veterinary Teaching Hosp., 219 N.C. App. 117, 126 (2012))).

82. Considering the nature of the business relationships at issue, the Court

therefore declines to presume that the Transfers at issue were made for consideration

in the absence of supporting evidence.
CONCLUSION

83. Considering all competent evidence of record on a de novo review and

applying the plain language of N.C. Gen. Stat. § 105-164.3(235), the Court determines

that there are no genuine issues of material fact and that summary judgment is and

was appropriate in favor of AEI as to the Transfer Issue. See Variety Wholesalers, Inc.

v. Salem Logistics Traffic Servs. LLC, 365 N.C. 520, 523 (2012) (“Summary judgment

is appropriate ‘if the pleadings, depositions, answers to interrogatories, and

admissions on file, together with the affidavits, if any, show that there is no genuine

issue as to any material fact and that any party is entitled to a judgment as a matter

of law.’” (quoting N.C. R. Civ. P. 56(c))).

84. Accordingly, the Court AFFIRMS the Final Decision as to the Transfer

Issue, and, pursuant to N.C. Gen. Stat. § 150B–51(d), GRANTS summary judgment

in favor of AEI as to the Transfer Issue. 8

SO ORDERED, this the 21st day of January 2026.

/s/ Matthew T. Houston
Matthew T. Houston
Special Superior Court Judge
for Complex Business Cases

8 This Order and Opinion does not address those portions of the Final Decision that were not

presented on appeal, including the Retailer Issue, (R_015659), nor does the Court necessarily
approve or adopt the legal reasoning of the Final Decision, particularly the dicta as to the
alleged nature of the Transfers as “Distributions,” by affirming the ultimate result of
summary judgment. See N.C. Gen. Stat. § 150B-51(d) (standard of review); GRE Props.
Thomasville, 235 N.C. App. at 274; see also York Oil Co, 164 N.C. App. at 555; Krueger, 198
N.C. App. at 576–77.