Chung Wah Hong Co., Inc. v. Commissioner of Revenue (November 3, 2011)

COMMONWEALTH OF MASSACHUSETTS

APPELLATE TAX BOARD


CHUNG WAH HONG CO., INC.		v.	     COMMISSIONER OF REVENUE         	

Docket No. C294232 	       	     	Promulgated:
								November 3, 2011

		  				
This is an appeal filed under the formal procedure pursuant to G.L. c. 58A, § 7 and G.L. c. 62C, § 68 ("§ 68"), from the revocation by the Commissioner of Revenue ("Commissioner" or "appellee") of the cigarette retailer license held by Chung Wah Hong Co., Inc. ("CWH" or "appellant").  This appeal was consolidated for hearing with Docket No. C304858, an appeal which related to the Commissioner's assessment of cigarette excise and sales taxes upon the appellant for the tax periods 2004-2009.  The decision in that appeal will be issued separately.  
	Chairman Hammond heard the appeal and was joined in a decision for the appellee by Commissioners Rose, Mulhern, and Chmielinski.  
	These findings of fact and report are made pursuant to requests by the appellant and appellee under G.L. c. 58A, § 13 and 831 CMR 1.32.

Karnig Boyajian, Esq. and Timothy O'Brien, Esq. for the appellant.

Timothy Stille, Esq. and Arthur Zontini, Esq. for the appellee.



   FINDINGS OF FACT AND REPORT

On the basis of the testimony and other evidence entered into the record in this appeal, the Appellate Tax Board ("Board") made the following findings of fact.  
At all times relevant to this appeal, the appellant was a Massachusetts corporation which owned and operated a grocery store in the Chinatown section of Boston.  It catered primarily to the residents of Chinatown.  Among the items sold at the grocery store were cigarettes, pursuant to a valid cigarette retailer license issued by the Commissioner.  
On March 11, 2005, the Massachusetts State Police, pursuant to a valid search warrant, entered the appellant's premises and seized records and numerous boxes of unstamped cigarettes.   As a result of this seizure and the subsequent investigation by the Department of Revenue ("DOR"), on June 14, 2005, the appellant was indicted on three counts of failure to file corporate excise returns, one count of willfully delivering false sales tax returns, one count of willfully evading or defeating the cigarette excise, and one count of possession with intent to sell unstamped cigarettes.  
On March 13, 2006, the appellant plead guilty to all six counts of the indictment.  By notice dated April 8, 2008, the Commissioner notified the appellant of her intent to revoke its cigarette retailer's license effective April 11, 2008.  The appellant filed its appeal with the Board challenging the Commissioner's revocation of its license on April 11, 2008, which was within ten days of the notice of revocation, as required by § 68.  On the basis of these facts, the Board found and ruled that it had jurisdiction to hear and decide this appeal.
Although this appeal was consolidated for hearing with Docket No. C304858, the decision in that appeal will be issued separately.  The only issue to be decided in this appeal was whether the Commissioner's revocation of the appellant's license was authorized by § 68.  That section provides that the Commissioner may suspend or revoke a license if:
(1) The licensee or registrant willfully fails to file any return or report required by this chapter; (2) The licensee or registrant willfully files, causes to be filed, gives or causes to be given a return, report, certificate or affidavit required under this chapter, or under the provisions of the applicable tax, which is false; (3) The licensee or registrant willfully fails to collect, truthfully account for or pay over any tax under the provisions of this chapter; (4) The licensee or registrant has been convicted of a crime provided for by this chapter; (5) The licensee or registrant has otherwise willfully failed to comply with any provision of the tax laws of the commonwealth or regulations thereunder; or (6) The licensee or registrant has ceased to act in the capacity for which the license or registration was issued. 
The appellant presented its case-in-chief through the testimony of Nancy Mui, who testified that she was personally familiar with the Chin family, who were the operators of CWH.   Ms. Mui also testified that beginning in 2007, she performed certain tax accounting services for CWH.  The appellant additionally offered into evidence certain tax returns, invoices, checks, and billing documents.  
The Commissioner offered the testimony of Thomas Nowicki, who is the chief investigator for DOR's Criminal Investigations Unit; Allan Ferullo, who is a field supervisor within DOR's Audit Division; and Christine Keane, who is an auditor within DOR's Audit Division.  The testimony of these three individuals, each of whom had involvement in the investigation or audit of CWH, along with other evidence entered into the record, revealed a pattern of shoddy record-keeping practices on CWH's part, along with significant co-mingling of funds between CWH and Boston Communications Corp., Inc., which was another business owned by the Chin family.  
The appellant's argument in opposition to the revocation of its cigarette retailer license was premised on its assertion that the Commissioner's proposed revocation was inequitable.  The appellant argued that the license revocation was unwarranted because the appellant has cooperated with DOR, has paid significant amounts of cigarette excise since DOR began its investigation, and has operated its business without further incident since 2005.  The appellant asserted that cigarette revenue was a major source of revenue for its grocery store, and that the loss of that revenue, coupled with the loss of incidental sales made by cigarette purchasers, would severely impede its ability to operate.  Similarly, the appellant asserted that it employs numerous individuals within its community and it provides valuable goods and services to that community, and that the loss of its cigarette license would negatively impact its ability to provide those opportunities within the community.
The Board found none of the appellant's arguments to be persuasive.  Rather, the Board found that the record clearly established that the circumstances in which the Commissioner is authorized to revoke a cigarette retailer's license had occurred.  The appellant plead guilty to all six counts of the indictment, thereby establishing grounds for revocation under prongs one through five of § 68.  The Board therefore found that the revocation of the appellant's cigarette retailer license was authorized by § 68, and that the Commissioner acted within her authority in revoking the license.  Accordingly, the Board issued a decision for the appellee in this appeal.
                      OPINION
     Under the provisions of G.L. 64C, § 2, retailers may sell tobacco products only if they possess a valid license issued by the Commissioner.  Pursuant to § 68, the Commissioner is authorized to revoke a cigarette retailer license in certain circumstances.  Specifically, the Commissioner may suspend or revoke a license if:
(1) The licensee or registrant willfully fails to file any return or report required by this chapter; (2) The licensee or registrant willfully files, causes to be filed, gives or causes to be given a return, report, certificate or affidavit required under this chapter, or under the provisions of the applicable tax, which is false; (3) The licensee or registrant willfully fails to collect, truthfully account for or pay over any tax under the provisions of this chapter; (4) The licensee or registrant has been convicted of a crime provided for by this chapter; (5) The licensee or registrant has otherwise willfully failed to comply with any provision of the tax laws of the commonwealth or regulations thereunder; or (6) The licensee or registrant has ceased to act in the capacity for which the license or registration was issued. 
Section 68 authorizes the suspension or revocation of a license in the event that just one of the delineated criteria for suspension or revocation has been met; it does not require that all of the criteria, or even more than one of them, be met.  The uncontroverted evidence in the record established that the first five criteria were met in this case.  The taxpayer plead guilty to all six counts of the indictment, thereby establishing grounds for revocation under prongs one through five of § 68.  The Board therefore found and ruled that the Commissioner was within her authority to revoke the appellant's cigarette retailer license.  
Further, the Board rejected the appellant's argument that its cooperation with DOR and its current state of compliance with the relevant laws should defeat the revocation of its license.  There is no support in the statute for this claim.  Indeed, such an interpretation would essentially nullify the intended effects of the statute.  Moreover, the Board found and ruled that the appellant's equitable arguments against license revocation were without merit.  In addition to the appellant's guilty pleas, which were sufficient to establish grounds for license revocation, the Board found that the evidence showed a clear pattern of shoddy record-keeping practices and co-mingling of funds between CWH and another business owned by the Chin family, in contravention of the record-keeping requirements set forth in G.L. c. 64C, § 11.  In sum, there was ample support in the record to support the Commissioner's revocation of CWH's cigarette retailer license.  

Accordingly, the Board found and ruled that the Commissioner's revocation of the appellant's cigarette retailer license was authorized by the express provisions of § 68, and it therefore issued a decision for the appellee in this appeal.  


					    
THE APPELLATE TAX BOARD




					By: __________________________________
					     Thomas W. Hammond, Jr., Chairman


A true copy,

Attest: __________________________
		Clerk of the Board

ATB 2011-961