January 9, 2024- Drivetime Car Sales Company, LLC v. New Mexico Taxation & Revenue Department, No. A-1-CA-39739

A-1-CA-39739Nmctapp

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IN THE COURT OF APPEALS OF THE STATE OF NEW MEXICO	1
Opinion Number: ________________	2
Filing Date: January 9, 2024	3
No. A-1-CA-39739	4
DRIVETIME CAR SALES COMPANY,	5
LLC,	6
Protestant-Appellant,	7
v.	8
NEW MEXICO TAXATION & REVENUE	9
DEPARTMENT,	10
Respondent-Appellee.	11
APPEAL FROM THE ADMINISTRATIVE HEARINGS OFFICE	12
Ignacio V. Gallegos, Hearing Officer	13
Akerman LLP	14
David V. Jones	15
San Antonio, TX	16
Peter O. Larsen	17
Jacksonville, FL	18
for Appellant	19
Raúl Torrez, Attorney General	20
Peter Breen, Special Assistant Attorney General	21
Santa Fe, NM	22
for Appellee	23
Court of Appeals of New Mexico
Filed 1/9/2024 11:01 AM
OPINION	1
HANISEE, Judge.	2
{1} 	Protestant Drivetime Car Sales Company, LLC (Taxpayer) appeals the denial	3
of its protest seeking a refund from the New Mexico Taxation and Revenue	4
Department (the Department) of excise tax payments made pursuant to the New	5
Mexico Motor Vehicle Excise Tax Act (the Act), NMSA 1978, §§ 7-14-1 to -11	6
(1988, as amended through 2023). This appeal involves a matter of first impression	7
as to the interpretation of Section 7-14-3 of the Act and presents the question of	8
whether a business, such as Taxpayer, is entitled to a refund of excise taxes paid in	9
relation to used vehicles that are purchased via retail installment contracts and	10
subsequently returned to the business by the purchaser. For the reasons that follow,	11
we affirm.	12
BACKGROUND	13
{2} 	Taxpayer is a vehicle sales and financing agent that owns and operates used	14
vehicle dealerships in New Mexico. Taxpayer is licensed as a used motor vehicle	15
dealer as well as a motor vehicle sales finance company, which allows Taxpayer to	16
both sell used vehicles to purchasers and finance the purchase loans associated	17
therewith. At the time a purchaser enters into a retail installment contract with	18
Taxpayer for the purchase of a vehicle, Taxpayer pays the excise tax imposed by	19
Section 7-14-3. While Taxpayer pays such excise tax and fees upfront—specifically,	20
2
upon 	submission 	of 	the 	application 	for 	change 	of 	title 	and 	registration,	1
contemporaneous with the initial transfer of possession—the sum of the excise tax	2
and fees is included in the total sales price of the vehicle and reflected in the amount	3
to be paid by the purchaser over time through the retail installment contract.	4
Taxpayer allows purchasers to, in its words, “unwind” the contract by executing a	5
“return 	agreement” 	or 	“rescission 	agreement” 	and 	returning 	possession 	of 	a	6
purchased vehicle for any reason within five days of the vehicle sale, and in some	7
instances beyond the five-day limit. Pertinent to this appeal, when a purchaser	8
returns a vehicle, Taxpayer does not require the purchaser to pay back the excise tax	9
already paid by Taxpayer. Rather, Taxpayer seeks to recoup the excise tax paid by	10
pursuing a refund from the Department.	11
{3} 	Here, Taxpayer requested a refund from the Department for excise taxes paid	12
in the amount of $69,213.66 for 175 vehicles that were eventually returned to	13
Taxpayer. All of the vehicles at issue were returned after the five-day return period,	14
including twelve vehicles that were returned more than 100 days after purchase. The	15
Department denied Taxpayer’s request for a refund, and Taxpayer submitted to the	16
Department a protest of such denial. Prior to the administrative hearing on	17
Taxpayer’s protest, Taxpayer filed a motion for summary judgment and a request	18
for oral argument with the administrative hearing office.	19
3
{4} 	Following the hearing, the administrative hearing officer (AHO) concluded in	1
its decision and order that the Department, rather than Taxpayer, was entitled to	2
summary judgment and denied Taxpayer’s protest of the Department’s denial of	3
Taxpayer’s refund request. In its decision and order, the AHO determined that	4
Section 7-14-3 sets forth a rebuttable presumption that a sale is complete upon the	5
issuance of a certificate of title for each vehicle sold. In resolving the parties’	6
arguments regarding the effect of such presumption—as well as the meaning of	7
“sale,” which the Act does not define—the AHO relied on the definition of “buying	8
or selling” from the New Mexico Gross Receipts and Compensating Tax Act,	9
NMSA 1978, § 7-9-3(A) (2019, amended 2023), to ultimately find that Taxpayer	10
had failed to rebut the presumption that a sale had occurred in the transactions below.	11
The AHO concluded that, in this case, “[s]ales occurred when the seller and customer	12
entered into the retail purchase agreement . . . whereby customer paid a down	13
payment and possession of the vehicle transferred,” and Taxpayer was therefore not	14
entitled to the refunds it sought. Taxpayer appealed the AHO’s decision and order,	15
pursuant to NMSA 1978, Section 7-1-25 (2015), which—in the realm of taxation—	16
provides the statutory right for a party to appeal an adverse decision and order of an	17
AHO directly to this Court, and Rule 12-601 NMRA, which sets forth the procedure	18
for filing such direct appeals.	19
4
DISCUSSION	1
{5} 	Taxpayer broadly argues that the AHO’s decision and order is not in	2
accordance with the law. Specifically, Taxpayer argues that the transactions at	3
issue—those in which a purchaser entered into a retail installment contract with	4
Taxpayer for the purchase of a used vehicle and subsequently returned such	5
vehicle—were not “sales” subject to the excise tax under the Act. In Taxpayer’s	6
view, when the purchasers returned the vehicles to Taxpayer, the retail installment	7
contracts between Taxpayer and the purchasers were “unwound” and rescinded,	8
such that the transactions “ceased to qualify as ‘sales’ under New Mexico law.” The	9
Department answers that (1) the underlying transactions constitute sales under the	10
Act despite Taxpayer’s agreements to rescind certain retail installment contracts, and	11
(2) the Act does not include any exceptions that could support Taxpayer’s assertions.	12
{6} 	In reviewing the AHO’s decision, we presume that the “assessment of taxes	13
or demand for payment made by the [D]epartment is . . . correct.” NMSA 1978,	14
Section 7-1-17(C) (2007, amended 2023). “[W]hether a protesting taxpayer has	15
overcome the statutory presumption of correctness is a purely legal determination.”	16
Gemini Las Colinas, LLC v. N.M. Tax’n & Revenue Dep’t, 2023-NMCA-039, ¶ 2,	17
531 P.3d 622. Under Section 7-1-25(C), “[t]his Court will only set aside an AHO’s	18
decision if the decision is: (1) arbitrary, capricious or an abuse of discretion; (2) not	19
supported by substantial evidence in the record; or (3) otherwise not in accordance	20
5
with the law.” Tucson Elec. Power Co. v. N.M. Tax’n & Revenue Dep’t, 2020-	1
NMCA-011, ¶ 6, 456 P.3d 1085 (internal quotation marks and citation omitted).	2
“Even when we review for an abuse of discretion, our review of the application of	3
the law to the facts is conducted de novo.” Elite Well Serv., LLC v. N.M. Tax’n &	4
Revenue Dep’t, 2023-NMCA-041, ¶ 6, 531 P.3d 635 (internal quotation marks and	5
citation omitted). “We may affirm the AHO’s ruling on a ground not relied upon by	6
the AHO if reliance on the new ground would not be unfair to [the t]axpayer.”	7
Tucson Elec. Power Co., 2020-NMCA-011, ¶ 6.	8
{7} 	“In interpreting statutes, we seek to give effect to the Legislature’s intent, and	9
in determining intent we look to the language used and consider the statute’s history	10
and background.” Id. ¶ 8 (internal quotation marks and citation omitted). “The	11
guiding principle in statutory construction requires that we look to the wording of	12
the statute and attempt to apply the plain meaning rule, recognizing that when a	13
statute contains language which is clear and unambiguous, we must give effect to	14
that language and refrain from further statutory interpretation.” Elite Well Serv.,	15
LLC, 2023-NMCA-041, ¶ 7 (internal quotation marks and citation omitted). We	16
ultimately “consider all parts of the statute together, reading the statute in its entirety	17
and construing each part in connection with every other part to produce a harmonious	18
whole.” Tucson Elec. Power Co., 2020-NMCA-011, ¶ 8 (internal quotation marks	19
and citation omitted).	20
6
{8} 	Under Section 7-14-3 of the Act:	1
An excise tax, subject to the credit provided by Section 7-14-7.1, is	2
imposed upon the sale in this state of every vehicle, except as otherwise	3
provided in Section 7-14-7.1 . . . . To prevent evasion of the excise tax	4
imposed by the . . . Act and the duty to collect it, it is presumed that the	5
issuance of every original and subsequent certificate of title for vehicles	6
of a type required to be registered under the provisions of the Motor	7
Vehicle Code constitutes a sale for tax purposes, unless specifically	8
exempted by the . . . Act or unless there is shown proof satisfactory to	9
the [D]epartment that the vehicle for which the certificate of title is	10
sought came into the possession of the applicant as a voluntary transfer	11
without consideration or as a transfer by operation of law.	12
(Emphasis added.) The word “sale” is not expressly defined by the Act—hence the	13
AHO’s reliance on the definition of the word from the Gross Receipts and	14
Compensating Tax Act. See § 7-14-2; see also § 7-9-3(A). Taxpayer contends that	15
without a definition of “sale,” the presumption included in Section 7-14-3 “that the	16
issuance of every original and subsequent certificate of title for vehicles . . .	17
constitutes a sale for tax purposes” is rebuttable and, as noted above, asserts that a	18
sale does not necessarily occur when a certificate of title is issued. Indeed, Taxpayer	19
argues that because the vehicles in this case were returned after purchase, and the	20
relevant retail installment contracts were unwound, no sales for tax purposes	21
occurred under the Act. Just as the Act lacks a definition of the word “sale,” the Act	22
likewise lacks any clear indication of how a presumption of such a sale may be	23
rebutted. See §§ 7-14-2, -3. We look to relevant legislative history in order to discern	24
whether, in this case, Taxpayer successfully rebutted the presumption of the	25
7
occurrence of a sale contained within Section 7-14-3. See Renzenberger, Inc. v. N.M.	1
Tax’n & Revenue Dep’t, 2018-NMCA-010, ¶ 7, 409 P.3d 922 (“If there is an	2
ambiguity or a lack of clarity, we will turn to other aspects of statutory construction,	3
including the purpose of the statute and its legislative history.”).	4
{9} 	As explained by the AHO in its decision and order, an excise tax associated	5
with the sales of used vehicles was first enacted in 1935 under the Emergency School	6
Tax Act, which, in pertinent part, imposed an “excise tax” on the sale of “new or	7
second-hand automobiles, trucks or tractors.” 1935 N.M. Laws, ch. 73, § 201(D).	8
Under the Emergency School Tax Act, “a person engaged in selling at retail, new or	9
second-hand automobiles, . . . shall pay a tax of one-half of one per cent upon the	10
gross receipts of sales of new or second-hand automobiles.” Id. There, the term	11
“gross receipts” was defined as:	12
the total receipts of a taxpayer received as compensation for personal	13
or professional services for the exercise of which a privilege tax is	14
imposed by [the Emergency School Tax Act], the total receipts of a	15
taxpayer derived from trades, business, commerce, and the gross	16
proceeds of sales as hereinafter defined, and without any deduction on	17
account of losses or expenses of any kind.	18
1935 N.M. Laws, ch. 73, § 103(d). The Emergency School Tax Act uniquely	19
specified that the “[g]ross proceeds of sales shall not include the sale price of	20
property returned by customers when the full sale price thereof is refunded either in	21
case or by credit.” 1935 N.M. Laws, ch. 73, § 103(e) (internal quotation marks	22
omitted).	23
8
{10} 	In 1955, the Legislature adopted a statute which separated the taxation of	1
motor vehicles from the gross receipts tax, placing instead an excise tax on the	2
issuance of certificates of title for vehicles—akin to the current language in Section	3
7-14-3. See 1955 N.M. Laws, ch. 247, § 3(a). Notably, unlike the Emergency School	4
Tax Act, the 1955 statute did not contemplate or include any allowance or exemption	5
for returned or refunded vehicles. In 1988, the Legislature enacted the Act, including	6
Section 7-14-3. Since its enactment, Section 7-14-3 has never included a provision	7
comparable to that in the Emergency School Tax Act in which the Legislature	8
exempted returned and refunded vehicles from the imposition of a tax.	9
{11} 	This historical review indicates that the Legislature did not intend for the	10
excise tax under the Act to function identically to a gross receipts tax, given that the	11
Legislature separated the taxation methods in 1955. It is for this reason we decline	12
to adopt the AHO’s reliance of the Gross Receipts and Compensating Tax Act’s	13
definition of “selling” to inform our interpretation of Section 7-14-3 in resolving this	14
appeal. Moreover, the above legislative history indicates that the Legislature did not	15
intend for the Act to provide a tax exemption for returned and refunded vehicles, as	16
evinced by the inclusion of such exemption in the context of gross receipts tax and	17
the exclusion thereof under the Act. Indeed, Section 7-14-3 is bereft of any language	18
implying an exemption for returned and refunded vehicles, and we “will not read	19
into a statute language which is not there” given that “[t]he Legislature knows how	20
9
to include language in a statute if it so desires.” Elite Well Serv., 2023-NMCA-041,	1
¶¶ 7, 18 (internal quotation marks and citations omitted). Under Section 7-14-6, the	2
enumerated exemptions from the excise tax under the Act do not apply to Taxpayer	3
or the contested sales at issue, and Taxpayer does not assert otherwise. While	4
Taxpayer contends that the return and refund of the vehicles in question essentially	5
rendered the sales as having never occurred, such contention is not reflected in	6
Section 7-14-3, or elsewhere in the Act, and does not comport with legislative	7
history. Rather, while the plain language of the statute is unclear as to the definition	8
of a sale or how the presumption of a sale can be rebutted by a party, the relevant	9
legislative history supports a conclusion that, in this case, Taxpayer failed to rebut	10
the presumption that a sale occurred upon the issuance of title in the relevant	11
underlying transactions. See id.	12
{12} 	When interpreting a statute, “[i]t is only where the literal meaning of a statute	13
would be absurd, unreasonable, or otherwise inappropriate in application that we go	14
beyond the mere text of the statute.” Elite Well Serv., 2023-NMCA-041, ¶ 19	15
(internal quotation marks and citation omitted). Here, we do not consider it to be	16
absurd, unreasonable, or otherwise inappropriate that a taxpayer in Taxpayer’s	17
position would be unable to seek a refund from the Department for taxes paid on	18
vehicles when (1) Taxpayer elects to pay such excise taxes upfront; (2) Taxpayer	19
allows vehicles to be returned for refunds—in some cases allowing such returns to	20
10
occur over 100 days from purchase; and (3) Taxpayer does not require purchasers	1
who return vehicles to repay the excise taxes initially paid by Taxpayer. Each of	2
these facts are reflected in Taxpayer’s business model, and the Department is not	3
responsible for the management thereof. Indeed, under the business model chosen	4
by Taxpayer, and given the issuance of a new title under that policy, Taxpayer’s	5
return policy is more akin to a repurchase of a given sold vehicle by Taxpayer than	6
a returned and refunded item. Moreover, none of this converges to alter the fact that,	7
under the Act, the excise tax is a tax imposed on the purchaser of a vehicle, not on	8
the seller. It is only by virtue of Taxpayer’s dual role as both a used vehicle dealer	9
and a financing company that it finds itself in a comparable position to that of a	10
purchaser 	following 	Taxpayer’s 	elective 	payment 	of 	the 	excise 	tax 	on 	the	11
purchaser’s behalf. The events leading to this appeal could have been avoided—and	12
could be avoided in the future—had Taxpayer required its customers who returned	13
a purchased vehicle to either (1) pay Taxpayer the amount of excise tax originally	14
paid by Taxpayer, or (2) receive a refund less the amount of excise tax paid. That	15
the retail installment contracts at issue did not include any such provision is not a	16
flaw in the Department’s imposition of the excise tax under Section 7-14-3, but	17
rather is a curable component of Taxpayer’s chosen business model and contract	18
practices.	19
11
{13} 	While the AHO’s decision and order was premised upon somewhat different	1
reasoning than our own, we agree with the AHO’s ultimate conclusion to deny	2
Taxpayer’s protest of its denied refund. See Tucson Elec. Power Co., 2020-NMCA-	3
011, ¶ 6. We discern no unfairness that could befall Taxpayer by our application of	4
axiomatic principles of statutory construction, see id. ¶¶ 6-8, and thus hold that the	5
AHO did not err in denying Taxpayer’s protest of its denied refund.	6
CONCLUSION	7
{14} 	For the above reasons, we affirm.	8
{15} 	IT IS SO ORDERED.	9
_________________________	10
J. MILES HANISEE, Judge	11
WE CONCUR:	12
__________________________	13
MEGAN P. DUFFY, Judge	14
__________________________	15
ZACHARY A. IVES, Judge	16

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