FREDERICKA HOMBERG WICKER, Judge.
Appellant, Willow Bend Ventures, L.L.C., (hereinafter "Willow Bend") appeals the Board of Tax Appeals' judgment awarding St. John the Baptist Parish Sales and Use Tax Collector (hereinafter "the Collector") $1,479,914.17 in owed taxes, penalties, interest, and attorney fees related to the sale of dirt from Willow Bend's borrow pit located in St. John the Baptist Parish. For the following reasons, we affirm the Board's judgment.
This litigation arises out of past due taxes allegedly owed on the sale of processed dirt from Willow Bend's borrow pit located in St. John the Baptist Parish. Following Hurricane Katrina, Willow Bend purchased a 540-acre piece of property in the parish and underwent an extensive certification process to have its processed dirt sold on the property certified to be used in Corps of Engineers (COE) projects. On May 23, 2014, the Collector issued a "Notice of Assessment" which reflected that Willow Bend owed a total amount of $1,605,244.42 to the Collector in taxes, penalties, and interest for the tax period of January 1, 2010 to June 30, 2013.
On June 26, 2014, Willow Bend filed a "Petition for Redetermination of Assessment" with the Board of Tax Appeals, representing that it had been aggrieved by the Collector's "improper assessment of St. John Parish sales and use tax, interest and penalties." In its petition, Willow Bend alleged that, because the dirt sold from its pit was used for COE projects, the sales at issue were not "retail sales" as defined under La. R.S. 47:301(10)(g) and, thus, are not subject to sales and use tax. On March 5, 2015, the Collector filed a reconventional demand against Willow Bend additionally seeking attorney fees pursuant to La. R.S. 47:337.13.1.
The matter proceeded to trial on May 31, 2016 and June 1, 2016.
At trial, Dr. Bob Thorn testified that Willow Bend retained him in December 2007 to aid in the permitting and certification process for its borrow pit. He explained the certification process, which is required for a vendor to be approved to sell dirt for use in COE hurricane protection levee projects. He further testified that COE project contractors would receive a list of COE-approved borrow pits and that Willow Bend expended a great deal of resources to obtain certification for its 540-acre pit.
Mr. Wayne Fletcher testified that he worked closely with the formation of Willow Bend after Hurricane Katrina and was in communication with the COE during that time period as well. He testified that the dirt business following Hurricane Katrina was lucrative and that the primary purpose behind the development and certification of the Willow Bend borrow pit, which he estimated at a cost of $7.5 to $8 million dollars, was to sell dirt to be used for COE projects. He further testified that contractors not involved in COE projects would not have been interested in purchasing dirt from Willow Bend, as it was priced higher than dirt at non-certified pits.
In his testimony, Mr. Fletcher examined the invoices and contracts introduced into evidence to attempt to establish links between the customers' contracts or invoices and various COE projects. Mr. Fletcher discussed thirty customers' contracts or invoices in his testimony. The documents introduced into evidence reflected that while some of the customers had contracts or invoices with clear references to a specific COE contract, other customers' invoices reflected vague descriptions of various projects (such as the term "airport" or "Chalmette") with no reference to a COE project. Additionally, various invoices referenced a COE contract or code but the evidence reflected that the dirt purchaser was not a COE-approved contractor provided on the COE project "Master List" and Willow Bend provided no subcontract or any evidence to show a relationship between the COE project and the dirt purchaser. Moreover, the evidence reflected that, as to some of the invoices that related to a known COE project and contractor, Willow Bend unnecessarily collected, but failed to remit, taxes on those invoices. Willow Bend further acknowledged that other customers clearly had no connection to any COE projects.
Mr. Thomas Hook, a representative of Assured Compliance, Inc., testified that he works for a third-party administrator that conducts audits for the Collector. He testified that he participated in the audit process for the Willow Bend audit at issue. In his testimony, Mr. Hook also thoroughly discussed each customer's contract and/or invoices to explain whether the customers' invoices or contracts made any reference to any COE projects. He acknowledged that some of the customer contracts did involve COE projects, and that his office properly excluded that amount of sales from the estimated taxes owed in the Notice of Assessment. He testified that, in reviewing the invoices, he interpreted the invoices to the "benefit of the taxpayer," meaning that if he could recognize a code or reference to a COE project by a COE contractor on the COE Master List, he would exclude those invoices from his calculations.
Tom Hook also testified that, as to some of the contracts or invoices that would generally be excluded as involving COE projects, Willow Bend's records reflected that it had in fact unnecessarily collected from those customers a total of $48,649.12 in sales tax in 2010; $40,959.85 in 2011; and $29,825.63 in 2012 during the audit period. He further testified that, although Willow Bend charged their customers sales tax during this period, it did not remit the taxes collected to the Collector and, thus, that amount actually collected but not remitted was included in the amount owed to the Collector in the Notice of Assessment. Mr. Hook further testified that Willow Bend did not file tax returns or remit any taxes during the three-year audit period at issue.
Ms. Debbie Fletcher testified that she worked in Willow Bend's office during the audit period and handled the billing. She testified that when trucks arrived to pick up dirt, she would issue each truck a ticket providing the amount of dirt loaded and that the ticket would be compared to the amount of dirt delivered to the contractor's site.
On April 11, 2017, the Board of Tax Appeals, the Honorable Cade R. Cole presiding, issued a written judgment in favor of the Collector and against Willow Bend for: $609,471.60 in tax; $182,841.48 in penalties (25% late penalty and 5% negligence penalty); $539,608.90 in interest (1.25% per month); $133,192.19 in attorney fees (10% of tax, penalty, and interest due); and $14,800 in audit costs. The amount of the judgment totaled $1,479,914.17.
On appeal, Willow Bend first contends that the Board applied the incorrect burden of proof and improperly placed the burden on Willow Bend to "follow the property after the sale and to demonstrate that the taxpayer/purchaser actually used the property for the excluded or exempted purpose." Willow Bend contends that the Board improperly required it to follow the dirt "days, weeks, or even months after the sale" to qualify for the excluded or exempted provisions of La. R.S. 47:301(10)(g). Willow Bend asserts that, because La. R.S. 47:301(10)(g) is a tax exclusion and not an exemption, the statute should be interpreted in favor of the taxpayer and that the Collector should have the initial burden to show that the exclusion does not apply.
La. R.S. 47:302 imposes a sales tax generally on "sale at retail." However, the statute at issue in this matter, La. R.S. 47:301(10)(g) specifically defines a category of transactions that are not included within the definition of "sale at retail." La. R.S. 47:301(10)(g) provides:
Concerning the distinction between a tax exclusion and an exemption, the Louisiana Supreme Court has stated:
Harrah's Bossier City Inv. Co., LLC v. Bridges, 09-1916 (La. 5/11/10), 41 So.3d 438, 446.
The Louisiana First Circuit Court of Appeal has found that the provision at issue, La. R.S. 47:301(10)(g), is a tax exclusion to be interpreted in favor of the taxpayer. Odebrecht Construction v. Louisiana Dept. of Revenue, 15-13 (La. App. 1 Cir. 9/18/15), 182 So.3d 132. The Board, in its written reasons for judgment, applied the Odebrecht holding and properly found that La. R.S. 47:301(10)(g) is a tax exclusion to be applied in favor of the taxpayer. The Board found:
Thus, the Board found that the exclusion at issue applies to dirt sold to a subcontractor who contracts with a COE-approved contractor in connection with a COE project. However, upon review of the evidence presented at trial, the Board further found that Willow Bend failed to show that the sales at issue fall within the scope of the exclusion. See Harrah's, supra, at 450. Meaning, the Board found that Willow Bend failed to show minimally that the exclusion at issue "encompasses" the purchases or sales at issue. Id.
In its written reasons for judgment, the Board pointed out that it excluded taxes due on those sales where the invoices referenced an identifiable COE project with a known COE-approved contractor. However, for sales with "generic references to towns or places without anything more to tie an invoice to an identifiable Corps contract," the Board found those generic references, with no connection to a COE contractor, to be insufficient to be encompassed within the scope of the La. R.S. 47:301(10)(g), exclusion. On appeal Willow Bend mistakenly contends that the Board held that it must "follow the property" days, weeks, or months after the time of sale. Rather, the record reflects that the Board looked to the evidence presented at trial, including the sales invoices, to determine whether, at the time of sale, there was any indication that the sale related to a COE contractor or known subcontractor in connection with a COE project.
Accordingly, we find the Board properly found that La. R.S. 47:301(10)(g) is a tax exclusion. Further, although the exclusion should be interpreted in favor of the taxpayer when there is a question as to its applicability, we find the evidence presented at trial must show, minimally, that the sales or purchases at issue are those generally encompassed within the exclusion. This assignment of error lacks merit.
Willow Bend further asserts on appeal generally that the Board erred in excluding certain testimony at trial. Specifically, Willow Bend, through various witnesses, attempted to introduce testimony concerning statements made to its representatives or employees by various purchasers/subcontractors to show that Willow Bend had knowledge that the dirt sold was intended for use in connection with COE projects.
The Board applies the same rules of evidence as all district courts. See La. R.S. 47:1412.
Finally, Willow Bend contends that the evidence presented at trial was sufficient to show that all of its transactions or sales were related to a COE project and, thus, are not subject to sales and use tax under La. R.S. 47:301(10)(g). In its brief to this Court, Willow Bend does not point to any specific sales or contracts but rather generally contends that all of its sales were connected to a COE project.
In reviewing a decision of the Board, this Court should not set aside the Board's findings of fact on appeal unless they are manifestly erroneous in view of the evidence in the entire record. Odebrecht Construction, 182 So.3d at 139. Upon review of the record in this matter, we find the Board was not manifestly erroneous in its determination that, as to certain sales to contractors and subcontractors, the record is devoid of sufficient evidence to relate the sales to COE projects. The Board pointed out that, as to the sales of dirt to a known COE contractor where the invoice generally references a COE project name or code— even if the COE contract was never introduced into evidence—those sales would be excluded and no sales tax would be due. However, as to those sales with a generic references to a town or location (such as "Chalmette" or "airport"), or those invoices with no reference to any known COE project by a known COE contractor, we cannot find that the Board was manifestly erroneous in its determination that the evidence did not sufficiently show that those sales were related to or intended for future use in a COE project.
For the foregoing reasons, we find the Board did not err in its judgment. Accordingly, the judgment of the Board is affirmed.
The following exchange took place concerning one hearsay objection:
