BECKWITH, Associate Judge:
In the District of Columbia, sales tax is governed by D.C.Code §§ 47-2001 to 47-2027.
Having found that the OTCs are liable for the District of Columbia sales tax, we confront a second issue concerning the extent of that tax liability. The District argues that the OTCs are liable for tax on the entire amount they collect from their customers, including the "sales tax reimbursement" amount that the OTCs have been passing on to the hotels, which the hotels, in turn, remit to the District as the sales tax due on the amount the hotels earn on the deal. In reply, the OTCs argue that this "sales tax reimbursement" amount should be excluded from the taxable "sales price" by the plain text of D.C.Code § 47-2001(p)(2)(D). The "sales price" is defined as the "total amount paid" to a "vendor" by a "purchaser" for the taxable service, but — as the District concedes — expressly excludes "[t]he amount of reimbursement of tax paid by the purchaser to the vendor under this chapter[.]" D.C.Code § 47-2001(p)(2)(D). Nevertheless, the District claims that the OTCs are not entitled to the benefit of the § 47-2001(p)(2)(D) exclusion because the OTCs have been failing to state the tax reimbursement amounts separately when collecting such amounts from their customers, and the separate statement is one of the chapter's requirements. Therefore, the District contends, those reimbursement amounts have not been properly collected "under this chapter" and are not entitled to the benefit of the § 47-2001(p)(2)(D) exclusion. The Superior Court rejected that reading of the statute and granted summary judgment to the OTCs because, while the statute does require tax reimbursement amounts to be stated separately, it does not make the separate statement a prerequisite to being a "reimbursement of tax paid by the purchaser to the vendor under this chapter[.]" Put differently, the Superior Court read § 47-2001(p)(2)(D) as simply excluding the tax reimbursement amount from the sales price, rather than creating an exclusion that vendors "earn" when they state the sales tax reimbursement amount separately and "forfeit" when they do not. While requiring a vendor to forfeit the § 47-2001(p)(2)(D) exclusion when the vendor fails to state the tax reimbursement amount separately would be a permissible statutory scheme, the Superior Court was not convinced that that is the scheme Congress had in mind, and neither are we. We reject the District's invitation to read such a forfeiture into the words "under this chapter," and affirm the trial court's grant of summary judgment to the OTCs with respect to the § 47-2001(p)(2)(D) exclusion.
Appellant OTCs operate websites that allow customers to search for, compare, book, and pay for travel reservations. In that respect, the OTCs serve as intermediaries between customers and a host of travel service providers, including car rental companies, airlines, and — importantly for this appeal — hotels. The OTCs' primary business model for the sale of hotel rooms is known as the merchant model: a uniform, nationwide model that operates the same way, in all relevant respects, for all OTCs and in all jurisdictions, including in the District of Columbia. The OTCs have been using the merchant model to book hotel stays in the District since at least the late 1990s.
Under the merchant model, the OTCs contract with hotels for the right to sell hotel rooms to online customers at a "retail rate," while paying the hotels that actually furnish the rooms some lower, negotiated "net rate." In a typical merchant model transaction, a customer uses an OTC's website to search for and select
When charging the customer's credit card, the OTC collects an amount that consists of the net room rate that it will later forward to the hotel, a tax recovery charge, and a retail margin that the OTC keeps as profit. The tax recovery charge — which represents the sales tax due on the net room rate received by the hotel — is also forwarded to the hotel, which then remits it to the District. The District thus receives the sales tax due on the net rate paid to the hotel, but does not receive sales tax on the OTCs' retail margins — that is, on the difference between (1) the total charges that the customer pays to the OTC and (2) the lower, net rate that the OTC forwards to the hotel.
When it charges the customer, the OTC does not isolate the "sales tax" as a separate amount, but instead calls the sales tax a "tax recovery charge," which it combines with a "service fee." As a result, the customer does not know how much sales tax has been paid on the transaction.
On March 22, 2011, the District brought suit to recover what it viewed as unpaid back sales taxes — those owed on the OTCs' retail margins — as well as penalties and interest related to the OTCs' merchant model sales in the District since 1998. On September 24, 2012, the Superior Court granted partial summary judgment to the District on the issue of the OTCs' basic tax liability, holding that the District's "gross sales tax law has applied to Defendants [the OTCs] at all times." The court also found that the OTCs had failed to state any sales tax amounts separately from the other retail charges, but reserved ruling on the tax effect of that finding. Then on December 9, 2013, the court resolved the tax effect of that ruling in favor of the OTCs, concluding that the sales tax amounts that the OTCs had been collecting from their customers and forwarding to the hotels should be excluded from the "sales price" on which the OTCs now owe sales tax, despite the fact that those sales tax amounts had not been stated separately. Both parties appealed.
Pursuant to D.C.Code § 47-2001, the District of Columbia imposes sales tax upon all "vendors" for "the privilege of selling at retail certain tangible personal property and for the privilege of selling certain selected services[.]" D.C.Code § 47-2002(a). Many of these terms are defined in the statute. A "vendor" is "a person or retailer selling property or rendering services upon the receipts from which a tax is imposed under this chapter." D.C.Code § 47-2001(w). A "purchaser" is
D.C.Code § 47-2001(q). Thus, a "sale" is either transferring possession of property, or rendering a taxable service, for consideration. The taxable services are laid out in the definition of "retail sale" in § 47-2001(n)(1)(A)-(U), the only one at issue here being the following:
D.C.Code § 47-2001(n)(1)(C) (emphasis added). The total tax rate imposed on the "sale of or charges for any [hotel] rooms" is 14.5% of the "gross receipts." See D.C.Code § 47-2002(a)(2) (imposing tax of 10.05%); § 47-2002.02(1) (imposing additional tax of 4.45%). Gross receipts are defined as "the total amount of the sales prices of the retail sales of vendors[.]" D.C.Code § 47-2001(h).
The statute imposes tax only on the vendor, but requires that "reimbursement for the tax imposed upon the vendor shall be collected by the vendor ... from the purchaser on all sales the gross receipts from which are subject to tax imposed by this chapter so far as it can be done." D.C.Code § 47-2003(a). The statute further requires that the reimbursement be stated separately, mandating that
D.C.Code § 47-2009. There is one additional wrinkle, and that is in the definition of "sales price." This is important because the tax is imposed upon "gross receipts" that are, in turn, defined in terms of "sales price." The statute defines "sales price" as "the total amount paid by a purchaser to a vendor as consideration for a retail sale," D.C.Code § 47-2001(p)(1), and clarifies that the sales price includes "[a]ny services that are a part of the sale[.]" D.C.Code § 47-2001(p)(1)(C)(i). That definition of "sales price" is limited, however, by a number of exclusions that appear in § 47-2001(p)(2). At issue in this case is the § 47-2001(p)(2)(D) exclusion, which provides that "[t]he term `sales price' does not include ... [t]he amount of reimbursement of tax paid by the purchaser to the vendor under this chapter[.]"
Finally, there is a municipal regulation on the subject. 9 DCMR § 408, enacted in 1954
Since the District filed this lawsuit on March 22, 2011, the District's sales tax statute has been amended several times. The D.C. Council inserted mention of "net charges and additional charges" as well as "room remarketer" into the definition of the taxable service in D.C.Code § 47-2001(n)(1)(C) (2012 Repl.), which now reads:
D.C.Code § 47-2001(n)(1)(C) (emphasis added). The statute goes on to define "room remarketer" as:
D.C.Code § 47-2001(o -1) (2012 Repl.). Similarly, the tax provisions at § 47-2002(a)(2)(B) and § 47-2002.02(1)(B) were amended to clarify that
D.C.Code § 47-2002(a)(2)(B); § 47-2002.02(1)(B).
This court reviews summary judgment rulings de novo. Square 345 Ltd. P'ship v. District of Columbia, 927 A.2d 1020, 1023 (D.C.2007). The court is to "conduct an independent review of the record ... in considering whether the motion was properly granted." Id.
The rules of statutory construction are well established in the District of Columbia. See District of Columbia v. Place, 892 A.2d 1108, 1111 (D.C.2006). "The first step in construing a statute is to read the language of the statute and construe its words according to their ordinary sense and plain meaning." Hospitality Temps Corp. v. District of Columbia, 926 A.2d 131, 136 (D.C.2007) (citation and internal quotation marks omitted). The court must give effect to a statute's plain meaning when its words are clear and unambiguous. See District of Columbia v. Bender, 906 A.2d 277, 281-82 (D.C.2006). Generally, "[w]hen the plain meaning of the statutory language is unambiguous, the intent of the legislature is clear, and judicial inquiry need go no further." District of Columbia v. Gallagher, 734 A.2d 1087, 1091 (D.C.1999). "The literal words of a
A special rule of construction applies to tax statutes, which under certain circumstances can tip the balance in favor of the taxpayer. In District of Columbia v. Acme Reporting Co., this court made clear that "`the settled rule [is] that tax laws are to be strictly construed against the state and in favor of the taxpayer,' if the statute in controversy is unclear and ambiguous." 530 A.2d 708, 712 (D.C.1987) (quoting 3A Sutherland, Statutes and Statutory Construction § 66.01 (C. Sands, 4th ed. 1986)). The Acme court tempered that presumption in the next three sentences, however, clarifying that:
Acme, 530 A.2d at 712. In essence, then, interpreting tax laws is a three-step process: if the court is confronted with ambiguity on the face of the statute, step two is to turn to the legislative history and the other tools of reasonable statutory construction, and — if the ambiguity persists — step three is to construe the statute strictly against the state and in favor of the taxpayer, in accordance with the Acme rule. As the trial court explained: "Only if the statute remains ambiguous after resorting to all of the normal tools of statutory construction should the Court construe any remaining reasonable ambiguity against the District and in favor of the taxpayers."
Following the rules of statutory construction in general and Acme in particular, the first step in resolving the OTCs' contested sales tax liability is to determine whether the statutory language is plain and unambiguous. We begin our inquiry by considering the statutory text as it existed prior to the 2011 amendment, and then turn to the amendments to the extent necessary. "A statute is ambiguous when it is capable of being understood in two or more different senses by reasonably well-informed persons." Sutherland,
As noted above, both the OTCs and the District read the pivotal text from D.C.Code § 47-2001 (n)(1)(C) — defining the retail sale at issue as "[t]he sale or charge for any room ... furnished to transients by any hotel" — in a way that has facial plausibility. The OTCs are correct that the only verb in the definition is "furnish[ed]," and therefore it does not seem absurd to read the provision as a tax on the furnishing of rooms, which is arguably the service that the hotels, not the OTCs, provide. It is thus plausible to read the "sale or charge," as the OTCs do, to refer to the result rather than the taxable service. On this reading, the "sale or charge" is merely that which occurs when the hotels exercise the taxable privilege of furnishing rooms.
The District, on the other hand, reads the statute as imposing tax directly on the sale or charge for any room that is ultimately furnished by a hotel, which sounds exactly like the service that the OTCs provide. This reading is also plausible, because nowhere does the statute specify that the party responsible for the "sale or charge" needs to be the same party responsible for the "furnishing" and because the presence of the words "sale or charge" at the beginning of § 47-2001(n)(1)(C) suggests that the provision is aimed at the sales transaction whereby one "sells or charges" for the room, rather than the physical act of furnishing it. Given the reasonableness of the District's reading — "the tax is a sales tax, not an operator's tax; it applies to the `privilege of selling selected services,' not to the services themselves" (emphasis in original) — we agree with the trial court's finding that
Turning to an analysis of the statute's structure, purpose, and legislative history, we conclude that these considerations decisively favor the District's position. First, while the text of § 47-2001(n)(1)(C) leaves considerable ambiguity about which service exactly is subject to tax under the provision, an examination of the District's sales tax provisions as a whole lends support to the District's contention — and the well-reasoned conclusion of the trial court — that the tax is levied on the "sale or charge" for the service, rather than on the provision of the service itself.
As an initial matter, it is significant that the sales tax is imposed upon vendors for "the privilege of selling certain selected services," rather than rendering or providing them. See D.C.Code § 47-2002. The mention of both the "selling" in § 47-2002 and the "sale or charge" in § 47-2001(n)(1)(C) suggests that the sale is the subject of the tax, and the OTCs' arguments to the contrary — while plausible on their face — ultimately fail to withstand close scrutiny. For one, the sales tax is imposed on the "gross receipts" of a retail sale under the statute. The "gross receipts" include the entirety of the "sales price" and, here too, the statutory language is notably inclusive in reaching the ancillary services that are part of the taxable transaction: "`Sales price' means the total amount paid by a purchaser to a vendor as consideration for a retail sale... the total amount of the sales price includes ... any services that are a part of the sale[.]" D.C.Code § 47-2001(p)(1). This language, and the emphasis it places
First, the OTCs contend that "the sale or charge" that appears at the beginning of § 47-2001(n)(1)(C) cannot be the subject of the tax because, since "sale" is defined in § 47-2001(q) as a "transaction whereby services subject to tax under this chapter are rendered for consideration," the word "sale" must therefore be a reference to a taxable service — here the furnishing of hotels rooms — rather than a taxable service in itself. Yet the OTCs' argument — that "[s]ale and charge are used as nouns; they are what results when a hotel has performed the specified activity, i.e., furnished a room for consideration" — cannot be reconciled with the other goods and services enumerated in § 47-2001(n)(1).
Despite the admittedly confusing definition of "sale" found in § 47-2001(q), it is clear that the term "sale" is being used in its everyday sense in § 47-2001(n)(1) and that it is precisely the "sale" that is the focus of § 47-2001(n)(1)(C), just as a sale is the focus of every other provision of § 47-2001(n)(1). For context, it is helpful to consider § 47-2001(n)(1)(C) in relation to its neighboring provisions:
§ 47-2001(n)(1). Semantic wrangling aside, the clear purpose of § 47-2001(n)(1) is to enumerate certain transactions for the purpose of bringing them within the ambit of the District's sales tax law. Unsurprisingly for a chapter entitled "Gross Sales Tax," all of these provisions focus on a sale, and all of them focus on the sale from the customer's perspective. For example, § 47-2001(n)(1)(A)(i) taxes the "[s]ales of food or drink prepared for immediate consumption[.]" One could not fairly argue that this is a tax only on the service of "preparing." One could not seize on the only participle in the provision, extract the active tense of the underlying verb, and then hold out that verb as the taxable activity. Rather, § 47-2001(n)(1)(A)(i) is plainly a tax on the "sale" of food, and the rest of the provision merely describes the food that is to be taxed, that is, food "prepared for immediate consumption[.]" In arguing that "one is a `vendor' only if one exercises the taxable privilege of `furnishing' rooms to transients for consideration," the OTCs are following just that methodology: they are seizing on the only verb (or more precisely, participle) in § 47-2001(n)(1)(C), extracting the active tense of that verb, and then holding out that verb as the taxable activity. But that maneuver is no more correct in the context of furnished rooms than in the context of
The noun "sale" — and not "prepare," the verb (or, again, participle) that appears later in the provision — is the taxable activity in § 47-2001(n)(1)(A)(i). But in arguing that "sale" cannot similarly be the taxable activity in § 47-2001(n)(1)(C), the OTCs rely on a "property" versus "services" distinction. They appear to acknowledge that the word "sale" can be the subject of the tax for the transfer of a good, but not for the provision of a service, claiming that "[t]he Statute's use of passive voice in defining another type of retail sale, `sales of food or drink prepared for immediate consumption,' does not help the District [because] [t]he tax is imposed on the `sale' of that specific type of property, not on the service of preparing it" (citations omitted) (emphasis in original). This argument relies on a very strained reading of the statute: while the definition of "sale" in § 47-2001(q) appears to offer different definitions for the transfer of property versus the provision of services — for property, a "sale" is "any transaction whereby title or possession ... is or is to be transferred" and for services, a "sale" is "any transaction whereby services subject to tax... are rendered for consideration," see § 47-2001(q) — we are not inclined to read these definitions as substantively different, much less to assume that Congress was knowingly weaving back and forth between these definitions when it was enumerating the transactions that qualify as "retail sales" in § 47-2001(n)(1). The OTCs appear to contend that the difference between § 47-2001(n)(1)(A)(i)'s "sale of food or drink prepared for immediate consumption" and § 47-2001(n)(1)(C)'s "sale or charge ... for any room ... furnished to transients by any hotel" is that the former must be construed under the definition of "sale" that applies to the transfer of property and the latter under the definition of "sale" that applies to the provision of services. But that seems backwards. Instead of having to go through each provision and classify it as a "property" or a "service" — which itself might raise difficult interpretive questions — the more natural reading of the statute is much simpler; it is just a tax on the sales transactions that are enumerated within it. Viewed this way, the dual definition of "sale" in § 47-2001(q) seems merely to emphasize that some of those transactions will deal in goods, like § 47-2001(n)(1)(A)(i), and others will deal in services, like § 47-2001(n)(1)(C). Thus, the amount that the purchaser pays for prepared food is taxed under § 47-2001(n)(1)(A)(i), and the amount the purchaser pays for furnished rooms under § 47-2001(n)(1)(C).
The purpose of the sales tax statute — which is simply to tax the enumerated transactions, and to tax them in their entirety — overshadows fine points like the tense of the words. D.C.Code § 47-2001(n)(1)(B), taxing "[a]ny production, fabrication, or printing of tangible personal property on special order for a consideration," is illustrative. The provision does not include the word "sale" at all, but could easily be phrased as "the sale of tangible personal property produced, fabricated, or printed on special order for a consideration." That semantic change would not change the substance, and the provision could probably even be rewritten to sound
Not only do the structure and purpose of the District's sales tax law evince Congress's intent to tax the full amount that customers pay for hotel rooms in the District of Columbia, but the legislative history confirms this result. Congress aimed to tax the amount that the purchaser pays for the enumerated service, and — in targeting the sale — sought to include ancillary or intermediary transactions. While Congress in the year 1949 did not contemplate online travel companies matching customers with hotels using sophisticated information technology, it did know what a middleman was and did address the issue. We draw the same conclusion as the trial court, which reasoned:
Because we agree with the trial court's determination that § 47-2001(n)(1)(C) has always extended to reach the OTCs' retail margins, the 2011 amendments to the statute whereby the D.C. Council sought to clarify the reach of the provision are not critical to the outcome of this case. To the extent that they shed light on the meaning of § 47-2001(n)(1)(C), however, the amendments favor the District and exacerbate the problems with the OTCs' strained reading of the statute. As the trial court concluded, the legislative history of the 2011 amendments is very clear about the Council's purpose. The preamble for the amendment inserting "room remarketer" into D.C.Code § 47-2002 and § 47-2002.02 confirmed its purpose "to amend Title 47 of the District of Columbia Official Code to clarify and mandate that online travel companies pay the full amount of tax on the amount paid by the occupant," Payment of Full Hotel Taxes by Online Vendors Clarification Act of 2010, D.C. Law 18-364 (2011), and the fiscal impact statement explained that the amendment would clarify that District sales taxes "appl[y] to the total amount charged to the consumer by the room remarketer, instead of to the amount charged to the room remarketer by the hotel[.]" District of Columbia Office of the Chief Financial Officer, Fiscal Impact Statement — "Payment of Full Hotel Taxes by Online Vendors Clarification Act of 2010" (Dec. 2, 2010). The Council certainly intended to clarify that the OTCs' retail margins are taxable under § 47-2001(n)(1)(C), but it saw no need to overhaul the provision to achieve that result. Rather, it addressed the issue by clarifying that when "room remarketers" sell hotel rooms in the District, the retail margins are part of the transaction and subject to tax. The OTCs' response to the amendment exposes the snag in their reading: the OTCs contend that, because the amendment merely makes a new category
Moreover, the OTCs' reading of the statute would leave many provisions of the District's sales tax law vulnerable to potential loopholes and, as the trial court recognized, could lead to the absurd result in which nobody would be liable for sales tax:
In response, the OTCs point out that — as even the District concedes — the hotels have been remitting sales tax on the "net rates" they receive on the transactions. Thus, the hypothetical in which the hotels and the OTCs both dodge the sales tax has not been occurring, and it is not clear how it would work. There is no allegation that the OTCs are conspiring with or are somehow controlled by the hotels and if, for example, a hotel tried to evade the sales tax by transacting with itself and then remitting tax based only on a "net rate" that it calculated by removing some "convenience" or "booking" fee, then that would constitute a sham transaction that could be ignored under existing tax principles. See Black & Decker Corp. v. United States, 436 F.3d 431, 441 (4th Cir.2006).
While the loophole that troubled the trial court does not appear to be gaping, we are unpersuaded by the OTCs' contention that "[e]ven if the Superior Court's perceived loophole were nonetheless a viable concern, that loophole must be filled by the District Council, the legislative branch, not the courts." Rather, as the District argues, the rules of statutory interpretation in general and Acme in particular require consideration of practical consequences when determining a reasonable construction of the District's sales tax law. Acme, 530 A.2d at 715 (stating that the "`reasonableness of a construction can often be tested by considering the consequences of a different one'") (citation omitted). Regardless of the ease with which the OTCs and the hotels might conspire to lessen or eliminate the tax consequences of these sales, then, the OTCs' interpretation — inserting a middleman between vendor and purchaser — would result in the District receiving sales tax on only part of transactions that Congress intended to tax in their entirety. We therefore agree with the District that "[w]hile the OTCs' interpretation would allow retailers to avoid paying tax on some retail transactions — a result Congress surely did not intend — the District's interpretation avoids this problem: the tax is imposed on the charge to the customer."
While there is no case law that controls this dispute, this court's precedents also favor the District's contention that the OTCs owe sales tax on their retail margins pursuant to § 47-2001(n)(1)(C). The
The parties also draw starkly different conclusions from this court's decision in Square 345 Ltd. P'ship v. District of Columbia. In Square 345, this court addressed the question whether a hotel's so-called "attrition fees" are subject to sales tax as a retail sale of a hotel room. 927 A.2d at 1022. "Attrition fees" result when a group contracts with a hotel to make available a block of rooms at a given price until a certain date, typically so that the group's members can attend some event. Id. If the group's members do not reserve some agreed-upon minimum number of rooms, the group is responsible for the difference between the number of room nights actually used and the number of room nights guaranteed; that amount is called an attrition fee. Id. This court in Square 345 — after observing that "the statute permits the District to tax the hotel `for the privilege of selling certain selected services,' including the `sale of or charges for any room or rooms ... furnished to a transient by any hotel'" — held that the attrition fee was subject to sales tax because the hotel "provides a [taxable] `service' when it sets aside a room block for a group and its participants at a discounted rate for a specified period of time." Id. at 1024.
The OTCs claim that the Square 345 opinion is inconsistent with the reading of the statute that this court announces today because Square 345 placed the tax burden on the hotel and did not turn the intermediary group into a "vendor" responsible for sales tax. We disagree. In Square 345, the hotel was, in a meaningful sense, "selling" the block of rooms to the group in exchange for receiving the guaranteed attrition fee. The Square 345 court explained this explicitly:
Id. at 1024 (internal citations omitted). While both the OTCs here and the group that guaranteed the attrition fee there can be characterized as "intermediaries" in some sense, the reasoning from Square 345 does not apply to the OTCs operating pursuant to the merchant model. The District's argument in Square 345 highlights the differences between the two cases. There the District argued, in the alternative, that "the group who enters into the contract with a hotel should be considered the transient because it makes the block reservation on behalf of its participants
Finally, the OTCs argue that the imposition of back sales taxes is unfair and foreclosed by the four affirmative defenses of laches, waiver, equal protection, and the statute of limitations. We disagree.
"Laches is the principle that equity will not aid a plaintiff whose unexcused delay, if the suit were allowed, would be prejudicial to the defendant." Fed. Mktg. Co. v. Va. Impression Prods. Co., 823 A.2d 513, 525 (D.C.2003). This jurisdiction, however, has accepted the principle of nullum tempus occurrit reipubliciae ("no time runs against the state"), by which neither laches nor statutes of limitations will constitute a defense to suit by the sovereign in the enforcement of a public right. See New 3145 Deauville, L.L.C. v. First Am. Title Ins. Co., 881 A.2d 624, 629 (D.C.2005). The OTCs do point to a case in the District that has not followed the doctrine, but that exception is limited to zoning enforcement actions and the doctrine squarely applies in the tax collection context. See Stonewall Constr. Co. v. McLaughlin, 151 A.2d 535, 536 (D.C.1959). And even assuming that laches were an available defense, the equitable remedy would not be appropriate here because "if the party interposing the defense of laches substantially contributes to the delay he is precluded from taking advantage of the defense." Evans v. United States Fid. & Guar. Co., 127 A.2d 842, 848 (D.C.1956). While the OTCs claim that the District has known about the alleged noncompliance for nine years and taken no action whatsoever, prejudicing the OTCs because they will not be able to seek reimbursement from past customers, the OTCs' fairness argument is ultimately unavailing. It is clear from looking at the OTCs' statements to investors
Waiver is the unilateral, voluntary, and intentional relinquishment of a known right. In re Thomas, 740 A.2d 538, 547 (D.C.1999). The OTCs' waiver argument is closely related to their laches argument. In support of waiver, the OTCs point to the District's delay in bringing this case, its practice of accepting sales tax from the hotels based only on the "net rates," and a quotation from an article in the Washington Business Journal in which a former Attorney General suggested that litigation against the OTCs would be a "waste of time." Yet none of these three fairly evinces waiver. Allowing a defense of waiver based on the District's mere failure to bring the action earlier would eviscerate the principle of nullum tempus occurrit reipubliciae discussed above. And the fact that the District accepted sales tax indisputably owed to it on one part of a transaction in no way suggests waiver of a prospective claim for sales tax on another part of the transaction. And finally, the quotation from former Attorney General Peter Nickles was taken out of context. When considered in full, that statement makes clear that the District was keeping its options open:
Jonathan O'Connell, D.C. Could Be Losing Hotel Taxes to Online Companies, Wash. Bus. J. (May 29, 2009).
The equal protection guarantees contained in the United States Constitution are violated when a law is not applied evenhandedly. Smith v. United States, 460 A.2d 576, 578, n. 3 (D.C.1983). The OTCs cite a number of cases that point to a "duty of consistency" that applies when the government is interpreting and applying tax laws to similarly situated taxpayers. These "duty of consistency" cases stand for the proposition that the government may not interpret a tax statute to apply to one taxpayer and not to a similarly situated one. As the trial court explained, however, there is no evidence that the District has ever found that its sales tax law does not apply to other OTCs' merchant model transactions, and so this case does not really involve a claim of inconsistent application of a tax law. Rather, in identifying a small OTC that the District has not also sued for failure to pay sales taxes, the OTCs are effectively making a selective enforcement claim. "To support a defense of selective enforcement or discriminatory prosecution, appellant must show that the government's selection of it for prosecution has been based upon some form of invidious or otherwise impermissible form of discrimination, or is arbitrary and capricious." Hospitality Temps, 926 A.2d at 140. No such improper motivation is alleged here. It does not violate equal protection principles for the District to make enforcement decisions based on whether successful litigation will yield sufficient revenue to make legal action worthwhile, which is what appears to have happened in this case.
Finally, the Superior Court properly rejected the OTCs' statute of limitations
Like the trial court, we conclude that an analysis of the sales tax law's structure, purpose, and legislative history is sufficient to resolve the ambiguity that existed on the face of the law. Because ambiguity does not remain after the normal tools of statutory of construction have done their work, the Acme ambiguity rule does not come into play. We hold that the OTCs, in their merchant model transactions, were engaging in "the sale or charge for any room ... furnished to transients by any hotel" within the meaning of D.C.Code § 47-2001(n)(1)(C), and are therefore vendors liable for the District sales tax.
Given that we have found the OTCs liable for the District sales tax, the final issue in this case is whether they owe tax on the "sales tax reimbursement" amounts that they have been passing on to the hotels, ultimately to be remitted to the District as the tax due on the "net rate." The trial court, granting summary judgment to the OTCs, concluded that they do not, because "[t]he amount of reimbursement of tax paid by the purchaser to the vendor under this chapter" is expressly excluded from the definition of "sales price" by § 47-2001(p)(2)(D). We agree.
The dispute over the § 47-2001(p)(2)(D) exclusion concerns three words. The provision excludes from the term "sales price" "[t]he amount of reimbursement of tax paid by the purchaser to the vendor under this chapter" (emphasis added). Because a different part of the chapter requires the seller to state the amount of sales tax separately — and the OTCs have indisputably not been complying with the separate statement requirement — the District contends that any sales tax reimbursement that the OTCs have collected from their customers and passed on to the hotels does not count as having been paid "under this chapter," and therefore is not entitled to the § 47-2001(p)(2)(D) exclusion.
The District's argument depends on a problematic reading of the statute. The statute does not make compliance with the separate statement requirement a prerequisite to the § 47-2001(p)(2)(D) exclusion. If Congress had wanted to exclude tax reimbursements from the tax base only when they were separately stated, it could have done so. Congress knew how to
As a whole, § 47-2001(p)(2) reads:
(Emphasis added). While Congress made subsection (E) conditional on there being a separate statement, it did not do the same for section (D). And it is precisely because section (D) does not depend on a separate statement that the District seizes upon the last three words, "under this chapter," and uses those words to imply a link to the separate statement requirement found in § 47-2009. Thus, the District reads "under this chapter" in § 47-2001(p)(2)(D) as requiring conformity with the separate statement requirement in § 47-2009 and, presumably, every other provision of the sales tax law. But that is a peculiar reading of "under this chapter." This can be seen, for example, in the text of § 47-2009 itself:
(Emphasis added). Section 47-2009, then, requires the separate statement of any sales tax reimbursement amount collected "under ... this chapter," but it does not use "under this chapter" as a catch-all term for ensuring absolute compliance with all of the chapter's requirements. Rather, it uses the phrase in its regular sense, clarifying which sales are being discussed. The phrase is used in much the same way in § 47-2001(p)(2)(D), where it again clarifies which taxes are being discussed — that is, only those in Title 47, Chapter 20, entitled "Gross Sales Tax."
The District's arguments to the contrary are unpersuasive. First, the District relies on a municipal regulation, 9 DCMR § 408.2, which states that the tax reimbursement amount is to be excluded from the sales price if the reimbursement amount is stated separately. 9 DCMR § 408.2. The problem with this argument is that the regulation does not say that the tax reimbursement amount is to be excluded from the sales price only if stated separately. We acknowledge that 9 DCMR § 408.2 appears to be a completely superfluous provision, as its point is already
Yet context is critical, and a careful look at the structure of both the statute and the regulation counsels against implying an "only" as sometimes can and should be done pursuant to the expressio unius canon. To do so, we think, would cut against the thrust of 9 DCMR § 408 as a whole. Section 408 begins with the preface: "In addition to the provisions of the Act (D.C.Code § 47-2001(p)(2)), the term `sales price,' as used in the Act, shall not include any of the exceptions set forth in this section." 9 DCMR § 408.1. Significantly, § 47-2001(p)(2) lists things that are not included in the term "sales price," one of which is "[t]he amount of reimbursement of tax paid by the purchaser to the vendor under this chapter." And each of the substantive provisions of 9 DCMR § 408 includes the matching language "shall not be subject to the tax," which further suggests that the point of this regulation is to add to the list of exclusions found in the statute. See 9 DCMR § 408.1-4. Section 408 essentially says that, in addition to the § 47-2001(p)(2) exclusions, here are more exclusions. The District's reading seems to be that, because one of the exceptions in the regulation's list of "more exceptions" can — by implying the word "only" — be read as narrower than the corresponding exception in the statute's list of "original exceptions," then the "original exceptions" list has actually been eroded. While there is no rule against including cross-cutting provisions in the same section of a regulation — and there would be nothing wrong with the District's current tax authority, the Office of Tax and Revenue (OTR), providing a clarification that narrows one of the 47-2001(p)(2) exclusions, if it chose to — we think that 9 DCMR § 408.2 would be a cryptic way of expressing an intention to narrow. We are unwilling to read a regulation purportedly meant to broaden the § 47-2001(p)(2) exclusions as actually constricting § 47-2001(p)(2)(D).
The trial court found that the OTCs "substantially complied" with the separate statement requirement, then, and the District's counterargument relies on a sort of all-or-nothing logic we cannot accept. Granted, there does not appear to be a bright line between a noncompliant reimbursement and something that is not a reimbursement at all. By the District's logic, though, a tax reimbursement amount that was understated by fifty cents, for example, would seem to be not merely noncompliant, but something other than a reimbursement "under this chapter." In that example, much like this case, the customer would lack exact knowledge of the amount of reimbursement she has paid, but it is still farfetched to say that the reimbursement would therefore not be a reimbursement "under this chapter."
As the District correctly points out, there is no general rule that substantial compliance is good enough when it comes to the formalistic and often technical requirements of the tax code, see Kleiboemer v. District of Columbia, 458 A.2d 731, 734 & n. 4 (D.C.1983), and there is also a general canon of construction directing that tax exemptions be narrowly construed. See, e.g., Antietam Hotel Corp. v. Comm'r of Internal Revenue, 123 F.2d 274, 278 (4th Cir.1941). These are both valid considerations, and we note that we do not read the trial court as creating a new doctrine or general rule of tax law. But at the end of the day, general maxims are not going to decide this specific question of statutory interpretation. In particular, this case asks us to decide between two meanings of the phrase "under this chapter," and the choice appears to be between what we view as its ordinary use, meaning "under this chapter, as opposed to another" (or simply "here"), and an unusual use, meaning "in accordance with
The District also makes a number of policy arguments, emphasizing that Congress focuses on the consumer's perspective when passing sales tax laws because the consumer might need the separately stated sales tax information to comply with his or her own tax obligations, and that Congress strives for consumer protection (noting that, elsewhere in the sales tax law, Congress made it a criminal offense for vendors to assure customers that the vendors will absorb the District sales tax). Some of these arguments justify the separate statement requirement, but they are not reasons to change the definition of "sales price" adopted by the tax code. Ultimately, many of these arguments rely on the logic that, since the OTCs were culpable in not complying with the separate statement requirement, then they do not "deserve" the § 47-2001(p)(2)(D) exclusion. But § 47-2001(p)(2)(D) excludes sales tax reimbursement amounts from the definition of "sales price," and the remedy for the failure to comply with a given provision of the tax code is not necessarily greater taxation.
For the reasons in this opinion, we affirm the judgment of the Superior Court.
So ordered.
McLEESE, Associate Judge, concurring in part and dissenting in part:
I agree with the court that the online travel companies (OTCs) are subject to sales tax in the District of Columbia, and I join Parts I through IV of the court's opinion. I respectfully dissent, however, from the court's holding in Part V of the opinion that the OTCs are not liable for sales tax based on the full amount the OTCs charged purchasers.
Under the applicable provisions, vendors are required to pay a tax based on their gross sales receipts. D.C.Code § 47-2002(a) (2012 Repl.). To the extent possible, vendors must obtain reimbursement for that tax from purchasers. D.C.Code § 47-2003(a) (2012 Repl.). Gross receipts are defined in terms of sales price, and the sales price does not include tax-reimbursement amounts "paid by the purchaser to the vendor under this chapter [i.e., the chapter applicable to gross sales tax]." D.C.Code §§ 47-2001(h), -2001(p)(2)(D) (2012 Repl.). Vendors are required to charge purchasers separately for the tax reimbursement, and that charge must be separately stated on any receipt at the time of sale. D.C.Code § 47-2009 (2012 Repl.). By long-standing regulation, "[t]he amount of reimbursement of taxes paid by the purchaser to the vendor under the Act shall not be subject to the tax if the reimbursement amount is stated separately from the sales price." 9 DCMR § 408.2 (2015).
The OTCs did not comply with the statutory requirement that vendors separately charge purchasers for tax reimbursement, instead imposing a single charge that referred to taxes and fees without indicating the exact amount of either. The District of Columbia contends that the OTCs therefore did not obtain proper tax reimbursement and thus are liable for sales tax based on the entire amount the OTCs charged purchasers. In my view, the District's interpretation of the applicable provisions is reasonable and entitled to deference from this court. See, e.g., Auer v. Robbins, 519 U.S. 452, 461-62, 117 S.Ct. 905, 137 L.Ed.2d 79 (1997) (agency's interpretation of its own regulations is controlling unless "plainly erroneous or inconsistent with the regulation"; although agency's interpretation was advanced in legal brief, that did not undermine deference, where there was "no reason to suspect that the interpretation does not reflect the agency's fair and considered judgment on the matter in question") (internal quotation marks omitted); District of Columbia Dep't of Env't v. East Capitol Exxon, 64 A.3d 878, 880-81 (D.C. 2013) ("It is well established that this court affords deference to an agency's interpretation of the statute and regulations it is charged by the legislature to administer, unless its interpretation is unreasonable or is inconsistent with the statutory language or purpose. This deference stems from the agency's presumed expertise in construing the statute it administers. When, as here, the construction of an administrative regulation rather than a statute is in issue, deference is even more clearly in order.") (citations and internal quotation marks omitted).
The court does not explicitly address whether the District's interpretation of the applicable statutory provisions is entitled to deference or whether 9 DCMR § 408.2 should be upheld as long as the regulation reflects a reasonable interpretation of the applicable statutory provisions. The court does conclude, however, that the District's interpretation of § 408.2 is not entitled to deference, because that interpretation was not advanced at the outset of this litigation and is presented in a brief filed in this court by the Office of the Solicitor General. The Supreme Court has explained, however, that "Auer ordinarily calls for deference to an agency's interpretation of its own ambiguous regulation, even when that interpretation is advanced in a legal brief...." Christopher v. SmithKline Beecham Corp., ___ U.S. ___, 132 S.Ct. 2156, 2159, 183 L.Ed.2d 153 (2012). The District relied on the regulation in summary-judgment pleadings filed by the Office of the Attorney General, and I see no reason to doubt that the Office of the
In granting summary judgment in December 2012, the trial court ruled that the District waived this argument in a discovery response filed in February 2012. In opposing summary judgment in May 2012, however, the District clarified that it in fact was seeking to recover sales tax based on the full amount the OTCs charged purchasers, without any reduction for purported tax reimbursement. In the absence of any finding that the OTCs were prejudiced, I would not treat the argument as irretrievably lost based on a statement in a discovery response that was clarified before the trial court ruled on the summary-judgment motion. Cf., e.g., Brooks v. United States, 993 A.2d 1090, 1095 (D.C. 2010) (when exercising discretion in considering whether to grant request to withdraw prior waiver or stipulation, trial court may consider "various factors, including the stage of the proceedings, the importance of the testimony, inconvenience to the court, and prejudice to the [opposing party]"); Marshall v. District of Columbia, 391 A.2d 1374, 1378-79 (D.C.1978) (trial court did not abuse discretion in permitting District to withdraw prior admission by default, given absence of prejudice to opposing party); Schrier v. Home Indem. Co., 273 A.2d 248, 251 (D.C.1971) (reversing where trial court treated ambiguous language in stipulation as waiving defense).
On the merits, I agree with the District that 9 DCMR § 408.2 is better understood to mean that, unless the amount of tax reimbursement is stated separately from the sales price, vendors are not entitled to a reduction in tax based on a claim that some of the price to the purchaser was actually tax reimbursement. Two distinct canons of construction support this understanding of § 408.2. The first canon is "expressio unius est exclusio alterius, which embodies the common-sense principle that when a legislature makes express mention of one thing, the exclusion of others is implied." Odeniran v. Hanley Wood, LLC, 985 A.2d 421, 427 (D.C.2009) (internal quotation marks omitted). By expressly identifying only one circumstance in which vendors are entitled to a reduction for tax reimbursement, § 408.2 naturally tends to imply that vendors otherwise are not entitled to a reduction. "Although the expressio unius maxim must be applied with a considerable measure of caution, it is useful where the context shows that the draft[ers'] mention of one thing does really necessarily, or at least reasonably, imply the preclusion of alternatives." Id. (citation, ellipses, and internal quotation marks omitted). This seems to me such a case, particularly because, as the court acknowledges, a contrary reading of § 408.2 contradicts the "cardinal principle of statutory construction that a statute ought, upon the whole, to be so construed that, if it can be prevented, no clause, sentence, or word shall be superfluous, void, or insignificant." Virginia v. Maryland, 540 U.S. 56, 74, 124 S.Ct. 598, 157 L.Ed.2d 461 (2003) (internal quotation marks omitted). See, e.g., Consumer Action Network v. Tielman, 49 A.3d 1208, 1213 (D.C.2012) ("A basic principle is that each provision of the regulation should be construed so as to give effect to all of the regulation's provisions, not rendering any provision superfluous.") (brackets and internal quotation marks omitted). The applicable statutes already provide that vendors are entitled to a reduction for separately stated tax reimbursement. D.C.Code §§ 47-2001(h), -2001(p)(2)(D), -2009. Interpreting § 408.2 as simply reiterating that point renders the regulation entirely superfluous.
The court concludes, however, that the foregoing considerations are inadequate, because interpreting 9 DCMR § 408.2 to impose a limitation "would cut against the thrust of ... § 408 as a whole," which the court describes as adding to the statutory list of exceptions to "sales price." The principal difficulty with that conclusion is that § 408.2 is outside that thrust in any event, because even under the court's interpretation § 408.2 does not add to the statutory list of exceptions but instead pointlessly reiterates one statutory exception. Moreover, even if § 408.2 did point in a direction different from the other parts of § 408, that consideration would, in my view, be outweighed by the contrary considerations I have previously noted. In sum, § 408.2 provides for a reduction for tax reimbursement if the amount of tax reimbursement is separately stated. I do not think that that provision can reasonably be interpreted to permit such a reduction even if the amount of tax reimbursement is not separately stated.
I also would conclude that, so construed, 9 DCMR § 408.2 is a reasonable interpretation of the applicable statutory provisions. Those provisions authorize a reduction for tax reimbursement and require that tax reimbursement be separately stated, but do not speak explicitly to what should happen if a vendor does not separately state the amount of tax reimbursement. D.C.Code §§ 47-2001(h), -2001(p)(2)(D), -2009. In essence, § 408.2 reflects the view that part of the purchaser's payment to the vendor can be treated as tax reimbursement by the purchaser only to the extent that it is documented at the time of the sale that the parties to the sale understood that a specified amount of the purchaser's payment was tax reimbursement rather than sales price. Both as a matter of ordinary language and as a matter of policy, that seems to me a natural and reasonable approach to determining what portion of a purchaser's payment
With respect to policy, the District persuasively argues that the separate-statement requirement serves important purposes, including ensuring that both parties to a sale understand the amount of sales tax involved, which can determine other tax obligations of the parties. See, e.g., D.C.Code § 47-2205 (purchaser liable for unreimbursed tax) (2012 Repl.); 26 C.F.R. § 1.164-5 (2015) (permitting federal tax deduction for state sales tax if amount of sales tax is separately stated). As interpreted by the District, the applicable provisions provide a salutary incentive to comply with the separate-statement requirement. Unsurprisingly, a number of other jurisdictions take the same substantive approach, refusing to permit vendors to reduce their tax based on purported tax reimbursement that was not separately stated at the time of the transaction. See, e.g., Saco Indus. v. Illinois Dep't of Revenue, 301 Ill.App.3d 191, 234 Ill.Dec. 358, 702 N.E.2d 1012, 1014-15 (1998) (imposing tax based on full amount of purchasers' payments, because vendor failed to separately state tax at time of transaction); Noar Trucking, Inc. v. State Tax Comm'n, 139 A.D.2d 869, 527 N.Y.S.2d 597, 599 (1988) (same, where vendor failed to separately state tax amount, instead simply stating that gross price included tax); Rose v. Glander, 153 Ohio St. 363, 91 N.E.2d 685, 685-86 (1950) (per curiam) (if sales taxes separately stated, they are not included in sales price, "but if the [vendor] does not so separately state them they shall be included in the determination of the tax"). This jurisdiction takes the same substantive approach with respect to transportation charges, which by statute can be excluded from sales price for tax purposes only if separately stated. D.C.Code § 47-2001(p)(2)(E). I recognize, as the court points out, that the presence of express language in the latter provision but not D.C.Code § 47-2001(p)(2)(D) arguably provides some support for the OTCs' position. But I view that consideration as outweighed by the others I have mentioned, particularly given our obligation to defer to the District's interpretation of the relevant provisions as long as that interpretation is reasonable.
Finally, even assuming that the doctrine of substantial compliance is applicable in the present context, I do not view the OTCs' failure to provide any indication of the amount of reimbursement as constituting substantial compliance with the OTCs' statutory obligations. Nor do I view the imposition of a tax on the full amount of the customers' payments as an impermissible penalty.
In sum, I would hold that the OTCs are liable for tax based on the full amount of their customers' payments, without reduction for purported tax reimbursement. I therefore respectfully dissent from the holding of Part V of the court's opinion affirming the contrary ruling of the trial court.