IN THE COURT OF APPEALS OF THE STATE OF MISSISSIPPI NO. 2025-CA-00329-COA
ABG CONTRACTORS, INC. APPELLANT v.
CHRISTOPHER GRAHAM, IN HIS OFFICIAL APPELLEE CAPACITY AS THE COMMISSIONER OF REVENUE OF THE MISSISSIPPI DEPARTMENT OF REVENUE
DATE OF JUDGMENT: 02/20/2025 TRIAL JUDGE: HON. TIFFANY PIAZZA GROVE COURT FROM WHICH APPEALED: HINDS COUNTY CHANCERY COURT, FIRST JUDICIAL DISTRICT
ATTORNEY FOR APPELLANT: JAMES GARY McGEE JR. ATTORNEYS FOR APPELLEE: NICHOLAS ALEXANDER LOMELI WILLIAM JAMES DUKES
NATURE OF THE CASE: CIVIL - STATE BOARDS AND AGENCIES DISPOSITION: REVERSED AND REMANDED - 08/18/2026 MOTION FOR REHEARING FILED:
EN BANC.
LAWRENCE, J., FOR THE COURT:
¶1. This appeal by ABG Contractors Inc. (ABG) concerns an audit assessment by the Mississippi Department of Revenue (MDOR) resulting in ABG owing $220,362.00 in unpaid sales taxes. ABG ultimately appealed the MDOR Board of Tax Appeals’ decision to chancery court, arguing that MDOR (1) improperly included income from other businesses in the audit; (2) improperly considered shareholder contributions as income; (3) arbitrarily and capriciously applied a tax rate of 7% instead of 3.5%; (4) arbitrarily and capriciously applied a 1% city tax to a percentage of the income; and (5) improperly applied penalties and
2
interest to the amount owed. After holding a hearing, the Hinds County Chancery Court granted summary judgment in favor of MDOR on all issues, and ABG appealed. This Court finds that ABG has presented sufficient evidence to create a genuine issue of material fact on one or more of the issues raised, and a trial on the merits should have occurred. We reverse the order granting summary judgment and remand this case to the chancery court for a trial on the merits.
FACTS AND PROCEDURAL HISTORY ¶2. ABG is a construction company located in Jackson and owned by John K. Hunter. Hunter also owns Tri County Contractors Inc.; Tri County Contractors International LLC; Take Care Pharmacy Inc.; Hunter Asset Holdings LLC; and Hunter Asset Management LLC. ABG is taxed as an S-corporation and “typically operates as a subcontractor.” ¶3. On September 10, 2020, MDOR issued a notice to ABG that it would be performing a sales tax audit for the periods of January 2017 through September 10, 2020.1 ABG provided the auditor with “monthly bank statements for six bank accounts, a few invoices for jobs that [ABG] had MPC[2] numbers for, and an excel [spreadsheet] that resembled a ‘checkbook.’” The auditor determined that she was not receiving the full information and
1 The audit notice requested corporate and franchise tax records starting on January 1, 2017, and sales tax and withholding tax records starting in August 2017. The Mississippi Board of Tax Appeals found that the sales tax audit was for a period of “August 1, 2017 through July 31, 2020.” Regardless, this fact is not disputed.
2 An “MPC” is a Material Purchase Certificate created by Mississippi Code Annotated section 27-65-21 (Rev. 2024). Any person who meets certain tax qualifications enumerated in section 27-65-21 can use the MPC “to purchase materials and services that are to become a component part of the structure to be erected or repaired with no tax due.”
3
documentation from the business owner, so she decided to “base the audit off of the bank statements.” She “scheduled all bank statements[,]” estimated numbers for the months and years not received, and credited ABG for jobs connected with an MPC by taxing those sales at a 3.5% tax rate. Further, the auditor stated that “[b]ecause the business is in Jackson and I have no records to prove otherwise, I assume the taxpayer does have some jobs that are performed in Jackson which should be charged the extra 1% special city tax.” The auditor proceeded to apply an extra 1% tax to “[a] percentage” of the sales. MDOR assessed $249,508.00 against ABG. ¶4. ABG appealed to MDOR’s Board of Review, arguing, among many things, that the cash flow method used by the auditor overstated the income, and ABG challenged the 7% tax rate used for the assessment. ABG provided additional records that “showed more receipts from jobs subject to contractor’s tax as opposed to 7% tax, and the audit was adjusted accordingly.” The Board of Review reduced the assessment to $220,362.00. ¶5. ABG appealed the Board of Review’s decision to the Mississippi Board of Tax Appeals (BTA). The BTA reviewed ABG’s claims that
i) the cash flow method used by the Department to determine sales tax improperly included business income from Mr. Hunter’s other business entities; ii) the audit did not account for significant shareholder contributions;
iii) the audit taxed unidentified construction income at 7% rather than the 3.5% contractor’s tax; and iv) a lesser amount of sales should have been subject to the 1% special city tax rate for the city of Jackson.
The BTA ruled for MDOR on all issues, including the imposition of penalties and interest to the assessment. ¶6. Aggrieved, ABG appealed to the Hinds County Chancery Court on September 18,
4
2023. ABG raised the same issues as those reviewed by the BTA and requested the chancellor deem the sales tax assessment “inaccurate and invalid.” ¶7. On May 22, 2024, ABG filed a motion for partial summary judgment, arguing that MDOR erred by including “certain nontaxable deposits of other business entities in its sales tax audit” and that the imposition of penalties and interest to the assessment were arbitrary and capricious. ABG attached discovery documents and a sworn affidavit of Hunter stating that MDOR had audited both his personal tax records and ABG’s records.3 Hunter stated that MDOR had “improperly included business income of some of [his] other business entities in its sales tax audit of ABG[.]” Attached to the affidavit was documentation for each of the other businesses Hunter owned, which Hunter stated was “a sampling” of the documentation provided to MDOR to prove that his companies were separate entities. The documents included various filings with the Mississippi Secretary of State, filings with the Internal Revenue Service (IRS), and bank statements. ¶8. On May 24, 2024, MDOR filed a motion for summary judgment, arguing that its assessment was “prima facie correct as a matter of law under Miss. Code Ann. § 27-65- 37(1).” The motion argued that ABG had no evidence to dispute the audit specifically and that ABG could not overcome the presumption of correctness that attached to the assessment. On June 12, 2024, ABG filed a response to MDOR’s motion and attached hundreds of pages of documentation. ABG included multiple MPCs, over two hundred pages from its general ledger, invoices, and other contracts.
3 The record evidenced that the “individual income tax assessment” against Hunter was “abated in full” and “is not at issue in this pending appeal.”
5
¶9. On February 20, 2025, the chancellor entered an order denying ABG’s motion for partial summary judgment and granting summary judgment in favor of MDOR on all five issues. The chancellor found that ABG “failed to provide MDOR documentation showing that any of the pertinent deposits included in the MDOR’s analysis were anything other than income for ABG.” Further, the chancellor determined that ABG had failed to overcome a presumption of correctness that attached to the assessment due to ABG’s failure to maintain “adequate records[.]” Regarding the application of the 7% sales tax rate and the 1% special tax for the City of Jackson, the chancellor stated that ABG had failed to provide sufficient documentation to change MDOR’s assessment. The chancellor affirmed the order of the BTA and dismissed ABG’s cause with prejudice. On Monday, March 24, 2025, ABG appealed.
ISSUES PRESENTED
¶10. This Court will review the following issues raised by ABG:
I. Whether MDOR improperly attributed business income from Hunter’s other business entities as income for ABG.
II. Whether MDOR improperly included Hunter’s shareholder contributions as income for ABG.
III. Whether MDOR improperly applied a 1% special tax to an estimated amount of sales.
STANDARD OF REVIEW
¶11. The Court’s “standard of review of a tax appeal is de novo.” Toolpushers Supply Co. v. Miss. Dep’t of Revenue, 379 So. 3d 333, 335 (¶9) (Miss. 2024). “This Court reviews ‘questions of law de novo.’” HWCC-Tunica Inc. v. Miss. Dep’t of Revenue, 296 So. 3d 668
6
(¶14) (Miss. 2020) (quoting Campbell Props. Inc. v. Cook, 258 So. 3d 273, 275 (¶9) (Miss. 2018)). ¶12. Further, this Court employs a de novo standard of review for the grant or denial of a motion for summary judgment. White v. Targa Downstream LLC, 358 So. 3d 627, 632 (¶11) (Miss. 2023) (quoting State ex rel. Watson v. Long Beach Harbor Resort LLC, 346 So. 3d 406, 409-10 (¶16) (Miss. 2022)). “Summary judgment ‘shall’ be granted ‘if the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” Aceil v. Alcorn St. Univ., 418 So. 3d 589, 595 (¶22) (Miss. Ct. App. 2025) (quoting M.R.C.P. 56(c)). “The non-moving party ‘should be given the benefit of every reasonable doubt,’ and ‘[i]n any case where doubt exists as to whether there is a genuine issue of material fact, the trial judge should err on the side of denying the motion and permitting a full trial[.]’” Id. (first alteration in original) (quoting Renner v. Retzer Res. Inc., 236 So. 3d 810, 815 (¶21) (Miss. 2017)).
ANALYSIS
¶13. Pursuant to Mississippi Code Annotated section 27-65-43 (Rev. 2024), “[i]t shall be the duty of every person taxable under this chapter to keep and preserve for a period of three (3) years adequate records of the gross income, gross receipts or gross proceeds of sales of the business[,]” and “such . . . records shall be open for examination, at any time, by the commissioner or his duly authorized agent.” Pursuant to Mississippi Code Annotated section 27-65-37(1) (Rev. 2024),
7
[i]f adequate records of the gross income or gross proceeds of sales are not maintained or invoices preserved as provided herein, or if an audit of the records of a taxpayer, or any return filed by him, or any other information discloses that taxes are due and unpaid, the commissioner shall make assessments of taxes, damages, and interest from any information available, which shall be prima facie correct.
(Emphasis added). When a taxpayer fails to keep adequate records, “a presumption that the Commission’s assessments are prima facie correct arises.” United Roofing & Construction of MS Inc. v. Miss. Dep’t of Revenue, 319 So. 3d 1164, 1173 (¶24) (Miss. Ct. App. 2020) (citing Marx v. Bounds, 528 So. 2d 822, 825-26 (Miss. 1988)). The Legislature intended the presumption of correctness to be rebuttable, “as evidenced by use of the words prima facie” in section 27-65-37(1).4 Marx, 528 So. 2d at 826. “The question in this case, as in other tax cases, is what data it takes to rebut that burden.” Jackson Land Food Mart Inc. v. Frierson, 314 So. 3d 146, 151 (¶29) (Miss. Ct. App. 2021). Certainly, “a taxpayer must do something more than merely disputing the auditor’s conclusions,” and “general allegations or denials are not enough to shift the burden.” Id. at 152 (¶36) (citing Marx, 528 So. 2d at 826-27). ¶14. ABG’s evidence, however, must also be viewed in the light most favorable to ABG, the non-moving party, as this is required for a motion for summary judgment. Aceil, 418 So. 3d at 595 (¶22) (quoting Karpinsky v. Am. Nat’l Ins. Co., 109 So. 3d 84, 88 (¶9) (Miss. 2013)). MDOR raised five issues in its motion for summary judgment that addressed each
4 The dissent argues the majority asserts that the presumption of correctness “shall be prima facie correct except at the summary judgment phase.” The dissent implies that the majority opinion includes such a sentence when it placed that language in direct quotes. To be clear, that alleged direct quoted sentence by the dissent is nowhere in the majority. The majority holds that there were genuine issues of material fact, and like every other Rule 56 motion for summary judgment, when that is the case, a trial should occur, not a summary dismissal. The rules apply to the government like everybody else.
8
of the five issues ABG alleged were errors with the audit. ABG admitted on appeal that it owes sales tax, but contended that “the evidence clearly establishes that the Taxpayer only owes $22,833.” Taking the evidence in the light most favorable to ABG but keeping in mind that the burden is on ABG to rebut the presumption of correctness, this Court finds that ABG met its burden and showed genuine issues of material fact as to the issues that this Court has reviewed on appeal.5 For the reasons that are set forth below, this Court reverses the chancellor’s grant of summary judgment and remands the case to the chancery court for a trial of the issues.
I. Whether MDOR improperly attributed business income from Hunter’s other business entities as income for ABG.
¶15. ABG argued that income from Hunter’s other businesses were improperly attributed to ABG’s tax liability. ABG based its argument on the documentation it produced, such as “bank statements from each of his six separate business entities” and the “filings with the
5 The dissent incorrectly suggests that this majority opinion does not apply the presumption of correctness to this case. We recognize the presumption and plainly state that it applies. To be sure, the statutory presumption applies at the summary judgment phase, and the “presumption is sufficient to satisfy the MDOR’s burden for purposes of summary judgment unless overcome by the taxpayer.” Rawan Hayaf LLP v. Frierson, 323 So. 3d 555, 563 (¶17) (Miss. Ct. App. 2021) (citing United Roofing, 319 So. 3d at 1172-74 (¶¶25-29)). Consistent with Rawan, however, ABG responded to MDOR’s motion for summary judgment and produced evidence to overcome the presumption by showing that there were genuine issues of material fact. The dissent would find that the presumption of correctness can only be rebutted at trial, but a taxpayer would never reach a trial under the dissent’s logic if the presumption always satisfies the summary judgment standard. That is wrong. As noted, the presumption is rebuttable. Marx, 528 So. 2d at 826. Our majority does not ignore a statutory presumption or undo years of legislative enactments. Instead, following de novo appellate review of the grant of summary judgment, this Court finds genuine issues of material fact exist which merit a trial.
9
Mississippi Secretary of State and IRS CP 575 G notices issued by the” IRS.6 ABG admitted that “mere filing of articles of incorporation is insufficient to establish the existence of a separate corporate entity for tax purposes,” but argued the fact that Hunter kept separate bank accounts and books for each of the business is sufficient to demonstrate that each business is distinct. ABG relies on a statement from Murdock Acceptance Corp. v. Adcox, 245 Miss. 151, 163, 138 So. 2d 890, 895-96 (1962), that “[o]rdinarily two or more corporations are separate and distinct entities although the same individuals are the incorporators of, or own stock in, the several corporations and although such corporations may have the same persons as officers.” Id. (citing 18 C.J.S. Corporations § 5j, at 374; Adler v. Interstate Truck and Banking Co., 166 Miss. 215, 146 So. 107 (1933)). ABG presented the following evidence for each business. ¶16. As to Hunter Asset Holdings LLC, ABG produced a BankPlus bank statement for January 2018 that showed a “Deposit” of $500 that was credited to the account on January 23. It also produced a letter from the IRS, known as a “CP 575 G” notice, to Hunter Asset Holdings LLC that assigned the company an EIN. Finally, a page titled “Mississippi Limited Liability Company Certification of Formation” from the Mississippi Secretary of State was included that showed Hunter Asset Holdings LLC was registered as a limited liability company on January 28, 2015. ¶17. For Hunter Asset Management LLC, a similar BankPlus bank statement was produced. The bank statement had a different account number and was for April 2018. It
6 The record evidences that the “IRS CP 575 G notices” are letters from the IRS that assign employer identification numbers (EINs) to the businesses.
10
showed two transactions for April 24: a deposit of $300 credited to the account and a “.00” charge for “dormant activation.” An IRS “CP 575 G” notice was also produced showing that Hunter Asset Management had been assigned an EIN on January 28, 2015. Additionally, a page from the Secretary of State was produced showing Hunter Asset Management was registered as a limited liability company on January 28, 2015. ¶18. As for Take Care Pharmacy, ABG produced a “CP 575 A” notice from the IRS showing that Take Care Pharmacy had been assigned an EIN but that additional forms were needed by “4/15/2018.” The notice was dated March 21, 2017. A BankPlus account statement for December 2019 showed multiple transactions with descriptions for the transactions listed to many different businesses. An invoice dated January 30, 2019, from “PBA Health” (a “Pharmacy Buying Association”) was introduced showing that Take Care Pharmacy had purchased “non-controlled substances” like Dulcolax, Tenoretic, and Zovirax. ¶19. For Tri County Contractors Inc., ABG produced a BankPlus statement from May 2018 showing ATM withdrawals along with other charges and a $7,750.00 credit noted on the statement as a “deposit.” An invoice, dated August 21, 2018, from Prassel Lumber Company Inc. was introduced showing the purchase of different wood and construction materials. Additionally, a letter from the IRS to Tri County Contractors Inc., dated August 30, 2021, was introduced that showed the company had been assigned an EIN. ¶20. Lastly, for Tri County Contractors International LLC, ABG introduced a BankPlus bank statement for January 2018 that showed multiple transactions, both debits and credits, over the span of that month. A letter from the IRS dated January 29, 2015, assigned Tri
11
County Contractors International LLC an EIN and requested additional forms. A certificate from the Secretary of State was produced showing that Tri County Contractors International had been registered as a limited liability company on January 28, 2015. ¶21. MDOR argued that “ABG has not included any documentation which shows that any deposit into any of these accounts includes income from other business entities, or that any such income was improperly included in the audit.” MDOR relies on the following statement from the United States Court of Appeals for the Fifth Circuit in Gunkle v. Commissioner of Internal Revenue, 753 F.3d 502 (5th Cir. 2014):
[T]he Commissioner may use indirect methods to reconstruct the income of a taxpayer who fails to maintain or produce records adequate to allow his correct tax liability to be determined. One common method of such reconstruction involves analyzing bank deposits. Such reconstruction assumes that, except for funds from nontaxable sources, money deposited into the taxpayer’s bank account constitutes taxable income: The taxpayer has the burden of proving otherwise. This rule covers deposits into bank accounts over which the taxpayer has dominion and control and is not limited to deposits made to the taxpayer’s personal account.
Id. at 508 (citations omitted). ¶22. MDOR argued that similar to Gunkle, “the auditor in the present case used a cash flow analysis of bank records to determine the sales made by ABG and the amount of tax owed.” MDOR did not deny that it used income from bank statements for companies other than ABG to calculate taxable income for ABG.7 Instead, MDOR maintained that it was correct in
7 ABG argued in its reply brief that MDOR only had the other business bank account statements because the other entities, in addition to Hunter, were audited. ABG argued that Hunter “provided MDOR with bank statements for all his business entities[,]” and then MDOR “arbitrarily decided to include all of the bank accounts in its cash flow analysis of ABG.” The chancellor did not rule on this allegation, but the record before this Court contains audit notices for Take Care Pharmacy Inc, Tri County Contractors Inc., and Tri
12
attributing other business income to ABG because Hunter “repeatedly failed to provide any source documentation which would prove that the deposits included as income in the audit were anything other than income for ABG.” ABG, on the other hand, provided evidence that it claimed proved the income of the other businesses was not ABG’s income. ABG claimed separate bank accounts, separate tax identification numbers, and deposit information statements all successfully rebutted the presumption of correctness and proved the businesses were separate and distinct entities, contrary to MDOR’s assertion. ¶23. While we cannot decide as a matter of law that ABG has proved that the other entities’ income should not be attributed to ABG’s income, it is clear that ABG at least created a genuine issue of material fact as to whether those businesses were separate and distinct. This Court will not disregard principles of Mississippi caselaw that would suppose that the entities are separate and distinct, merely because MDOR recommended otherwise. See Murdock, 245 Miss. at 163, 138 So. 2d at 895-96; Johnson & Higgins of Miss. Inc. v. Commn’r of Ins. of Miss., 321 So. 2d 281, 285 (Miss. 1975). While we follow the direction of the Legislature by applying the statutory presumption of correctness, we also must not ignore caselaw. Instead, the statutory presumption is rebutted by the application of our caselaw to the evidence presented by ABG. Under the summary judgment standard, viewing the evidence in the light most favorable to ABG, a genuine issue of material fact exists as to whether the businesses are separate and distinct. The grant of summary judgment is reversed and the case is remanded for a trial.
County Contractors International.
13
¶24. Summary judgment should not be granted if genuine issues of material fact exist. M.R.C.P. 56(c). The trial court cannot try issues of fact when determining if summary judgment is appropriate, instead, the court must decide only whether genuine issues of material fact exist. Waggoner v. Williamson, 8 So. 3d 147, 153 (¶13) (Miss. 2009) (citing Pollard v. Sherwin-Williams Co., 955 So. 2d 764, 769 (¶13) (Miss. 2007)). Despite finding that a genuine issue of material fact exists, where summary judgment is reversed and the case is “remanded for a trial on all issues,” a party may still seek relief for other remaining claims in the complaint. Town Creek Master Water Mgmt. Dist. v. Webb, 93 So. 3d 20, 26 (¶12) (Miss. 2012). Accordingly, this Court will address ABG’s other arguments. See Waggoner, 8 So. 3d at 153-57 (¶¶11-21); Duckworth v. Warren, 10 So. 3d 433, 439 (¶16) (Miss. 2009).
II. Whether MDOR improperly included Hunter’s shareholder contributions as income for ABG.
¶25. ABG argued, and MDOR did not disagree, that shareholder contributions are presently not subject to sales tax. However, MDOR contended that ABG has failed to introduce any personal bank statements from Hunter showing that the deposits were truly shareholder contributions. ABG stated that it produced “general ledger records that explicitly state the transfer of shareholder contributions by Mr. Hunter to the taxpayer.” ¶26. MDOR argued that this case is similar to Parrott v. Frierson, 426 So. 3d 326, 336 (¶34) (Miss. Ct. App. 2025), where the taxpayer argued that MDOR had “improperly included certain non-business income in its sales tax assessment.” The taxpayer stated that the non-business income was from his emergency cash fund and credit-card advances. Id. However, the taxpayer “provided no documentation to corroborate his testimony about the
14
source of the cash he was depositing into his business account.” Id. ¶27. Similar to Parrott, ABG has failed to provide source documentation showing where the shareholder deposits originated from. All the evidence reveals is an entry in the general ledger that describes the deposit as a “shareholder contribution.” However, Parrott noted that the taxpayer was depositing cash into the business account and “the personal cash deposits could not be differentiated from the sales deposits.” Id. In this case, the general ledger indicates the nature of the deposit and the deposits are clearly distinguishable in the general ledger from other deposits. ¶28. ABG contended that MDOR failed to follow its statutory guidelines for making an assessment with “any information available” because it refused to accept the information in the general ledger. See Miss. Code Ann. § 27-65-37(1). MDOR refused to accept the notations in the ledger that clearly marked certain deposits as shareholder contributions, claiming they were not shareholder contributions. Accordingly, MDOR assessed a sales tax on those deposits. ABG argued that the ledger proves certain deposits into the ABG business account were shareholder contributions and should not have been assessed a sales tax pursuant to Mississippi law. A genuine issue of material fact exists as to whether the deposits were shareholder contributions or taxable income. A trial on the merits will allow the authenticity and reliability of the general ledger to be litigated and factually resolved.
III. Whether MDOR improperly applied a 1% special tax to an estimated amount of sales.
¶29. ABG argued that MDOR, again, acted “arbitrarily and capriciously” by assuming “an arbitrary percentage of the Taxpayer’s sales were subject to the special city tax of Jackson,
15
Mississippi.” ABG argued that under Castigliola v. Mississippi Department of Revenue, 162 So. 3d 795 (Miss. 2015), MDOR carried the burden to establish that ABG’s taxable income should be subject to the 1% tax rate. ABG cites directly from Castigliola: “MDOR carries the burden to show, as a threshold matter, that a particular taxing power applies to a particular transaction.” Id. at 797 (¶2). Castigliola clarified that “it is clear that MDOR carries the burden to establish that a particular transaction falls within its statutory power to tax.” Id. at 799 (¶14). ¶30. Pursuant to Mississippi Code Annotated section 27-65-241 (Rev. 2024), a municipality “with a population of one hundred fifty thousand (150,000) or more” may assess a “special sales tax at the rate of not more than one percent (1%) of the gross proceeds of sales or gross income of the business, as the case may be, derived from any of the activities taxed at the rate of seven percent (7%) or more.” Miss. Code Ann. § 27-65-241(1)(b) & (2)(a). ¶31. MDOR assessed the 1% tax by reasoning that if ABG is a construction company based in Jackson, then it is reasonable to assume that a portion of ABG’s income is subject to the City of Jackson’s special tax. MDOR defended its assessment by stating that ABG has not produced “complete records to specifically identify whether or not jobs were performed in Jackson.” MDOR contended that ABG only has “bare allegations,” which do not overcome the presumption of correctness. Similarly, the BTA stated that ABG “provided no documentation to support these jobs, such as contracts or invoices.” Additionally, the chancellor found that ABG had not provided “sufficient documentation to exclude any jobs
16
from the 1% City of Jackson special tax.” ¶32. ABG contended on appeal that any jobs performed in Jackson were “either exempt or taxable at the 3.5% contractor’s tax rate, and thus not subject to the 1% special city tax.” However, the BTA final order evidences that ABG “identified in a schedule a small number of sales by name and compensation received and asserted that it owed . . . $405.68 in special city tax for year 2019.” Neither ABG nor MDOR clarified this point for the Court. ¶33. ABG produced MPCs for multiple projects – a church in Rankin County, a building in Lamar County, and two projects for the City of Durant. Further, there are invoices and contracts for projects in Brandon, Mississippi; Mundelein, Illinois; Hattiesburg, Mississippi; Florida; and Crystal Springs, Mississippi. ABG did produce documents relating to projects in Jackson, Mississippi. However, these documents do not reveal the nature of the project and whether they would be subject to the special city tax. ¶34. This Court finds that the summary judgment evidence produced by ABG supports its argument that the majority of ABG’s jobs were either exempt from the city tax or not subject to the 1% tax. There are genuine issues of material fact present as to whether MDOR correctly applied the special city tax to a random amount of ABG’s income. MDOR has not presented any evidence to support its application of the special tax other than its assessment, which merely bases the tax on ABG’s location. ABG, however, has successfully shown that a portion of its projects are outside Jackson. Accordingly, this Court finds that MDOR has arbitrarily imposed additional taxes without providing an evidentiary foundation. See Castigliola, 162 So. 3d at 799 (¶14) (“MDOR carries the burden to establish that a particular
17
transaction falls within its statutory power to tax.” (citing Stone v. Rogers, 186 Miss. 53, 189 So. 810, 812 (1939))). “Further, ‘[i]t is a well-established rule that a taxing statute must be strictly construed against the taxing power and in favor of the taxpayer, and all doubts as to whether or not a tax has been imposed must be resolved in favor of the taxpayer.” Miss. Dep’t of Revenue v. EKB Inc., 348 So. 3d 968, 970 (¶12) (Miss. 2022). The chancellor’s ruling on this issue is reversed, and the case is remanded for a trial on the merits. ¶35. The dissent argues that remanding this case for a trial is an “intrusion by this Court into the legislature’s control of tax and tax collection.” This Court does not intrude anywhere that the Rules of Civil Procedure and Rules of Evidence do not require us to go. A taxpayer in a dispute with the government should be afforded a trial like everyone else when there are genuine issues of material fact precluding summary judgment. This Court offers no new taxes, abolishes no taxes owed, nor alters the presumption of correctness enacted by the government to benefit the government. This ruling only handles the issue before it. Since genuine issues of material fact as to taxes owed appear, the citizen should get a trial on those issues, and both the government and the citizen can put forth their proof and reach a conclusion after a fair trial to determine the truth.
CONCLUSION
¶36. This Court concludes that the chancellor erred by granting summary judgment in favor of MDOR, as genuine issues of material fact exist on issues presented by the parties. The other issues the parties raised but are not addressed in this opinion should be considered on remand during a trial on the merits as well. The chancery court’s order is reversed, and the
18
case is remanded for a trial on all issues presented to the chancery court. ¶37. REVERSED AND REMANDED.
BARNES, C.J., CARLTON, P.J., WESTBROOKS, EMFINGER, WEDDLE AND LASSITTER ST. PÉ, JJ., CONCUR. WILSON, P.J., CONCURS IN RESULT ONLY WITHOUT SEPARATE WRITTEN OPINION. McDONALD, J., CONCURS IN PART AND DISSENTS IN PART WITHOUT SEPARATE WRITTEN OPINION. McCARTY, J., DISSENTS WITH SEPARATE WRITTEN OPINION, JOINED IN PART BY McDONALD, J.
McCARTY, J., DISSENTING:
¶38. In giving the delinquent taxpayer a bench trial, the majority ignores the plain language of a near century-old legislative mandate, plus years of precedent from the Supreme Court and this Court, and wastes judicial resources. Because the majority refuses to apply a statutory mandate which applies during all phases of a tax dispute, I respectfully dissent. ¶39. This case is not difficult, as it essentially involves one statute. “In Mississippi, sales tax is a privilege tax—one that grants the payor ‘the privilege of engaging or continuing in business or doing business within this state.’” Jackson Land Food Mart Inc. v. Frierson, 314 So. 3d 146, 151 (¶24) (Miss. Ct. App. 2021) (quoting Miss. Code Ann. § 27-65-13 (Rev. 2017)). “A crucial part of the sales tax system is that taxpayers are required to keep records.” Id. (¶25) (Miss. Ct. App. 2021). ¶40. This law provides that:
If adequate records of the gross income or gross proceeds of sales are not maintained or invoices preserved as provided herein, or if an audit of the records of a taxpayer, or any return filed by him, or any other information discloses that taxes are due and unpaid, the commissioner shall make assessments of taxes, damages, and interest from any information available, which shall be prima facie correct.
19
Miss. Code Ann. § 27-65-37(1) (emphasis added). “The Legislature’s statutory use of the term ‘shall’ connotes a mandatory requirement.” Tallahatchie Gen. Hosp. v. Howe, 49 So. 3d 86, 92 (¶17) (Miss. 2010) (citing Weiner v. Meredith, 943 So. 2d 692, 694 (¶8) (Miss. 2006)). In other words, if you fail to keep adequate records, the tax commission is required by law to calculate its own number, and that number must be considered correct. ¶41. “[I]t is well established that the auditor’s ‘assessment of taxes invokes a statutory presumption of correctness.’” Jackson Land Food Mart, 314 So. 3d at 151 (¶29) (emphasis added) (quoting United Roofing & Constr. of MS Inc. v. Dep’t of Revenue, 319 So. 3d 1164, 1172 (¶25) (Miss. Ct. App. 2020)). “Once the auditor’s assessment is made and the presumption of prima facie correctness attaches, ‘the taxpayer bears the burden of proof showing that a genuine dispute exists regarding the correctness of the assessment.’” Id. at (¶28) (quoting United Roofing, 319 So. 3d at 1173 (¶25)). ¶42. This presumption is not a new concept in a new statute. It has been on the books since 1932, when our Legislature first determined that the tax commissioner could calculate the unpaid taxes “and such . . . shall be prima facie correct for the purposes of this act[.]” Miss. Laws 1932, ch. 90, § 8. ¶43. Nor is it unusual for it to be applied at summary judgment. As we have concluded time and again, this “presumption is sufficient to satisfy the MDOR’s burden for purposes of summary judgment unless overcome by the taxpayer.” Rawan Hayaf LLP v. Frierson, 323 So. 3d 555, 563 (¶17) (Miss. Ct. App. 2021) (citing United Roofing, 319 So. 3d at 1172-74 (¶¶25-29)).
20
¶44. Indeed, we rejected the same conclusory argument about summary judgment in United Roofing that ABG makes today.
United incorrectly contends that due to this presumption, summary judgment in favor of MDOR is impossible. United argues MDOR cannot meet the burden of proving there is no genuine issue of material fact because the presumption itself creates a genuine issue of material fact; that is, there is an absence of direct proof and thus a factual dispute. United also claims any judgment as a matter of law “is nullified” because the presumption must be evaluated at trial, not at the summary judgment stage. Further, United claims MDOR did not meet its burden of persuasion because the presumption would have been enacted at trial.
United Roofing, 319 So. 3d at 1173 (¶26). But we concluded that “United confuses the burden of persuasion for summary judgment and the burden of persuasion at trial.” Id. at (¶28). “MDOR bore the initial burden of persuasion for summary judgment.” Id. “Once satisfied, the burden shifted to United to ‘produce significant probative evidence’ of a genuine issue for trial.” Id. United could not do that, because it did not keep adequate records, and the statutory presumption worked against it. Id. ¶45. In this case, ABG does not dispute that it was engaged in providing construction services during the audit period. Based upon statutory law, “because [ABG] was admittedly engaged in a taxable business, it had a duty to keep adequate records of its gross income from taxable [construction] services.” Back Bay Lawnscapes LLC v. Graham, 420 So. 3d 949, 957 (¶20) (Miss. Ct. App. 2025) (citing Miss. Code Ann. § 27-65-42(4); Miss. Code Ann. § 27- 65-43). ¶46. ABG argues that it “did meet the record-keeping requirements imposed under Miss. Code Ann. §27-65-43[.]” ABG claims that it “produced bank statements, vendor invoices,
21
customer invoices, and general ledger accounting data,” and “other documentation . . . including contract agreements, MPC certificates, and State filings[.]” According to ABG, “[a]ll these documents were adequate to accurately calculate the Taxpayer’s tax liability[.]” ¶47. While ABG may have furnished some tax calculations, “this information did not adequately show the amount of gross income [ABG] earned from taxable [construction] services—which is the crux of the sales tax dispute here.” Back Bay, 420 So. 3d at 958 (¶22). ¶48. There are several flaws with the majority’s opinion. The first is that it refuses to apply Section 27-65-37 during litigation. While the statute says the DOR’s calculation “shall be prima facie correct,” the majority rewrites the law to say “shall be prima facie correct except at the summary judgment phase.” Of course, the Legislature did not write that, and certainly did not write it in 1932 when the law was originally drafted. The majority has simply decided not to apply the statutory presumption at summary judgment—despite both United Roofing and Rawan Hayaf applying it in just that way. ¶49. The second is the intrusion by this Court into the Legislature’s control of tax and tax collection. Indeed “The Mississippi Department of Revenue is granted by the Legislature ‘the power to adopt, amend or repeal’ tax regulations.” Mississippi Hub LLC v. Baldwin, 358 So. 3d 305, 315 (¶31) (Miss. 2023) (citing Miss. Code Ann. § 27-35-50(6) (Rev. 2017)). This is not our role, but has been invested in that body. And it is not our prerogative to re- interpret this clear law or usurp such power. ¶50. Last, in disregarding our precedent that the presumption applies at summary judgment,
22
the majority also squanders scarce judicial resources. Indeed, the whole purpose of summary judgment is to efficiently resolve cases or issues without the need for a full trial when there is no genuine dispute over material facts. Here, summary judgment would serve as a useful tool to conserve not only the resources of the trial court, but also the DOR and the taxpayer. ¶51. Ultimately, there is no way ABG can prevail at trial before the chancery court. While the majority incorrectly allows it to limp past the summary judgment stage, ABG cannot win at trial due to the statutory presumption. It would be a waste of judicial resources for us to remand after a grant of summary judgment, only to have the chancery court once again find that the statutory presumption means that DOR will prevail. ¶52. Because the majority impedes on the power of the Legislature over the tax code, and fails to follow statutory law and Court precedent requiring the application of the tax code during summary judgment in litigation, ultimately resulting in the waste of judicial resources, I respectfully dissent.
McDONALD, J., JOINS THIS OPINION IN PART.