Bridges v. Cepolk Corp.

153 So. 3d 1137, 13 La.App. 3 Cir. 1051, 2014 WL 551587, 2014 La. App. LEXIS 346
CourtLouisiana Court of Appeal
DecidedFebruary 12, 2014
DocketNo. 13-1051
StatusPublished
Cited by7 cases

This text of 153 So. 3d 1137 (Bridges v. Cepolk Corp.) is published on Counsel Stack Legal Research, covering Louisiana Court of Appeal primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Bridges v. Cepolk Corp., 153 So. 3d 1137, 13 La.App. 3 Cir. 1051, 2014 WL 551587, 2014 La. App. LEXIS 346 (La. Ct. App. 2014).

Opinion

THIBODEAUX, Chief Judge.

|,The plaintiff, Cynthia Bridges as Secretary of the Louisiana Department of Revenue (“the Department”), appeals the trial court judgment denying its motion for summary judgment, and granting the cross-motion for summary judgment filed by the defendant taxpayer, Cepolk Corporation (“Cepolk”). Finding that the Department proved that the movable items purchased by Cepolk were subject to sales and use tax, and that Cepolk did not meet its burden of proving an exemption to the taxes, we reverse the judgment in favor of Cepolk and grant summary judgment to the Department.

I.

ISSUES

We must decide whether the trial court erred:

(1) in finding that Cepolk acted as the Government’s agent in purchasing materials installed in the Fort Polk housing; and
(2) in finding that Cepolk purchased the materials for resale to the Government prior to their incorporation into the final product.

II.

FACTS AND PROCEDURAL HISTORY

Cepolk is a non-resident, Nevada corporation with contracts to modify or replace the heating, ventilation, and air conditioning (HVAC) systems at the Fort Polk family housing complex in Louisiana. Cepolk asserted that the construction phase of its work was completed in 1994 and that it continued to provide bi-annual maintenance on the water heaters, air conditioning filters, florescent lights, and ad hoc system maintenance when requested. The Department 12conducted a sales and use tax audit of Cepolk for the period of March 1, 2006, through December 31, 2008. The audit revealed that Cepolk had failed to pay the sales tax on approximately $4,000,000.00 in purchases of materials and supplies from vendors such as Lowes, The Home Depot, Sherwin-Williams, Solar Supply, Inc., and various ■ other electrical, plumbing, and heating and air conditioning supply companies.

The purchases included small and large items such as lumber, nails, miscellaneous tools, gypsum, duct tape, wire strippers, water heaters, nuts, bolts, batteries, saw kits, sinks, refrigerators, and numerous other items used by the company in fulfilling its contracts. They also included monthly rentals on equipment paid to a financial entity, as well as payments to Home Depot Credit Services.

The Department filed suit to collect $160,573.87 in tax, plus interest of $46,145.60 as of August 20, 2010, and penalties of $4,779.00, for a total of $211,498.47, plus additional interest under La.R.S. 47:1601. Cepolk asserted that it had fulfilled any tax obligations to the State and that the purchases at issue were made by Cepolk as an agent for the United States Government (“Government” or “federal Government”).

The Department filed a motion and supplemental motion for summary judgment, attaching four contracts to which Cepolk was a party, and asserting that Cepolk was not a purchasing agent for the Government and was not exempt from the tax under the applicable Louisiana statutes and jurisprudence. Cepolk filed a cross-motion for summary judgment, attaching various contracts and asserting that it was unable to obtain certain others that were incorporated by reference.

[1141]*1141lsThe motions were heard on March 4, 2013. The trial court granted summary judgment in favor of Cepolk and dismissed the Department’s suit to collect the taxes. For the reasons below, we reverse and render.

III.

STANDARD OF REVIEW

The grant or denial of a motion for summary judgment is reviewed de novo, “using the same criteria that govern the trial court’s determination of whether summary judgment is appropriate; i.e. whether there is any genuine issue of material fact, and whether the movant is entitled to judgment as a matter of law.” Samaha v. Rau 07-1726, pp. 3-4 (La.2/26/08), 977 So.2d 880, 882-83 (citations omitted); La. Code Civ.P. art. 966.

IV.

LAW AND DISCUSSION

Evidence

As a threshold matter, the contracts entered into evidence at the summary judgment hearing in March of 2013 were the exhibits of the Department, which specifically moved to have all of its exhibits admitted into evidence. Cepolk did not move to have its exhibits entered into evidence at any time during the hearing. We, therefore, cannot consider the exhibits merely attached to Cepolk’s cross-motion for summary judgment.1 Accordingly, our legal analysis will address the four contracts properly admitted into evidence, which are:

|4(1) AMENDMENT OF SOLICITATION/MODIFICATION OF CONTRACT, referred to as the “U.S. Army Contract” by the Department, and as the “ESPC” (energy savings performance contract) by Cepolk, effective May 22, 1994, between the Director of Contracting-Fort Polk, and the Co-Energy Group. It is undisputed that this contract was assigned to Cepolk. We will refer to it as the “Army Contract.”
(2) MASTER SUBCONTRACT AGREEMENT, dated July 15, 2005, between Picerne Construction/FP, LLC as Contractor and Cepolk as Subcontractor. We will refer to this contract as the “Master Subcontract I.”
(3) SUBCONTRACT, dated January 1, 2006, between Picerne Military Housing as Manager and Cepolk as Subcontractor. We will refer to it as the “Subcontract.”
(4) MASTER SUBCONTRACT AGREEMENT, dated April 24, 2008, between Picerne Construction/FP, LLC as Contractor and Cepolk as Subcontractor. We will refer to this contract as the “Master Subcontract II.”

[1142]*1142 Applicable Law

Louisiana Revised Statutes 47:302(A)2 imposes a tax upon the retail sale3 and the use,4 consumption, distribution, and storage of tangible personal | ¿property,5 unless the purchases are specifically excluded or exempt from taxation. “Exemptions from taxation are to be strictly construed against the person claiming the exemption[,] and they must be clearly and affirmatively established.” Bill Roberts, Inc. v. McNamara, 539 So.2d 1226, 1229 (La.1989). Items of tangible personal property, such as construction materials, are considered corporeal movables, as used in the Louisiana Civil Code, until they are incorporated into an immovable and become a component part of the immovable building or construction. City of New Orleans v. Baumer Foods, Inc., 532 So.2d 1381 (La.1988); See La.Civ.Code arts. 471,6 472.7

Items of tangible personal property that are purchased for resale as items of tangible personal property, for example by dealers, are not taxed upon the original purchase. See La.R.S. 47:301(10)(a)(i). However, the dealer must ultimately pay the sales tax when he resells the items. Louisiana Revised Statutes La.R.S 47:314 establishes a presumption that tangible personal property held by a dealer is to be taxed:

Failure to pay any tax due as provided in this Chapter shall ipso facto, without demand or putting in default, cause the tax, interest, penalties, and costs to become immediately delinquent, and the collector has the authority, on motion in a court of competent jurisdiction, |„to take a rule on the dealer....

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Bluebook (online)
153 So. 3d 1137, 13 La.App. 3 Cir. 1051, 2014 WL 551587, 2014 La. App. LEXIS 346, Counsel Stack Legal Research, https://law.counselstack.com/opinion/bridges-v-cepolk-corp-lactapp-2014.