'. . . , .
STATE OF MAINE SUPERIOR COURT CUMBERLAND, ss Civil Action Docket No. AP-07-026 /I'"- -, J I , ",
SCARBRORO MUFFLER CENTER, INC.,
Plaintiff / Petitioner
v. DECISION AND JUDGMENT
STATE OF MAINE, TAX ASSESSOR
Defendant / Respondent
I. BEFORE THE COURT
This matter comes before the court on the State Tax Assessor's motion for
summary judgment and the cross-motion for summary judgment by the petitioner,
Scarboro Muffler center, Inc.
II. PROCEDURAL HISTORY AND BACKGROUND
Scarboro Muffler Center, Inc. (SMC) brought this petition for a review of an
assessment for State of Maine use tax for the years 2003 to 2006 on a 2003 50th
Anniversary Limited Edition Chevrolet Corvette (the Vehicle).
SMC is an automobile repair center and automobile dealer in Scarborough,
Maine. SMC was and is currently licensed by the State to sell new or used vehicles.
In July 2003, SMC purchased the Corvette as a new vehicle from Pape Chevrolet
for $50,000. SMC paid no sales taxes on the transaction based on certification that the
Vehicle was being purchased for resale. When SMC purchased the Vehicle its odometer
reflected only 17 miles. During the three years that SMC owned the Vehicle, the Vehicle was operated
with an affixed dealer plate. Although SMC's President, Randy P. Sargent's (Sargent),
did not display a "for sale" sign on the Vehicle, there was a used vehicle disclosure
notice on or in the Vehicle at all times. The Vehicle was kept at various locations,
including SMC's business location, Sargent's horne located approximately 3 1;2 miles
from SMC, and the garage of an acquaintance of Sargent, located in Scarborough,
Maine. Sargent sometimes drove the Vehicle to and from work, and on one occasion he
took the Vehicle to car show in Buxton, Maine.
In June 2006, SMC sold the Vehicle to James and Judi Czimbal for $41,500, after
having advertised the Vehicle's sale in the Portland Press Herald. 1 Prior to
consummating the sale, SMC permitted James Czimbal to test drive the Vehicle for
approximately ten miles. This was the one and only time that any person took the
Vehicle for a test drive. At the time of sale the Vehicle's odometer reflected 6,700 miles.
Following an audit of SMC's business records, the Assessor assessed use tax,
interest, and penalties on the Vehicle, corning to a total tax of $3,935.92 due. The
assessed tax was based on the Assessor's determination that SMC withdrew the Vehicle
from inventory for SMC's and Sargent's own use. SMC timely requested
reconsideration of the assessment, which upheld the assessment in full.
SMC timely appealed the Reconsideration Decision to this court. The Assessor
filed a motion for summary judgment and SMC filed a cross-motion for summary
judgment.
1 The petitioner produced no evidence for the record of the number of times, the period of time covered or the nature or type of advertisements placed for the vehicle.
- - 2 III. DISCUSSION
A. SUMMARY JUDGMENT
1. Standard of Review
Title 36 M.R.S.A. § 151 governs judicial review of decisions by the Assessor and
"provides that the Superior Court 'shall conduct a de novo hearing and make a de novo
determination of the merits of the case.'" Foster v. State Tax Assessor, 1998 ME 205, P 7,
716 A.2d 1012, 1014; 36 M.R.S.A. § 151. Summary judgment, however, is proper where
there exist no genuine issues of material fact such that the moving party is entitled to
judgment as a matter of law. M.R. Civ. P. 56(c); see also Levine v. R.B.K. Caly Corp., 2001
ME 77, <]I 4, 770 A.2d 653, 655. A genuine issue is raised "when sufficient evidence
requires a fact-finder to choose between competing versions of the truth at trial."
Parrish v. Wright, 2003 ME 90, <]I 8, 828 A.2d 778, 781. A material fact is a fact that has
"the potential to affect the outcome of the suit." Burdzel v. Sobus, 2000 ME 84, <]I 6, 750
A.2d 573, 575. "If material facts are disputed, the dispute must be resolved through
fact-finding." Curtis v. Porter, 2001 ME 158, <]I 7, 784 A.2d 18, 22.
A party wishing to avoid summary judgment must present a prima facie case for
the claim or defense that is asserted. Reliance National Indemnity v. Knowles Industrial
Services, 2005 ME 29, <]I 9, 868 A.2d 220, 224-25. At this stage, the facts are reviewed "in
the light most favorable to the non-moving party." Lightfoot v. Sch. Admin. Dist. No. 35,
2003 ME 24, <]I 6, 816 A.2d 63, 65.
2. Sufficiency of the Evidence
A tax is imposed "on the storage, use or other consumption in this State of
tangible personal property or a service, the sale of which would be subject to tax under
section 1764 or 1811. 36 M.R.S. § 1861. When tangible personal property is withdrawn
from inventory by the retailer for the retailer's own use, use tax liability accrues as of
- - 3 the date of withdrawal. Id. Use is defined to include "the exercise in this State of any
right or power over tangible personal property incident to its ownership." 36 M.R.S. §
1752(21). The statute does not specify a minimum amount of use by the retailer that
will result in withdrawal of the property from inventory for resale. 36 M.R.S. § 1752(21);
36 M.R.S. § 1861; Maine Revenue Services Sales, Fuel & Special Tax Division
Instructional Bulletin No. 24 (Bulletin No. 24). The burden of proving that a transaction
was not taxable is on the person charged with the tax liability. 36 M.R.S. § 1763.
The Assessor published Bulletin No. 24, to provide guidance for vehicle dealers
about use tax liability on vehicles purchased for resale. Section 7(A) of Bulletin No. 24
provides that no tax is imposed on vehicles used by dealers for demonstration or
display purposes only. Section 7(£) further states that a seller who purchases "property
tax-free for resale, but subsequently withdraws the property from inventory for use
inconsistent with holding the property solely for demonstration and sale, becomes
liable for use tax on the cost of the property." The operation of a vehicle with dealer's
plates is "considered presumptive evidence of use for demonstration only." § 7(A).
The Assessor argues that the record is more than sufficient to rebut the
presumption that SMC used the Vehicle for demonstration purposes only. The
Assessor contends that in viewing all of the circumstances collectively, there are
numerous factors that support its finding that SMC removed the Vehicle from its
inventory for personal use; those factors include (1) the length of time SMC owned the
Vehicle; (2) the 6,700 miles SMC put on the Vehicle; (3) that Sargent was driving the
Vehicle for his own personal use; (4) that Sargent often stored the Vehicle outside of
SMC's business location; (5) that SMC only took the car to one car show during the
three years it had the Vehicle; (6) that SMC did not put a "for sale" sign on the Vehicle;
- - 4 and, that (7) the record fails to show any advertisement at any time that the Vehicle
was for sale.
SMC argues that the Assessor has failed to overcome the presumption, created
by § 7(A) of Bulletin No. 24, that the car was used for display and demonstration
purposes because of the affixed dealer plates. SMC contends that the Assessor relies on
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'. . . , .
STATE OF MAINE SUPERIOR COURT CUMBERLAND, ss Civil Action Docket No. AP-07-026 /I'"- -, J I , ",
SCARBRORO MUFFLER CENTER, INC.,
Plaintiff / Petitioner
v. DECISION AND JUDGMENT
STATE OF MAINE, TAX ASSESSOR
Defendant / Respondent
I. BEFORE THE COURT
This matter comes before the court on the State Tax Assessor's motion for
summary judgment and the cross-motion for summary judgment by the petitioner,
Scarboro Muffler center, Inc.
II. PROCEDURAL HISTORY AND BACKGROUND
Scarboro Muffler Center, Inc. (SMC) brought this petition for a review of an
assessment for State of Maine use tax for the years 2003 to 2006 on a 2003 50th
Anniversary Limited Edition Chevrolet Corvette (the Vehicle).
SMC is an automobile repair center and automobile dealer in Scarborough,
Maine. SMC was and is currently licensed by the State to sell new or used vehicles.
In July 2003, SMC purchased the Corvette as a new vehicle from Pape Chevrolet
for $50,000. SMC paid no sales taxes on the transaction based on certification that the
Vehicle was being purchased for resale. When SMC purchased the Vehicle its odometer
reflected only 17 miles. During the three years that SMC owned the Vehicle, the Vehicle was operated
with an affixed dealer plate. Although SMC's President, Randy P. Sargent's (Sargent),
did not display a "for sale" sign on the Vehicle, there was a used vehicle disclosure
notice on or in the Vehicle at all times. The Vehicle was kept at various locations,
including SMC's business location, Sargent's horne located approximately 3 1;2 miles
from SMC, and the garage of an acquaintance of Sargent, located in Scarborough,
Maine. Sargent sometimes drove the Vehicle to and from work, and on one occasion he
took the Vehicle to car show in Buxton, Maine.
In June 2006, SMC sold the Vehicle to James and Judi Czimbal for $41,500, after
having advertised the Vehicle's sale in the Portland Press Herald. 1 Prior to
consummating the sale, SMC permitted James Czimbal to test drive the Vehicle for
approximately ten miles. This was the one and only time that any person took the
Vehicle for a test drive. At the time of sale the Vehicle's odometer reflected 6,700 miles.
Following an audit of SMC's business records, the Assessor assessed use tax,
interest, and penalties on the Vehicle, corning to a total tax of $3,935.92 due. The
assessed tax was based on the Assessor's determination that SMC withdrew the Vehicle
from inventory for SMC's and Sargent's own use. SMC timely requested
reconsideration of the assessment, which upheld the assessment in full.
SMC timely appealed the Reconsideration Decision to this court. The Assessor
filed a motion for summary judgment and SMC filed a cross-motion for summary
judgment.
1 The petitioner produced no evidence for the record of the number of times, the period of time covered or the nature or type of advertisements placed for the vehicle.
- - 2 III. DISCUSSION
A. SUMMARY JUDGMENT
1. Standard of Review
Title 36 M.R.S.A. § 151 governs judicial review of decisions by the Assessor and
"provides that the Superior Court 'shall conduct a de novo hearing and make a de novo
determination of the merits of the case.'" Foster v. State Tax Assessor, 1998 ME 205, P 7,
716 A.2d 1012, 1014; 36 M.R.S.A. § 151. Summary judgment, however, is proper where
there exist no genuine issues of material fact such that the moving party is entitled to
judgment as a matter of law. M.R. Civ. P. 56(c); see also Levine v. R.B.K. Caly Corp., 2001
ME 77, <]I 4, 770 A.2d 653, 655. A genuine issue is raised "when sufficient evidence
requires a fact-finder to choose between competing versions of the truth at trial."
Parrish v. Wright, 2003 ME 90, <]I 8, 828 A.2d 778, 781. A material fact is a fact that has
"the potential to affect the outcome of the suit." Burdzel v. Sobus, 2000 ME 84, <]I 6, 750
A.2d 573, 575. "If material facts are disputed, the dispute must be resolved through
fact-finding." Curtis v. Porter, 2001 ME 158, <]I 7, 784 A.2d 18, 22.
A party wishing to avoid summary judgment must present a prima facie case for
the claim or defense that is asserted. Reliance National Indemnity v. Knowles Industrial
Services, 2005 ME 29, <]I 9, 868 A.2d 220, 224-25. At this stage, the facts are reviewed "in
the light most favorable to the non-moving party." Lightfoot v. Sch. Admin. Dist. No. 35,
2003 ME 24, <]I 6, 816 A.2d 63, 65.
2. Sufficiency of the Evidence
A tax is imposed "on the storage, use or other consumption in this State of
tangible personal property or a service, the sale of which would be subject to tax under
section 1764 or 1811. 36 M.R.S. § 1861. When tangible personal property is withdrawn
from inventory by the retailer for the retailer's own use, use tax liability accrues as of
- - 3 the date of withdrawal. Id. Use is defined to include "the exercise in this State of any
right or power over tangible personal property incident to its ownership." 36 M.R.S. §
1752(21). The statute does not specify a minimum amount of use by the retailer that
will result in withdrawal of the property from inventory for resale. 36 M.R.S. § 1752(21);
36 M.R.S. § 1861; Maine Revenue Services Sales, Fuel & Special Tax Division
Instructional Bulletin No. 24 (Bulletin No. 24). The burden of proving that a transaction
was not taxable is on the person charged with the tax liability. 36 M.R.S. § 1763.
The Assessor published Bulletin No. 24, to provide guidance for vehicle dealers
about use tax liability on vehicles purchased for resale. Section 7(A) of Bulletin No. 24
provides that no tax is imposed on vehicles used by dealers for demonstration or
display purposes only. Section 7(£) further states that a seller who purchases "property
tax-free for resale, but subsequently withdraws the property from inventory for use
inconsistent with holding the property solely for demonstration and sale, becomes
liable for use tax on the cost of the property." The operation of a vehicle with dealer's
plates is "considered presumptive evidence of use for demonstration only." § 7(A).
The Assessor argues that the record is more than sufficient to rebut the
presumption that SMC used the Vehicle for demonstration purposes only. The
Assessor contends that in viewing all of the circumstances collectively, there are
numerous factors that support its finding that SMC removed the Vehicle from its
inventory for personal use; those factors include (1) the length of time SMC owned the
Vehicle; (2) the 6,700 miles SMC put on the Vehicle; (3) that Sargent was driving the
Vehicle for his own personal use; (4) that Sargent often stored the Vehicle outside of
SMC's business location; (5) that SMC only took the car to one car show during the
three years it had the Vehicle; (6) that SMC did not put a "for sale" sign on the Vehicle;
- - 4 and, that (7) the record fails to show any advertisement at any time that the Vehicle
was for sale.
SMC argues that the Assessor has failed to overcome the presumption, created
by § 7(A) of Bulletin No. 24, that the car was used for display and demonstration
purposes because of the affixed dealer plates. SMC contends that the Assessor relies on
alleged facts without any standard or context to explain why those alleged facts indicate
removal of a vehicle from inventory. According to SMC, Sargent was displaying the
Vehicle for sale when he drove it around town and at all times SMC owned the car it
was trying to sell it. SMC argues that it promoted the sale of the Vehicle by advertising
the Vehicle in the newspaper, displaying the Vehicle on its lot, and operating the
Vehicle around town and to Sargent's residence. SMC also took the Vehicle to a car
show and parked it with other vehicles that were being offered for sale. SMC further
contends that it only stored the Vehicle off its business premises because Sargent was
not comfortable leaving such a valuable part of SMC's inventory in its unattended lot.
Although SMC is correct in its assertion that the dealer plates created a
presumption in its favor, this presumption is rebuttable and not conclusive.
Presumptive evidence is defined as "prima facie evidence or evidence which is not
conclusive and admits of explanation or contradiction." BLACK'S LAW DICTIONARY 1186
(6th ed. 1990). The record reflects sufficient evidence to refute the initial presumption
that the Vehicle was used exclusively for demonstration purposes, and the Assessor's
decision was reasonable.
Because this matter is considered de novo, 36 M.R.S. § lSI, the court applies the
usual rules of summary judgment rather than examining whether the Assessor's
decision is supported by the record as in the case of a Rule 80C appeal without the
statutory prescription of a de novo hearing.
- - 5 Considering all of the evidence in the light most favorable to the petitioner, the
court concludes that there is no dispute as to material facts. The respondent is entitled
to summary judgment.
B. Waiver of the Assessor's Opposition
The Assessor filed its opposition to SMC's cross-motion for summary judgment
two days after the due date pursuant to M.R. Civ. P. 7(c)(2). SMC argues that the court
should rule on SMC's cross-motion as an unopposed motion because the Assessor's
opposition was not timely filed. SMC also contends that the court should not consider
the Assessor's response to SMC's Statement of Additional Material Facts and the
Assessor's Additional Statement of Material Facts.
Whether or not to consider the late response is discretionary with the court. It is
immaterial in this case because the court is granting the Assessor's motion and makes
the petitioner's motion moot.
IV. DECISION AND JUDGMENT
The clerk will make the following entries as the Decision and Judgment of the
court:
A. The plaintiff's Motion for Summary Judgment is denied.
B. The decision of the State tax assessor is affirmed.
C. The defendant's Motion for Summary Judgment is granted and judgment is entered for defendant.
D. No costs are awarded.
SO ORDERED.
Dated: October 21, 2008
- - 6 Date Filed 05-08-07 CUMBERLAND Docket No. ---,A~P,-----,0!....!7_-..!=2",,6 _ County
Action 80C APPEAL
SCARBORO MUFFLER CENTER INC MAINE STATE TAX ASSESSOR
Ys.
Plaintiff's Attorney Defendant's Attorney JOHN J WALL III ESQ KELLY L TURNER AAG MONAGHAN LEAHY DEPARTMENT OF THE ATTORNEY GENERAL PO BOX 7046 6 STATE HOUSE STATION PORTLAND ME 04112-7046 AUGUSTA ME 04333-0006 (207) 774-3906
Date of Entry