NORTH CAROLINA COURT OF APPEALS
Filed: 21 February 2012
TECHNOCOM BUSINESS SYSTEMS
No. 10 CVS 004398
NORTH CAROLINA DEPARTMENT
Appeal by respondent from order entered 7 January 2011 by
Judge Ben F. Tennille in Wake County Superior Court.
the Court of Appeals 9 November 2011.
Attorney General Roy A. Cooper, by Assistant Attorney
General Tenisha S. Jacobs, for respondent-appellant.
The Wooten Law Firm, by Louis E. Wooten, and Everett
Gaskins Hancock LLP, by E.D. Gaskins, Jr., for petitionerappellee.
Where sales taxes were erroneously collected on optional
maintenance agreements and paid to the North Carolina Department
ruling of the trial court.
-2Facts and Procedural History
business of selling and leasing office equipment.
Determination was the result of an audit performed on Technocom
for the period between 1 June 2002 and 31 August 2005.
In the course of its business, Technocom purchases and uses
agreements that Technocom services the equipment that it sells
or leases to its customers.
Regarding Technocom’s tax liability
North Carolina imposes a State and local use
tax on tangible personal property purchased
inside or outside the State for storage, use
or consumption in this State. . . . Use tax
is payable by the person who purchases,
leases or rents tangible personal property
or who purchases a service.
[Technocom’s] use of parts, supplies and
maintenance agreements during the audit
period constitutes a taxable use of tangible
personal property within the meaning of N.C.
-3Gen. Stat. § 105-164.3(49)1. [Technocom] did
not pay sales tax or accrue use tax on these
items, and the Department has assessed
[Technocom] for the appropriate use tax in
its proposed assessment and this final
Between 1 June 2002 and 31 August 2005, Technocom collected
Department held that these agreements were not subject to sales
tax because they did not involve services necessary to complete
the sale of tangible personal property under N.C. Gen. Stat. §
sales and use tax liability should be offset by the sales tax it
Department stated that it could not refund or credit Technocom
pursuant to N.C. Gen. Stat. § 105-164.11(a)3 because there was no
proof Technocom had refunded its customers the sales tax it
erroneously collected on its optional maintenance agreements.
contested case hearing in the Office of Administrative Hearings
Thereafter, on 1 May 2009, Technocom also filed a
N.C.G.S. § 105-164.3(49) defines “use” under Article 5 of the
N.C.G.S. § 105-164.3(37) defines the meaning of “sales price”
under Article 5 of the general statutes.
N.C.G.S. § 105-164.11(a) is titled, “Excessive and erroneous
-4motion for partial summary judgment and the Department filed a
motion for summary judgment.
By order entered on 16 November
2009, an administrative law judge granted summary judgment in
favor of the Department and sustained the Final Determination.
The order concluded that no provision of the Revenue Act allowed
Technocom to offset its use tax liability with sales tax it
erroneously collected from its customers.
The Department, in a final agency decision, upheld the 16
November 2009 decision of the administrative law judge.
March 2010, Technocom filed a petition for judicial review of
the final agency decision in Wake County Superior Court.
Following a hearing held 10 December 2010, the superior
Determination of the Department in a 4 January 2011 order.
superior court, in pertinent part, stated:
Transactions that do not generate a windfall
and that do not result in the unfair
treatment of customers are not included in
the meaning of “exempt or nontaxable sales”
transactions at issue here are not “exempt
or nontaxable sales,” Section 105-164.11(a)
is not applicable. The general provision
contained in Section 105-164.41 governs the
outcome, and Technocom is entitled to a
credit against the sales tax paid to the
Department during the audit period.
Technocom, “leaving open the amount of the tax credit to which
[Technocom] is entitled” for the OAH’s determination.
entered an order on 3 March 2011 stating the following:
1. [Technocom] is GRANTED partial summary
judgment on the following legal issue:
Whether the North Carolina Revenue Laws
authorize Technocom to offset its use tax
liability on the parts and supplies it
provided to customers . . . with the sales
taxes based on the sales of those same
remitted in error to the Department[.]
Petitioner is entitled to a tax credit
of $192,457.33 on the parts and supplies
[Technocom] previously charged, collected
and remitted North Carolina sales tax on
when it provided such items to its customers
. . . if the Order entered in this matter on
4 January 2011 is affirmed on appeal.
No further proceedings at OAH are
required in this matter as there is no
[Technocom] would be entitled to if the
Order is affirmed on appeal.
The Department appeals the superior court’s 4 January 2011
sole issue on appeal is whether the North Carolina
Revenue Laws authorize Technocom to offset its use tax liability
Department argues that no provision in the North Carolina Sales
and Use Tax Act (“Act”), N.C. Gen. Stat. §§ 105-164.1 et seq.,
permits Technocom to claim such a credit against its use tax
An appellate court reviewing a superior
court order regarding an agency decision
examines the trial court’s order for error
of law. The process has been described as a
twofold task: (1) determining whether the
trial court exercised the appropriate scope
of review and, if appropriate, (2) deciding
whether the court did so properly. When, as
here, a petitioner contends the [superior
court’s] decision was based on an error of
law, de novo review is proper.
Holly Ridge Assocs., LLC v. N.C. Dep’t of Env’t & Natural Res.,
quotation marks and citations omitted).
Because this appeal centers on a close reading of the Act,
we must seek “[t]he principal goal of statutory construction
[which] is to accomplish the legislative intent.”
“If the language of a statute is clear, the
-7court must implement the statute according to the plain meaning
of its terms so long as it is reasonable to do so.”
[T]he Act, with certain exceptions and in
pertinent part, imposes upon persons engaged
in the business of selling tangible personal
property at retail in this state a state
sales tax at a rate of three percent of the
sales price of each item sold. The Act also
imposes a complementary state use tax “upon
the storage, use or consumption in this
purchased within and without this state for
storage, use or consumption within this
state” at a rate of three percent of the
cost of such property “when the same is not
sold but used, consumed, distributed or
stored for use or consumption in this State.
. . .”
In re Assessment of Additional N.C. & Orange County Use Taxes,
etc., 312 N.C. 211, 214, 322 S.E.2d 155, 158 (1984) (citation
The first purpose of the Act is to generate revenue for the
This is accomplished by a sales tax which is
imposed upon the retail merchant as a
privilege tax for the right to engage in
The tax is, however,
designed to be passed on to the consumer.
The second purpose of the sales and use tax
scheme is to equalize the tax burden on all
This is achieved through
imposition of the use tax in certain
situations where the sales tax is not
Id. at 214-15, 322 S.E.2d at 158.
-8“While a sales tax and a use tax in many instances may
bring about the same result, they are different in conception.”
Colonial Pipeline Co. v. Clayton, 275 N.C. 215, 222, 166 S.E.2d
671, 676 (1969).
“A sales tax is assessed on the purchase price
of property and is imposed at the time of sale.
A use tax is
assessed on the storage, use or consumption of property
takes ef[f]ect only after such use begins.”
Id. at 223, 166
S.E.2d at 677.
The General Assembly has defined a “sale” as a “transfer
for consideration of title or possession of tangible personal
property . . . for consideration of a service.”
N.C.G.S. § 105-
A sale may include such things as a “lease or
rental” or a “transaction in which the possession of property is
transferred but the seller retains title or security for the
payment of the consideration.”
The sales tax collected on
the “sales price” includes the “total amount or consideration
for which tangible personal property . . . or services are sold,
leased, or rented.”
N.C.G.S. § 105-164.3(37) (2009).
“use”, on the other hand, is the “exercise of any right, power,
or dominion whatsoever over tangible personal property . . . by
-9the purchaser of the property or service.”
N.C.G.S. § 105-
In the instant case, Technocom does not dispute that it
optional maintenance agreements and that Technocom should have
paid a use tax in connection with the parts and supplies it
provided under those agreements.
pursuant to N.C. Gen. Stat.
However, it does argue that
105-164.41, the Department is
Technocom asserts that the Department should credit the sales
taxes made in error against the use tax assessment levied by the
Department, particularly, whereas here, the Department seeks to
treat the transactions at issue as a “use” for tax purposes but
as a “sale” for refund purposes.
N.C.G.S. § 105-164.41, titled “Excess payments; refunds[,]”
states that “[if] it appears that an amount of tax has been paid
in excess of that properly due, then the amount in excess shall
be credited against any tax or installment thereof then due from
N.C.G.S. § 105-164.41 (2009).
On the other
hand, N.C. Gen. Stat. § 105-164.11 (2009), titled “Excessive and
erroneous collections[,]” provides guidance in situations where
excessive and erroneous collections are made and, specifically,
-10prohibits the relief sought by Technocom.
N.C.G.S. § 105-164.11
provides the following:
When the tax collected for any period is in
excess of the total amount that should have
been collected, the total amount collected
must be paid over to the Secretary.
tax is collected for any period on exempt or
collected shall be remitted to the Secretary
and no refund shall be made to a taxpayer
unless the purchaser has received credit for
or has been refunded the amount of tax
N.C.G.S. § 105-164.11 (2009) (emphasis added).
Stewart v. Johnston County Bd. Of Educ., 129
N.C. App. 108, 110, 498 S.E.2d 382, 384 (1998).
statutes apparently overlap, it is well established that the
statute special and particular shall control over the statute
general in nature, even if the general statute is more recent,
College v. J. Hyatt Associates, Inc., 313 N.C. 230, 238, 328
S.E.2d 274, 279 (1985) (citation omitted).
N.C.G.S. § 105-164.41 is the more general statute, applying
to any situation where the amount of tax has been paid in excess
-11of that properly due.
However, although N.C.G.S. § 105-164.11
is a more specific and particular statute, it does not apply to
N.C.G.S. § 105-164.11 only applies to taxes collected on “exempt
transfer of tangible personal property for a consideration to be
Department concluded that the optional maintenance agreements at
issue constituted a taxable use of tangible personal property
within the meaning of N.C.G.S. § 105-164.3(49) and not a sale.
subject to use taxes and not sales taxes.
105-164.11 does not apply.
Therefore, N.C.G.S. §
We hold that the general provision
Department during the audit period.
Based on the foregoing, the
order of the trial court is affirmed.
Judges ELMORE and STEPHENS concur.