Julie P. Magee, in her official capacity as Commissioner of Revenue of the State of Alabama, and the State of Alabama Department of Revenue v. The Home Depot U.S.A., Inc.

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REL: 11/04/2011 Notice: T h i s o p i n i o n i s s u b j e c t t o formal r e v i s i o n b e f o r e p u b l i c a t i o n i n t h e advance s h e e t s o f Southern R e p o r t e r . R e a d e r s a r e r e q u e s t e d t o n o t i f y t h e R e p o r t e r o f D e c i s i o n s , Alabama A p p e l l a t e C o u r t s , 300 D e x t e r A v e n u e , M o n t g o m e r y , A l a b a m a 3 6 1 0 4 - 3 7 4 1 ((334) 2 2 9 - 0 6 4 9 ) , o f a n y t y p o g r a p h i c a l o r o t h e r e r r o r s , i n o r d e r t h a t c o r r e c t i o n s may b e made b e f o r e t h e o p i n i o n i s p r i n t e d i n Southern R e p o r t e r . ALABAMA COURT OF CIVIL APPEALS OCTOBER TERM, 2011-2012 2100715 J u l i e P. Magee, i n her o f f i c i a l c a p a c i t y as Commissioner o f Revenue o f the S t a t e o f Alabama, and the S t a t e o f Alabama Department o f Revenue v. The Home Depot U.S.A., I n c . Appeal from Montgomery C i r c u i t (CV-08-1025.80) Court THOMPSON, P r e s i d i n g J u d g e . Julie P. Magee, i n her o f f i c i a l capacity as t h e 2100715 Commissioner State o f Revenue o f Alabama Department Department") appeal Montgomery Inc. of the State Circuit o f Alabama, o f Revenue and t h e 1 (collectively, "the f r o m a summary j u d g m e n t e n t e r e d by the C o u r t i n f a v o r o f The Home D e p o t U.S.A., ("Home D e p o t " ) , r e v e r s i n g t h e Department's d e n i a l o f a refund o f s a l e s t a x t o Home D e p o t a n d a w a r d i n g Home D e p o t a refund of sales reasons stated t a x i n t h e amount o f $ 2 6 6 , 6 7 2 . 9 3 . herein, we reverse For the the c i r c u i t court's Home D e p o t operates judgment. The p e r t i n e n t f a c t s a r e u n d i s p u t e d . r e t a i l home-improvement including centers throughout the United s e v e r a l i n Alabama. I n 1997, Home D e p o t i n t o c o n t r a c t s w i t h t h r e e r e l a t e d companies, G e n e r a l States, entered Electric C a p i t a l C o r p o r a t i o n , GE C a p i t a l F i n a n c i a l , I n c . , a n d Monogram Credit Card Bank of Georgia (collectively, "the finance companies"), f o r the p r o v i s i o n of p r i v a t e - l a b e l c r e d i t to i t s customers program, ("the PLCC the finance program") . companies provided Under cards t h e PLCC c u s t o m e r s o f Home T i m R u s s e l l , t h e f o r m e r C o m m i s s i o n e r o f Revenue o f t h e S t a t e o f A l a b a m a , was a p a r t y t o t h e a c t i o n i n t h e c i r c u i t court in his official capacity. Magee, the current c o m m i s s i o n e r , was s u b s t i t u t e d f o r R u s s e l l . See R u l e 4 3 ( b ) , A l a . R. App. P. 1 2 2100715 Depot w i t h t h e o p p o r t u n i t y on credit. I f a Home t o make p u r c h a s e s f r o m Home D e p o t Depot customer decided t o make p u r c h a s e u t i l i z i n g t h e PLCC p r o g r a m , t h e c u s t o m e r w o u l d to one o f t h e f i n a n c e company w o u l d e v a l u a t e in credit Depot. decide customer. i t would f o r making company finance p u r c h a s e s a t Home approved establish a credit When t h e c u s t o m e r company w o u l d f o r w a r d The w h e t h e r a n d t o what e x t e n t t o t o t h e customer I f the finance application, f o r credit. apply t h e a p p l i c a n t ' s c r e d i t w o r t h i n e s s and, i t s sole discretion, offer companies a t h e customer's account for the made a p u r c h a s e , t h e f i n a n c e t h e amount o f t h e c u s t o m e r ' s p u r c h a s e , i n c l u d i n g a p p l i c a b l e t a x e s , l e s s a s e r v i c e f e e , t o Home D e p o t for payment o f t h e p u r c h a s e . would pay t h e a p p l i c a b l e governmental entity From t h i s sales amount, Home t a x to the or e n t i t i e s . Home D e p o t Depot appropriate deducted the s e r v i c e f e e on i t s f e d e r a l i n c o m e - t a x r e t u r n s a s a c r e d i t - c a r d discount. After the establishment the finance companies, o f a c r e d i t a c c o u n t w i t h one o f a Home D e p o t customer u t i l i z i n g the PLCC p r o g r a m w o u l d d e a l e x c l u s i v e l y w i t h t h e f i n a n c e w i t h r e g a r d t o payment o f t h e a c c o u n t . 3 The f i n a n c e company companies 2100715 had the right accounts. t o charge interest and fees Pursuant t o the contracts on t h e c r e d i t b e t w e e n Home D e p o t a n d t h e f i n a n c e c o m p a n i e s , t h e f i n a n c e c o m p a n i e s were t h e s o l e a n d e x c l u s i v e owners o f a l l t h e c r e d i t a c c o u n t s t h e y e s t a b l i s h e d for Home customer of Depot's In a s i t u a t i o n i n which a f a i l e d t o p a y o f f h i s o r h e r c r e d i t a c c o u n t w i t h one the finance finance customers. companies companies, the contracts provided that the w o u l d b e a r t h a t l o s s a n d t h a t t h e y were n o t permitted t o p a s s on t h o s e l o s s e s t o Home D e p o t . companies d e d u c t e d t h o s e l o s s e s as b a d d e b t on t h e i r corporate income-tax returns. In July company s u c c e e d e d t h e f i n a n c e companies Depot's 2 2003, The f i n a n c e federal a different cards. private-label credit a s t h e i s s u e r o f Home On O c t o b e r 20, 2003, Home D e p o t f i l e d a p e t i t i o n w i t h t h e Department paid f o ra refund o f $610, 449.84 o f s a l e s t a x i t had f r o m S e p t e m b e r 2000 t o J u l y 2003 f o r i t s c u s t o m e r s who h a d p a r t i c i p a t e d i n t h e PLCC p r o g r a m their a n d who h a d d e f a u l t e d i n o b l i g a t i o n s t o r e p a y t h e amount o f t h e p u r c h a s e s they T h e f i n a n c e c o m p a n i e s were p e r m i t t e d u n d e r t h e c o n t r a c t s to charge back accounts t o Home Depot under limited circumstances. Simply i n c u r r i n g a l o s s from a customer's failure t o p a y on an a c c o u n t was n o t one o f t h o s e circumstances. 2 4 2100715 had f i n a n c e d w i t h t h e f i n a n c e c o m p a n i e s . Home Depot r e l i e d on Ala. Admin. Code (Dep't o f R e v e n u e ) , r . 810-6-4-.01 ("the debt regulation"), which bad- provides for a refund of sales t a x p a i d b y a r e t a i l e r on c r e d i t a c c o u n t s t h a t a r e c h a r g e d o f f a s uncollectible f o r f e d e r a l income-tax In a l e t t e r dated October purposes. 18, 2004, t h e D e p a r t m e n t d e n i e d Home D e p o t ' s r e f u n d p e t i t i o n . I n denying the p e t i t i o n , the Department took t h e p o s i t i o n that gross t h a t were p a i d f o r b y c r e d i t c a r d s were t a x a b l e on t h e f u l l selling price. Home Depot receipts from sales The l e t t e r f r o m t h e D e p a r t m e n t s t a t e d t h a t , i f wanted t o pursue the matter further, i t could r e q u e s t a f o r m a l h e a r i n g b e f o r e an a d m i n i s t r a t i v e law judge w i t h i n two y e a r s o f t h e d a t e o f i t s r e c e i p t o f t h e l e t t e r o r file an a p p e a l d i r e c t l y On appeal September to c i r c u i t court. 22, 2006, t o t h e Department's requesting a formal hearing. dismiss argued, Home the appeal filed a notice of A d m i n i s t r a t i v e Law Division, The D e p a r t m e n t f i l e d a m o t i o n t o f o r lack Home D e p o t ' s a p p e a l Depot of j u r i s d i c t i o n was u n t i m e l y . 40-2A-7(c)(3), A l a . Code because, i t I t argued pursuant to § petition f o r a r e f u n d h a d been d e n i e d b y o p e r a t i o n o f l a w s i x 5 1 9 7 5 , Home that, Depot's 2100715 months a f t e r i t h a d b e e n f i l e d as a result, that ( i . e . , on A p r i l 20, 2004) a n d , t h e two-year period i n which to file an a p p e a l h a d e x p i r e d on A p r i l 20, 2006, f i v e months b e f o r e Home Depot the filed i t s notice a d m i n i s t r a t i v e law judge was estopped untimely to from of ("the asserting appeal. ALJ") that Ultimately, h e l d t h a t t h e Department Home Depot's because t h e Department h a d a f f i r m a t i v e l y Home D e p o t that i t h a d two y e a r s receipt of the l e t t e r of October Depot's refund i n which petition from was represented t h e date 18, 2004, to file appeal of i t s denying i t s appeal Home to the A d m i n i s t r a t i v e Law D i v i s i o n . On November 20, 2007, Depot's r e f u n d p e t i t i o n . the A L J held a hearing on Home Much o f t h e t e s t i m o n y a t t h e hearing f o c u s e d on t h e s e r v i c e f e e t h e f i n a n c e c o m p a n i e s c h a r g e d Home Depot on i t s c u s t o m e r s ' program. credit purchases under t h e PLCC A l t h o u g h i t was a c k n o w l e d g e d a t t h e h e a r i n g t h a t t h e c o n t r a c t s b e t w e e n Home Depot a n d t h e f i n a n c e c o m p a n i e s d i d n o t l i s t t h e v a r i o u s e l e m e n t s t h a t t h e f i n a n c e c o m p a n i e s a n d Home Depot c o n s i d e r e d to be c h a r g e d i n determining t h e amount o f t h e s e r v i c e f e e t o Home D e p o t , testimony f i n a n c e companies attempted t o estimate 6 indicated that the t h e amount o f b a d d e b t 2100715 t h a t w o u l d be g e n e r a t e d a s p a r t o f t h e PLCC p r o g r a m a n d t h a t they s e t the service Eugene Joseph f e e based, Thorncraft, i n part, J r . , the vice on t h a t estimate. president of r i s k management f o r G e n e r a l E l e c t r i c Consumer F i n a n c e D i v i s i o n i n America, testified as follows regarding how the finance c o m p a n i e s d e t e r m i n e d t h e amount o f t h e s e r v i c e f e e t o c h a r g e Home Depot when n e g o t i a t i n g t h e c o n t r a c t s w i t h Home D e p o t : "[W]hen we n e g o t i a t e a d e a l , we make a s e r i e s o f assumptions. We t a k e a l o o k a t w h a t o u r t h r o u g h t h e - d o o r p o p u l a t i o n s a r e g o i n g t o l o o k l i k e , o r what t h e c u s t o m e r s l o o k l i k e when t h e y come t h r o u g h . We make a d e t e r m i n a t i o n o f how t h e y a r e g o i n g t o s p e n d . How many a r e g o i n g t o r e v o l v e a n d p a y i n t e r e s t s o we can determine a c a s h f l o w . We w i l l know what o u r i n t e r e s t rates are. We w i l l know how many w i l l go d e l i n q u e n t s o we c a n know what o u r l a t e f e e s t r e a m w i l l b e . A n y o t h e r s u n d r y income s t r e a m w o u l d be i n c o r p o r a t e d i n t o t h a t . We a l s o t h e n t a k e a l o o k a t what o u r c o s t s a r e g o i n g t o b e . Money c o s t s , o p e r a t i n g e x p e n s e , b a d d e b t s , e t c e t e r a . From t h e r e we g e t a, k i n d o f a p o r t f o l i o l e v e l income s t r e a m . From t h a t , we d e t e r m i n e what o u r t h r e s h o l d o f p r o f i t a b i l i t y should be. A n d b a s e d on t h a t , we w o u l d a s s e s s f e e s t o -- we w o u l d s e t t h e s e r v i c e f e e so we a s s e s s t h a t f e e t o t h e r e t a i l e r . " Thorncraft s t a t e d t h a t "bad debt i s a c r i t i c a l element i n t h e economic p r o f i l e . " He a l s o s t a t e d t h a t t h e f i n a n c e companies made a p r o f i t u n d e r t h e PLCC p r o g r a m a n d t h a t t h e i r estimates with respect t o a n t i c i p a t e d b a d d e b t s were v e r y close to the a c t u a l amount o f b a d d e b t s t h e y e x p e r i e n c e d u n d e r t h e p r o g r a m . 7 2100715 Testimony a t the hearing i n d i c a t e d t h a t t h e s e r v i c e f e e Home Depot p a i d the f i n a n c e companies d i d not v a r y from customer t o c u s t o m e r b a s e d on t h e c u s t o m e r ' s creditworthiness. At t h e hearing, its Home D e p o t i n d i c a t e d t h a t i t h a d r e d u c e d refund to include request only state Department-administered l o c a l sales taxes. sales t a x e s and The amended r e f u n d amount Home Depot r e q u e s t e d was $383,341.29. In i t s post-hearing e n t i t l e d t o a refund the applicability petition. b r i e f s , Home Depot s t a t e d t h a t i t was o f s a l e s t a x because i t had demonstrated o f t h e bad-debt Particularly, regulation to i t s Home Depot a r g u e d t h a t refund i t had p a i d t h e s a l e s t a x on t h e c r e d i t s a l e s a t i s s u e a n d t h a t t h e c r e d i t a c c o u n t s a s s o c i a t e d w i t h t h o s e s a l e s h a d become u n c o l l e c t i b l e and were written o f f as b a d debt. Home Depot argued, a l t e r n a t i v e l y , t h a t i f the A L J concluded t h a t t h e o n l y entitled the t o claim a refund entity income-tax that took returns, under t h e bad-debt r e g u l a t i o n i s a deduction Home entity Depot f o r t h e bad debt qualified f o r the on i t s refund because i t had f u l l y compensated the f i n a n c e companies f o r t h e bad d e b t t h e y h a d i n c u r r e d u n d e r t h e PLCC p r o g r a m b y v i r t u e o f the s e r v i c e f e e i t had p a i d to the finance 8 companies. Home 2100715 Depot p o i n t e d t o evidence a t the hearing demonstrating the f u t u r e bad debt t h e f i n a n c e the PLCC p r o g r a m was s p e c i f i c a l l y c o n s i d e r e d amount o f t h e s e r v i c e denial of enrichment fee. i t s refund companies would i n c u r under i n setting the F i n a l l y , Home Depot a r g u e d t h a t petition to the State that would o f Alabama w o u l d be r e t a i n i n g a g r e a t e r result because amount o f s a l e s in unjust t h e Department t a x t h a n Home D e p o t ' s c u s t o m e r s who d e f a u l t e d on t h e i r o b l i g a t i o n s u n d e r t h e PLCC p r o g r a m h a d a c t u a l l y In i t spost-hearing had p r o p e r l y finance b r i e f , t h e Department argued t h a t i t d e n i e d Home D e p o t ' s r e f u n d companies, underlying paid. n o t Home Depot, Home D e p o t ' s p e t i t i o n p e t i t i o n because t h e owned the bad and t h e f i n a n c e companies, n o t Home D e p o t , h a d w r i t t e n o f f t h e b a d d e b t on t h e i r tax returns. The D e p a r t m e n t contended that debt income- Home Depot h a d r e c e i v e d f u l l payment f r o m t h e f i n a n c e c o m p a n i e s f o r t h e P L C C program t r a n s a c t i o n s and t h a t the finance companies d i d n o t t r a n s f e r t h e i r b a d d e b t a r i s i n g u n d e r t h e PLCC p r o g r a m t o Home Depot. the I t a r g u e d t h a t , i f Home Depot was a l l o w e d sales t a x i t had p a i d t o recover on t h e b a d d e b t s owned by the f i n a n c e c o m p a n i e s , Home Depot w o u l d r e a l i z e more p r o f i t on t h e 9 2100715 credit transactions than simply p a i d i n cash. i t would have had t h e customers The D e p a r t m e n t a r g u e d t h a t t h e b a d - d e b t r e g u l a t i o n d i d not apply t o Home D e p o t ' s On June 6, 2008, t h e A L J e n t e r e d a detailed final t h e Department's petition. The A L J c o n c l u d e d t h a t t h e b a d - d e b t r e g u l a t i o n d i d apply t o Home D e p o t ' s r e f u n d regulation retailer as applying only o f Home order affirming not denial petition. Depot's refund p e t i t i o n ; he c o n s t r u e d t h e i n circumstances where i t s e l f makes t h e c r e d i t s a l e , n o t i n c i r c u m s t a n c e s involving credit-card sales customer by a t h i r d p a r t y "where finance c r e d i t i s extended t o the company, as i n t h i s case." The A L J a l s o r e j e c t e d Home D e p o t ' s a l t e r n a t i v e argument i t was due t h e r e f u n d finance the companies that i t sought because i t had reimbursed t h e for their bad debt by paying them t h e s e r v i c e f e e . The A L J c o n c l u d e d t h a t t h e amount o f t h e s e r v i c e fee a t t r i b u t a b l e t o the estimate the finance companies determined and t h a t , under "[e]ven i n c l u d e d a b a d d e b t component amounts, o f b a d d e b t t o be i n c u r r e d b y t h e PLCC p r o g r a m i f i t i s assumed could n o t be that the fees equal t o theestimated bad debt ... t h e b a d d e b t s a c t u a l l y i n c u r r e d b y t h e [ f i n a n c e c o m p a n i e s ] may have been ( o r could 10 be i n t h e f u t u r e ) much 2100715 greater t h a n a n t i c i p a t e d , " t h u s a l l o w i n g Home Depot t o c l a i m a l a r g e r refund service also f e e i t had p a i d held Alabama could o f s a l e s t a x e s t h a n h a d been r e f l e c t e d i n t h e that sales Home Depot could t a x i t had p a i d not prove Alabama t o the finance that companies. not prove The A L J t h e amount o f on t h e b a d d e b t s b e c a u s e i t a l l of those sales had occurred in a n d t h a t Home Depot c o u l d n o t d e m o n s t r a t e t h e amount o f l o c a l s a l e s t a x i t h a d p a i d on t h e b a d d e b t s t o t h e l o c a l jurisdictions i n Alabama administered b y t h e Department. T h u s , t h e A L J a f f i r m e d t h e D e p a r t m e n t ' s d e n i a l o f Home D e p o t ' s refund petition. Home Depot determination filed an appeal t o t h e Montgomery 4 0 - 2 A - 9 ( g ) ( 1 ) , A l a . Code 1975. of the Department's C i r c u i t Court pursuant t o § I n J a n u a r y 2009, Home Depot and t h e D e p a r t m e n t f i l e d c r o s s - m o t i o n s f o r a p a r t i a l summary j u d g m e n t on t h e i s s u e w h e t h e r Home Depot was e n t i t l e d t o t h e refund the o f sales taxes f o r which i t had p e t i t i o n e d . ALJ's Depot's determination, court granted Home summary-judgment m o t i o n a n d d e n i e d t h e D e p a r t m e n t ' s summary-judgment m o t i o n . Depot the c i r c u i t Reversing had s a t i s f i e d The c i r c u i t c o u r t a l l the requirements 11 held that Home o f t h e bad-debt 2100715 r e g u l a t i o n and, a refund of sales regulation. dismissed as a result, taxes t h a t Home Depot was e n t i t l e d t o paid on bad debt The D e p a r t m e n t f i l e d an a p p e a l , under that which t h i s court a s h a v i n g been t a k e n from a n o n f i n a l judgment. After t h i s court dismissed Depot f i l e d the Department's appeal, Home a m o t i o n f o r a summary j u d g m e n t a s t o t h e amount of t h e refund due. I n i t s m o t i o n , Home Depot s o u g h t a r e f u n d amount o f $266,672.93, r e f l e c t i n g a s u b s t a n t i a l r e d u c t i o n i n t h e r e f u n d amount i t h a d p r e v i o u s l y s o u g h t . Home Depot s t a t e d t h a t i t h a d r e d u c e d t h e amount o f t h e s a l e s - t a x r e f u n d r e q u e s t i n g " i n an a t t e m p t t o e l i m i n a t e a l l q u e s t i o n s [its] data and c a l c u l a t i o n s . " Home D e p o t , r e f l e c t e d of: (1) l o c a l resulting sales This regarding new amount, a c c o r d i n g t o i t s e l i m i n a t i o n from i t s refund tax; i t was (2) s a l e s t a x paid claim on b a d d e b t s f r o m p u r c h a s e s made b y A l a b a m a a c c o u n t h o l d e r s a t Home D e p o t ' s s t o r e s l o c a t e d o u t s i d e o f A l a b a m a ; a n d (3) s a l e s t a x p a i d on b a d d e b t s t h a t were s u b s e q u e n t l y p a i d b y c u s t o m e r s a f t e r h a v i n g been t a k e n as bad-debt d e d u c t i o n s by t h e f i n a n c e companies. On M a r c h 15, 2011, motion and e n t e r e d t h e c i r c u i t c o u r t g r a n t e d Home D e p o t ' s a summary j u d g m e n t i n i t s f a v o r , 12 awarding 2100715 it the refund of sales t a x that summary j u d g m e n t d i s p o s e d circuit See court, that i t sought. of the remaining judgment constituted Because t h e issue before the a final judgment. F u r i n v . C i t y o f H u n t s v i l l e , 3 So. 3d 256, 260 ( A l a . C i v . App. 2008). The Department filed a timely appeal to this court. Although without motu. neither party has argued j u r i s d i c t i o n , we f i r s t See Ex p a r t e Smith, October 20, 2003. within law. that the corresponding petition. a letter with Finally, A l a . Code 1975. and another on O c t o b e r t o Home D e p o t for a refund d i d n o t a c t on i.e., was d e e m e d d e n i e d b y o p e r a t i o n Department one 1983). s i x months o f i t s f i l i n g , See § 4 0 - 2 A - 7 ( c ) ( 3 ) , date, i t s request t h e Department by A p r i l 20, 2004, t h e p e t i t i o n of court i s 438 S o . 2 d 7 6 6 , 768 ( A l a . Because Home D e p o t ' s p e t i t i o n this c o n s i d e r t h a t q u e s t i o n ex mero A s p r e v i o u s l y n o t e d , Home D e p o t f i l e d on that stating, However, Home Depot relative to 18, 2004, after continued the refund t h e Department i npertinent part: "On O c t o b e r 2 0 , 2 0 0 3 , t h i s d e p a r t m e n t r e c e i v e d the above r e f e r e n c e d p e t i t i o n f o r r e f u n d o f S t a t e Sales Tax. " A f t e r a thorough i n v e s t i g a t i o n o f your r e f u n d c l a i m by our F o r e i g n A u d i t S e c t i o n and a d e c i s i o n 13 sent 2100715 made by Judge Thompson, (ALJS. 91-203) gross r e c e i p t s d e r i v e d from s a l e s p a i d f o r by c r e d i t c a r d a r e t a x a b l e on t h e f u l l s e l l i n g p r i c e . There would b e no b a d d e b t d e d u c t i o n s e v e n i f t h e c r e d i t c a r d company later determined the debt to be uncollectible. deny " F o r t h i s r e a s o n , we h a v e no a l t e r n a t i v e b u t t o your r e f u n d r e q u e s t . " I f you w i s h t o pursue t h i s m a t t e r f u r t h e r , you may r e q u e s t a f o r m a l h e a r i n g b e f o r e a n [ A L J ] w i t h i n two y e a r s f r o m t h e d a t e y o u r e c e i v e t h i s l e t t e r o r y o u may a p p e a l d i r e c t l y t o c i r c u i t c o u r t . I f you d e s i r e a h e a r i n g b e f o r e an [ A L J ] , you must file Notice with t h e Alabama Department o f Revenue, Administrative Law D i v i s i o n , P.O. Box 320001, Montgomery, Alabama 36132-0001." Home D e p o t filed i t s n o t i c e of appeal t h e A L J on S e p t e m b e r after i t sr e c e i p t years after of law. from We n o t e had been that the timely As appeal two y e a r s filing over of a n o t i c e of appeal i s a prerequisite the appeal. t o an See § 40-2A- A l a . Code 1 9 7 5 . noted, to Initially, motion than deemed d e n i e d b y o p e r a t i o n of a refund p e t i t i o n exercise of j u r i s d i c t i o n 7(c)(5), was l e s s with o f t h e D e p a r t m e n t ' s l e t t e r b u t more t h a n two i t spetition the denial ALJ's 22, 2006, w h i c h seeking a hearing t h e Department filed the Administrative the ALJ granted Law a motion Division that motion. for a rehearing, asserting 14 to dismiss the as untimely. Home D e p o t t h a t i t had r e l i e d filed a i n good 2100715 faith on t h e i n f o r m a t i o n O c t o b e r 18, 2004, l e t t e r , petition and t h e time denial. In a detailed motion f o r a rehearing pertinent provided relative by the Department to the denial of i t s f o r the taking order, in o f an a p p e a l the ALJ granted and r e i n s t a t e d i t s appeal, refund from Home writing, i n "The Administrative Law Division initially granted the Department's motion to dismiss f o r l a c k of jurisdiction because [Home D e p o t ] f a i l e d to a p p e a l w i t h i n t w o y e a r s f r o m when [Home D e p o t ] ' s petition was d e e m e d d e n i e d . [Home D e p o t ] c o n t e n d s on r e h e a r i n g , h o w e v e r , t h a t t h e a p p e a l s h o u l d n o t b e d i s m i s s e d b e c a u s e i t r e c e i v e d an O c t o b e r 18, 2004, letter from the Department that stated that the r e f u n d was b e i n g d e n i e d , a n d t h a t [Home D e p o t ] h a d two years from that date t o appeal. The letter s p e c i f i e d t h a t ' [ i ] f you w i s h t o p u r s u e t h i s m a t t e r f u r t h e r , y o u may r e q u e s t a f o r m a l h e a r i n g b e f o r e a n A d m i n i s t r a t i v e Law J u d g e w i t h i n t w o y e a r s f r o m t h e d a t e you r e c e i v e this letter ' [Home D e p o t ] claims that i t relied i n good faith on that i n f o r m a t i o n , a n d t h a t i t s a p p e a l f i l e d w i t h i n two y e a r s o f t h e O c t o b e r 18, 2004, l e t t e r should be a c c e p t e d as t i m e l y . "The Department does not dispute that the O c t o b e r 1 8 , 2 0 0 4 , l e t t e r n o t i f i e d [Home D e p o t ] t h a t it h a d two y e a r s f r o m t h a t d a t e t o a p p e a l . I t c o n t e n d s , h o w e v e r , t h a t t h e l e t t e r was a n u l l i t y , and c o u l d n o t e x t e n d o r w a i v e t h e two y e a r s t a t u t e of l i m i t a t i o n s f o r a p p e a l i n g . I t a l s o argues that i t c a n n o t be e s t o p p e d f r o m a s s e r t i n g t h e s t a t u t o r y t i m e l i m i t a s a b a r t o t h e [Home D e p o t ] ' s refund claim. I disagree. Supreme C o u r t 15 that Depot's part: "Alabama's i t s has c o n s i s t e n t l y held 2100715 t h a t t h e R e v e n u e D e p a r t m e n t c a n n o t be e s t o p p e d f r o m a s s e s s i n g and c o l l e c t i n g a t a x t h a t i s l e g a l l y due. Community Action Agency of Huntsville, Madison C o u n t y , I n c . v . S t a t e , 406 So. 2d 890 (Ala. 1981); S t a t e v . M a d d o x T r a c t o r & E q u i p m e n t Co., 69 So. 2d 426 (1953). The C o u r t h a s a l s o h e l d , h o w e v e r , t h a t the S t a t e may be estopped from a s s e r t i n g t h a t a taxpayer failed to timely appeal 'where the untimeliness of the filing of their appeal was c a u s e d by m i s i n f o r m a t i o n f u r n i s h e d by the State's o f f i c e r and r e l i e d upon by t h e p e t i t i o n e r s t o t h e i r detriment.' Ex p a r t e F o u r S e a s o n s , L t d . , 450 So. 2d 110, 112 ( A l a . 1984 ) . The r a t i o n a l e o f Ex parte Four Seasons a p p l i e s i n t h i s case. "In Ex parte Four Seasons, the county tax assessor n o t i f i e d the p e t i t i o n e r s t h a t the county b o a r d o f e q u a l i z a t i o n h a d r u l e d on t h e i r p r o t e s t on O c t o b e r 20, 1982. The p e t i t i o n e r s w e r e r e q u i r e d b y s t a t u t e to appeal t h a t d e c i s i o n to the c i r c u i t c o u r t within 30 days. T h e y a p p e a l e d on November 18, w i t h i n 30 d a y s f r o m O c t o b e r 2 0 . "The State moved for [a] summary judgment because the board had actually denied the p e t i t i o n e r s ' p r o t e s t on o r b e f o r e O c t o b e r 4, 1982. C o n s e q u e n t l y , t h e p e t i t i o n e r s had f a i l e d t o a p p e a l w i t h i n 30 d a y s f r o m when t h e p r o t e s t h a d a c t u a l l y been denied. The t r i a l c o u r t a n d t h e C o u r t o f C i v i l A p p e a l s h e l d t h a t t h e a p p e a l m u s t be d i s m i s s e d as untimely. "The Supreme C o u r t r e v e r s e d . 'In the case b e f o r e us, the s e c r e t a r y ' s a c t i v e m i s r e p r e s e n t a t i o n of the date of the board's d e c i s i o n i s b e i n g used i n an a t t e m p t t o d e n y t h e t a x p a y e r s , who r e l i e d on i t , t h e i r r i g h t t o an a p p e a l t o a c o u r t o f l a w . Such a r e s u l t would o b v i o u s l y work a s e r i o u s injustice. Furthermore, the p u b l i c ' s i n t e r e s t would not be u n d u l y damaged by t h e i m p o s i t i o n of e s t o p p e l i n t h i s case.' Ex p a r t e F o u r S e a s o n s , 450 So. 2d a t 112. 16 2100715 "The Supreme C o u r t s u b s e q u e n t l y a p p l i e d i t s rationale i n Ex p a r t e F o u r S e a s o n s i n T a l l a d e g a B o a r d o f E d u c a t i o n v . Y a n c y , 682 S o . 2 d 33 ( A l a . 1 9 9 6 ) ; E x p a r t e T a n n e r , 553 S o . 2 d 598 ( A l a . 1 9 8 9 ) ; a n d E x p a r t e S t a t e D e p t . o f Human R e s o u r c e s , 548 S o . 2 d 176 ( A l a . 1 9 8 8 ) . Likewise, the Court of C i v i l Appeals adopted the r a t i o n a l e o f Ex p a r t e Four S e a s o n s i n C i t y o f M o b i l e v . S u m r a l l , 727 S o . 2 d 118 ( A l a . C i v . A p p . 1 9 9 9 ) , a n d W a l l a c e v . M o o r e , 684 S o . 2 d 161 ( A l a . C i v . A p p . 1 9 9 6 ) . The a b o v e c a s e s e s t a b l i s h t h a t i f a g o v e r n m e n t a l e m p l o y e e a c t i n g in i h i s o r h e r o f f i c i a l c a p a c i t y g i v e s a n i n d i v i d u a l or o an e n t i t y e r r o n e o u s i n f o r m a t i o n t h a t i s r e l i e d on in i good f a i t h by t h e i n d i v i d u a l o r e n t i t y , and w h i c h d i r e c t l y r e s u l t s i n the i n d i v i d u a l or e n t i t y f a i l i n g to t i m e l y a p p e a l , t h e government i s e s t o p p e d from a s s e r t i n g t h e s t a t u t e o f l i m i t a t i o n s as a d e f e n s e . " I n t h i s c a s e , [Home D e p o t ] a n d t h e D e p a r t m e n t actively communicated concerning [Home Depot]'s r e f u n d c l a i m a f t e r [Home D e p o t ] f i l e d i t s p e t i t i o n i n O c t o b e r 2 0 0 3 . [Home D e p o t ] s u b m i t t e d t w o l e t t e r s t o t h e D e p a r t m e n t on M a r c h 1 7 , 2 0 0 4 , w h i c h p r o v i d e d additional i n f o r m a t i o n and/or documents c o n c e r n i n g the r e f u n d c l a i m , as r e q u e s t e d b y t h e Department. [Home D e p o t ] l a t e r s e n t a J u n e 2 1 , 2 0 0 4 , l e t t e r t o the Department that provided more information c o n c e r n i n g i t s r e f u n d c l a i m , a g a i n as r e q u e s t e d b y the Department. The a b o v e c o r r e s p o n d e n c e c o n f i r m s t h a t [Home D e p o t ] h a d r e a s o n t o b e l i e v e t h a t t h e D e p a r t m e n t was a c t i v e l y c o n s i d e r i n g i t s r e f u n d c l a i m up t o when t h e D e p a r t m e n t n o t i f i e d [Home D e p o t ] i n w r i t i n g on O c t o b e r 18, 2004, t h a t i t s p e t i t i o n h a d been d e n i e d . " I m p o r t a n t l y , t h e D e p a r t m e n t ' s O c t o b e r 18 l e t t e r a l s o i n f o r m e d [Home D e p o t ] t h a t i t h a d t w o y e a r s from that date to appeal. The D e p a r t m e n t i s required to n o t i f y a taxpayer i n writing within s i x months whether a petition has been granted or denied. Code o f A l a . 1 9 7 5 , § 4 0 - 2 A - 7 ( c ) ( 3 ) . The Department failed to do so in this case. 17 2100715 Consequently, the p e t i t i o n was d e e m e d d e n i e d b y o p e r a t i o n o f l a w s i x m o n t h s a f t e r i t was f i l e d , o r on A p r i l 2 0 , 2 0 0 4 . See a g a i n , § 4 0 - 2 A - 7 ( c ) ( 3 ) . The D e p a r t m e n t was n o t t h e r e a f t e r r e q u i r e d t o n o t i f y [Home D e p o t ] t h a t t h e r e f u n d h a d b e e n d e n i e d . It d i d s o , h o w e v e r , p u r s u a n t t o i t s O c t o b e r 18, 2004, letter. I t a l s o i n f o r m e d [Home D e p o t ] i n t h e l e t t e r t h a t i t h a d two y e a r s f r o m t h a t n o t i c e d a t e t o appeal. " I n Ex p a r t e Tanner, s u p r a , t h e p r o b a t e c o u r t i s s u e d a c o n d e m n a t i o n o r d e r o n May 8, 1 9 8 4 , b u t i n c o r r e c t l y n o t i f i e d t h e p r o p e r t y owners t h a t t h e order h a d b e e n e n t e r e d on May 2 2 . The o w n e r s a p p e a l e d w i t h i n 30 d a y s f r o m May 2 2 , b u t m o r e t h a n 30 d a y s f r o m when t h e o r d e r was a c t u a l l y e n t e r e d . The S u p r e m e C o u r t , r e l y i n g on i t s p r i o r d e c i s i o n s i n E x p a r t e D e p t . o f Human R e s o u r c e s a n d E x p a r t e F o u r S e a s o n s , h e l d t h a t ' [ a ] l t h o u g h t h e p r o b a t e c o u r t was not r e q u i r e d t o send t h e Tanners n o t i c e , once i t did, they were entitled to rely on the date assigned' t o the condemnation order. Ex p a r t e T a n n e r , 553 S o . 2 d a t 5 9 9 . "The a b o v e r a t i o n a l e a p p l i e s i n t h i s c a s e . The D e p a r t m e n t was n o t r e q u i r e d t o s e n d [Home D e p o t ] t h e October 18, 2004, letter notifying i t that the p e t i t i o n was b e i n g d e n i e d b e c a u s e t h e p e t i t i o n h a d a l r e a d y b e e n deemed d e n i e d b y o p e r a t i o n o f l a w on A p r i l 20, 2004. I t n o n e t h e l e s s d i d so, and a l s o informed [Home D e p o t ] t h a t i t h a d t w o y e a r s from that date t o appeal. I f t h e Department had not sent [Home D e p o t ] the October 18 d e n i a l letter, the b u r d e n w o u l d h a v e b e e n on [Home D e p o t ] t o d e t e r m i n e how l o n g i t h a d t o a p p e a l , i . e . , t w o y e a r s f r o m when t h e p e t i t i o n was d e e m e d d e n i e d . But because the D e p a r t m e n t s e n t t h e O c t o b e r 18 l e t t e r a n d i n f o r m e d [Home D e p o t ] t h a t i t h a d t w o y e a r s f r o m t h a t d a t e t o a p p e a l , [Home D e p o t ] was e n t i t l e d t o r e l y o n t h a t information. " E s t o p p e l would not a p p l y i f t h e Department had 18 2100715 notified [Home D e p o t ] a f t e r t h e a p p e a l p e r i o d had e x p i r e d t h a t i t s t i l l had t i m e t o a p p e a l . That i s , an a p p e a l p e r i o d c a n n o t be r e v i v e d a f t e r i t has expired. I n t h i s c a s e , h o w e v e r , as i n Ex p a r t e F o u r Seasons and the other cases cited above, the e r r o n e o u s i n f o r m a t i o n was p r o v i d e d w h i l e t h e a p p e a l period was still open. But for the erroneous i n f o r m a t i o n , [Home D e p o t ] c o u l d h a v e a p p e a l e d w i t h i n two y e a r s f r o m when t h e p e t i t i o n was d e e m e d d e n i e d . It d i d not do so b a s e d on i t s r e l i a n c e on the Department's October 18, 2004, letter, which i n d i c a t e d t h a t [Home D e p o t ] h a d two y e a r s f r o m t h a t date to appeal. As i n Ex p a r t e F o u r S e a s o n s , t o n o t allow [Home D e p o t ] to pursue i t s appeal 'would o b v i o u s l y work a s e r i o u s i n j u s t i c e . Furthermore, t h e p u b l i c i n t e r e s t w o u l d n o t be u n d u l y d a m a g e d b y the i m p o s i t i o n of e s t o p p e l i n t h i s c a s e . ' Ex p a r t e F o u r S e a s o n s , 450 So. 2d a t 112. " E s t o p p e l would not, of c o u r s e , apply i n a l l c a s e s where a Department employee g i v e s a taxpayer erroneous advice concerning the taxpayer's appeal rights. R a t h e r , i t m u s t be a p p l i e d ( o r r e j e c t e d ) on a case-by-case b a s i s . For e s t o p p e l to apply, the a d v i c e o r i n f o r m a t i o n m u s t seem r e a s o n a b l e on i t s f a c e , a n d t h e t a x p a y e r m u s t r e l y on t h e a d v i c e or i n f o r m a t i o n i n good f a i t h . The O c t o b e r 18, 2004, l e t t e r i n f o r m i n g [Home D e p o t ] t h a t i t h a d two years t o a p p e a l was reasonable on i t s f a c e , especially c o n s i d e r i n g t h a t t h e D e p a r t m e n t a n d [Home D e p o t ] h a d a c t i v e l y communicated concerning the refund claim e v e n a f t e r t h e r e f u n d was deemed d e n i e d in April 2004. [Home D e p o t ] a l s o r e l i e d on t h e erroneous i n f o r m a t i o n i n good f a i t h . E s t o p p e l a p p l i e s under the f a c t s of t h i s case." We agree timeliness Division, of and, with the ALJ's Home D e p o t ' s like the analysis appeal ALJ, we 19 to hold of the the of the Administrative Law that the issue Department, 2100715 because of asserting Depot's i t s October that the appeal. jurisdictional As 18, ALJ a 2004, lacked letter, was estopped from to consider Home that there jurisdiction result, we impediments to our conclude consideration are no of the present Department's appeal. appeal. We The turn now standard of to the review merits of appropriate the to this appeal was set f o r t h i n S t a t e D e p a r t m e n t o f Revenue v. W e l l s F a r g o F i n a n c i a l A c c e p t a n c e A l a b a m a , I n c . , 19 So. 3d 892 ( A l a . C i v . App. 2008): " A l t h o u g h t h e o r d e r o f an A L J i s t o be p r e s u m e d p r i m a f a c i e c o r r e c t i n an a p p e a l o f t h a t o r d e r i n t h e c i r c u i t c o u r t , A l a . Code 1975, § 4 0 - 2 A - 9 ( g ) ( 2 ) , t h i s c o u r t ' s s t a n d a r d o f r e v i e w does n o t require t h a t i t g i v e d e f e r e n c e to e i t h e r the ALJ's d e c i s i o n or the c i r c u i t c o u r t ' s judgment. Instead, because t h i s i s an a p p e a l f r o m a summary j u d g m e n t and i n v o l v e s o n l y q u e s t i o n s of law, our r e v i e w of the m a t t e r i s de novo. S t a t e Dep't o f Revenue v. G a r n e r , 812 So. 2d 380, 382 ( A l a . C i v . App. 2001). B e c a u s e we a r e c o n c e r n e d w i t h t h e a p p l i c a t i o n o f t a x s t a t u t e s , we must be m i n d f u l of the principles governing t h e i r construction. 'It is well settled t h a t t h e r i g h t t o r e c l a i m money v o l u n t a r i l y p a i d t o t h e s t a t e o r t h e c o u n t i e s t h e r e o f , as t a x e s , i s a creature of legislative grace Lee v. Cunningham, 234 A l a . 639, 642, 176 So. 477, 480 (1937) ( o p i n i o n on r e h e a r i n g ) . L i k e t a x e x e m p t i o n s , t a x r e f u n d s a r e t o be c o n s t r u e d i n f a v o r of the taxing authority. S m i t h v. S e a r s , Roebuck & Co., 672 So. 2d 794, 799 ( A l a . C i v . App. 1 9 9 5 ) ; see a l s o Ex p a r t e J e f f e r s o n S m u r f i t C o r p . , 951 So. 2d 659, 665 ( A l a . 2006) ( s t a t i n g t h a t the right to a franchise-tax refund i s a matter of legislative 20 2100715 grace)." 19 So. trial 3d a t 894. We c o u r t must g i v e also note that "[t]his substantial i n t e r p r e t a t i o n o f i t s r u l e s and deference c o u r t and t o an the agency's r e g u l a t i o n s " and t h a t " ' [ a ] n a g e n c y ' s i n t e r p r e t a t i o n o f i t s own r e g u l a t i o n must s t a n d i f i t i s r e a s o n a b l e , e v e n t h o u g h i t may n o t a p p e a r as r e a s o n a b l e some other Tillman, interpretation.'" 751 So. 2d 517, 518 Mobile ( A l a . C i v . App. F e r l i s i v. A l a b a m a M e d i c a i d A g e n c y , 481 C i v . App. Cnty. Pers. Bd. as v. 1999) (quoting So. 2d 400, 403 ( A l a . 1985)). In Wells Fargo, we p r o v i d e d the f o l l o w i n g background A l a b a m a t a x l a w as i t r e l a t e s t o t h e b a d - d e b t regulation: "Subject t o c e r t a i n e x c e p t i o n s not a p p l i c a b l e here, a s a l e s t a x i s l e v i e d on ' e v e r y p e r s o n , f i r m , o r c o r p o r a t i o n , ... e n g a g e d o r c o n t i n u i n g w i t h i n t h i s s t a t e , i n the b u s i n e s s of s e l l i n g at r e t a i l any t a n g i b l e p e r s o n a l p r o p e r t y whatsoever ' Ala. Code 1975, § 4 0 - 2 3 - 2 ( 1 ) . Those p e r s o n s o r e n t i t i e s who meet the definition in § 40-23-2(1) are considered 'taxpayers.' § 40-23-1(a)(7) (defining taxpayer f o r purposes o f t h e s e c t i o n as '[a]ny p e r s o n l i a b l e f o r t a x e s h e r e u n d e r ' ) . T a x p a y e r s must be l i c e n s e d , § 40-23-6, and must pay t h e s a l e s t a x due on t h e i r g r o s s r e c e i p t s m o n t h l y . § 40-23-7(a); b u t see § 4 0 - 2 3 - 7 ( d ) ( p e r m i t t i n g q u a r t e r l y r e p o r t s f o r t h o s e whose a v e r a g e s a l e s - t a x l i a b i l i t y i s u n d e r $200 p e r m o n t h ) . I n a d d i t i o n , a t a x p a y e r must keep r e c o r d s of i t s 'gross s a l e s , gross proceeds of s a l e s , and g r o s s r e c e i p t s o r g r o s s r e c e i p t s of s a l e s ' and any o t h e r r e c o r d s n e c e s s a r y t o compute 21 of 2100715 t h e amount o f s a l e s t a x due. § 40-23-9. The s a l e s t a x due on c a s h s a l e s i s t o be computed and r e m i t t e d m o n t h l y , § 4 0 - 2 3 - 7 ( a ) , w h i l e t h e s a l e s t a x due on c r e d i t s a l e s i s t o be computed on e a c h i n s t a l l m e n t p a i d to the taxpayer. § 40-23-8. According to § 40-23-8, ' i n no e v e n t s h a l l t h e g r o s s p r o c e e d s o f c r e d i t s a l e s be i n c l u d e d i n t h e measure o f t h e t a x t o be p a i d u n t i l c o l l e c t i o n s o f s u c h c r e d i t s a l e s s h a l l have b e e n made.' " B e c a u s e on some c r e d i t s a l e s t a x p a y e r s were r e m i t t i n g t h e s a l e s t a x , w h i c h was l a t e r d i s c o v e r e d n o t t o be due b e c a u s e a p o r t i o n o f t h e p u r c h a s e p r i c e was deemed t o be u n c o l l e c t i b l e , t h e D e p a r t m e n t p r o m u l g a t e d an a d m i n i s t r a t i v e r e g u l a t i o n t h a t w o u l d a l l o w a r e t a i l e r to seek a r e f u n d o f , or take a c r e d i t on a s u b s e q u e n t s a l e s - t a x r e p o r t f o r , t h o s e s a l e s t a x e s p a i d on c e r t a i n q u a l i f y i n g u n c o l l e c t i b l e accounts. A l a . Admin. Code (Dep't o f R e v e n u e ) , r . [810]-6-4-.01." 19 So. 3d a t 894-95. Regulation 810-6-4-.01, provides, i n relevant the bad-debt regulation, part: "(1) The t e r m 'bad d e b t o r u n c o l l e c t i b l e a c c o u n t ' as u s e d i n t h i s r u l e s h a l l mean any p o r t i o n o f t h e s a l e s p r i c e of a t a x a b l e item which the retailer cannot c o l l e c t . Bad d e b t s i n c l u d e , b u t a r e not l i m i t e d to, worthless checks, worthless c r e d i t card p a y m e n t s , and u n c o l l e c t i b l e c r e d i t a c c o u n t s . Bad d e b t s , f o r s a l e s and use t a x p u r p o s e s , do not i n c l u d e f i n a n c e c h a r g e s , i n t e r e s t , o r any other nontaxable charges a s s o c i a t e d w i t h the original s a l e s c o n t r a c t , or expenses i n c u r r e d i n attempting t o c o l l e c t any d e b t , d e b t s s o l d o r a s s i g n e d t o t h i r d p a r t i e s f o r c o l l e c t i o n , or repossessed p r o p e r t y . II 22 2100715 "(3) The t e r m ' c r e d i t s a l e ' s h a l l i n c l u d e a l l s a l e s i n which t h e terms o f t h e s a l e p r o v i d e f o r d e f e r r e d payments o f t h e p u r c h a s e p r i c e . Credit sales include installment sales, conditional sales c o n t r a c t s , and r e v o l v i n g c r e d i t a c c o u n t s . "(4) S e c t i o n s 40-23-8 a n d 4 0 - 2 3 - 6 8 ( e ) , Code o f A l a . 1975, r e q u i r e t h a t any p e r s o n t a x a b l e u n d e r t h e l a w h a v i n g c a s h a n d c r e d i t s a l e s may r e p o r t t h e c a s h s a l e s , and t h e r e t a i l e r s h a l l i n c l u d e i n each r e p o r t a l l c r e d i t c o l l e c t i o n s made d u r i n g t h e p r e c e d i n g t a x r e p o r t i n g p e r i o d a n d s h a l l p a y t h e t a x e s due on t h e cash s a l e s and t h e c r e d i t c o l l e c t i o n s a t t h e time o f f i l i n g t h e t a x r e p o r t , b u t i n no e v e n t s h a l l t h e g r o s s p r o c e e d s o f c r e d i t s a l e s be i n c l u d e d i n t h e measure o f t a x t o be p a i d u n t i l c o l l e c t i o n s o f t h e c r e d i t s a l e s have b e e n made. "(5) I n t h e e v e n t a r e t a i l e r r e p o r t s a n d p a y s t h e s a l e s o r u s e t a x on c r e d i t a c c o u n t s w h i c h a r e l a t e r d e t e r m i n e d t o be u n c o l l e c t i b l e , t h e r e t a i l e r may ... o b t a i n a r e f u n d f o r any t a x p a i d w i t h r e s p e c t t o t h e t a x a b l e amount o f t h e u n p a i d b a l a n c e due on t h e u n c o l l e c t i b l e c r e d i t accounts w i t h i n three years f o l l o w i n g t h e d a t e on w h i c h t h e a c c o u n t s were c h a r g e d o f f as u n c o l l e c t i b l e f o r f e d e r a l income t a x purposes. "(6) I f a r e t a i l e r r e c o v e r s i n w h o l e , o r i n p a r t , amounts p r e v i o u s l y c l a i m e d as b a d d e b t c r e d i t s o r r e f u n d s , t h e amount c o l l e c t e d s h a l l be i n c l u d e d i n the f i r s t t a x r e p o r t f i l e d a f t e r t h e c o l l e c t i o n occurred. ( S e c t i o n s 40-23-8 a n d 4 0 - 2 3 - 6 8 ( e ) ) " On a p p e a l , not meet t h e r e q u i r e m e n t s seek a r e f u n d does t h e D e p a r t m e n t c o n t e n d s t h a t Home Depot does of sales not extend under tax. t h e bad-debt I t argues that to credit-card transactions 23 regulation to the regulation like those a t 2100715 i s s u e i n t h i s case b u t t h a t i t a p p l i e s o n l y t o r e t a i l e r s t h a t extended c r e d i t d i r e c t l y t o t h e i r customers. argues t h a t , because The D e p a r t m e n t Home Depot d i d n o t e x t e n d c r e d i t t o i t s customers who u t i l i z e d defaulted on t h e i r o b l i g a t i o n s t o t h e f i n a n c e bad-debt refund t h e PLCC program and s u b s e q u e n t l y companies, t h e r e g u l a t i o n does n o t p e r m i t Home Depot t o o b t a i n t h e i t requests. Home Depot r e s p o n d s that t o be e n t i t l e d t o a r e f u n d o f s a l e s t a x u n d e r t h e r e g u l a t i o n , a r e t a i l e r n e e d o n l y show t h a t it reported and p a i d sales t a x on c r e d i t l a t e r d e t e r m i n e d t o be u n c o l l e c t i b l e . accounts that I t argues t h a t i t has met t h a t s t a n d a r d i n t h e p r e s e n t c a s e b e c a u s e paid sales t a x on t h e p u r c h a s e s f i n a n c e d by the finance respect as i t s customers i t r e p o r t e d and made on s a l e s companies and i t sought a r e f u n d with t o t h o s e p u r c h a s e s t h a t were s u b s e q u e n t l y w r i t t e n o f f bad debt after t h e customers' d e t e r m i n e d t o be u n c o l l e c t i b l e . plain were language of the regulation credit accounts were Home Depot a s s e r t s t h a t t h e does n o t r e q u i r e that the r e t a i l e r be t h e e n t i t y t h a t e x t e n d e d c r e d i t t o t h e p u r c h a s e r . According t o Home Depot, i ti s the r e t a i l e r ' s status t a x p a y e r , n o t as a c r e d i t o r , as a that allows a r e t a i l e r to obtain 24 2100715 a refund of sales Given regulation 3d this tax paid court's to obligation t o construe t h e bad-debt i n f a v o r o f t h e D e p a r t m e n t , s e e W e l l s F a r g o , 19 So. a t 894, a s w e l l owes on b a d d e b t . the regulations, as t h e s u b s t a n t i a l Department's deference interpretation this of court i t s own s e e M o b i l e C o u n t y P e r s . B d . , 751 So. 2 d a t 518, we c o n c l u d e t h a t t h e Department's i n t e r p r e t a t i o n o f t h e b a d - debt regulation i s correct. first sentence of subsection "bad debt sales or uncollectible price collect. of a taxable In situations third-party financing, to the r e t a i l e r As t h e Department (1) o f t h e r e g u l a t i o n account" item like of the the r e t a i l e r cannot that the present case, t h e bad debt a t i s s u e and i s n o t a p o r t i o n regard t o a l l the purchases g i v i n g defines as t h e p o r t i o n rise involving does n o t r e l a t e of the sales t a x a b l e item t h a t t h e r e t a i l e r cannot c o l l e c t . issue, notes, the price of a Instead, with t o t h e bad debt a t Home Depot was n o t owed a n y amount o f money customers, because f r o n t by t h e finance Home Depot regulation i t had been p a i d by i t s f o r t h o s e p u r c h a s e s up companies. argues that subsection (1) o f t h e b a d - d e b t does n o t l i m i t b a d d e b t s t o t h o s e i n c u r r e d 25 o n l y by 2100715 r e t a i l e r s because t h a t s u b s e c t i o n card payments" Depot fails payments within the d e f i n i t i o n t o demonstrate, at issue includes "worthless however, i n the present credit o f "bad debt." that case Home the credit-card were "worthless." Indeed, a t t h e time o f each s a l e a t i s s u e i n the p r e s e n t Home Depot r e c e i v e d for t h e items full being payment f r o m t h e f i n a n c e purchased; such case, companies a transaction hardly i n v o l v e s a " w o r t h l e s s payment" f r o m t h e f i n a n c e c o m p a n i e s . our view, t o c o n s t i t u t e a " w o r t h l e s s payment made to the r e t a i l e r w o r t h l e s s , much l i k e a w o r t h l e s s c r e d i t c a r d payment," t h e must have, i n fact, not The s i t u a t i o n involve "worthless been c h e c k payment ( a l s o i n c l u d e d w i t h i n t h e d e f i n i t i o n o f "bad debt" i n s u b s e c t i o n regulation). In i n the present (1) o f t h e case s i m p l y does payments" as c o n t e m p l a t e d by t h e b a d - debt r e g u l a t i o n . Subsection (3) o f t h e b a d - d e b t r e g u l a t i o n d e f i n e s "credit s a l e " as i n c l u d i n g " a l l s a l e s i n w h i c h t h e terms o f t h e s a l e provide f o r d e f e r r e d payments o f t h e p u r c h a s e p r i c e . " present case, its t h e " t e r m s o f t h e s a l e " b e t w e e n Home Depot a n d customers d i d n o t "provide purchase In the price." Instead, f o r d e f e r r e d payments o f t h e Home D e p o t was p a i d 26 the entire 2100715 purchase p r i c e p l u s s a l e s t a x , l e s s a s e r v i c e fee, a t the of each s a l e . not sentence "credit sales." We r e c o g n i z e , (3) t o i n c l u d e , c r e d i t accounts," which, did as Home Depot t h e term " c r e d i t s a l e " i s d e f i n e d of subsection "revolving the Thus, a s t o Home Depot, t h e s a l e s a t i s s u e constitute argues, that time i n t h e second among o t h e r things, Home Depot a s s e r t s , a r e types o f accounts a t issue i n t h e present case. However, as d i s c u s s e d , we c o n s t r u e t h e f i r s t s e n t e n c e o f s u b s e c t i o n (3) as e x c l u d i n g from t h e scope o f t h e d e f i n i t i o n those s a l e s i n which the r e t a i l e r i s p a i d f o r the purchase a t the time o f t h e s a l e , whether by the p u r c h a s e r o r by a f i n a n c e the company. " r e v o l v i n g c r e d i t accounts" l i s t e d i n t h e second sentence of s u b s e c t i o n (3) n e c e s s a r i l y r e f e r t o a c c o u n t s owned b y t h e r e t a i l e r , n o t t o t h o s e owned b y a t h i r d - p a r t y f i n a n c e Finally, subsection due bad Thus, subsection debt (6) o f t h e b a d - d e b t r e g u l a t i o n , (1), r e f e r s t o a r e t a i l e r ' s i na credit sale. at issue company. This subsection i s debt owned like c o l l e c t i o n o f amounts again implies by t h e r e t a i l e r that the itself because, i n s i t u a t i o n s i n v o l v i n g t h e t h i r d - p a r t y f i n a n c i n g o f purchases from a retailer, p o s i t i o n t o "recover[] a retailer would ... amounts p r e v i o u s l y 27 n o t be i n a c l a i m e d as b a d 2100715 debt c r e d i t s or refunds." the Instead, i n such s i t u a t i o n s , f i n a n c e company w o u l d be i n s u c h a p o s i t i o n . Reading regulation bad-debt a l l of together, these we subsections of the conclude that subsection r e g u l a t i o n , which provides for a bad debt circumstances not that credit the various clearly envision i s not paid, that, that of not sales apply in the r e t a i l e r i s Instead, "[w]hen r e a d paragraphs t o t h e c u s t o m e r and own account does case, (5) o f t h e charged o f f charged o f f the bad debt. the ALJ's c o n c l u s i o n i n context, regulation purposes, w h e r e , as i n t h e p r e s e n t the e n t i t y agree w i t h and f o r income-tax bad-debt refund t a x e s p a i d on c r e d i t s a l e s t h a t a r e s u b s e q u e n t l y as only i n the the r e t a i l e r we together [bad-debt] must extend t h e a c c o u n t , and t h a t i f t h e the r e t a i l e r must be the party that d e d u c t s t h e d e b t as u n c o l l e c t i b l e . " Our c o n c l u s i o n as t o t h e a p p r o p r i a t e bad-debt r e g u l a t i o n comports w i t h courts of t h e i r jurisdictions' example, i n In re Sales 198 P.3d 902 (Okla. t h e c o n s t r u c t i o n by bad-debt-refund Tax C l a i m C i v . App. c o n s t r u c t i o n of the For f o r R e f u n d o f Home D e p o t , 2008), the Court A p p e a l s o f Oklahoma was a s k e d t o c o n s t r u e , u n d e r 28 laws. other of Civil circumstances 2100715 v i r t u a l l y i d e n t i c a l to those of the p r e s e n t case, a statute (Okla. S t a t . t i t . 68, § 1366) t h a t read, tax-refund in pertinent part: " ' T a x e s p a i d on g r o s s r e c e i p t s r e p r e s e n t e d by a c c o u n t s r e c e i v a b l e w h i c h , on o r a f t e r December 31, 1990, a r e f o u n d t o be w o r t h l e s s o r u n c o l l e c t i b l e and t h a t a r e e l i g i b l e t o be c l a i m e d ... as a d e d u c t i o n p u r s u a n t t o S e c t i o n 166 o f t h e I n t e r n a l Revenue Code ... may be c r e d i t e d upon s u b s e q u e n t r e p o r t s and r e m i t t a n c e s of the tax l e v i e d i n t h i s a r t i c l e , i n a c c o r d a n c e w i t h t h e r u l e s and r e g u l a t i o n s o f t h e Tax Commission. If such accounts are thereafter c o l l e c t e d , t h e same s h a l l be r e p o r t e d and t h e t a x s h a l l be p a i d upon t h e amount so c o l l e c t e d . ' " 198 P.3d statute a t 903. as we regulation. The c o u r t gave t h e same c o n s t r u c t i o n t o presently give Specifically, to the i t held Department's that a this bad-debt retailer, to be e n t i t l e d t o a r e f u n d o f s a l e s t a x u n d e r t h e s t a t u t e , must have b e e n t h e e n t i t y t h a t d e d u c t e d t h e bad d e b t on i t s income-tax returns: "[The taxpayer] c o u l d not s a t i s f y i t s burden of p r o v i n g a r i g h t t o a r e f u n d of s a l e s t a x under t h a t s t a t u t e . S e c t i o n 1366 i m p l i c i t l y r e q u i r e s t h e owner o f t h e bad d e b t a c c o u n t t o be t h e e n t i t y a l l o w e d t h e d e d u c t i o n where i t a l s o r e q u i r e s t h e owner t o r e p o r t s u b s e q u e n t c o l l e c t i o n s o f bad debt accounts as income." 198 P.3d I n c . v. at 904 State (emphasis added). Dep't o f Revenue, 151 29 See a l s o Home D e p o t Wash. App. 909, 922, USA, 215 2100715 P.3d 222, 228-29 (2009) (construing s t a t u t e u n d e r s i m i l a r f a c t s and the tax r e f u n d requirement claimant, on similar tax-refund that, "[a]lthough concluding s t a t u t e a t i s s u e does n o t e x p l i c i t l y c o n t a i n that bad analysis of debts be related deductible federal demonstrates t h a t the p a r t y seeking one a h o l d i n g t h e bad and the state refund tax made"). construction of the bad-debt r e g u l a t i o n f o l l o w s l o g i c a l l y from t h i s ("the i n Wells credit the t o whom r e p a y m e n t F u r t h e r m o r e , o u r c o n c l u s i o n as t o t h e p r o p e r decision laws t h e d e d u c t i o n must be d e b t as w e l l as t h e one s u c h a d e b t w o u l d be by a Fargo. In companies") that financed case, the several sales r e t a i l e r s o f a number o f d i f f e r e n t i t e m s . The court's companies by multiple i t e m s were s o l d on c r e d i t p u r s u a n t t o i n s t a l l m e n t s a l e s c o n t r a c t s e n t e r e d into b e t w e e n t h e r e t a i l e r s and t h e i r c u s t o m e r s . then assigned The retailers the c o n t r a c t s t o the c r e d i t companies i n exchange f o r payment f r o m t h e c r e d i t c o m p a n i e s o f t h e e n t i r e amount o f purchase p l u s a p p l i c a b l e s a l e s t a x , a f t e r which the remitted number o f the the s a l e s tax c o l l e c t e d to the customers installment failed sales t o pay contracts, 30 the retailers Department. for their After purchases credit the a under companies, 2100715 pursuant to amount o f the sales bad-debt tax Department d e n i e d that denial refunds. On and The regulation, t h e y had the paid refunds. awarded the sought on The those this argument t h a t the court c r e d i t companies rejected the of contracts. circuit Department a p p e a l e d t o t h i s appeal, refunds court the the The reversed requested court. credit assignment of r i g h t s under the companies' installment s a l e s c o n t r a c t s t o t h e c r e d i t c o m p a n i e s i n c l u d e d an a s s i g n m e n t t o them o f any r i g h t s t h e r e t a i l e r s w o u l d have had pursuant to the bad-debt r e g u l a t i o n . at 897-99. subject the Instead, we to assignment. right amenable t o to a refund assignment, W e l l s F a r g o , 19 concluded that Id. We under such to refunds So. s u c h r i g h t s were not a l s o c o n c l u d e d t h a t , even i f the bad-debt a r i g h t d i d not regulation exist in case: "In each t r a n s a c t i o n , at the time of the a s s i g n m e n t o f t h e i n s t a l l m e n t s a l e s c o n t r a c t and a l l the r i g h t s thereunder, the r e t a i l e r r e c e i v e d the f u l l p u r c h a s e p r i c e and a l l t h e s a l e s t a x due on t h e r e t a i l sale. No o t h e r p a y m e n t s were due t o t h e r e t a i l e r f r o m t h e p u r c h a s e r o r t h e c r e d i t company. The retail sale, as f a r as the retailer was c o n c e r n e d , was c o n c l u d e d . The r e t a i l e r was r e q u i r e d t o r e p o r t t h e p r o c e e d s f r o m t h a t r e t a i l s a l e and t o compute and r e m i t t h e s a l e s t a x due on t h a t r e t a i l s a l e on i t s m o n t h l y s a l e s - t a x r e p o r t . §§ 40-23-7 & -8. The r e t a i l e r , a t t h e t i m e o f t h e a s s i g n m e n t o f 31 3d was that 2100715 t h e i n s t a l l m e n t s a l e s c o n t r a c t , d i d n o t have t h e p o t e n t i a l f o r a n d w o u l d n e v e r have t h e p o t e n t i a l f o r an u n c o l l e c t i b l e a c c o u n t a r i s i n g f r o m t h a t r e p o r t e d r e t a i l s a l e . The s a l e s t a x c o l l e c t e d on t h a t r e t a i l s a l e a n d r e m i t t e d t o t h e D e p a r t m e n t was n o t an o v e r p a y m e n t o f t a x , b e c a u s e s a l e s t a x was due on t h e e n t i r e p u r c h a s e p r i c e when i t was p a i d t o t h e retailer. §§ 40-23-7 & - 8 . The r e t a i l e r ' s ' r i g h t ' t o a r e f u n d u n d e r t h e 'bad d e b t ' r e g u l a t i o n was n o t a c o n t i n g e n t r i g h t t h a t c o u l d be a s s i g n e d ; i t was a r i g h t t h a t n e v e r came i n t o b e i n g a n d w o u l d n e v e r come i n t o b e i n g . The r e t a i l e r w o u l d n e v e r q u a l i f y f o r a r e f u n d u n d e r t h e 'bad d e b t ' r e g u l a t i o n b e c a u s e i t d i d n o t p a y s a l e s t a x on i n s t a l l m e n t s due on a c r e d i t account; instead, i t received the e n t i r e purchase p r i c e a t the time of the r e t a i l s a l e , which r e q u i r e d t h e payment o f a l l s a l e s t a x due a t t h a t time. See D e p a r t m e n t o f Revenue v . Bank o f A m e r i c a , N.A., 752 So. 2 d [637] a t 642 [ ( F l a . D i s t . C t . App. 2 00 0)]; In re P e t i t i o n of General Elec. C a p i t a l C o r p . (DTA No. 816785, Dec. 27, 2001) (N.Y. Tax App. T r i b . 2001) (not p u b l i s h e d ) ; s e e a l s o 29 R i c h a r d A. L o r d , W i l l i s t o n on C o n t r a c t s § 74:1, a t 206 ( 4 t h e d . 2003) ( s t a t i n g , i n a d i s c u s s i o n o f a s s i g n m e n t s o f a c h o s e i n a c t i o n , t h a t 'the a s s i g n e e a c q u i r e s r i g h t s s i m i l a r t o those o f t h e a s s i g n o r , and i s p u t i n t h e same p o s i t i o n w i t h r e f e r e n c e t o t h o s e r i g h t s as t h a t i n which the assignor stood a t the time of the assignment')." Id. a t 899. Home Depot s e e k s t o d i s t i n g u i s h W e l l s F a r g o on t h e b a s i s that, unlike the r e t a i l e r s i n t h a t c a s e , Home Depot " d i d n o t receive the f u l l purchase p r i c e plus sales tax f o r [the] transactions." immaterial distinction. This, in our view, The A L J r e j e c t e d a n y n o t i o n 32 i s an that PLCC Home D e p o t ' s 2100715 payment of a therefore, service fee t o the finance companies (and, i t s r e c e i p t o f l e s s than the e n t i r e purchase p r i c e of t h e f i n a n c e d purchases) c o n f e r r e d seek a r e f u n d on Home Depot a r i g h t t o under t h e bad-debt r e g u l a t i o n : "Home Depot a r g u e s i n t h e a l t e r n a t i v e t h a t i t i s e n t i t l e d t o a r e f u n d b e c a u s e a b a d d e b t component was i n c l u d e d i n t h e f e e s i t p a i d t o t h e [ f i n a n c e companies], and consequently, i t suffered the economic l o s s f o r t h e bad debts. Home Depot c l a i m s t h a t i t ' f u l l y compensated [the f i n a n c e companies] f o r w o r t h l e s s (Home Depot c a r d ) a c c o u n t s t h r o u g h t h e s e r v i c e f e e and other c o n s i d e r a t i o n . ' Home D e p o t ' s P o s t - H e a r i n g B r i e f a t 21. I d i s a g r e e . "The a g r e e m e n t s b e t w e e n Home Depot a n d t h e [finance companies] included only the fee p e r c e n t a g e s , a n d d i d n o t s p e c i f y how t h e p e r c e n t a g e s were d e t e r m i n e d . Several witnesses testified, however, t h a t t h e p a r t i e s e s t i m a t e d and c o n s i d e r e d t h e e x p e c t e d b a d d e b t amounts when n e g o t i a t i n g t h e f e e amounts. B u t t h e r e i s no e v i d e n c e s h o w i n g t h e amount o r what p a r t o f t h e f e e s c o n s t i t u t e d a b a d d e b t component. C o n s e q u e n t l y , t h e r e i s no p r o o f t h a t t h e f e e s i n c l u d e d a b a d d e b t component t h a t f u l l y compensated t h e [ f i n a n c e companies] f o r t h e a c t u a l bad debts. " "Even i f i t i s assumed t h a t t h e f e e s i n c l u d e d a bad d e b t component e q u a l t o t h e e s t i m a t e d b a d d e b t amounts, w h i c h , a s d i s c u s s e d , c a n n o t be e s t a b l i s h e d , the bad debts a c t u a l l y i n c u r r e d by t h e [ f i n a n c e c o m p a n i e s ] may have b e e n (or c o u l d be i n t h e f u t u r e ) much g r e a t e r t h a n a n t i c i p a t e d . F o r e x a m p l e , assume t h a t t h e [ f i n a n c e companies] e s t i m a t e d t h a t d u r i n g a g i v e n p e r i o d x amount o f t h e a c c o u n t s w o u l d become u n c o l l e c t i b l e . Assume f u r t h e r t h a t i t i n c l u d e d t h a t 33 2100715 x amount a s a b a d d e b t component i n t h e f e e s . Due t o an u n e x p e c t e d e c o n o m i c d o w n t u r n , h o w e v e r , t h e a c t u a l b a d d e b t amount was x x x . A p p l y i n g Home D e p o t ' s r a t i o n a l e , i t w o u l d be e n t i t l e d t o a s a l e s t a x r e f u n d b a s e d on x x x amount, e v e n t h o u g h i t h a d p a i d t h e [ f i n a n c e c o m p a n i e s ] a b a d d e b t component i n t h e f e e , i . e . , h a d s u f f e r e d an e c o n o m i c l o s s , o f o n l y x amount. C l e a r l y , t h a t c a n n o t be a l l o w e d . "Home Depot asserts that t h e fees fully compensated t h e [ f i n a n c e companies] f o r t h e bad debts because t h e [ f i n a n c e companies] 'covered a l l i t s costs and earned a p r o f i t during t h e p e r i o d i n issue.' Home D e p o t ' s P o s t - H e a r i n g B r i e f a t 2 1 . A s discussed, h o w e v e r , t h e f e e s r e c e i v e d f r o m Home Depot were only one s o u r c e o f income f o r the [ f i n a n c e c o m p a n i e s ] . They a l s o r e c e i v e d s u b s t a n t i a l interest income and late fees from their cardholders. Consequently, the fact that the [ f i n a n c e c o m p a n i e s ] made a p r o f i t d u r i n g t h e s u b j e c t p e r i o d does n o t e s t a b l i s h , o r e v e n s u g g e s t , t h a t Home Depot f u l l y c o m p e n s a t e d t h e [ f i n a n c e c o m p a n i e s ] for the expected bad debts. In short, there i s n o t h i n g p r o v i n g t h e amount o f t h e b a d d e b t component included i n the fees, and n o t h i n g tying that undeterminable amount t o t h e a c t u a l b a d d e b t s i n c u r r e d by t h e [finance companies]." (Footnote omitted.) there i s simply payment of compensated We a g r e e w i t h theALJ's conclusion no e v i d e n c e d e m o n s t r a t i n g t h a t the service the finance fee to companies the s u b s t a n t i a l p a r t , f o r t h e i r bad-debt l o s s e s . agree w i t h Home Depot that i t s failure Home D e p o t ' s finance in full, that companies o r even i n Thus, we c a n n o t to receive the f u l l p u r c h a s e p r i c e f o r i t s s a l e s u n d e r t h e PLCC p r o g r a m b e c a u s e o f 34 2100715 its payment of a service fee t o the finance companies s u f f i c i e n t l y d i s t i n g u i s h e s t h i s c a s e f r o m W e l l s F a r g o s o as t o confer on Home Depot an e n t i t l e m e n t t o a refund of sales tax t h a t , i n W e l l s F a r g o , we s a i d d i d n o t e x i s t u n d e r t h e b a d - d e b t regulation. Home Depot c o n t e n d s t h a t t h e d e n i a l o f a r e f u n d c a s e b a s e d on t h e D e p a r t m e n t ' s c o n s t r u c t i o n i n this o f t h e bad-debt r e g u l a t i o n would v i o l a t e t h e Equal P r o t e c t i o n Clause o f t h e United States Constitution, Specifically, i t argues t h a t U.S. C o n s t . there amend. X I V , § 1. i s no r a t i o n a l b a s i s f o r d r a w i n g a d i s t i n c t i o n under t h e bad-debt r e g u l a t i o n between a retailer that, that like finances Home Depot, i t s own c r e d i t - c a r d p r o g r a m enters into agreements companies f o r t h o s e companies t o p r o v i d e a n d one with other the f i n a n c i n g f o r i t s c u s t o m e r s ' p u r c h a s e s . The D e p a r t m e n t r e s p o n d s t h a t Home Depot is not s i m i l a r l y situated to retailers customers' purchases and t h a t there that finance a r e sound p o l i c y r e a s o n s f o r d i s t i n g u i s h i n g b e t w e e n s u c h r e t a i l e r s a n d Home Depot regard As their with t o t h e a p p l i c a t i o n o f t h e bad-debt r e g u l a t i o n . to equal-protection supreme c o u r t challenges has w r i t t e n t h a t 35 "[a] p a r t y t o t a x laws, challenging our at a x 2100715 statute the as u n c o n s t i t u t i o n a l l y d i s c r i m i n a t o r y discrimination unreasonable reasonable embodied a n d must basis negate factor that statute offered is as a State v. 730 So. 2d 107, 111 ( A l a . 1998) . arguing that a state taxation statute v i o l a t e s the Equal Protection heavy burden." We every taxing supporting the c l a s s i f i c a t i o n . " A l a b a m a Mun. I n s . C o r p . , "Taxpayers i n the must show Clause of the Federal Constitution carry a I d . a t 112. agree with t h e Department Home retailers that similarly situated administer t h e i r own c r e d i t p r o g r a m s . Home Depot r e c e i v e d t o other that Unlike Depot finance such not and retailers, the purchase p r i c e a t the time were made u n d e r t h e PLCC p r o g r a m , is purchases n o t i n increments over time. M o r e o v e r , b e c a u s e Home Depot was n o t r e q u i r e d t o r e f u n d t o t h e finance its companies t h e purchase p r i c e f o r purchases customers companies, whatsoever. under t h e PLCC p r o g r a m d i d n o t p a y t h e f i n a n c e Home Depot b o r e no r i s k o f i t s c u s t o m e r s ' failed purchases. defaults S i m p l y p u t , Home Depot was n o t a f f e c t e d d i s c e r n i b l e way a t t h e t i m e i t s c u s t o m e r s program f o r which t o pay Thus, the finance we c a n n o t conclude 36 utilizing i n any t h e PLCC companies for their that, regard t o with 2100715 s a l e s - t a x r e f u n d s , t h e d i f f e r i n g t r e a t m e n t o f Home Depot a n d o t h e r r e t a i l e r s t h a t p r o v i d e t h e i r own f i n a n c i n g f o r p u r c h a s e s i s i r r a t i o n a l o r i n a n y way u n f a i r . I n t h i s r e g a r d , we a g r e e w i t h t h e Supreme C o u r t o f O h i o , w h i c h equal-protection argument in a case r e j e c t e d Home involving Depot's t h e same c i r c u m s t a n c e s as t h o s e i n t h e p r e s e n t case: " F i r s t , Home Depot c o n t e n d s t h a t t h e g u a r a n t e e o f e q u a l p r o t e c t i o n i n t h e U n t i e d S t a t e s and Ohio C o n s t i t u t i o n s r e q u i r e t h a t i t be t r e a t e d t h e same as t h o s e v e n d o r s who t h e m s e l v e s e x t e n d c r e d i t t o t h e i r customers. Under t h e s t a t u t e , t h e l a t t e r q u a l i f y f o r t h e bad-debt d e d u c t i o n . " T h i s argument f a i l s b e c a u s e v e n d o r s who e x t e n d c r e d i t themselves a r e not, w i t h r e s p e c t t o bad debt, s i m i l a r l y s i t u a t e d t o v e n d o r s l i k e Home Depot, who h i r e f i n a n c i a l i n s t i t u t i o n s t o extend c r e d i t . That i s so because, as a l r e a d y d i s c u s s e d , v e n d o r s t h a t e x t e n d c r e d i t t h e m s e l v e s assume t h e r i s k o f l o s s along with t h e o t h e r burdens o f l e n d i n g and collecting. As t h e t e s t i m o n y i n this case e s t a b l i s h e s , Home Depot a v o i d e d s u c h b u r d e n s when i t h i r e d GE t o i s s u e p r i v a t e - l a b e l c r e d i t c a r d s . Q u i t e s i m p l y , t h e r e i s no r e q u i r e m e n t o f e q u a l t r e a t m e n t of d i f f e r e n t l y s i t u a t e d persons." Home Depot USA, I n c . v . L e v i n , N.E.2d 630, 634 ( 2 0 0 9 ) . 121 O h i o S t . 3 d 482, 486, See a l s o 905 Home Depot USA, I n c . v . S t a t e Dep't o f Revenue, 151 Wash App. a t 926-29, 215 P.3d a t 230-32 ( r e j e c t i n g Home D e p o t ' s a case i n v o l v i n g equal-protection challengei n t h e same i s s u e 37 as t h e p r e s e n t c a s e ) ; Inre 2100715 Sales Tax C l a i m f o r Refund o f Home Depot, 198 P.3d a t 905 (same); a n d Home Depot U.S.A., I n c . v . I n d i a n a Dep't o f S t a t e Revenue, 891 N.E.2d 187, 191 n.7 ( I n d . Home Depot construction Process States also contends o f t h e bad-debt Clause U.S. C o n s t . g u a r a n t y o f due p r o c e s s c o n t a i n e d Ala. Const. 1901, A r t . "allowing I , § 6. t h e Department that the regulation of the Fourteenth Constitution, Tax C t . 2008) Department's violates Amendment (same). t h e Due t o the United amend. X I V , § 1, a n d t h e i n t h e Alabama C o n s t i t u t i o n , Specifically, to retain sales i t argues t a x payments that on d e f a u l t e d t r a n s a c t i o n s , a n d d e n y i n g t h e a g g r i e v e d r e t a i l e r any relief, i ne f f e c t transforms the State's sales tax into a tax on consumer d e f a u l t s " a n d t h a t , " [ w ] h e n a consumer d e f a u l t s on a c r e d i t card basis account, there i s no l e g i t i m a t e rationale or f o r i m p o s i n g a t a x on t h e r e t a i l e r w i t h r e s p e c t to that transaction." State they tax provisions are a r b i t r a r y Elkhorn do n o t v i o l a t e due p r o c e s s and i r r a t i o n a l . See U s e r y M i n i n g Co., 428 U.S. 1, 15 (1976) established that legislative Acts v. unless Turner ( " I t i s b y now w e l l adjusting t h e burdens and b e n e f i t s o f e c o n o m i c l i f e come t o t h e C o u r t w i t h a p r e s u m p t i o n 38 2100715 of constitutionality, complaining and that t h e burden i s on one o f a due p r o c e s s v i o l a t i o n t o e s t a b l i s h t h a t t h e l e g i s l a t u r e has a c t e d i n an a r b i t r a r y a n d i r r a t i o n a l way."). 3 We c o n c l u d e t h a t t h e D e p a r t m e n t ' s i n t e r p r e t a t i o n o f t h e b a d debt regulation Particularly, risk front than arbitrary above challenge, c r e d i t accounts of loss position neither as s t a t e d equal-protection establish is with we regard find f o rtheir on t h o s e accounts retailers that, like nor t o Home that that and bear t h e a r e i n a much Home Depot, different a r e p a i d up customers b e a r a n y r i s k o f d e f a u l t on t h o s e p u r c h a s e s . a refund Depot's retailers customers f o r a l l p u r c h a s e s made b y t h e i r the Department t o p r o v i d e irrational. a n d do n o t The r e f u s a l o f o f s a l e s taxes p a i d by t h e l a t t e r group o f r e t a i l e r s i s imminently reasonable, given those r e t a i l e r s d i d not bear the r i s k of l o s s with that regard t o c r e d i t payments a n d t h a t t h e amount t h o s e r e t a i l e r s were p a i d for thepurchases, i n c l u d i n g a p p l i c a b l e sales taxes, does n o t diminish on t h e i r on t h e b a s i s of their customers' default N e i t h e r p a r t y contends t h a t t h e due-process guaranty o f the Alabama C o n s t i t u t i o n c a l l s f o r a d i f f e r e n t a n a l y s i s i n t h e p r e s e n t c a s e t h a n t h e a n a l y s i s c a l l e d f o r u n d e r t h e Due P r o c e s s C l a u s e o f t h e F o u r t e e n t h Amendment t o t h e U n i t e d States C o n s t i t u t i o n . 3 39 2100715 credit accounts. court to reject We n o t e Home that Depot's virtually identical facts. this court i s not the only due-process challenge under See, e.g., Home Depot USA, I n c . v . L e v i n , 121 O h i o S t . 3 d a t 487, 905 N.E.2d a t 634-35; a n d Home Depot USA, I n c . v . S t a t e D e p ' t o f Revenue, 151 Wash App. a t 929, 215 P.3d a t 232. Finally, Home Depot a r g u e s t h a t t o deny a r e f u n d i n t h i s case w o u l d r e s u l t i n u n j u s t e n r i c h m e n t t o t h e S t a t e o f Alabama b e c a u s e , a c c o r d i n g t o Home D e p o t , i t p a i d s a l e s t a x e s on goods for which, disagree. in this ultimately, i t s customers failed t o pay. We The t r a n s a c t i o n s g i v i n g r i s e t o t h e r e f u n d p e t i t i o n c a s e c o n s t i t u t e d c o m p l e t e d s a l e s w i t h r e g a r d t o Home Depot. Home D e p o t ' s purchase, customers r e c e i v e d a n d Home Depot customers' failure was p a i d the object of the f o r the purchase. t o pay t h e f i n a n c i n g The companies f o r t h e i r p u r c h a s e s d i d n o t i n a n y way change t h e f a c t t h a t Home Depot was paid f o r the purchases, a n d t h e r e i s no e v i d e n c e i n t h e r e c o r d i n d i c a t i n g t h a t Home Depot r e f u n d e d t h e p u r c h a s e p r i c e t o t h e f i n a n c i n g companies and r e c o v e r e d t h e items f o r w h i c h the p u r c h a s e r f a i l e d t o pay. Thus, i f a n y t h i n g , a w a r d i n g Home Depot t h e r e f u n d t h a t i t s e e k s i n t h i s 40 case would r e s u l t i n 2100715 u n j u s t e n r i c h m e n t t o Home D e p o t . B a s e d on t h e f o r e g o i n g , we c o n c l u d e t h a t t h e D e p a r t m e n t ' s b a d - d e b t r e g u l a t i o n d i d n o t p r o v i d e a b a s i s on w h i c h t o g r a n t Home D e p o t ' s p e t i t i o n we r e v e r s e f o r a r e f u n d o f s a l e s t a x . As a r e s u l t , the c i r c u i t court's judgment, a n d we remand t h e c a u s e f o r t h e e n t r y o f a judgment a f f i r m i n g t h e D e p a r t m e n t ' s d e n i a l o f Home D e p o t ' s r e f u n d petition. REVERSED AND REMANDED WITH INSTRUCTIONS. P i t t m a n , B r y a n , Thomas, a n d Moore, 41 JJ., concur.

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