FINANCE AND ADMINISTRATION CABINET, DEPARTMENT OF REVENUE, COMMONWEALTH OF KENTUCKY v. MORRIS BEYER AND LINDA BEYER
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RENDERED:
MARCH 10, 2006; 2:00 P.M.
ORDERED PUBLISHED: MAY 26, 2006; 10:00 A.M.
Commonwealth Of Kentucky
Court of Appeals
NO. 2004-CA-002598-DG
FINANCE AND ADMINISTRATION CABINET,
DEPARTMENT OF REVENUE, COMMONWEALTH
OF KENTUCKY
v.
APPELLANT
ON DISCRETIONARY REVIEW FROM MCCRACKEN CIRCUIT COURT
HONORABLE JEFFREY HINES, JUDGE
ACTION NO. 04-XX-00016
MORRIS BEYER AND LINDA BEYER
APPELLEES
OPINION
REVERSING
** ** ** ** **
BEFORE:
TACKETT, TAYLOR, AND VANMETER, JUDGES.
TAYLOR, JUDGE:
Finance and Administration Cabinet, Department
of Revenue, Commonwealth of Kentucky, (Finance Cabinet) brings
this appeal from a November 18, 2004, order of the McCracken
Circuit Court affirming a summary judgment of the McCracken
District Court which declared Kentucky Revised Statutes (KRS)
138.450(12)(a) and (f) unconstitutional as violative of the
equal protection clause of the Fourteenth Amendment of the
United States Constitution and Section 2 of the Kentucky
Constitution.
We reverse.
The facts of this appeal are rather straightforward
and were succinctly set forth by the district court in its order
granting summary judgment:
2. KRS 138.460 imposes a use tax on
the use in this state of every motor vehicle
(with exceptions not relevant to this
litigation) at the rate of six percent (6%)
of the “retail price” of the motor vehicle.
3. KRS 138.450(12)(a) defines “retail
price” for “new, dealer demonstrator,
previous model year motor vehicles and UDrive-It motor vehicles that have been
transferred within one hundred eighty (180)
days of being registered as a U-Drive-It and
that have less than five thousand (5,000)
miles” as the total consideration given at
the time of purchase or at a later date,
including any trade-in allowance.
4.
KRS 138.450(12)(f) defines “retail
price” for “used motor vehicles previously
registered in Kentucky that are sold in
Kentucky, and U-Drive-It motor vehicles that
are not transferred within one hundred
eighty (180) days of being registered as a
U-Drive-It or that have more than five
thousand (5,000) miles “as the total
consideration given, excluding any amount
allowed as a trade-in allowance by the
seller.
5.
Plaintiffs [Morris Beyer and Linda
Beyer] purchased a 1999 Ford F-350 on or
about October 23, 1998, and registered said
vehicle in a timely fashion on October 26,
1998. Plaintiffs [Morris Beyer and Linda
Beyer] paid under protest the motor vehicle
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usage tax pursuant to KRS 138.460 in the
amount of $2,126.25 based upon a “retail
price” for said vehicle of $35,437.00. The
“retail price” was determined by taking 90%
of the manufacturer’s suggested retail price
of $39,375.00 pursuant to KRS
138.450(12)(a)1.
6.
Plaintiffs [Morris Beyer and Linda
Beyer] paid for the 1999 Ford F-350 by
trading in a used vehicle valued at
$28,375.00 and paying cash to the dealer in
the amount of $11,000.00.
7. Plaintiffs [Morris Beyer and Linda
Beyer], as purchasers of the new 1999 Ford
F-350, paid $1,466.25 more usage tax than
they would have paid had they been able to
exclude the amount of their trade in vehicle
as a purchaser of a used vehicle would have
been permitted to do so.
8.
Plaintiffs [Morris Beyer and Linda
Beyer] also purchased a 2001 Freightliner
Model FL60 on or about October 5, 2000, and
registered said vehicle in a timely fashion
on October 12, 2000. Plaintiffs [Morris
Beyer and Linda Beyer] paid under protest
the motor vehicle usage tax pursuant to KRS
138.460 in the amount of $2,680.92 based
upon a “retail price” for said vehicle of
$44,682.00, the “total consideration given
excluding any trade-in allowance” pursuant
to KRS 138.450(12)(a).
9. Plaintiffs [Morris Beyer and Linda
Beyer] paid for the 2001 Freightliner by
trading in a used vehicle valued at
$27,000.00, less a loan payoff of $25,707.08
for a net trade-in of $1,292.92, and paying
cash to the dealer in the amount of
$7,389.08.
10. Plaintiffs [Morris Beyer and Linda
Beyer], as purchasers of the new 2001
Freightliner Model FL60, paid $1,620.00 more
usage tax than they would have paid had they
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been able to exclude the amount of their
trade in vehicle as a purchaser of a used
vehicle would have been permitted to do so.
On October 25, 2000, Morris Beyer and Linda Beyer
filed a complaint in the district court.
Therein, the Beyers
sought monetary damages and a declaration that KRS
138.450(12)(a) and (f) were unconstitutional as violative of the
equal protection clause of the Fourteenth Amendment of the
United States Constitution and Section 2 of the Kentucky
Constitution.
On September 10, 2004, the district court entered
summary judgment concluding that there were no genuine issues of
material fact and that KRS 138.450(12)(a) and (f) were
unconstitutional.
Specifically, the court found:
[T]he classifications of “new car purchaser”
and “used car purchaser” as established by
KRS 138.450(12)(a) and KRS 138.450(12)(f)
unreasonably and arbitrarily discriminated
between purchasers of new cars and
purchasers of used cars without there being
any legitimate governmental purpose in doing
so.
Further, the court believed there existed no rational basis for
making the distinction between new and used motor vehicles for
the purpose of the tax imposed by KRS 138.460.
Being
unsatisfied with the decision, the Finance Cabinet appealed to
the circuit court.
By order entered November 18, 2004, the
circuit court affirmed the summary judgment of the district
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court.
On December 17, 2004, the Finance Cabinet filed a motion
for discretionary review with the Court of Appeals.
P. (CR) 76.20.
Ky. R. Civ.
The Court granted the motion by order entered
February 14, 2005.
This review follows.
The Finance Cabinet contends the district court
committed error by determining that KRS 138.450(12)(a) and (f)
were unconstitutional.
The district court entered summary
judgment declaring KRS 138.450(12)(a) and (f) violative of the
equal protection clause of the Fourteenth Amendment of the
United States Constitution.
Summary judgment is proper where
there exist no material issues of fact and movant is entitled to
judgment as a matter of law.
CR 56; Steelvest, Inc. v.
Scansteel Service Center, Inc., 807 S.W.2d 476 (Ky. 1991).
In
this appeal, the material facts are undisputed and resolution
rests upon questions of law.
For the reasons hereinafter
elucidated, we are compelled to agree with the Finance Cabinet
and hold that the district court erred by declaring KRS
138.450(12)(a) and (f) unconstitutional.
Resolution of this appeal revolves around the
constitutionality of KRS 138.460(1) and KRS 138.450(12).
138.460(1) reads as follows:
A tax levied upon its retail price at the
rate of six percent (6%) shall be paid on
the use in this state of every motor
vehicle, except those exempted by KRS
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KRS
138.470, at the time and in the manner
provided in this section.
KRS 138.450(12)(a) and (f) provide, in part, as follows:
(a)
For new, dealer demonstrator,
previous model year motor vehicles
and U-Drive-It motor vehicles that
have been transferred within one
hundred eighty (180) days of being
registered as a U-Drive-It and
that have less than five thousand
(5,000) miles, "retail price"
shall be the total consideration
given at the time of purchase or
at a later date, including any
trade-in allowance as attested to
in a notarized affidavit. . . .
. . . .
(f)
For used motor vehicles previously
registered in Kentucky that are
sold in Kentucky, and U-Drive-It
motor vehicles that are not
transferred within one hundred
eighty (180) days of being
registered as a U-Drive-It or that
have more than five thousand
(5,000) miles, "retail price"
means the total consideration
given, excluding any amount
allowed as a trade-in allowance by
the seller. The trade-in allowance
shall be disclosed in the
notarized affidavit signed by the
buyer and the seller attesting to
the total consideration
given. . . .
To survive a constitutional attack upon equal
protection grounds, the classification between “used motor
vehicle” and “new motor vehicle” as created by KRS
138.450(12)(a) and (f) must be rationally related to a
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legitimate governmental interest.
The rational basis test has
been explained by the United States Supreme Court as follows:
The Equal Protection Clause of the
Fourteenth Amendment, § 1, commands that no
State shall "deny to any person within its
jurisdiction the equal protection of the
laws."
. . . .
[T]he Equal Protection Clause requires only
that the classification rationally further a
legitimate state interest.
. . . .
The appropriate standard of review is
whether the difference in treatment . . .
rationally furthers a legitimate state
interest. In general, the Equal Protection
Clause is satisfied so long as there is a
plausible policy reason for the
classification . . . .
Nordlinger v. Hahn, 505 U.S. 1, 10 (1992)(citations omitted).
Stated differently:
The equal protection analysis is not solely
concerned with the resulting effect of a
statutory provision. The relevant inquiry
under the equal protection analysis is
whether the classification (that is, the
difference in treatment) is rationally
related to a legitimate governmental
interest.
Commonwealth v. Meyers, 8 S.W.3d 58, 61 (Ky.App. 1999).
The Finance Cabinet offers myriad justifications for
the difference in treatment between a “used motor vehicle” and a
“new motor vehicle.”
Having reviewed those justifications, we
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view one as legitimate – the General Assembly intended to
stimulate the used car market in this Commonwealth.
By permitting the retail price of a used motor vehicle
to be setoff by the trade-in allowance, the legislature
effectively decreased the tax burden upon used vehicle
purchasers and thus, made the purchase of a used motor vehicle
more economically attractive.
By lowering the use tax upon a
used motor vehicle, the used car industry undoubtedly benefited
by a reduction in the total purchase price of a used car.
We
observe that economic growth is a legitimate governmental
interest.
Hence, we believe the difference in treatment between
a “used motor vehicle” and a “new motor vehicle,” as found in
KRS 138.450(12)(a) and (f), rationally furthers the goal of
stimulating the used car industry.
As there exists a legitimate
state interest rationally related to the difference in treatment
between a “used motor vehicle” and a “new motor vehicle,” we are
of the opinion that KRS 138.450(12)(a) and (f) do not violate
the equal protection clause of the Fourteenth Amendment of the
Unites States Constitution and the district court erred by so
concluding.
As KRS 138.450(12)(a) and (f) further a legitimate
governmental interest, we, likewise, conclude the distinction
between a new car and a used car for the purpose of taxation was
not an exercise of arbitrary power over property by the
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legislature.
Accordingly, we hold that KRS 138.450(12)(a) and
(f) do not violate Section 2 of the Kentucky Constitution.
We view the Finance Cabinet’s remaining arguments to
be without merit.1
For the foregoing reasons, the order of the McCracken
Circuit Court is reversed.
ALL CONCUR.
BRIEFS AND ORAL ARGUMENT FOR
APPELLANT:
BRIEF AND ORAL ARGUMENT FOR
APPELLEES:
Stephen G. Dickerson
Finance and Administration
Cabinet
Frankfort, Kentucky
J. Ronald Jackson
JACKSON & PAGE, PLLC
Paducah, Kentucky
1
Finance and Administration Cabinet, Department of Revenue, Commonwealth of
Kentucky, (Finance Cabinet) also argued that the McCracken District Court
lacked jurisdiction over this case. Upon consideration of Kentucky Revised
Statutes 138.500 coupled with the unique facts herein, we believe the
McCracken District Court was properly vested with subject matter jurisdiction
to hear this dispute. Likewise, the Finance Cabinet collects the usage tax
in McCracken County, and also would be subject to personal jurisdiction under
this statute in McCracken County.
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