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Barfield v. Diamond Construction Inc.

Court of Appeals of Louisiana, Second Circuit

April 5, 2017


         Appealed from the Twenty-Sixth Judicial District Court for the Parish of Webster, Louisiana Lower Court Case No. 73592-A Honorable Michael O. Craig, Judge

          ROBERT E. SHADOIN Counsel for Appellant

          KEOGH, COX & WILSON, LTD. Counsel for Appellee By: Christopher K. Jones Virginia J. McLin Brent J. Cobb

          DEPT. OF REVENUE, STATE OF LOUISIANA By: Antonio C. Ferachi

          Before LOLLEY, PITMAN, and GARRETT, JJ.

          PITMAN, J.

         Defendant Diamond Construction, Incorporated ("DCI"), appeals a judgment of the trial court granting a motion for summary judgment filed by Tim Barfield, former Secretary of the Louisiana Department of Revenue ("the State"), which found that DCI was liable to the State for past due sales and use taxes for the taxable period of January 2009 through December 2011 ("the taxable period"), plus applicable penalties, interest and attorney fees. For the following reasons, we affirm the judgment of the trial court.


         A petition for collection of taxes was filed by the State against DCI alleging that it had transacted business in Louisiana, earned income attributable to Louisiana and subjected itself to Louisiana tax law. The State alleged that, during the taxable period, DCI was required to collect and remit to it Louisiana sales and use taxes. The State conducted a sales and use tax examination and audit for the taxable period and found that DCI was a construction business that performed various services and sold equipment, which resulted in taxable transactions, including, but not limited to, welding, fabrication, repairs, rentals, gate guards and hauling. DCI was not registered for Louisiana general sales tax during the taxable period.

         The State alleged that there were taxable sales for which DCI failed to charge Louisiana state sales tax and that it had failed to provide any information demonstrating that the additional sales or the customer were exempt from the imposition of sales tax. These taxes were calculated to be $364, 045.59. The State further alleged that, while DCI did charge some sales taxes to customers, it failed to remit those taxes. It calculated that claim to be in the amount of $9, 773.77, plus interest and penalties. It claimed that the facts alleged were prima facie true and constituted a prima facie case and that the burden of proof to establish anything to the contrary rested on DCI in accordance with La. R.S. 13:5034, et seq. The total of these taxes is $373, 819.26.

         The State also alleged that it had correctly computed the tax, penalty and interest due from DCI in accordance with the statutes and regulations, and the audit revealed that sales tax was due and owing. It claimed the total amount due was $524, 786.47, which included sales tax in the amount of $373, 819.26, interest calculated to December 31, 2013, in the amount of $78, 726.27, and a penalty amount of $72, 240.84.

         DCI filed a general denial to all of the allegations and only responded to paragraph 16 of the State's petition, which alleged that it had issued a notice of proposed tax due to DCI on June 28, 2013. DCI's response to that allegation was that it had forwarded the information to its accountant, Marty Estep, who was to review the documents, gather information and report his findings to DCI; however, Mr. Estep never complied with the request.

         On April 25, 2015, the State filed a motion for summary judgment, arguing there were no genuine issues of material fact remaining for trial since DCI was unable to carry its burden of disproving the allegations in its petition for collection of taxes, which were treated as prima facie true under La. R.S. 13:5034, et seq. It claimed that DCI, in its answer and discovery responses, had admitted all material facts required for a judgment to be rendered in the State's favor, and it attached its interrogatories, requests for production and DCI's responses. It also attached its request for admission of fact; the second set of requests for admission of fact; the affidavit of Kenneth Foster, revenue agent for the State, who performed the audit; and several other attachments.

         DCI filed a memorandum in opposition to the motion for summary judgment and claimed that genuine issues of material fact remained which made summary judgment inappropriate. The memorandum indicated that it filed affidavits from two of its largest customers, La-Tex Pump and Transportation (by owner Thomas Smith) and Nabors Industries, Ltd. (by drilling superintendent Michael Olivo), which provided sworn testimony that DCI performed services for each of them during the years 2009, 2010 and 2011 and that a portion of that work was performed in Texas. DCI also filed affidavits of its president, Robert Haynes, and financial advisor, Don G. McCullough, who was specifically contracted to work on the case.

         Both the Haynes and McCullough affidavits assert that a portion of the taxes sought by the State were improper because the services being taxed were 1) performed outside of Louisiana's taxable jurisdiction; 2) the services were outside of the scope of Louisiana's sales and use tax; 3) many invoices subject to the audit were sent to customers outside of Louisiana; 4) a quality investigation thereof would undoubtedly show that a large portion of those invoices were requesting payment for services performed out-of-state; ...

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