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Aline Bae Tanning, Inc. v. Nebraska Department of Revenue

Supreme Court of Nebraska

May 20, 2016

ALINE BAE TANNING, INC., A NEBRASKA CORPORATION, ET AL., APPELLANTS AND CROSS-APPELLEES,
v.
NEBRASKA DEPARTMENT OF REVENUE, AN AGENCY OF THE STATE OF NEBRASKA, AND KIMBERLY K. CONROY, TAX COMMISSIONER, APPELLEES AND CROSS-APPELLANTS. JB & ASSOCIATES, INC., DOING BUSINESS AS SUNTAN CITY, A NEBRASKA CORPORATION, APPELLANT,
v.
NEBRASKA DEPARTMENT OF REVENUE, AN AGENCY OF THE STATE OF NEBRASKA, AND KIMBERLY K. CONROY, TAX COMMISSIONER, APPELLEE

          Appeals from the District Court for Lancaster County: ANDREW R. JACOBSEN, Judge.

         Steve Grasz and Henry L. Wiedrich, of Husch Blackwell, L.L.P., for appellants.

         Douglas J. Peterson, Attorney General, and L. Jay Bartel for appellees.

         HEAVICAN, C.J., WRIGHT, CONNOLLY, MILLER-LERMAN, CASSEL, AND KELCH, JJ., AND IRWIN, JUDGE. IRWIN, Judge, not participating in the decision. STACY, J., not participating.

          OPINION

          [293 Neb. 624] Heavican, C.J.

         NATURE OF CASE

         Several indoor tanning salon businesses appeal from the district court's decision affirming the denial of tax refund claims by the Tax Commissioner (Commissioner). The salons assert that the Nebraska Department of Revenue (Department) improperly collected more than $1.7 million in admissions taxes from the salons. The Commissioner reasoned that the salons were not the taxpayers and, therefore, found that the salons lacked standing to claim refunds. The district court affirmed the Commissioner's decision. The salons appealed, and we granted their petition to bypass. The Department and Commissioner cross-appeal, claiming the district court lacked subject matter jurisdiction over some of the claims. We affirm.

         BACKGROUND

         In May 2013, Aline Bae Tanning, Inc.; Ashley Lynn's, Inc.; Maple 110 Tanning, L.L.C.; RSB LLC; [293 Neb. 625] Tanning Horizons, L.L.C.; and Wilson-Bonn, L.L.C. (collectively Ashley Lynn's) filed a total of 15 claims for tax refunds with the Department. The Ashley Lynn's salons claimed refunds of admissions taxes on gross receipts totaling more than $1 million. In December 2013, JB & Associates, Inc., doing business as Suntan City (JB), filed a claim with the Department for a refund of over $600,000 in admissions tax.

         Though not entirely clear, it appears that in November 2012, the Attorney General's office had issued an opinion that Neb. Rev. Stat. § 77-2703(1) (Reissue 2009) did not authorize subjecting tanning salons to admissions taxes. The Department has since repealed the regulation listing tanning salons among the businesses subject to the tax[1] and has ceased collecting the tax. The Ashley Lynn's and JB salons (collectively salons) argue that as the Attorney General had opined, they are not subject to the admissions tax and, as such, are entitled to a refund of the tax paid.

         The Commissioner disallowed the Ashley Lynn's salons' claims on October 7, 2013, and disallowed JB's claims on December 31. The Commissioner sent all of the salons nearly identical letters separately denying each claim. The letters explained that " [a] refund of a tax improperly or erroneously collected can only be issued by the State directly to the purchaser who paid the tax." (Emphasis in original.)

         The salons sought judicial review in both cases, naming both the Department and the Commissioner as defendants. In November 2013, the Ashley Lynn's salons filed one petition for all 15 of the Commissioner's disallowances. Each of the 15 disallowance notice letters were attached to the petition. JB filed a petition for judicial review in January 2014. The district court consolidated the two cases and heard arguments in January 2015.

          [293 Neb. 626] Neb. Rev. Stat. § 77-2708(2)(b) (Reissue 2009) permits " the person who made the overpayment" to file a claim for a refund of erroneously or illegally collected taxes. The district court below held that under § 77-2708 and our opinions in Governors of Ak-Sar-Ben v. Department of Rev. (Ak-Sar-Ben)[2] and Anthony, Inc. v. City of Omaha,[3] the salons were not the " person[s]" who made the overpayments and thus lacked standing to claim refunds.

         The salons jointly appealed and petitioned for bypass, which this court granted. The Department and Commissioner cross-appealed. We affirm because the salons lack standing.

         ASSIGNMENTS OF ERROR

         The salons assign, restated, that the district court erred by (1) finding the salons had no standing to claim refunds and (2) failing to reach the merits and find that the salons were entitled to refunds.

         The Department and Commissioner cross-appeal, assigning that the district court erred in finding it had subject matter jurisdiction over the claims by the Ashley Lynn's salons.

         STANDARD OF REVIEW

          A judgment or final order rendered by a district court in a judicial review pursuant to the Administrative Procedure Act (APA) may be reversed, vacated, or modified by an appellate court for errors appearing on the record. When reviewing an order of a district court under the APA for errors appearing on the record, the inquiry is whether the decision conforms to the law, is supported by competent evidence, and is not arbitrary, capricious, or unreasonable.[4]

          [293 Neb. 627] [2] On review, an appellate court determines the meaning of a statute independently of the determination ...


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