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The U.S. Supreme Court announced Oct. 5 that it would not hear a case in which the Delaware Supreme Court ruled Ford Motor Company must pay taxes on vehicles it ships to the state.
By denying Ford’s petition, the high court solidified a decision rendered by the state court in December 2008.
In 2003, Ford claimed it was entitled to a $3 million refund of the wholesaler’s gross receipts taxes it paid on cars and trucks sold to Ford dealerships in Delaware.
The automaker argued that since title for the vehicles transferred to the dealers when they left the factory, the vehicles were not sold to the dealers in Delaware and therefore the tax did not apply.
But a state tax appeals panel, and then the New Castle County Superior Court, held that the sale of a vehicle to a dealership is not complete until the vehicle arrives on the lot.
Delaware Director of Revenue Patrick Carter said Ford was in compliance with state law prior to the lawsuit and had paid the taxes it owed, but he’s not sure if the company stopped paying gross receipts taxes after the lawsuit was filed.
Carter said he also doesn’t know if Ford has altered its shipping and distribution procedures in any way that would change how the tax is applied.
“What normally happens with a company in litigation is, if they had not been filing, they end up getting their information together and file that, if they don’t the state will give them notice,” he said.
“We have to go back and see if they changed their model. We’ll give them some time.”
Nicholas A. Mirkay, a tax law professor at Widener Law School in Wilmington, said it’s no surprise that Delaware held Ford’s feet to the fire on the tax matter.
“I think, overall, state taxing agencies are being as aggressive as they can to ensure that any business contact in a state establishes the requisite contact for taxation,” he said. “The way in which they pursued this is not at all uncommon.”
Carter also said the decision may affect other companies with situations similar to Ford’s, especially those that have not been paying their wholesaler’s tax.
“There may be a number of businesses on the sidelines just waiting for this ruling, and if they find that the U.S. Supreme Court denies the case, they say ‘Uh oh, we’re in the same boat and we owe the tax we haven’t been reporting,’” he said.
The U.S. Supreme Court announced Oct. 5 that it would not hear a case in which the Delaware Supreme Court ruled Ford Motor Company must pay taxes on vehicles it ships to the state.
By denying Ford’s petition, the high court solidified a decision rendered by the state court in December 2008.
In 2003, Ford claimed it was entitled to a $3 million refund of the wholesaler’s gross receipts taxes it paid on cars and trucks sold to Ford dealerships in Delaware.
The automaker argued that since title for the vehicles transferred to the dealers when they left the factory, the vehicles were not sold to the dealers in Delaware and therefore the tax did not apply.
But a state tax appeals panel, and then the New Castle County Superior Court, held that the sale of a vehicle to a dealership is not complete until the vehicle arrives on the lot.
Delaware Director of Revenue Patrick Carter said Ford was in compliance with state law prior to the lawsuit and had paid the taxes it owed, but he’s not sure if the company stopped paying gross receipts taxes after the lawsuit was filed.
Carter said he also doesn’t know if Ford has altered its shipping and distribution procedures in any way that would change how the tax is applied.
“What normally happens with a company in litigation is, if they had not been filing, they end up getting their information together and file that, if they don’t the state will give them notice,” he said.
“We have to go back and see if they changed their model. We’ll give them some time.”
Nicholas A. Mirkay, a tax law professor at Widener Law School in Wilmington, said it’s no surprise that Delaware held Ford’s feet to the fire on the tax matter.
“I think, overall, state taxing agencies are being as aggressive as they can to ensure that any business contact in a state establishes the requisite contact for taxation,” he said. “The way in which they pursued this is not at all uncommon.”
Carter also said the decision may affect other companies with situations similar to Ford’s, especially those that have not been paying their wholesaler’s tax.
“There may be a number of businesses on the sidelines just waiting for this ruling, and if they find that the U.S. Supreme Court denies the case, they say ‘Uh oh, we’re in the same boat and we owe the tax we haven’t been reporting,’” he said.
The decision also could affect how much revenue the state will reap from its tax amnesty period, which ends Oct. 30. If those businesses with an eye on the Ford case are smart, they’ll pay now, Carter said.
“It will be interesting at the end of this month, when Oct. 30 comes around, if there are other companies with large liabilities that say, ‘Let’s pay this off rather than fighting it in the court system,’” he said. “There may be other firms with other issues, and instead of litigating those issues, they might decide to take amnesty, instead of paying all those legal bills.”
Email Doug Denison at doug.denison@doverpost.com.
