        IN THE COURT OF APPEALS OF THE STATE OF MISSISSIPPI

                                NO. 2014-CA-01355-COA

NORTRAX SOUTH, INC.                                                         APPELLANT

v.

THORNHILL FORESTRY SERVICE, INC.                                              APPELLEE


DATE OF JUDGMENT:                          08/29/2014
TRIAL JUDGE:                               HON. ANTHONY ALAN MOZINGO
COURT FROM WHICH APPEALED:                 MARION COUNTY CIRCUIT COURT
ATTORNEYS FOR APPELLANT:                   JOHN THOMAS ROUSE
                                           M. BRENT HICKS
ATTORNEYS FOR APPELLEE:                    R. ANDREW FOXWORTH
                                           TERESA PRILLHART JOHNSON
NATURE OF THE CASE:                        CIVIL - OTHER
TRIAL COURT DISPOSITION:                   DEBT FOUND INVALID
DISPOSITION:                               REVERSED, RENDERED AND
                                           REMANDED: 02/16/2016
MOTION FOR REHEARING FILED:
MANDATE ISSUED:

       BEFORE LEE, C.J., FAIR AND WILSON, JJ.

       FAIR, J., FOR THE COURT:

¶1.    Nortrax South sold Thornhill Forestry Service nine bulldozers over the course of three

years. Nortrax collected three percent sales tax on the understanding that Thornhill was

eligible for the reduced rate then applicable to certain “equipment used in logging, pulpwood

operations or tree farming.” See Miss. Code Ann. § 27-65-17 (2008). Nortrax was later

audited by the Mississippi Department of Revenue, which determined that the sales to

Thornhill did not qualify for the reduced tax rate. According to the MDOR, although

Thornhill provided services to tree farmers and loggers, it was not itself a tree farmer or
logger and therefore was inelgible for the lower rate.

¶2.    Nortrax paid the difference – which, including interest, was about $92,000 – and then

filed suit in the circuit court to collect that amount from Thornhill. The suit was stayed while

Nortrax, in collaboration with Thornhill, appealed the MDOR’s decision through the

administrative remedies provided by statute. The ordinary, higher tax rate was affirmed by

the MDOR Board of Review. The second appeal, which would have been to the MDOR

Board of Tax Appeals, was inadvertently filed outside of the time allowed by statute, and the

appeal was dismissed for that reason.

¶3.    Nortrax then picked up its suit to collect the taxes it had paid on Thornhill’s behalf.

The case was tried to the court, with most of the facts being stipulated. The circuit court

found that both parties “agree that the Board of Review’s decision affirming the 7% tax is

incorrect, or at least inconsistent with the Commission’s practice toward Thornhill.” The

Commission’s decision therefore “may be erroneous or arbitrary” and, since it might have

been overturned had Nortrax prosecuted the appeal to the fullest extent, the question of the

validity of the debt to Nortrax was “left open.” The circuit court denied relief, and Nortrax

appeals. We reverse that decision, render a judgment in favor of Nortrax, and remand for the

circuit court to determine the amount of the judgment.

                                        DISCUSSION

¶4.    Under Mississippi law, the sales tax is imposed upon the seller. See Miss. Code Ann.

§ 27-65-17 (Supp. 2015). However, statute also obligates the seller to collect the sales tax


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from the purchaser at the time of the sale, “insofar as practicable.” See Miss. Code Ann. §

27-65-31 (Supp. 2015).

¶5.    In this case, Nortrax collected three percent of the purchase price at the time of sale

under the belief that Thornhill was eligble for a reduced rate. The MDOR subsequently

determined that Thornhill was not eligible for the reduced rate, which Nortrax appealed in

a proceeding to which Thornhill was not a party. That proceeding ended when Nortrax failed

to timely file an administrative appeal. Nortrax now seeks to collect the additional taxes

from Thornhill.

¶6.    According to Thornhill, the question of the correct tax rate remained unlitigated as

between it and Nortrax. Thornhill frames the issue as one of collateral estoppel – it contends

that it cannot be bound by a decision to which it was not a party, and thus that the circuit

court was free to relitigate the issue of tax liability for the transaction. The trial court seems

to have denied relief because Nortrax contested the tax liability on Thornhill’s behalf, up to

that point that it inadvertently terminated the MDOR appeals process.

¶7.    Mississippi law is quite clear on the issue of liability:

       [Statutory law] distinctly provides that, whatever the contract as to the sales
       price, the amount of the tax due by the seller shall be added to the sales price
       of the property, and that the seller shall collect the amount from the buyer, and
       this sales tax collection by the seller from the buyer should be in addition to
       the sales price. When the parties to this contract made it, they made it in
       contemplation of this section of law being enforced, and they knew or are now
       charged with knowledge that the sales price would have added thereto the two
       per cent sales tax thereon, and that this sales tax should be in addition to the
       sales price agreed to by the parties. This statute, in this language, created,
       when the statute became effective, the relationship of debtor and creditor as to

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         the sales tax. We do not think anyone could dispute that.

Woodrich v. St. Catherine Gravel Co., 188 Miss. 417, 425-26, 195 So. 307, 309-10 (1940)

The court continued:

         We have already determined that the applicable statutes created the
         relationship of debtor and creditor on the facts of this case, between the buyer
         and the seller. That gave rise to a cause of action – whether it was two cents
         or two million cents. The amount was immaterial. The debt became fixed
         when the purchaser proceeded to pay the agreed sales price, and if it is true
         that the seller was required to demand payment of the sales tax at the time he
         took payment in full or partial payment of the sales price, and he did not then
         and there collect it, can any sane man say that the tax part of the debt was
         destroyed? Or, if perchance the seller violated Section 3 of Chapter 155 by
         failure or refusal to add to the sales price and collect the amount due by him
         on account of said tax, can anybody say that discharged or extinguished the
         debt which was super-imposed on the contract by the statute? We must
         emphatically reply in the negative. We think therefore, whether through
         mistake or carelessness, or want of care or design, the seller did not collect the
         sales tax, at the time provided by the statute, that tax became due and payable
         by the buyer to the seller, and that this is true notwithstanding the seller may
         have committed a misdemeanor by violating Section 1 of the Act. However,
         the buyer in this case sought to have the collection of the sales tax delayed in
         order that he might secure from the State Tax Commission a reduction of the
         two per cent sales tax to one-eighth per cent.

Id. at 427, 195 So. at 310; see also Ricks Lumber Co. v. Natchez Steel & Pipe Inc., 318 So.

2d 883, 887-888 (Miss. 1975); Viking Supply Corp. v. Mantee Dev. Corp., 218 So. 2d 887,

888 (Miss. 1969).

¶8.      It is clear that under the preceding authority, Thornhill agreed to the pay the tax that

was accessed to Nortrax – and the statute entrusts the determination of the amount to the

MDOR. See Miss. Code Ann. § 27-65-37 (Supp. 2015); Miss. Code Ann. § 27-77-5 (Supp.

2015).

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¶9.    Thornhill does not dispute that it owes sales tax, it just argues it cannot be bound to

the amount determined by the MDOR because it was not a party to the proceedings that

determined the tax owed. But the purchaser’s liability established in Woodrich was not so

limited, even though the amount of the tax was apparently disputed in that case. Moreover,

although we are sympathetic to Thornhill’s argument that it should have some right to litigate

the amount of tax it is ultimately responsible for, Thornhill’s assertion that it had no right to

participate as a party before the MDOR is supported only by perfunctory argument, and the

record reflects no actual attempt to intervene. Nor has Thornhill substantiated the suggestion

that it is entitled to relief because Nortrax voluntarily assumed a duty to litigate the tax

liability on its behalf.

¶10.   Under Woodrich, the liability of the purchaser is for the amount of the sales tax

imposed on the seller. The trial court erred as a matter of law in relitigating that issue. As

the facts are undisputed, we render judgment for Nortrax on the issue of the additional tax

and interest to the MDOR. We remand the case to the trial court to consider Northrax’s

claims for pre- and post-judgment interest.

¶11. THE JUDGMENT OF THE CIRCUIT COURT OF MARION COUNTY IS
REVERSED AND RENDERED, AND THIS CASE IS REMANDED FOR FURTHER
PROCEEDINGS CONSISTENT WITH THIS OPINION. ALL COSTS OF THIS
APPEAL ARE ASSESSED TO THE APPELLEE.

    LEE, C.J., IRVING AND GRIFFIS, P.JJ., BARNES, ISHEE AND JAMES, JJ.,
CONCUR. WILSON, J., CONCURS IN RESULT ONLY. CARLTON AND
GREENLEE, JJ., NOT PARTICIPATING.



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