Opinion
No. 1-704 / 01-0240.
Filed January 28, 2002.
Appeal from the Iowa District Court for Warren County, DALE B. HAGEN, Judge.
Petitioner appeals the district court ruling which affirmed on judicial review a sales/use tax assessment issued by the Iowa Department of Revenue and Finance. AFFIRMED.
Rod Powell of Powell Law Firm, P.C., Norwalk, for appellant.
Thomas J. Miller, Attorney General, Harry M. Griger, Special Assistant Attorney General, and Marcia Mason, Assistant Attorney General, for appellee.
Considered by SACKETT, C.J., and MAHAN and HECHT, JJ.
David Houston appeals the district court ruling which affirmed on judicial review a sales/use tax assessment issued by the Iowa Department of Revenue and Finance. We affirm.
I. Factual Background and Proceedings. Houston owns and operates a transportation business known as Unique Courtesy Services. Houston's business consists primarily of airport shuttle services as well as pre-arranged transportation contracts with various large companies in the Des Moines area. Houston also subcontracts to local charter companies as circumstances require. Houston's transportation fleet includes one seven-passenger van, two fifteen-passenger vans, two minibuses with seating capacity of twenty-two, and one stretch limousine. Houston additionally has four subcontractors who operate seven-passenger vans under his business name.
On October 13, 1997, Houston received a Notice of Assessment of sales/use tax from the Iowa Department of Revenue and Finance (Department) in the amount of $43,060.00 for transportation services provided by his seven-passenger vans pursuant to Iowa Code section 422.43(11) (1997) and Iowa Administrative Code rule 701-26.80 (1997), which provide for sales/use tax on limousine services. The assessment was based on total gross receipts for the period of April 1, 1992 through June 30, 1997, after Houston failed to provide documentation as to the amount of gross receipts attributable to each vehicle used in his business. The assessment was not based on revenue generated from use of Houston's stretch limousine which was purchased after the audit date.
On December 15, 1997, Houston filed a protest to the notice of assessment pursuant to Iowa Administrative Code rule 701-7.9(17A), contending his business was not a limousine service subject to sales/use tax. On October 13, 1998, a hearing was held before the Department. A proposed decision was entered on August 3, 1999, concluding Houston was providing a taxable limousine service and affirming the Department's assessment of tax. On Houston's petition for judicial review, the district court agreed with the Department, concluding that (1) Houston's transportation service was a limousine service subject to sales/use tax and (2) the tax assessment was properly based on total gross receipts.
On appeal, Houston contends his transportation service does not qualify as a limousine service under Iowa Code section 422.43(11) and Iowa Administrative Code rule 701-26.80, and thus the district court erred by finding he was subject to the tax. In the alternative, Houston contends the district court erred by affirming the amount of the Department's assessment, which was based on his total gross receipts for the period in question, when it was undisputed that some of the receipts were exempt from the tax.
II. Standard of Review. Our review of agency action is governed by the Administrative Procedure Act as amended. Iowa Code § 17A.19. When a district court renders a decision pursuant to Iowa Code section 17A.19, we determine whether the district court correctly applied the law. Jackson County Public Hospital v. Public Employment Relations Bd., 280 N.W.2d 426, 429-30 (Iowa 1979). To make that determination, we apply the standards of section 17A.19(8) to the agency action to assess whether this court's conclusions are the same as those of the district court. Id. The agency action must be supported by substantial evidence in the record. Koehler Elec. v. Wills, 608 N.W.2d 1, 3 (Iowa 2000). Substantial evidence is that which would allow a reasonable mind to reach the same conclusion as the decision maker. Id.
III. Discussion. Houston contends the district court erred in characterizing his transportation service as a taxable limousine service under Iowa Administrative Code rule 701-26.80. In particular, Houston contends his seven passenger vans are not sufficiently similar to a limousine to warrant imposition of the limousine service sales/use tax. Houston further argues his service is a unique taxicab or bus service and therefore exempt from sales/use tax under Iowa Code section 422.45(2).
Limousine service, including driver, is a taxable service enumerated in Iowa Code section 422.43(11). Although the Iowa Code does not define the term "limousine service," it is administratively defined as "one which provides a large or luxurious automobile with a driver by prearrangement. A limousine driver does not cruise the streets soliciting or accepting business, so a taxi service is not a limousine service." Iowa Admin. Code R. 701-26.80.
We find the Department's characterization of Houston's business as a limousine service is supported by substantial evidence. As the district court correctly noted, Iowa Administrative Code rule 701-26.80 does not provide that limousines must be luxurious because they are statutorily defined as large or luxurious automobiles. Houston's seven-passenger vans fall within the ambit of the rule since they are large automobiles.
Furthermore, the district court correctly noted a substantial portion of Houston's business involves pre-arranged trips on a contractual basis. Houston's vans do not cruise the streets soliciting customers, but generally require twenty-four hours notice. Although Houston contends he solicits business at the airport, like a taxicab solicits business on the street, and notes he is authorized to do so under a City of Des Moines permit, we adopt as our own the district court's conclusion that Houston did not ordinarily do so. Moreover, Houston's vans are not equipped with taximeters requiring collection of fees directly from passengers and customers are sent bills after the service is provided.
Alternatively, Houston contends the district court erred in ruling he was properly assessed sales tax based on total gross receipts. Houston points out a portion of his services were provided to the government and therefore are exempt from sales/use tax. Houston further argues a portion of his receipts are not subject to sales/use tax because the Department conceded his fifteen-passenger vans and minibuses do not qualify as limousines.
The district court correctly noted the burden of proving entitlement to an exemption is on the taxpayer. Southern Sioux City Rural Water Sys., Inc. v. Iowa Dep't of Rev., 383 N.W.2d 585, 587 (Iowa 1986). Despite numerous Department requests for records, Houston failed to provide any financial documentation during the audit process, during informal protest resolution procedures, or during formal discovery. Furthermore, the taxpayer has the burden of demonstrating the amount of exempt receipts. See Iowa Code § 421.60(6)(c) ("burden of proof shall be upon the taxpayer who challenges the assessment"). Houston provided no documentation as to the amount of gross receipts attributable to each vehicle, claiming the records were voluminous and inconclusive on the issue of which vans were used for specific trips. We conclude the district court correctly affirmed the Department's determination that Houston failed to meet his burden of proving the amount of his claimed exemption. The auditor is authorized to determine the amount of tax from such information as the department is able to obtain. Iowa Code § 422.54(2). The district court concluded the Department did not err in calculating Houston's tax on total gross receipts because Houston failed to meet his burden of proving his entitlement to the claimed exemption. We find the district court's reasoning persuasive and adopt it as our own.
Although we have not addressed in this opinion all of the issues raised and arguments made by Houston, we have carefully considered them. Those we have not addressed lack merit, were not preserved, or are moot. Accordingly, we affirm the decision of the district court in its entirety.
AFFIRMED.