Opinion
No. 78-486
Decided March 29, 1979.
Taxpayer appealed the district court's affirmance of the decision of the Department of Revenue that he owed use taxes, interest, and a 10 percent penalty.
Affirmed
1. TAXATION — Resale Exemption — Use Tax — Regular Course of Business — Requires Demonstration — Commercial Continuity or Consistency. The resale exemption from the use tax requires that the purchase and resale be in the regular course of business and this involves a requirement that commercial continuity or consistency be demonstrated by the taxpayer; accordingly, where taxpayer claimed to be exempted from paying use taxes on the in-state storage of gold and silver coins which he had purchased out of state, but, except for four isolated purchases, the record contained no evidence demonstrative of this regular course of business requirement, the trial court correctly ruled that the taxpayer had not met his burden of proving his entitlement to a use tax exemption.
2. Ten Percent Penalty — Negligent Disregard — Rules and Regulations — Applicable — Use Taxes. The statutory 10% penalty imposable upon taxpayer for "negligence or intentional disregard of rules and regulations" is applicable with regard to the payment of use taxes as well as sales taxes.
Appeal from the District Court of the County of Boulder, Honorable Richard W. Dana, Judge.
Chrisman Bynum, P.C., Richard Bland, for plaintiff-appellant.
J. D. MacFarlane, Attorney General, David W. Robbins, Deputy Attorney General, Edward G. Donovan, Special Assistant Attorney General, Stephen H. Kaplan, Assistant Attorney General, for defendant-appellee.
Defendant, Department of Revenue, determined that plaintiff, Charles E. Rose, owed $370.80 in use taxes, plus interest, based on plaintiff's in-state storage of gold and silver coins which he purchased out of state. The Department also imposed a 50% penalty based on its finding that plaintiff had acted fraudulently with "intent to evade the tax" within the meaning of § 39-26-115, C.R.S. 1973. The district court affirmed the decision of the Department with respect to plaintiff's tax liability, but reversed the 50% penalty, imposing instead a 10% penalty based on plaintiff's "negligence or intentional disregard of authorized rules and regulations." Section 39-26-115, C.R.S. 1973. Plaintiff appeals and we affirm. The Department has not cross-appealed the district court's reduction in the penalty.
The parties stipulated to the following facts. In 1974 and 1975, plaintiff made four purchases of gold and silver coins from Monex International, Inc., a large west coast coin dealer. Plaintiff purchased the coins as an investment in their precious metal content.
Monex advised plaintiff that he could avoid paying Colorado sales tax by taking delivery of the coins in Wyoming. Plaintiff therefore directed Monex to deliver the coins in Wyoming, accepted delivery there, and brought the coins back to Colorado, where they have since remained in storage. The market price for the coins has not risen as plaintiff had hoped, and he has not displayed the coins, offered them for sale, or advertised them for sale. Plaintiff did not have a retail sales license during the relevant period, nor did he pay any inventory, sales, or use tax on the coins or list them in any business schedules.
Plaintiff claims that he is exempted from paying use taxes on the coins by § 39-26-203(1)(b), C.R.S. 1973. We disagree. That section provides that the use tax statute shall not apply:
"To the storage, use, or consumption of any tangible personal property purchased for resale in this state, either in its original form or as an ingredient of a manufactured or compounded product, in the regular course of a business."
[1] Citing Bedford v. Colorado Fuel Iron Corp., 102 Colo. 538, 81 P.2d 752 (1938), plaintiff argues that his purchase of the coins for investment purposes only must be considered, as a matter of law, to be covered by this resale exemption. However, plaintiff ignores that portion of the exemption which requires the purchase and resale to be "in the regular course of a business." We agree with the trial court that this phrase involves a requirement of commercial continuity or consistency which the plaintiff here has failed to demonstrate. See Colorado College v. Heckers, 33 Colo. App. 219, 517 P.2d 419 (1973). Apart from four isolated purchases, there is nothing in the record which would support a finding that plaintiff is in the regular business of purchasing coins for resale. Under these circumstances, the trial court correctly ruled that plaintiff failed to meet his burden of proving that he was within the resale exemption. See Security Life Accident Co. v. Heckers, 177 Colo. 455, 495 P.2d 225 (1972).
We realize that some states have given a blanket sales and use tax exemption to bulk investment purchases of monetized bullion. See, e.g., Cal. Rev. Tax Code § 6355 (West) (1979 Cum. Supp.). However, no such blanket exemption exists in Colorado.
[2] Plaintiff also argues that the trial court erred in imposing the 10% penalty under § 39-26-115, C.R.S. 1973, on the grounds that 1) the penalty statute applies only to sales taxes under part I of Article 26 and not to use taxes under part II, and 2) plaintiff was not negligent. However, Western Electric Co. v. Weed, 185 Colo. 340, 524 P.2d 1369 (1974), which involved the non-payment of use as well as sales taxes, is dispositive of plaintiff's first contention. Moreover, the evidence here supports the trial court's conclusion that plaintiff's non-payment constituted negligence within the meaning of the penalty provision. Western Electric, supra.
Judgment affirmed.
JUDGE COYTE and JUDGE KELLY concur.