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Court rules in state’s favor on tax refunds

MONTGOMERY – A state appeals court ruled in favor of the Alabama Department of Revenue in a sales tax refund case Friday that could have cost the state more than $30 million.

In a 5-0 decision, the Court of Civil Appeals rejected arguments by six credit companies seeking tax refunds.

Department spokeswoman Carla Snellgrove said the department was “very pleased” with the decision because this case and others like it in which similar credit companies were seeking refunds could have cost the state $30 million to $35 million.

The case involved Wells Fargo Financial Acceptance Alabama, DaimlerChrysler Services North America, Greenpoint Credit, America Honda Finance Corp., Wells Fargo Financial Alabama and Conseco Finance Corp.

They had financed the purchases of everything from jewelry to autos to mobile homes in Alabama, and the total amount they lent included the sales taxes on the purchases.

When some of the accounts became uncollectable and had to be written off, the credit companies sought refunds from the Revenue Department for the sales taxes paid on the purchases.

A Montgomery County circuit judge sided with the credit companies, but the Court of Civil Appeals reversed the decision.

The appeals court said the sales taxes were sent to the Revenue Department by the retailers who sold the cars, jewelry and mobile homes, not by the credit companies. Since the credit companies did not submit the tax payments, they had no standing as taxpayers to seek refunds, the court said in a decision written by Judge Terri Willingham Thomas.

The court also said the credit companies could not be assigned the rights of retailers.

David Otero, a Jacksonville, Fla., attorney who represented the companies, said Friday he had not yet seen the ruling and no decision had been made about whether to appeal to the Alabama Supreme Court.