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Qwest Corp. v. City of Northglenn

Court of Appeals of Colorado, Seventh Division

April 24, 2014

Qwest Corporation, Plaintiff-Appellant,
City of Northglenn, Colorado, a home rule city; and City of Thornton, Colorado, a home rule city, Defendants-Appellees

City and County of Denver District Court No. 12CV37. Honorable Ann B. Frick, Judge.


Larry H. McMillin, Denver, Colorado; Garlin Driscoll, LLC, David J. Driscoll, Jeffrey S. Rose, Louisville, Colorado, for Plaintiff-Appellant.

Hayes, Phillips, Hoffman & Carberry, P.C., Kendra L. Carberry, Kelly L. Donlon, Denver, Colorado, for Defendant-Appellee City of Northglenn.

Margaret Emerich, City Attorney, Gary G. Jacobson, Deputy City Attorney, Thornton, Colorado; Williamson & Hayashi, LLC, Mary Lynn Macsalka, Boulder, Colorado, for Defendant-Appellee City of Thornton.

Opinion by JUDGE FOX. Navarro, J., concurs. J. Jones, J., dissents.


FOX, Judge

Page 506

[¶1] Plaintiff, Qwest Corporation, appeals the judgment in favor of defendants, City of Northglenn (Northglenn) and City of Thornton (Thornton). Qwest contends that it is not liable to Thornton for unpaid use taxes because it erroneously paid the use taxes in question to Northglenn instead. Because the statute of limitations in § 39-26-210, C.R.S. 2013, precludes Thornton from collecting the taxes erroneously paid to Northglenn, and because Qwest remains liable to Thornton for its tax deficiency under § 29-2-106.1, C.R.S. 2013, we affirm.

I. Background and Procedural History

[¶2] The facts of this case are undisputed. Qwest, a telephone services provider, has a facility in Thornton, a home rule municipality. Under Thornton's tax code, Qwest must pay use taxes on new purchases delivered to the Thornton facility. Northglenn, an adjacent home rule municipality, has a similar tax ordinance.

[¶3] Qwest's Thornton facility is across the street from Northglenn. Between 2002 and 2005, an error in Qwest's computer software recognized the Thornton facility as being in Northglenn. As a result, Qwest mistakenly paid to Northglenn use taxes it owed to Thornton during that time.

[¶4] The record indicates that Qwest may have known about the error as early as 2002. However, it made no effort to correct its mistake until 2005, when it started paying taxes to the correct municipality.

Page 507

[¶5] In 2008, Thornton conducted an audit of Qwest for the years 2002 through 2008 and discovered that Qwest had failed to pay sales and use taxes to Thornton from 2002 through 2005. After Thornton notified Qwest of the deficiency, Thornton and Qwest entered into numerous agreements extending the three-year limitations period under § 39-26-210 for collecting tax assessments and requesting refunds applicable to Qwest's tax liability to Thornton. Qwest and Thornton also agreed to the method Thornton used to estimate the amount of use tax Qwest owed. Thornton later issued Qwest a sales and use tax assessment totaling $65,862.19 for the period 2002 through 2005.

[¶6] In 2010, pursuant to § 29-2-106.1(3), Qwest requested a hearing concerning its use tax liability from 2002 to 2005 by the Colorado Department of Revenue (the Department) and joined Northglenn as a respondent. This was the first time that Qwest notified Northglenn that the municipality had received tax payments in error. At the conclusion of the hearing, the Department concluded that any action against Northglenn to collect taxes for the 2002 through 2005 period was time barred, and that Qwest remained liable to Thornton.

[¶7] Qwest appealed to the district court and moved for summary judgment. The district court affirmed the Department's decision. As relevant here, the district court concluded that § § 29-2-106.1(5) and (6) did not relieve Qwest of its tax liability to Thornton for that period because the statute of limitations in § 39-26-210 relieved Northglenn of any duty to forward Qwest's tax payments to Thornton.

II. Standard of Review

[¶8] When a taxpayer appeals the final determination of the Department, the district court examines the case de novo. Walgreen Co. v. Charnes, 819 P.2d 1039, 1047 (Colo. 1991); Noble Energy, Inc. v. Colo. Dep't of Revenue, 232 P.3d 293, 295-96 (Colo. App. 2010); see also § 39-21-105(2)(b), C.R.S. 2013. In reviewing the decision of the district court, we defer to the district court's factual findings, and we will disturb them only if they are clearly erroneous and not supported by the record. Noble Energy, 232 P.3d at 296; see also § 39-21-105(7). We review the district court's application of law, including its grant of summary judgment, de novo. W. Elk Ranch, L.L.C. v. United States, 65 P.3d 479, 481 (Colo. 2002); Noble Energy, Inc., 232 P.3d at 296.

[¶9] Statutory construction also presents a question of law that we review de novo. Denver Post Corp. v. Ritter, 255 P.3d 1083, 1088 (Colo. 2011). When construing a statute, we give effect to the intent of the General Assembly. Id. We construe the entire statutory scheme to give consistent, harmonious, and sensible effect to all its parts. Id. If the statutory language is clear, we apply its plain and ordinary meaning, and we avoid interpretations that could lead to an absurd result. Id.

III. Qwest's Tax Liability

[¶10] Qwest contends that, under § § 29-2-106.1(5)-(6), it is immune from liability for use taxes owed to Thornton from 2002 to 2005 because it erroneously paid those taxes to Northglenn. According to Qwest, the district court erred in concluding that the limitations period in § 39-26-210 relieves Northglenn of any obligation to forward the erroneously paid taxes to Thornton. We disagree.

A. Tax Dispute Resolution

[¶11] Section 29-2-106.1 establishes a process for local governments to collect unpaid sales and use taxes and for taxpayers to claim refunds on overpaid sales and use taxes. This statute allows a taxpayer owing taxes or claiming a refund to request a hearing with the appropriate local government, and, once the taxpayer exhausts all local remedies, to request a hearing before the Department. § § ...

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