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Click here for the full text of this decision FACTS:In 1998, Vista Stores acquired leasehold interests in 53 Fina convenience store/gas stations from FinaServe Inc., a Fina subsidiary. At this time, Vista and Fina entered into what was called a “Branded Contract,” which required Vista to purchase gasoline exclusively from Fina at a 5 million gallon-per-month minimum. Vista was thus a dealer and Fina was a distributor for purposes of the Tax Code. A distributor is exempt from collecting gasoline tax when it sells to another distributor, but must include the tax when it sells to dealers. As a result, at this point, all gasoline sales from Fina to Vista were executed on a tax-paid basis. As the tax was passed on to the customer at the gas pump, Fina was responsible for remitting the appropriate gasoline tax to the taxing authority. Tax Code 153.105(e) allows distributors to retain the two percent of taxable gallons of gasoline it sells to compensate it for the expense of the collection and remittance of taxes Also under the Branded Contract, FinaNet, another Fina subsidiary, would provide Vista with credit card processing for all major cards, and offer Vista customers a Fina credit card. The credit card services were to be provided for a fee, and all Vista credit card sales would be transferred and assigned to Fina. Fina would provide Vista with bi-weekly statements showing the credit receipts from both gasoline and non-gasoline purchases as a credit against Vista’s gasoline purchases. Wanting to take advantage of the two percent tax retention for distributors, Vista created its own distributor, Akard Street Fuels, because dealers could not operate simultaneously as distributors. Akard sold its gas directly and exclusively to Vista. Vista was Akard’s only “customer.” Though Akard had a bank account, it had a zero balance linked to a Vista account for coverage. Though its agreement was only with Vista, and it had no obligation to sell fuel to Akard, Fina nonetheless began selling Akard gasoline on a tax-free basis in July 1999. Though Fina wasn’t including the tax on its price to Akard, it continued to apply Vista’s credit card revenues as a credit to Akard’s liability for gasoline purchases. Fina still sent Vista the bi-weekly statements showing the credits. Basically, Fina began treating Akard and Vista as one and the same, referring to the new company as “Akard/Vista,” but not changing or modifying the Branded Contract. In August 2000, Alon USA acquired Fina’s distributor network in Texas, Oklahoma and New Mexico, as well as certain refineries and pipeline networks. Even though Alon had no duty to sell gasoline to Akard � since the Branded Contract had not been altered to include Akard � it operated exactly had Fina been operating toward the two companies. Thus, Akard (the distributor) purchased gasoline tax-free from Alon (in its role as a distributor). Vista (the dealer) purchased gasoline from Akard (the distributor) on a tax-paid basis and then added the gasoline tax to the price it charged consumers at the pump, as required by Tax Code 153.105(a). At the same time, Akard began falling behind in its gasoline tax obligations. By December 2000, it owed the state $2.5 million for August through October gasoline purchases. Aware of this situation, Alon said it would begin withholding credit card payments due to Vista to create a $1 million security deposit. Vista secured a temporary restraining order against Alon on Feb. 9, 2001, to allow Vista to use the deposit to buy gasoline. Akard then pulled $770,000 of the $942.783 that had been withheld to purchase gasoline. Alon applied the remainder of the deposit to Akard’s gasoline sales account. In the meantime, the state comptroller had suspended Akard’s distributor’s permit on Feb. 2, 2001. At the time, Akard still owed taxes for September, October and December 2000 and January 2001. The state then sued Alon to recover Akard”s past-due taxes. The state alleged that Alon was a statutory trustee under Tax Code 111.016 for receiving or collecting a tax or money represented to be a tax in the form of credit card payments at gasoline outlets operated by Vista during the liability period. The state also alleged that Alon was a tortfeasor in the conversion of trust funds, as well as a tortfeasor for breach of fiduciary duty regarding trust funds. The trial court awarded the state a judgment on Akard’s past-due tax amounts for December 2000 and January 2001, but denied recovery for the September and October 2000 amounts. Both Alon and the state appeal. HOLDING:Affirmed in part; reversed and rendered in part. In first discussing whether Alon was a statutory trustee, the court sets forth the provisions of 111.016(a): “Any person who receives or collects a tax or any money represented to be a tax from another person holds the amount so collected in trust for the benefit of the state and is liable to the state for the full amount collected plus any accrued penalties and interest on the amount collected.” The court also notes that 153.105(a) of the Tax Code states that in “each subsequent sale of gasoline on which the tax has been collected, the amount of the tax shall be added to the selling price so that the tax is paid ultimately by the person using or consuming the gasoline for the purpose of propelling a vehicle upon the public highways of this state.” Reading the two sections together, the court explains that when a consumer buys gas for his vehicle, the selling price includes the gasoline tax, and any person who receives or collects that payment from the consumer holds the amount collected in trust for the benefit of the state and is liable to the state for the full amount of gasoline tax collected plus any accrued penalties and interest on the amount of gasoline tax collected. The court further explains that the charge consumers pay at the pump is made up of two parts � the cost of the gasoline and the tax. Whether paying in cash or on a credit card, however, the consumer only sees only the one price listed. When the consumer pays his credit card bill, the amount paid is still comprised of the two components, so the credit card provider who receives the consumer’s payment withholds the corresponding amount of gasoline tax in trust for the benefit of the state. However, when the credit card provider assumes the responsibility to pay the dealer before it collects from the consumer, as Alon did in this case, the amount owed to the dealer that corresponds to the gasoline tax constitutes trust funds for the benefit of the state, even if it will only later be collected from the consumer. The court rejects Alon’s argument that it never collected taxes and that the prepaid credit card charges were setoffs exempt from liability for the statutory trustee. To be considered a proper setoff, the court says there must have been a mutuality of obligations. There was no mutuality, the court finds, because Alon never had a contract with Akard and was under no obligation to sell to Akard. Alon’s contractual obligation was to sell gasoline to Vista, and Alon decided to treat Vista and Akard as separate entities for the purpose of selling gasoline tax-free to Akard but treat them as the same entity for purposes of the setoff. The court also looks at the trust fund nature of the fees to bolster its determination that the set-offs were inappropriate. Alon had notice that taxes were included in credit card transactions and thus had notice of the trust fund nature of the charges, especially since it also operated such a large number of gas stations of its own, the court adds. Having determined that Alon held gasoline taxes in trust for the state, the court then examines the evidence of the actual amount of taxes Alon held. Alon claims there”s no evidence to establish the actual amount as a matter of law. The court points out that the comptroller is authorized under Tax Code 111.008(a) to come up with an amount based on the information he has at hand. If it wanted a more precise estimate, it was up to Alon to provide the comptroller with more accurate information. The court also points out that, when an administrative body charged with enforcing the tax laws adopts a formula to determine the tax, courts should presume the formula is calculated to reach a reasonable result. Furthermore, once the comptroller presented its estimate for the amount of taxes collected, Alon had the burden to show that the determination was unreasonable, excessive, or that it was reached capriciously or arbitrarily. The court then finds that the state’s expert was qualified to give expert testimony, that the testimony he gave was relevant, and that it was even corroborated by other record evidence, including evidence from a Vista executive. Having affirmed the imposition of tax liability against Alon for December 2000 and January 2001, the court then reverses the trial court”s finding that Alon was not liable for the September and October 2000 back-taxes because, as concluded above, Alon was a statutory trustee under 111.016. OPINION:Law, C.J.; Law, C.J., Patterson and Puryear, JJ.

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