In the tax world, we are frequently reminded that procedure is important. The Alabama Supreme Court drove this point home in its decision dismissing a $1 million local use tax assessment because the final assessment was signature stamped rather than being signed by hand. City of Huntsville v. Colsa Corp., No. 1091797, 2011 WL 1334397 (Ala. Apr. 8, 2011).
Following a two-year-long audit, the City of Huntsville issued a use tax assessment covering a number of the taxpayer’s purchases. The assessment was stamped with the City Finance Director’s signature stamp, which he had applied himself. The taxpayer argued that the assessment was invalid under the Alabama Taxpayer Bill of Rights, codified at Ala. Code § 40-2A-1, et seq., and the Department of Revenue’s regulations, Ala. Admin. Code r. 810-14-1-.15(4) (adopted by the City), which require that a final assessment be entered “by signing” the document or a “facsimile signature” “if a summary record which includes the information on the final assessment has been signed.” Despite the fact that the appropriate City official had physically applied his own signature stamp, the Alabama Supreme Court held that the City had not properly entered a final assessment because, without an original signature, “the notice was effectively unexecuted and, therefore, invalid.”
Similarly, the Louisiana Court of Appeals recently held that a statute of limitations waiver could not bind a corporate taxpayer where the employee signing the waiver did not have express authority to bind the corporation. Bridges v. Hertz Equip. Rental Corp., 47 So.3d 519 (La. App. 2010), rehearing denied Sept. 16, 2010, writ granted, 51 So.3d 28 (La. Dec. 17, 2010). Although the corporation’s employee was a Director of Tax Audits, was the only taxpayer representative communicating with the Department of Revenue about the audit, and signed in a space for “Taxpayer’s Authorized Representative,” the court held that the waivers were not binding on the corporation and dismissed the assessments as barred by the statute of limitations.
These cases provide harsh reminders, for both states and taxpayers, that courts often strictly enforce procedural rules.