Nevada Supreme Court rebukes Tax Commission in Masco

Equitable tolling suspends statute of limitations for refunds

In Nevada Dept. of Taxn. v. Masco Builder Cabinet Group, the Nevada Supreme Court upheld a district court decision that reintstated a taxpayer-favorable administrative law judge (ALJ) determination. The taxpayer, Masco Builder Cabinet Group (Masco), is a cabinet manufacturer that sells its cabinets in retail showrooms and as part of lump-sum construction contracts. The Nevada sales and use taxation of the lump-sum contracts was at issue in the case.

Nevada Supreme Court's decision

Regarding those contracts, the Nevada Supreme Court held that the Nevada Tax Commission had improperly substituted its own judgment for that of the ALJ in reversing the ALJ's determination that Masco was:

  • Subject to use tax (on Masco's cost to acquire the cabinet components) as opposed to sales tax (on the retail sales price of the cabinets) and, accordingly
  • Entitled to a refund of overpaid sales tax (due to the higher base upon which the sales tax has been calculated and remitted)

The Supreme Court also found that the statute of limitations for filing a refund claim for the overpaid sales tax should be tolled where the Nevada Department of Taxation had led the taxpayer to believe that a formal filing was not necessary.

By Fred Paladino, Dave Rennie, and Trevor Kwan of Deloitte Tax LLP, originally published in Bloomberg BNA "Tax Management Weekly State Tax Report" in December 2011

Read the Nevada Supreme Court's decision.
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