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State v. American West Community Promotions6/4/2002
REVERSED AND REMANDED.
[ ] American West Community Promotions, Inc. appeals from a district court judgment affirming an order of the North Dakota State Tax Commissioner which held American West liable for $20,883.51 in sales tax. We reverse the decision of the district court and remand to the Tax Commissioner for further proceedings consistent with this opinion.
I.
[ ] American West Community Promotions, Inc. ("American West") is an advertising and marketing firm that represents approximately 400 retail, food, and service merchants in North Dakota. American West produces promotional coupon books on behalf of its clients and markets the books in various ways, including radio ads, newspaper ads, direct mail, and through a promotional telephone campaign. The books sell for $43.95 each and contain coupons entitling the coupon holders to a variety of discounts and free products and services from participating merchants. In September of 1999, the State, by and through its Tax Commissioner ("Commissioner"), conducted a sales and use tax audit of American West. As a result of the audit, the Commissioner concluded American West had made taxable sales of its coupon books in North Dakota, but failed to pay sales tax. American West challenged this conclusion and requested an administrative hearing.
[ ] At the administrative hearing, American West argued its coupon books are not tangible personal property and, thus, not subject to sales tax under N.D.C.C. § 57-39.2-02.1. Furthermore, American West argued the Commissioner exceeded statutory authority in promulgating N.D. Admin. Code § 81-04.1-01-28, which provides that sales of coupon books are taxable as sales of tangible personal property.
[ ] The Administrative Law Judge ("ALJ") rejected American West's argument and concluded it was liable for $20,883.51 in sales tax to the state of North Dakota. The Commissioner issued an order adopting the ALJ's recommended findings of fact and conclusions of law on February 1, 2001. American West appealed the Commissioner's order to the district court on February 28, 2001. On July 13, 2001, the district court issued a judgment which affirmed the Commissioner's order, and American West appealed to this Court.
II.
[ ] Our review of a decision by an administrative agency is governed by N.D.C.C. § 28-32-19. See Ringsaker v. Director, N.D. Dept. of Transp., 1999 ND 127, 5, 596 N.W.2d 328. We limit our review to the record before the administrative agency, and we do not review the decision of the district court. See id. Section 28-32-19, N.D.C.C., requires us to affirm the agency's decision unless:
1) a preponderance of the evidence does not support the agency's findings; 2) the agency's findings of fact do not support its conclusions of law and its decision; 3) the agency's decision violates the constitutional rights of the appellant; 4) the agency did not comply with the Administrative Agencies Practice Act in its proceedings; 5) the agency's rules or procedures have not afforded the appellant a fair hearing; or 6) the agency's decision is not in accordance with the law. Dworshak v. Moore, 1998 ND 172, 6, 583 N.W.2d 799 (quoting Greenwood v. Moore, 545 N.W.2d 790, 793 (N.D. 1996)).
III.
[ ] American West argues the Commissioner erred in concluding it was liable for sales tax because when it sells a coupon book it is not selling tangible personal property, but the intangible right to receive discounts from its clients. The Commissioner responds that the issue in this case is not whether the coupon books are tangible or intangible property, but whether the Commissioner's act in promulgating N.D. Admin. Co
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