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Roth v. Alcohol & Tobacco Tax

United States District Court, W.D. North Carolina, Charlotte Division

April 5, 2017

WILLIAM L. ROTH, Plaintiff,
v.
ALCOHOL & TOBACCO TAX & TRADE BUREAU BATF and BATF, Defendants.

          ORDER

          Graham C. Mullen United States District Judge.

         This matter is before the Court upon Defendants' Motion to Dismiss pursuant to Rule 12(b)(1) and 12(b)(6) of the Federal Rules of Civil Procedure. The pro se Plaintiff has filed a response in opposition and the Defendants have filed a Reply. This matter is now ripe for disposition.

         I. FACTUAL BACKGROUND

         On October 5, 2016, Plaintiff William L. Roth filed a complaint in the General Court of Justice in Mecklenburg, North Carolina, seeking a refund of firearm and ammunition excise taxes allegedly paid by a third party to the Alcohol and Tobacco Tax and Trade Bureau (“TTB”) in the first quarter of 2005. Defendants filed a timely notice of removal and the case was removed to this Court on October 24, 2016.

         The Internal Revenue Code imposes an excise tax on the first domestic sale of firearms and ammunition manufactured in the United States. 26 U.S.C. § 4181; 27 C.F.R. § 53.2, 53.61(a), (e). Under certain circumstances, domestically-manufactured firearms and ammunition may be sold tax-free for export, or for resale by the purchaser to a second purchaser for export. See 26 U.S.C. § 4221(a)(2); 27 C.F.R. § 53.133. If the original manufacturer pays the tax on an article that was subsequently exported prior to its first taxable use, such payment is deemed an overpayment by reason of its exportation. See 27 C.F.R. § 53.178(a), (b). Either the manufacturer or the exporter of the article may request a refund in this circumstance. See 26 U.S.C. § 6416(c); 27 C.F.R. § 53.184. If the exporter requests a refund, the exporter must include with its refund claim a letter from the manufacturer that waives the manufacturer's right to claim the refund and that provides proof of the amount of taxes paid by the manufacturer. See 27 C.F.R. § 53.184(b).

         From at least 2004 through 2007, Plaintiff Roth owned and operated a corporation called Operational Support Services, Inc. (“OSS”). (Doc. No. 7-3, Decl. of Todd Moon, at ¶ 2.)[1] OSS has alleged to TTB that it bought firearms and ammunition from third party seller(s). Id. at ¶ 3. OSS allegedly bought the firearms and ammunition at “tax-included” prices, meaning that OSS's purchase price included the cost of the federal tax remitted to TTB by the original manufacturer, meaning that OSS's purchase price included the cost of the federal excise tax incurred by the original manufacturer. Id. OSS then alleged that it exported the firearms and ammunition outside the United States, and subsequently requested a refund of the excise taxes. Id.

         In 2007, OSS filed two claims with the TTB for refunds of excise taxes. Id. at ¶ 4. The administrative claims were assigned claim numbers MWR-106924 and MWR-109002. Id. The first claim, MWR-106924, requested a refund of excise taxes in the amount of $63, 339.55 for tax periods encompassing 2004 through 2006. Id. The second claim, MWR-109002, requested a refund of excise taxes in the amount of $56, 573.74. Id.

         On June 12, 2007, TTB denied both claims in full. Id. at ¶ 5; Exhibit A. TTB denied the claims because OSS failed to provide the required supporting evidence. Id. For instance, OSS did not provide a statement, signed by the person who paid the tax, waiving its right to claim a credit or refund of such tax. Id. OSS also failed to provide proof of the amount of excise taxes paid by the manufacturer and the dates that the taxes were paid. Id.

         On October 5, 2016, Plaintiff Roth filed a Complaint seeking an “excise tax revenue refund due for the first quarter of 2005.” See Complaint, Doc. No. 1. Plaintiff states in his Complaint that “Plaintiff paid the excise tax to ATK, Inc., [w]ho in turn paid the [TTB]. The TTB audited my records and admitted to plaintiff that they owe me the refund however they have fail[ed] to pay the funds owed to the plaintiff.” Id. Plaintiff did not include a copy of the refund claim(s) that OSS filed with the TTB as part of his complaint. See id. The TTB has no record of Plaintiff Roth ever paying excise taxes to the TTB or filing an administrative claim for refund with the TTB in his personal capacity. (Doc. No. 7-3, at ¶ 6.)

         II.DISCUSSION

         Under Federal Rule of Civil Procedure 12(b)(1), a case may be dismissed for lack of subject matter jurisdiction. When subject matter jurisdiction is challenged under this rule, the plaintiff bears the burden of persuasion. Smith v. Wash. Metro. Area Transit Auth., 290 F.3d 201, 205 (4th Cir. 2002).

         Under Federal Rule of Civil Procedure 12(b)(6), a case may be dismissed for failure to state a claim upon which relief can be granted. To survive a Rule 12(b)(6) motion to dismiss, the court must determine whether the complaint “provide[s] enough facts to state a claim that is plausible on its face.” Sarvis v. Alcorn, 826 F.3d 708, 718 (4th Cir. 2016) (quoting Robinson v. Am. Honda Motor Co., 551 F.3d 218, 222 (4th Cir. 2009)). In order to reach facial plausibility, the plaintiff must “plead factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)).

         The Court will first address Defendants' 12(b)(1) motion. There is no dispute that Plaintiff Roth never filed an administrative claim with TTB in his personal capacity. Under 28 U.S.C. § 1346(a)(1), the United States has consented to be sued in federal district court in civil actions “for the recovery of any internal revenue tax alleged to have been erroneously or illegally assessed or collected.” However, a party bringing such an action must exhaust its administrative remedies by filing a timely and proper refund claim prior to filing suit. See 26 U.S.C. § 7422(a) (“No suit . . . shall be maintained in any court for the recovery of any internal revenue tax alleged to have been erroneously or illegally assessed or collected, . . . until a claim for refund . . . has been duly filed with the Secretary, according to the provisions of law in that regard….”). The code requires that the taxpayer first exhaust his administrative remedies in order to “allow the administrative agency to act within the sphere of its special competence, to apply its expertise, … to correct its own errors, and [to] create[] a reasonable division of labor between agency and court.” Kenlin Indus. v. United States, 927 F.2d 782, 786-87 (4th Cir. 1991).

         The Plaintiff in this refund suit has failed to exhaust his administrative remedies. The TTB has no record of William L. Roth ever filing an administrative claim for refund with ...


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