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Covington Pike Toyota, Inc. v. Cardwell

829 S.W.2d 132 (1992)

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Covington Pike Toyota, Inc. v. Cardwell

Tennessee Supreme Court

829 S.W.2d 132 (1992)

Facts

Covington Pike Toyota, Inc. (Covington) (plaintiff) was a Tennessee company that sold new and used cars. Covington also sold contracts for extended warranty service to customers who purchased cars, entitling those who purchased the warranty contracts to free repair services at certain Toyota dealerships around the country. Covington did not collect sales taxes on purchases of the warranty contracts. Under Tennessee law, state sales tax extended to the performance of repair services. Charles, the commissioner of revenue (defendant), interpreted Tennessee’s sales-tax statute to also apply to warranty contracts that provided for repair services. Cardwell assessed a deficiency against Covington for unpaid sales tax related to its contracts for extended warranty service. Covington filed a lawsuit in the Shelby County Chancery Court opposing Cardwell’s assessment. The chancellor of the chancery court granted summary judgment for Covington, holding that Cardwell had exceeded his authority by interpreting the statute to include warranty contracts in the category of taxable repair services. Cardwell appealed.

Rule of Law

Issue

Holding and Reasoning (Anderson, J.)

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