Georgia's $74M tax dispute with Copart likely headed for legal showdown

The legal dispute between the state of Georgia and a Texas-based firm that bought Gov. Nathan Deal's salvage yard company is hurtling toward a courtroom showdown.

The state has been locked for years in a fight with with Copart over as much as $74 million in back taxes – a dispute that became public days after the governor sold a salvage yard he co-owned to the company. The sale was in July 2013 and the company has repeatedly declined to comment.

But the company disclosed in a recent regulatory filing that state officials informed them in late June they will be assessed a $100 million fee -- adding about $26 million in interest to the original figure. In the filing, Copart said it intended to appeal the assessment directly to the Georgia Tax Tribunal.

Department of Revenue officials declined to comment on the matter, but the appeal could be another headache for Deal. The governor has said he wants an independent jurist to settle the dispute, but his recent appointee to the tax tribunal, former Republican state Rep. Larry O'Neal, is a longtime political ally.

That will likely force O'Neal to recuse himself from the case, leaving a Georgia Supreme Court justice to appoint a new judge to oversee the matter. If he doesn't, Deal's critics will accuse him of interfering with the case.

The story led to an ethics complaint and a congressional investigation. Deal resigned from Congress in March 2010 before an ethics inquest could move forward, saying he wanted to devote himself full-time to the governor’s race. After he was elected, he put the business in the blind trust.

With an election looming in 2013, Deal and Cronan sold the salvage yard to Copart and netted about $3.2 million each. Copart, meanwhile, continued to pledge in Securities Exchange Commission filings that it would fight the "ambiguous" state rules involving the dispute, which centered on whether parts sales to international resellers are subject to Georgia sales tax.

In its most recent filing, Copart said it is bracing for an "expensive and time-consuming" legal fight.

"We believe we have strong defenses to the DOR’s notice of assessment, if issued, and intend to defend this matter," it said. "There can be no assurance that this matter will be resolved in our favor, however, or that we will not ultimately be required to make a substantial payment to the Georgia DOR."

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About the Author

Greg Bluestein
Greg Bluestein
Greg Bluestein is a political reporter who covers the governor's office and state politics for The Atlanta Journal-Constitution.