Pacificorp, Inc. v. Dep't of Revenue, S-16-0084.

• Citation: 401 P.3d 905
• Decision Date: 14 September 2017
• Docket Number: S-16-0084.
• Parties: PACIFICORP, INC., Appellant (Petitioner), v. DEPARTMENT OF REVENUE, STATE of Wyoming, Appellee (Respondent).
• Court: United States State Supreme Court of Wyoming

401 P.3d 905

PACIFICORP, INC., Appellant (Petitioner),

v.DEPARTMENT OF REVENUE, STATE of Wyoming, Appellee (Respondent).

S-16-0084.

Supreme Court of Wyoming.

September 14, 2017

Representing Appellant: Paul J. Hickey, Hickey & Evans, LLP, Cheyenne, Wyoming; Richard G. Smith, Hawley, Troxell, Ennis & Hawley, LLP, Boise, Idaho. Argument by Mr. Smith.

Representing Appellee: Peter K. Michael, Attorney General; Karl D. Anderson, Senior Assistant Attorney General; Ryan T. Schelhaas, Senior Assistant Attorney General; Lisa M. Spillman, Senior Assistant Attorney General. Argument by Ms. Spillman.

Before BURKE, C.J., and HILL, DAVIS, FOX, and KAUTZ, JJ.

BURKE, Chief Justice.

[¶1] PacifiCorp, Inc. operates coal-fired electrical generation facilities in Wyoming. In 2012, PacifiCorp sought a ruling from the Wyoming Department of Revenue that its purchases of certain chemicals used in the process of generating electricity qualified for either the manufacturers' sales tax exemption or the wholesalers' sales tax exemption. The Department ruled against PacifiCorp, and the Board of Equalization affirmed the Department's ruling. PacifiCorp appealed to the district court, and we accepted certification of the appeal from the district court. We affirm the Board of Equalization's decision.

ISSUES

[¶2] PacifiCorp presents three issues for our review:

1. Whether the Board committed legal error, or made a decision not supported by substantial evidence, when it determined that PacifiCorp did not engage in "manufacturing" or "processing" as required to qualify for a sales tax exemption under Wyo. Stat. Ann. § 39-15-105(a)(iii)(A).

2. Whether the Board committed legal error, or made a decision not supported by substantial evidence, when it held that certain chemicals necessary to treat water and sulfur dioxide emissions during the coal combustion processes that generate electricity are not "used directly" to generate electricity, and are therefore not exempt from sales tax under Wyo. Stat. Ann. § 39-15-105(a)(iii)(A).

3. Whether the Board committed legal error, or made a decision not supported by substantial evidence, when it held that PacifiCorp's purchases of certain chemicals and catalysts do not constitute wholesale purchases exempt from taxation under Wyo. Stat. Ann. § 39-15-105(a)(iii)(F).

FACTS

[¶3] PacifiCorp operates four coal-fired electrical generation facilities in Wyoming: the Jim Bridger, Dave Johnston, Naughton, and Wyodak power plants. To generate electricity at these facilities, PacifiCorp first feeds coal into a pulverizer where it is ground to a powder. The coal powder is then blown into a boiler where it is ignited. The walls of the boiler are lined with tubes filled with water. The burning coal heats the water inside the tubes and converts it to steam. The steam's pressure is directed into a turbine, causing the rotors in the turbine to rotate. The turbine is connected to a generator, a large two-pole magnet that rotates inside a coil of wires, which generates electric energy that is transmitted and sold to customers.

[¶4] There are two separate water cycles involved in the generation process: boiling and cooling. As mentioned above, the water inside the boiler tubes is converted to steam to turn the turbines and generate electricity. In the cooling cycle, water is used to condense the steam back into liquid water.¹ The water in the boiling cycle must be "ultrapure," meaning exceptionally free of dissolved minerals, and neither acidic nor alkaline, in order to prevent mineral build-up inside the boiler that would eventually cause failure. To create "ultrapure" water, river water is run through a softening system, a reverse-osmosis unit, and a demineralizing process. It is then further treated with chemicals for additional purification. The cooling water must also be "ultrapure," and it is treated in similar fashion. The chemicals used by PacifiCorp to make the water "ultrapure" are one subject of this appeal.

[¶5] When the coal is burned in the boiler, it generates a gas stream containing various air pollutants. To meet state and federal air quality requirements, PacifiCorp sends the gas stream through an electrostatic precipitator to remove fly ash, and through a scrubber to remove sulfur dioxide. In the scrubber, a chemical reagent² is used to remove the sulfur dioxide from the gas stream and convert it to solid sodium sulfate. These chemical reagents are the other subject of this appeal.

[¶6] On March 27, 2012, PacifiCorp sought a ruling from the Wyoming Department of Revenue that its purchase of the chemicals used in the boiling and cooling cycles and the chemical reagents used to remove air pollutants from the gas stream should be exempt from sales tax. PacifiCorp asserted that it manufactures electricity, making it eligible for the statutory sales tax exemption for manufacturers. It also claimed that it purchases these chemicals as a wholesaler, making it eligible for the sales tax exemption for wholesale purchasers. The Department ruled against PacifiCorp on May 9, 2012. PacifiCorp appealed to the Wyoming State Board of Equalization.

[¶7] On October 1, 2012, PacifiCorp filed a sales tax refund claim with the Department, indicating that the "substantive issue" in this claim was the same as that being reviewed by the Board in PacifiCorp's appeal from the Department's ruling that it was not eligible for the manufacturers' or wholesalers' sales tax exemptions. The Department denied the refund request. PacifiCorp appealed to the Board of Equalization. The Board consolidated the two appeals, and held a contested case hearing on January 28 and 29, 2013.

[¶8] On January 8, 2016, the Board issued its Findings of Fact, Conclusions of Law and Order affirming the Department's determination that PacifiCorp was not eligible for the sales tax exemption for manufacturers or wholesale purchasers, and denying PacifiCorp's sales tax refund request. PacifiCorp filed its petition for review in the district court. Soon thereafter it filed an Unopposed Motion for Certification asking the district court to certify its petition for review to this Court pursuant to W.R.A.P. 12.09. The district court granted the motion to certify, and we accepted the certification.

STANDARD OF REVIEW

[¶9] Judicial review of administrative decisions is governed by Wyo. Stat. Ann. § 16-3-114(c) (LexisNexis 2011). We will uphold the Board of Equalization's findings of fact if they are supported by substantial evidence in the record. Chevron U.S.A., Inc. v. Department of Revenue , 2007 WY 79, ¶ 9, 158 P.3d 131, 134 (Wyo. 2007). In this case, however, the underlying facts are largely undisputed. The basic question is whether PacifiCorp qualifies for a statutory sales tax exemption, and answering that requires us to interpret the pertinent statutes. Statutory interpretation raises questions of law, which we review de novo . State ex rel. Wyo. Workers' Safety & Comp. Div. v. Smith , 2013 WY 26, ¶ 9, 296 P.3d 939, 941–42 (Wyo. 2013).

[¶10] "When we interpret statutes, our goal is to give effect to the intent of the legislature, and we ‘attempt to determine the legislature's intent based primarily on the plain and ordinary meaning of the words used in the statute.’ " Fugle v. Sublette County School Dist. No. 9 , 2015 WY 98, ¶ 8, 353 P.3d 732, 734 (Wyo. 2015) (quoting Krenning v. Heart Mountain Irrigation Dist. , 2009 WY 11, ¶ 9, 200 P.3d 774, 778 (Wyo. 2009) ). "Where legislative intent is discernible a court should give effect to the ‘most likely, most reasonable, interpretation of the statute, given its design and purpose.’ " Adekale v. State , 2015 WY 30, ¶ 12, 344 P.3d 761, 765 (Wyo. 2015) (quoting Rodriguez v. Casey , 2002 WY 111, ¶ 20, 50 P.3d 323, 329 (Wyo. 2002) ).

We therefore construe each statutory provision in pari materia , giving effect to every word, clause, and sentence according to their arrangement and connection. To ascertain the meaning of a given law, we also consider all statutes relating to the same subject or having the same general purpose and strive to interpret them harmoniously. We presume that the legislature has acted in a thoughtful and rational manner with full knowledge of existing law, and that it intended new statutory provisions to be read in harmony with existing law and as part of an overall and uniform system of jurisprudence. When the words used convey a specific and obvious meaning, we need not go farther and engage in statutory construction.

Nicodemus v. Lampert , 2014 WY 135, ¶ 13, 336 P.3d 671, 674 (Wyo. 2014) (citing Estate of Dahlke ex rel. Jubie v. Dahlke , 2014 WY 29, ¶¶ 36–37, 319 P.3d 116, 125–26 (Wyo. 2014) ).

DISCUSSION

[¶11] Wyoming imposes a sales tax on the "sales price of every retail sale of tangible personal property within the state," unless a statutory exemption applies. Wyo. Stat. Ann. § 39-15-103(a)(i)(A). We have long recognized that "[t]here is a presumption created against granting exceptions and in favor of taxation." State Board of Equalization v. Tenneco Oil Co. , 694 P.2d 97, 100 (Wyo. 1985). Accordingly, the burden of establishing an exemption is on the one claiming it. Commissioners of Cambria Park v. Board of County Comm'rs of Weston County , 62 Wyo. 446, 174 P.2d 402, 405 (1946). Moreover, "[a]s a general rule, tax exemptions are given a strict interpretation against an assertion of a taxpayer and in favor of the taxing power." Eastern Laramie County Solid Waste Disposal Dist. v. State Board of Equalization , 9 P.3d 268, 271 (Wyo. 2000) (citing 3A Sutherland Statutory Construction § 66.09, at 42 (5th ed. 1992)).

[¶12] In its first issue, PacifiCorp asserts that it is engaged in the manufacturing of electricity. On that basis, it claims that it is entitled to the manufacturers' sales tax exemption set forth in Wyo. Stat. Ann. § 39-15-105(a)(iii)(A). For purposes of this exemption, the term "manufacturing" is defined as "the operation of producing a new product, article, substance or commodity different from...