960 P.2d 685 (Colo. 1998), 97SA79, Winslow Const. Co. v. City and County of Denver

Docket Nº:97SA79.
Citation:960 P.2d 685
Opinion Judge:Justice HOBBS Justice.
Party Name:WINSLOW CONSTRUCTION COMPANY, a Colorado corporation, Plaintiff-Appellee, v. CITY AND COUNTY OF DENVER, Defendant-Appellant, and Executive Director of Revenue, State of Colorado, Defendant.
Attorney:Holley, Albertson & Polk, P.C., George Alan Holley, Eric E. Torgersen, Golden, for Plaintiff-Appellee. Daniel E. Muse, City Attorney, City and County of Denver, Maria Kayser, Assistant City Attorney, Robert F. Strenski, Assistant City Attorney, Denver, for Defendant-Appellant. No Appearance by or...
Case Date:June 22, 1998
Court:Supreme Court of Colorado

Page 685

960 P.2d 685 (Colo. 1998)

WINSLOW CONSTRUCTION COMPANY, a Colorado corporation, Plaintiff-Appellee,

v.

CITY AND COUNTY OF DENVER, Defendant-Appellant, and Executive Director of Revenue, State of Colorado, Defendant.

No. 97SA79.

Supreme Court of Colorado, En Banc

June 22, 1998

Rehearing Denied Aug. 24, 1998.

Page 687

Holley, Albertson & Polk, P.C., George Alan Holley, Eric E. Torgersen, Golden, for Plaintiff-Appellee.

Daniel E. Muse, City Attorney, City and County of Denver, Maria Kayser, Assistant City Attorney, Robert F. Strenski, Assistant City Attorney, Denver, for Defendant-Appellant.

No Appearance by or on Behalf of Executive Director of Revenue, State of Colorado.

Krassa, Madsen & Miller, LLC, Shayne M. Madsen, Boulder, for Amicus Curiae Colorado Retail Council.

Lentz, Evans and King, P.C. Robert A. Wherry, Jr. Denver, Colorado Attorneys for Amicus Curiae Colorado Contractors.

Association, Inc. and Colorado Association of Commerce and Industry Patrick C. Boyle Denver, Colorado Attorney for Amicus Curiae Colorado Association of Commerce and Industry.

OPINION

Justice HOBBS Justice.

This case arises from a dispute over a municipal tax which the City and County of Denver (Denver) levied on self-propelled construction equipment owned and used by Winslow Construction Company (Winslow) in the performance of construction work at Denver International Airport (DIA). The Arapahoe County District Court (district court) struck down the municipal tax as an unconstitutional ad valorem tax. Denver brought this appeal directly to us under section 13-4-102, 5 C.R.S. (1997). 1 Denver asserts that the district court lacked jurisdiction to hear the case, and, in the alternative, that the tax should be upheld as a valid excise tax on the privilege of using the equipment within the city. 2

In addition, Denver urges this court to determine that section 29-2-109(2), 9 C.R.S. (1997), cannot be applied to curtail application of its use tax in light of its home rule authority. This section exempts from local taxation the use of personal property which occurs more than three years after its most recent sale, if the property was significantly used in the state within those three years.

We reverse the ruling of the district court. We hold that Denver's use tax is not an ad valorem tax. We also determine that section 29-2-109(2) cannot be applied to prevent Denver from collecting its use tax more than three years after purchase of the construction equipment.

I.

Winslow is a Colorado corporation with its principal place of business in Englewood, Colorado. In 1993 Winslow performed construction

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work at DIA, located in the city and county of Denver, utilizing self-propelled, motorized construction equipment that it owned. Winslow owned three pieces of this construction equipment for less than three years prior to its first use in Denver; the remainder it owned for more than three years.

In May of 1994, Denver audited Winslow for the period between January 1, 1993 and March 31, 1994. It then calculated the use tax due pursuant to the provisions of Denver Revised Municipal Code section 53-96 (D.R.M.C.53-96), which states:

There is levied and there shall be collected and paid a tax in the amount stated in this article, by every person exercising the taxable privilege of storing, using, distributing or consuming in the city ... any article of tangible personal property, purchased at retail, for said exercise of said privilege, as follows:

(1) On the purchase price paid or charged upon all sales and purchases of tangible personal property.

Under D.R.M.C. 53-92(c), 3 no tax is due if a sales or use tax that is equal to or greater than Denver's tax has already been paid on the property to another municipal corporation. If the property has previously been taxed at a lower rate, the difference must be paid to Denver upon its use within the city and county.

On August 22, 1994, Denver filed a Notice of Final Determination, Assessment and Demand for Payment by Winslow for the use tax, plus penalties and interest, on those pieces of the equipment that Winslow owned for more than three years prior to first use in Denver. On September 21, 1994, Denver issued a second notice for equipment that Winslow owned for less than three years prior to their first use in Denver.

Winslow filed petitions for review with Denver's manager of revenue on September 9, 1994, and October 7, 1994, contesting the entire tax levy as an unconstitutional ad valorem property tax under article X, section 6 of the Colorado Constitution. 4 In the alternative, Winslow argued that section 29-2-109(2) prevents Denver from collecting the tax on construction equipment Winslow owned for more than three years prior to its use within the city and county. 5 Denver's manager of revenue held that D.R.M.C. 53-96 is not an ad valorem tax, relying primarily on the fact that the tax is based upon the purchase price, as opposed to the assessed value, of the property. The manager also concluded that the state's three year limitation set forth in section 29-2-109(2) cannot be applied to Denver, a home rule city, because the tax is a matter of local concern. Thus, the manager upheld the tax levy on all self-propelled construction equipment Winslow owned and used at DIA, regardless of the date of purchase.

Winslow appealed to the executive director of the Colorado Department of Revenue pursuant

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to section 29-2-106.1(3)(a), 9 C.R.S. (1997). 6 The executive director agreed with Denver's manager of revenue that the use tax is not an ad valorem tax, but held that section 29-2-109(2)'s three year limitation is a valid exercise of the General Assembly's authority over matters of statewide concern. Accordingly, the executive director prohibited Denver from collecting its tax on equipment Winslow owned for more than three years before its use at DIA.

Winslow then sought de novo review in the district court in Arapahoe County pursuant to section 29-2-106.1(7), 9 C.R.S. (1997), 7 challenging the executive director's determination that D.R.M.C. 53-96 is not an ad valorem tax. Invoking its home rule powers, Denver filed a counterclaim against Winslow challenging the applicability of section 29-2-109(2) to it, and a cross claim against the executive director alleging that she did not have jurisdiction over Winslow's appeal from the decision of Denver's manager of revenue. The executive director filed a notice of non-participation in the case and did not answer the cross claim. Winslow and Denver each moved for summary judgment based on a joint stipulation of facts filed with the district court.

The district court granted Winslow's motion for summary judgment, determining that D.R.M.C. 53-96 is a prohibited ad valorem tax. In light of this ruling, the district court did not determine whether the exemption of section 29-2-109(2) for personal property purchased more than three years prior to its use in the taxing jurisdiction applies to Denver. Following denial of post trial motions, including denial by failure to rule on Denver's motion regarding the applicability of section 29-2-109(2) to it, Denver appealed directly to us under section 13-4-102.

Winslow and Denver have stipulated that if section 29-2-109(2) does not apply to Denver, Winslow owes $25,935.00, plus interest and penalty, on the equipment it owned for more than three years prior to its use at DIA. The parties have not stipulated to the amount Winslow owes on the equipment it owned for less than three years, and that issue will therefore require determination by the district court if we uphold D.R.M.C. 53-96.

II.

We hold, pursuant to section 29-2-106.1, that the executive director and the district court where the taxpayer resided or had its principal place of business, see § 39-21-105(2)(a), 11 C.R.S. (1997), had jurisdiction over this tax appeal. We reverse the district court's ruling which invalidated Denver's use tax; it is not an ad valorem tax. In light of Denver's home rule status, the executive director erred in applying section 29-2-109(2) to exempt Winslow from paying Denver's use tax on equipment it owned for more than three years prior to its use in Denver.

A.

Jurisdiction of the Executive Director and the District Court

Denver contends that the executive director lacked jurisdiction to hear Winslow's appeal from the manager of revenue's decision, and that, as a consequence, the district

Page 690

court lacked jurisdiction. Denver therefore asserts that the only forum for judicial review of the manager's decision is the Denver District Court under C.R.C.P. 106. We disagree.

We first reject Denver's threshold argument that the executive director admitted lack of jurisdiction when she failed to answer the cross claim in district court. To the contrary, the executive director's decision not to participate in litigation in which she claims no interest does not constitute an admission that she lacked jurisdiction over the tax issues raised in this case. Winslow is the real party in interest regarding the tax, and has at no time admitted that the executive director lacked jurisdiction over its appeal. The executive director's decision not to respond to a cross claim cannot deprive a taxpayer of the exercise of its right of appeal under section 29-2-106.1. Jurisdiction is not conferred upon or taken away from a court based on the position of a party regarding the court's jurisdiction; instead, jurisdiction concerns the court's authority to decide the class of cases in which it renders judgment and is determined as a matter of law. See Dallas Creek Water Co. v. Huey, 933 P.2d 27, 38 (Colo.1997).

We therefore proceed to Denver's second jurisdictional argument, that section 29-2-106.1 impermissibly vests the executive director with municipal powers to hear appeals from local government sales and use tax determinations. In this...

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