Bonneville Intern. Corp. v. Utah State Tax Com'n, 920775-CA

• Decision Date: 17 August 1993
• Docket Number: No. 920775-CA,920775-CA
• Citation: 858 P.2d 1045
• Parties: BONNEVILLE INTERNATIONAL CORPORATION, Petitioner, v. UTAH STATE TAX COMMISSION, Respondent.
• Court: Utah Court of Appeals

Page 1045

858 P.2d 1045

BONNEVILLE INTERNATIONAL CORPORATION, Petitioner, v. UTAH STATE TAX COMMISSION, Respondent.

No. 920775-CA.

Court of Appeals of Utah.

Aug. 17, 1993.

Boyd J. Hawkins, Asst. Gen. Counsel, and Brian C. Johnson, Scott R. Ryther, Brent O. Hatch (Argued), Kimball, Parr, Waddoups, Brown & Gee, Salt Lake City, for petitioner.

Jan Graham, State Atty. Gen., Brian L. Tarbet (Argued), John C. McCarrey, Asst. Attys. Gen., Salt Lake City, for respondent.

Before BENCH, GREENWOOD and RUSSON, JJ.

OPINION

GREENWOOD, Judge:

Bonneville International Corporation (Bonneville) petitions for review of a final decision of the Utah State Tax Commission (the Commission) denying a sales tax exemption for certain manufacturing equipment purchases made by Video West, one of Bonneville's divisions. We reverse.

FACTS

Bonneville is a Utah corporation involved in radio and television broadcasting. Bonneville Communications and Video West are manufacturing and reproduction divisions of Bonneville. Bonneville Communications produces audio tapes and Video West produces video tapes. The two divisions perform their assembly, duplication and distribution activities at two separate locations and are financially independent of one another.

In 1990, Bonneville Communications and Video West each purchased certain pieces of machinery and equipment in order to expand their manufacturing capacities. Bonneville paid Utah sales taxes on these purchases. Bonneville requested an advisory opinion from the Commission regarding the possible application of a sales tax exemption for these purchases as set forth in Utah Code Ann. § 59-12-104(15) (1992). This statute provides in relevant part:

The following sales and uses are exempt from the taxes imposed by this chapter:

....

(15) Sales or leases of machinery and equipment purchased or leased by a manufacturer for use in new or expanding operations ... in any manufacturing facility in Utah. Manufacturing facility means an establishment described in SIC Codes 2000 to 3999 of the Standard Industrial Classification Manual 1972, of the federal Executive Office of the President, Office of Management and Budget. For the purposes of this subsection, the commission shall by rule define "new or expanding operations" and "establishment."

(Emphasis added.)

The Commission issued an opinion, ruling that none of the purchases of Video West or Bonneville Communications qualified for this sales tax exemption. Bonneville filed a Petition for Redetermination and a formal hearing was held. After the hearing, Bonneville and the Commission agreed that Bonneville's Petition for Redetermination would be treated as a claim for refund of sales taxes paid.

On September 2, 1992, the Commission issued its findings of fact, conclusions of law, and final decision. In this decision, the Commission affirmed the parties' stipulation that Bonneville Communications's purchases were exempt from sales tax pursuant to Utah Code Ann. § 59-12-104(15). The Commission agreed that Bonneville Communications qualified for the exemption provided by statute because it was a manufacturing facility described in the Standard Industrial Classification Manual 1972, Codes 2000 to 3999 (SIC Codes). In particular, as a manufacturer of prerecorded magnetic tape, Bonneville Communications fell within SIC Code 3652, which includes Establishments primarily engaged in manufacturing phonograph records and pre-recorded magnetic tape.

Although finding that Video West was also a manufacturing facility engaged in the manufacture of pre-recorded magnetic tape, the Commission determined that Video West did not fit within Code 3652, or within any other manufacturing code between 2000 and 3999. In interpreting the language of SIC Code 3652, the Commission stated that the term "phonograph records" modified "pre-recorded magnetic tape," so as to limit the manufacturing facilities covered by Code 3652 to those manufacturing audio products only, thus excluding video tape production. To further bolster this conclusion, the Commission noted that the 1987 version of SIC Code 3652 appears to specifically limit activity code 3652 to audio media. ¹

After determining that manufacturing activity code 3652 was inappropriate, and rejecting the activity code suggested by the Auditing Division, ² the Commission selected a "service" ³ code, code 7819, as the category most closely corresponding to Video West's activities. SIC Code 7819 reads:

Establishments primarily engaged in performing services independent of motion picture production but allied thereto, such as motion picture film processing, editing and titling; casting bureaus; wardrobe and studio property rental; television tape services (editing, transfers, etc.); and stock footage film libraries.

Again consulting the 1987 SIC Manual for guidance, the Commission noted that "motion picture and video tape reproduction" services were expressly added to the updated version of activity code 7819.

Because the Commission determined that Video West was not classified as a manufacturer within SIC Codes 2000 to 3999, the Commission denied the sales tax exemption for Video West's equipment purchases. This petition for review followed.

STANDARD OF REVIEW

Because this action was commenced after the effective date of the Utah Administrative Procedures Act, it is governed by the provisions set forth in Utah Code Ann. § 63-46b-1 through -22 (1989 & Supp.1992). The Act states in relevant part:

(1) As provided by statute, the Supreme Court or the Court of Appeals has jurisdiction to review all final agency action resulting from formal adjudicative proceedings.

....

(4) The appellate court shall grant relief only if, on the basis of the agency's record, it determines that a person seeking judicial review has been substantially prejudiced by any of the following:

....

(d) the agency has erroneously interpreted or applied the law;

....

(h) the agency action is:

(i) an abuse of the discretion delegated to the agency by statute;

Utah Code Ann. § 63-46b-16 (1987).

This statutory directive has been interpreted to require us to review cases involving the construction or application of statutes which do not grant discretion to the Commission under a correction of error standard. Morton Int'l Inc., v. State Tax Comm'n, 814 P.2d 581, 589 (Utah 1991). See also King v. Industrial Comm'n, 850 P.2d 1281, 1291 (Utah App.1993); Ferro v. Department of Commerce, 828 P.2d 507, 510 (Utah App.1992). Bonneville challenges the Commission's determination that for purposes of section 59-12-104(15), Video West's activities fall within SIC Code 7819 and not within SIC Code 3652. In determining the appropriate standard by which to review this challenge, we note that the statute is silent regarding Commission discretion to determine whether a manufacturer fits within the requisite SIC Codes. Consequently, there is no explicit grant of discretion to the Commission to interpret section 59-12-104(15) and the SIC Codes. See Morton, 814 P.2d at 589.

The Commission has not argued that a grant of discretion should be implied from the language of section 59-12-104(15). Inasmuch as there is only one permissible reading of section 59-12-104(15) and SIC Code 3652, ⁴ there is no question as to legislative intent that would imply a grant of discretion to the agency to interpret the terms. Id. at 588-89; Ferro, 828 P.2d at 510-11. ⁵ Because the language is unambiguous, we "interpret and apply the statutory language by the traditional methods of statutory construction." King, 850 P.2d at 1291. In interpreting section 59-12-104(15) by determining the scope of SIC Code 3652, and applying traditional rules of statutory construction, we "assume[ ] that each term in the statute was used advisedly; thus the statutory words are read literally, unless such a reading is unreasonably confused or inoperable." Savage Indus. v. State Tax Comm'n, 811 P.2d 664, 670 (Utah 1991). "[A] statutory term should be interpreted and applied according to its usually accepted meaning, where the ordinary meaning of the term results in an application that is neither unreasonably confused, inoperable, nor in blatant contradiction of the express purpose of the statute." Morton, 814 P.2d at 590. Furthermore, " 'Unambiguous language in [a] statute may not be interpreted to contradict its plain meaning.' " State v. Bagshaw, 836 P.2d 1384, 1386 (Utah App.1992) (quoting Bonham v. Morgan, 788 P.2d 497, 500 (Utah 1989) (per curiam)).

Because we find no explicit or implied grant of discretion in section 59-12-104(15), we will review the Commission's interpretation under a correction of error standard.

ANALYSIS

Bonneville contends that once the Commission found that Video West was a manufacturer, Video West automatically qualified for the exemption pursuant to Utah Code Ann. § 59-12-104(15) (1992). Bonneville argues that the statutory reference to activity codes 2000 through 3999 was simply "shorthand" for the legislative intent that any establishment involved in manufacturing qualifies for the exemption. Alternatively Bonneville claims that Video West specifically qualifies for the manufacturing exemption because its activities fit squarely within the provisions of SIC Code 3652 in that Video West is engaged in the manufacture of pre-recorded magnetic tape. Bonneville correctly notes that the 1972 Manual, which by ...