Citation Partners, LLC v. Wis. Dep't of Revenue

Citation406 Wis.2d 36,2023 WI 16,985 N.W.2d 761
Docket Number2020AP1683
Decision Date01 March 2023
Parties CITATION PARTNERS, LLC, Petitioner-Respondent-Petitioner, v. WISCONSIN DEPARTMENT OF REVENUE, Respondent-Appellant.
CourtUnited States State Supreme Court of Wisconsin

For the petitioner-respondent-petitioner, there were briefs filed by Frederic J. Brounder, J. Wesley Webendorfer, and DeWitt LLP, Madison. There was an oral argument by J. Wesley Webendorfer.

For the respondent-appellant, there was a brief filed by Anthony D. Russomanno, assistant attorney general, with whom on the brief was Joshua L. Kaul, attorney general. There was an oral argument by Anthony D. Russomanno, assistant attorney general.

DALLET, J., delivered the majority opinion of the Court, in which ANN WALSH BRADLEY, HAGEDORN, and KAROFSKY, JJ., joined. ROGGENSACK, J., filed a dissenting opinion, in which ZIEGLER, C.J., and REBECCA GRASSL BRADLEY, J., joined.


¶1 Wisconsin imposes a five percent tax on the sale or lease of tangible personal property, including aircraft, as well as on select services. The tax applies to the "sales price"—that is, "the total amount of consideration" paid for a sale, lease, or service, with no deductions for the seller's or lessor's costs. See Wis. Stat. §§ 77.52(1)(a), 77.51(15b)(a) (2013-14).1 The sale of aircraft parts and maintenance, however, are exempt from sales tax. See Wis. Stat. §§ 77.52(2)(a)10., 77.54(5)(a)3.

¶2 Citation Partners, LLC owns an aircraft which it leases to third parties, the Lessees. As part of the total amount the Lessees pay to lease the aircraft, Citation Partners charges per-flight-hour rates for aircraft repairs and engine maintenance. Those rates correspond to the amount Citation Partners spends on aircraft repairs and engine maintenance. Citation Partners argues that this portion of the lease payment is tax exempt because it is a sale of aircraft parts or maintenance. We disagree. The per-flight-hour charges for aircraft repairs and engine maintenance are taxable because they are part of the total amount of consideration the Lessees pay to lease Citation Partners' aircraft. We therefore affirm the court of appeals' decision.


¶3 Citation Partners owns an aircraft that it leases to the Lessees. The Lessees signed a contract called the Aircraft Dry Lease, defining the responsibilities they and Citation Partners have with regard to the lease of the aircraft. The Dry Lease requires the Lessees to notify Citation Partners if the aircraft needs repairs or maintenance. If so, Citation Partners is responsible for scheduling and paying for all repairs or maintenance.2 It does not perform any of the repairs or maintenance itself.

¶4 In addition to the Dry Lease, the Lessees entered into a Side Agreement with Citation Partners that sets forth the financial terms for the lease of the aircraft. The Side Agreement includes costs-per-flight-hour that Citation Partners charges the Lessees for aircraft repairs and engine maintenance. Those charges are substantially similar to the amount Citation Partners spends when it purchases aircraft repairs and engine maintenance directly from vendors.

¶5 In 2013, the Legislature passed Wisconsin Act 185, which expanded an existing sales tax exemption to include the sale of aircraft parts or maintenance. See 2013 Wis. Act 185. After the Act took effect, Citation Partners stopped collecting sales tax on the amounts it charged Lessees for aircraft repairs and engine maintenance. In 2017, the Wisconsin Department of Revenue notified Citation Partners that unpaid sales taxes were due on those amounts.

¶6 Citation Partners appealed, claiming that the Act 185 sales tax exemption applied to the Lessees' payments for aircraft repairs and engine maintenance because they were a dollar-for-dollar "reimbursement" to Citation Partners for those costs. The Tax Appeals Commission disagreed, concluding that the payments were not reimbursements and that Act 185 did not apply to any portion of the payments Citation Partners received from the Lessees.

The circuit court3 reversed the Commission's decision on the grounds that an agency relationship existed between Citation Partners and the Lessees. According to the circuit court, this relationship meant that the payments for aircraft repairs and engine maintenance were tax exempt, since those payments would be tax-free if they were made directly by the Lessees to the vendors.

¶7 The court of appeals reversed. Citation Partners, LLC v. DOR, 2021 WI App 86, ¶35, 400 Wis. 2d 260, 968 N.W.2d 734. In its view, the existence of an agency relationship was irrelevant. Id., ¶32. Instead, it held that the payments were not exempt from sales tax under the plain language of the statutes, which apply sales tax to "the total amount paid on an aircraft lease," without "any deduction for the portions of a lease attributed to aircraft maintenance or engine maintenance, which are the costs and expenses of running an aircraft leasing business." Id., ¶24.


¶8 We review the Commission's decision rather than the circuit court's. See Friendly Vill. Nursing & Rehab, LLC v. DWD, 2022 WI 4, ¶13, 400 Wis. 2d 277, 969 N.W.2d 245. In doing so, we defer to the Commission's findings of fact so long as they are supported by substantial evidence, but we review its legal conclusions de novo. Id.


¶9 In order to determine whether the Lessees' cost-per-flight-hour payments to Citation Partners for aircraft repairs and engine maintenance are taxable, we analyze the tax statutes. "When interpreting statutes, we start with the text, and if its meaning is plain on its face, we stop there." Clean Wis., Inc. v. DNR, 2021 WI 72, ¶10, 398 Wis. 2d 433, 961 N.W.2d 611. In assessing the plain meaning of the text, "[w]e also consider the broader statutory context, interpreting language consistently with how it is used in closely related statutes." Duncan v. Asset Recovery Specialists, Inc., 2022 WI 1, ¶9, 400 Wis. 2d 1, 968 N.W.2d 661. After analyzing the relevant statutes, we then consider what effect, if any, Citation Partners' arguments about the law of agency has on our interpretation.


¶10 Wisconsin imposes a five percent tax on the "sales price" for tangible personal property like aircraft that is sold or leased. § 77.52(1)(a). "[S]ales price" is defined broadly as "the total amount of consideration, ... for which tangible personal property ... [is] sold, licensed, [or] leased." § 77.51(15b)(a). The "total amount of consideration," and therefore the "sales price," is calculated "without any deduction for" "[t]he seller's cost of the property or items, property, or goods ... sold," or "[t]he cost of materials used, labor or service cost, ... and any other expense of the seller." Id. (a)1.-2. Thus, §§ 77.52(1)(a) and § 77.51(15b)(a) together state that the total amount of consideration paid for a lease—the "sales price"—is taxable, with no deduction for the lessor's costs. See § 77.51(15b)(a)1.-2.

¶11 To calculate the total "sales price" that the Lessees pay Citation Partners to lease the Aircraft, we simply multiply the number of flight hours by the total of all the costs-per-flight-hour.4 The Side Agreement breaks the total costs-per-flight-hour down into different hourly rates, including a base rate ($724.50/hour), Airplane Repairs ($488/hour), and Engine TAP Costs ($292.26/hour).5 The Lessees have to pay all of these costs in order to lease the aircraft. The sum of those costs—including for aircraft repair and engine maintenance—is thus "the total amount of consideration ... for which [the aircraft is] ... leased" and is therefore taxable. See § 77.51(15b)(a). If there were any doubt remaining as to whether Citation Partners' costs for aircraft repairs and engine maintenance can be deducted from the sales price, § 77.51(15b)(a) confirms that the "total amount of consideration" must be calculated "without any deduction" for Citation Partners' costs. Id. (emphasis added).

¶12 Citation Partners argues that the payments are not taxable because they are not consideration at all. That is because, in its view, Citation Partners simply hands the money the Lessees pay for repairs and maintenance over to the vendors that provide those services. But consideration is "any act of the plaintiff from which the defendant ... derives a benefit or advantage." Consideration, Black's Law Dictionary (11th ed. 2019); see also DOR v. River City Refuse Removal, Inc., 2007 WI 27, ¶50, 299 Wis. 2d 561, 729 N.W.2d 396 (explaining that consideration "may arise when there is a benefit to the promisor or a detriment to the promisee"). And Citation Partners clearly benefits from these payments by passing along to its Lessees the costs of maintaining its aircraft. For that reason, these payments are—by definition—consideration. See River City, 299 Wis. 2d 561, ¶50, 729 N.W.2d 396 (consideration includes "a change in financial position"). Additionally, accepting Citation Partners' argument that it receives no consideration from the Lessees' payments for aircraft repairs and engine maintenance simply because that payment corresponds to anticipated repair costs would render part of § 77.51(15b)(a) meaningless. See State ex rel. Kalal v. Cir. Ct. for Dane Cnty., 2004 WI 58, ¶46, 271 Wis. 2d 633, 681 N.W.2d 110 ("Statutory language is read where possible to give reasonable effect to every word, in order to avoid surplusage."). After all, if Citation Partners is right, it is not clear what § 77.51(15b)(a) means when it says that the "sales price"—the "total amount of consideration"—is calculated "without any deduction" for Citation Partners' costs. § 77.51(15b)(a) (emphasis added).

¶13 Citation Partners claims that the costs-per-flight-hour that it receives for aircraft parts and engine maintenance are nevertheless tax exempt. It points to two statutory exemptions related to aircraft: Wis. Stat. § 77.54(5)(a)3., which exempts the sale of "parts used to modify or repair aircraft," and Wis....

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