City of Marion v. Dept. of Revenue & Fin.

• Citation: 643 N.W.2d 205
• Decision Date: 03 April 2002
• Docket Number: No. 00-1309.,00-1309.
• Parties: CITY OF MARION, Iowa, Appellant, v. IOWA DEPARTMENT OF REVENUE AND FINANCE, Appellee.
• Court: United States State Supreme Court of Iowa

643 N.W.2d 205

CITY OF MARION, Iowa, Appellant, v. IOWA DEPARTMENT OF REVENUE AND FINANCE, Appellee.

No. 00-1309.

Supreme Court of Iowa.

April 3, 2002.

Rehearing Denied April 26, 2002.

Donald C. Hoskins, Marion, for appellant.

Thomas J. Miller, Attorney General, Harry M. Griger, Special Assistant Attorney General, and James D. Miller, Assistant Attorney General, for appellee.

CARTER, Justice.

The City of Marion (the city) challenges the imposition of a sales tax on its municipal swimming pool admission fees. The city contends Iowa Code section 422.45(20) (1997) exempts admission fees paid for entrance to the city pool from the collection of sales tax. After reviewing the record and considering the arguments, we conclude municipal swimming pool admission fees are not exempt from the collection of sales tax under section 422.45(20). Consequently, we affirm the decision of the district court.

The facts of this case are essentially undisputed. The city owns and operates the Marion municipal swimming pool. The Iowa Department of Revenue and Finance (the department) conducted an audit of the pool's gross receipts for admission fees from January 1, 1993, through December 31, 1997. After completion of the audit, it was determined that the city owed $23,140.90 in sales tax, penalties, and interest. The department issued a notice of assessment. Although the city paid the assessment, it did so under protest and subsequently requested a refund of the tax that it had paid. A contested-case hearing was held, and the denial of the tax refund was sustained by an administrative law judge. The city appealed that decision to the department director, who upheld the denial of its claim for refund. That decision was affirmed by the district court on a petition for judicial review.

The exemptions for the collection of sales tax are set forth in Iowa Code section 422.45, which states in relevant part:

There are hereby specifically exempted from the provisions of this division and from the computation of the amount of tax imposed by it, the following:

....

20. The gross receipts from sales or services rendered, furnished, or performed by a county or city. This exemption... does not apply to fees paid to cities and counties for the privilege of participating in any athletic sports.

(Emphasis added.) The exception from the exemption with regard to "participating in any athletic sports" was added to section 422.45(20) by a 1985 amendment. 1985 Iowa Acts ch. 32, § 84.

Following this amendment, the department revised Iowa Administrative Code rule 701-18.39 to accommodate the legislative changes. Pursuant to the procedures set forth in Iowa Code section 17A.4, the department received written comments and held a public hearing on the proposed rule changes. After review of the proposed rule by the legislative rules review committee, rule 701-18.39 was amended to read, in relevant part:

Sales or services rendered, furnished, or performed by a county or city.... On and after July 1, 1985, the gross receipts from fees paid to cities and counties for the privilege of participating in any athletic sports are also subject to tax....

A "sport" is any activity or experience which involves some movement of the human body and gives enjoyment or recreation. An "athletic" sport is any sport which requires physical strength, skill, speed, or training in its performance. The following activities are nonexclusive examples of athletic sports: Baseball, football, basketball, softball, volleyball, golf, tennis, racquetball, swimming, wrestling, and foot racing.

The following is a list of various fees which would be considered fees paid to a city or county for the privilege of participating in any athletic sport, and thus subject to tax under this rule. The list is not exhaustive.

1. Fees paid for the privilege of using any facility specifically designed for use by those playing an athletic sport: fees for use of golf course, ball diamond, tennis court, swimming pool, or ice skating rink are subject to tax. These fees are subject to tax whether they allow use of the facility for a brief or extended period of time, e.g., a daily fee or season ticket for use of a swimming pool or golf course would be subject to tax....

Iowa Admin. Code r. 701-18.39 (emphasis added).

Rule 701-18.39 represents the department's interpretation of section 422.45(20). Although the court gives weight to the department's interpretation, the meaning of a statute is always a matter of law to be determined by the court. Sorg v. Iowa Dep't of Revenue, 269 N.W.2d 129, 131 (Iowa 1978). The deference that should be accorded to the view of the agency in this case is prescribed in Iowa Code section 17A.19(11) (2001). That statute provides that the court

[s]hall not give any deference to the view of the agency with respect to whether particular matters have been vested by a provision of law in the discretion of the agency.

Iowa Code § 17A.19(11)(a). The court should, however, give appropriate deference to the view of the agency

with respect to particular matters that have been vested by a provision of law in the discretion of the agency.

Iowa Code § 17A.19(11)(c).

There is a statutory directive, which states:

The director shall have the power and authority to prescribe all rules not inconsistent with the provisions of this chapter, necessary and advisable for its detailed administration and to effectuate its purposes.

Iowa Code § 422.68(1). We conclude from this statute that the matter under consideration has been vested...