Colorado Dept. of Revenue v. Woodmen of the World

Decision Date01 July 1996
Docket NumberNo. 95SC15,95SC15
Citation919 P.2d 806
PartiesCOLORADO DEPARTMENT OF REVENUE; John J. Tipton, in His Official Capacity as the Executive Director of the Colorado Department of Revenue; and Amelie A. Buchanan, in Her Official Capacity as the Deputy Director of the Colorado Department of Revenue, Petitioners, v. WOODMEN OF THE WORLD and/or Assured Life Association, Respondents.
CourtColorado Supreme Court

Gale A. Norton, Attorney General, Stephen K. ErkenBrack, Chief Deputy Attorney General, Timothy M. Tymkovich, Solicitor General, Maurice G. Knaizer, Deputy Attorney General, Larry A. Williams, First Assistant Attorney General, Robert C. Ripple, Assistant Attorney General, Carolyn Lievers, Assistant Attorney General, General Legal Services Section, Denver, for Petitioners.

Holland & Hart, Alan Poe, Rachel A. Yates, Englewood, for Respondent.

Justice LOHR delivered the Opinion of the Court.

This case presents the issue of whether fraternal benefit societies are exempt from the payment of Colorado sales taxes on retail purchases of tangible personal property. The trial court upheld the claim of Woodmen of the World and/or Assured Life Association that it is exempt from such taxes. The Colorado Court of Appeals affirmed, with one judge dissenting. Woodmen of the World v. Colorado Dep't of Revenue, 893 P.2d 1349, 1354 (Colo.App.1994). We granted certiorari and now reverse the judgment of the court of appeals and return the case to that court with directions to reverse the judgment of the trial court and remand for further proceedings consistent with this opinion.

I.

In Colorado, sales taxes are imposed on all sales and purchases of tangible personal property at retail pursuant to the Emergency Retail Sales Tax Act of 1935, §§ 39-26-101 to -307, 16B C.R.S. (1994) ("sales tax act"). The sales tax act exempts certain sales from taxation based on the nature of the item sold or the characteristics of the purchaser. See § 39-26-114, 16B C.R.S. (1994).

Woodmen of the World and/or Assured Life Association ("Woodmen") is a fraternal benefit society organized in 1891 under the laws of Colorado. It provides death and disability insurance benefits to its members and their beneficiaries.

Based on inquiries from and information supplied by Woodmen, the Colorado Department of Revenue ("Department") informed Woodmen from time to time that it was exempt from the payment of sales taxes. This determination first appeared in a letter to Woodmen dated October 6, 1944, and was followed by a similar letter on June 2, 1978, and by certificates of exemption issued on August 29, 1979, and October 6, 1988.

In 1988 or 1989 the Department instituted a review of its policies for issuing certificates of exemption. Previously, it had issued such certificates whenever an organization could demonstrate that it was exempt from the payment of federal income taxes. Woodmen was exempt from federal income taxes as a fraternal benefit society under I.R.C. § 501(c)(8). As a consequence of its review, however, the Department determined that the sales tax act did not contain an exemption for sales to fraternal benefit societies. The Department also concluded that Woodmen did not satisfy the definition of a "charitable organization" in the sales tax act, and therefore was not entitled to the exemption in that act for sales to such organizations. Therefore, after auditing Woodmen's records the Department notified Woodmen by letter that effective February 23, 1990, it was "no longer entitled to make purchases that are exempt from Colorado sales tax."

As a result of the Department's notification, Woodmen began to pay sales taxes, but filed a refund claim for $2,133.06 on August 19, 1991. Woodmen claimed an exemption from the sales tax act on two grounds. First, it asserted that it is a "charitable organization" and therefore qualifies for exemption under a specific provision of the sales tax act. See § 39-26-102(2.5), 16B C.R.S. (1994) (defining charitable organization); § 39-26-114(1)(a)(II), 16B C.R.S. (1994) (providing an exemption for certain sales to charitable organizations). Second, it relied on a tax exemption provision in the fraternal benefit society statutes. See § 10-14-504, 4A C.R.S. (1994). 1 The Department denied Woodmen's refund claim, and Woodmen appealed the Department's final determination to the Douglas County District Court under a statute providing for de novo review. See § 39-21-105(2), 16B C.R.S. (1982). Both parties moved for summary judgment.

The district court determined that Woodmen is not a charitable organization within the meaning of section 39-26-102(2.5), 16B C.R.S. (1994), and that sales to Woodmen are not exempt from taxation under the charitable organization exemption provision outlined in section 39-26-114(1)(a)(II), 16B C.R.S. (1994). The court therefore granted the Department's motion for summary judgment on that issue. However, the court ruled that fraternal benefit societies are exempt from the payment of Colorado sales taxes pursuant to an exemption in the statutory provisions relating to fraternal benefit societies, and therefore granted Woodmen's cross-motion for summary judgment. See § 10-14-504, 4A C.R.S. (1994). The Department appealed, and the court of appeals affirmed over the dissent of one judge. Woodmen, 893 P.2d at 1354. We granted certiorari to review the court of appeals' decision, 2 and now reverse.

II.

Colorado imposes taxes on the sales and purchases of tangible personal property at retail under the Emergency Retail Sales Tax Act of 1935, §§ 39-26-101 to -307, 16B C.R.S. (1994). That statute outlines exemptions from the taxation scheme, including sales made to "charitable organizations, in the conduct of their regular charitable functions and activities." § 39-26-114(1)(a)(II), 16B C.R.S. (1994). A "charitable organization" is defined in section 39-26-102(2.5), 16B C.R.S. (1994). The Department determined that Woodmen is not a charitable organization and denied Woodmen's claim of exemption. The district court agreed and granted the Department's motion for summary judgment to the extent that Woodmen's claim was based on the charitable organization exemption provision of the sales tax act. Woodmen did not appeal that determination. Thus, the applicability to Woodmen of the charitable exemption provision of the sales tax act is not at issue before us.

III.

The district court and the court of appeals upheld Woodmen's claim of exemption under a provision of the statutes concerning the organization and governance of fraternal benefit societies. A fraternal benefit society is defined as follows:

Any incorporated society, order, or supreme lodge, without capital stock, conducted solely for the benefit of its members and their beneficiaries and not for profit, operated on a lodge system with ritualistic form of work, having a representative form of government, and which provides any of the benefits enumerated in section 10-14-401,[ 3] is hereby declared to be a fraternal benefit society.

§ 10-14-102, 4A C.R.S. (1994). 4 In a statute enacted in 1911, fraternal benefit societies were exempted from the payment of certain taxes:

Every fraternal benefit society organized or licensed under this Act is hereby declared to be a charitable and benevolent institution and all of its funds shall be exempt from all and every state, county, district, municipal and school tax, other than taxes on real estate and office equipment.

Ch. 139, sec. 30, 1911 Colo. Sess. Laws 422, 441 (currently codified as § 10-14-504, 4A C.R.S. (1994) (omitting "fraternal benefit" in view of a later-adopted definition of "society" and substituting "article" for "Act")).

However, Colorado did not impose retail sales taxes at the time section 10-14-504 was enacted. The sales tax was first adopted in this state by the Emergency Retail Sales Tax Act of 1935, §§ 39-26-101 to -307, 16B C.R.S. (1994). The issue before us, therefore, is whether the exemption from taxation granted to fraternal benefit societies in 1911 is applicable with respect to a tax that was neither in existence in 1911 nor adopted until 1935, twenty-four years after passage of the fraternal benefit society exemption provision.

Familiar rules of statutory construction guide our analysis. Our goal in construing statutes is to discern and give effect to the intent of the legislature. E.g., Jones v. Cox, 828 P.2d 218, 221 (1992); Woodsmall v. Regional Transp. Dist., 800 P.2d 63, 67 (Colo.1990). We look primarily to the language of a statute to determine legislative intent. E.g., Jones, 828 P.2d at 221; Woodsmall, 800 P.2d at 67. When the statutory language is clear and unambiguous, there is no need to resort to interpretive rules. E.g., People v. Andrews, 871 P.2d 1199, 1201 (Colo.1994); Woodsmall, 800 P.2d at 67. In contrast, we may consider legislative history to assist in ascertaining the meaning of a statute if the statutory language is ambiguous. E.g., General Elec. Co. v. Niemet, 866 P.2d 1361, 1364 (1994); Griffin v. S.W. Devanney & Co., Inc., 775 P.2d 555, 559 (Colo.1989). In determining the meaning of a statute, we must adopt a construction that will serve the legislative purposes underlying the enactment. E.g., Griffin, 775 P.2d at 559; Howard Elec. v. Department of Revenue, 771 P.2d 475, 479 (Colo.1989). Finally, in construing tax statutes there is a strong presumption that taxation is the rule and exemption the rare exception. E.g., Howard, 771 P.2d at 480; Security Life & Accident Co. v. Heckers, 177 Colo. 455, 458, 495 P.2d 225, 226 (1972). The burden is on the taxpayer who claims an exemption to establish clearly the right to such an exemption. E.g., Security Life, 177 Colo. at 458, 495 P.2d at 226. With these principles in mind, we turn to the task of construing the relevant statutes.

A.

Colorado had no sales tax in 1911, when fraternal benefit societies were declared to be "charitable and benevolent institution[s]" and were exempted from...

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