Gate Bluegrass Precast, Inc. v. Chumley, No. M2007-00250-COA-R3-CV (Tenn. App. 3/14/2008)
| Decision Date | 14 March 2008 |
| Docket Number | No. M2007-00250-COA-R3-CV.,M2007-00250-COA-R3-CV. |
| Parties | GATE BLUEGRASS PRECAST, INC. v. LOREN L. CHUMLEY, COMMISSIONER OF REVENUE OF THE STATE OF TENNESSEE. |
| Court | Tennessee Court of Appeals |
Michael G. Stewart and Brett R. Carter, Nashville, Tennessee, for the appellant, Gate Bluegrass Precast, Inc.
Robert E. Cooper, Jr., Attorney General and Reporter, Michael E. Moore, Solicitor General, Charles L. Lewis, Deputy Attorney General and Wyla M. Posey, Assistant Attorney General, Nashville, Tennessee, for the appellee, Loren L. Chumley, Commissioner of Revenue of the State of Tennessee.
David R. Farmer, J., delivered the opinion of the court, in which Alan E. Highers, P.J., W.S., and Holly M. Kirby, J., joined.
This lawsuit arises from taxpayer's assertion that it qualifies for tax exemptions provided to manufacturers by Tennessee Code Annotated § 67-6-206 and § 67-6-102. The trial court determined the exemptions are not available to taxpayer because taxpayer does not qualify as a "manufacturer" as defined by the taxation statutes. Taxpayer appeals. We affirm.
The issue in this case is whether Plaintiff/Taxpayer Gate Bluegrass Precast, Inc. ("GBP") is a manufacturer entitled to the exemptions from sales and uses taxes on industrial machinery, raw materials, and utilities under Tennessee Code Annotated §§ 67-6-206 and 67-6-102(24)(E) as codified in the 1998 Tennessee Code. GBP is a Florida corporation with its principal place of business in Kentucky. GBP operates a facility in Ashland City, Tennessee, where it manufactures precast architectural concrete panels that are installed onto real property. GBP and Gate Concrete, which, on some projects, installs the concrete panels produced by GBP, are subsidiaries of Gate Petroleum Company. This dispute concerns GBP's activities at its Ashland, Tennessee, facility during the tax period from July 1, 1996 through September 30, 1999 ("the tax period").
During the tax period, GBP purchased materials used in the fabrication of its architectural concrete products under resale certificates, thereby obtaining an exemption from the sales and use taxes otherwise applicable to the materials. It also asserted the exemptions from taxes on industrial machinery and utilities afforded to manufacturers by Tennessee Code Annotated § 67-6-206. Following a sales and use tax audit for the tax period, the Department of Revenue ("the Department") determined GBP did not qualify for the sales and use tax exemption because it was not a "manufacturer" for the purposes of section 67-6-206. Rather, the Department determined GBP was correctly characterized as a "contractor/dealer" where it utilized most of the concrete panels it fabricated in fulfillment of its installation contracts. The Department assessed state and local sales and use taxes in the amount of $133,312.00, plus interest, on materials and custom molds, equipment repair, and utilities used by GBP during the tax period. On April 8, 2003, the Department issued a proposed adjusted assessment in the amount of $106,740.00 upon determining that GBP had sold some of its fabricated panels in its capacity as a dealer. GBP paid the assessment and filed a claim for refund on June 30, 2003. On July 16, 2003, the Department denied GBP's claim for refund.
In November 2003, GBP filed a complaint in the Chancery Court for Davidson County pursuant to Tennessee Code Annotated § 67-1-1803, asserting it qualified for the sales and use tax exemptions provided to manufacturers by the Code during the audited tax period. GBP and the Department filed cross-motions for summary judgment. Following oral argument on the parties' cross motions, the trial court determined GBP was not a "manufacturer" under Tennessee Code Annotated §§ 67-6-206(b)(2) and 67-6-209(c), but the end-user and consumer of the majority of the concrete panels it fabricates. The trial court entered final judgment on the matter on January 16, 2007, (TR at 381) and GBP filed a timely notice of appeal to this Court. We affirm.
The issue presented for our review, as presented by BGP is:
Whether the trial court erred in finding that Gate Bluegrass Precast, Inc. ("Appellant"), a company that derives over 70% of its gross sales from manufacturing concrete panels, does not qualify for the industrial machinery exemption to the sales tax under Tennessee Code Annotated § 67-6-206.
The facts of this case are largely undisputed. The issue presented requires us to determine whether, as a matter of law, during the tax period at issue GBP acted as a contractor or end user of the personal property it fabricated, or whether it qualified as a "manufacturer" for the purposes of the exemptions provided by sections 67-6-206 and 67-5-102(24)(E) of the 1998 Code. We review issues of law de novo, with no presumption of correctness afforded to the determination of the trial court. Taylor v. Fezell, 158 S.W.3d 352, 357 (Tenn. 2005). We likewise review the trial court's application of law to the facts de novo, with no presumption of correctness. State v. Thacker, 164 S.W.3d 208, 248 (Tenn. 2005). Likewise, to the extent to which the issue presented requires us to
review the trial court's construction of the exemption provided by Tennessee Code Annotated § 676-206 and the limitation provided by § 67-6-209(c), our review is de novo, with no presumption of correctness attached to the determination of the trial court. Hill v. City of Germantown, 31 S.W.3d 234, 237 (Tenn. 2000).
The rules governing statutory construction are well-established. When interpreting a statute, the court is to "ascertain and give effect to the legislative intent without unduly restricting or expanding a statute's coverage beyond its intended scope." Hathaway v. First Family Fin. Servs., Inc., 1 S.W.3d 634, 640 (Tenn. 1999) (citations omitted). We must ascertain the intent of the legislature from the natural and ordinary meaning of the statutory language and in context of the entire statute, without forcing a construction that would limit or expand its scope. JJ & TK Corp. v. Bd. of Comm'rs, 149 S.W.3d 628, 630-31 (Tenn. Ct. App. 2004) (citations omitted). When the language of a statute is clear, we must utilize the plain, accepted meaning of the words used by the legislature to ascertain the statute's purpose and application. If the wording is ambiguous, however, we must look to the entire statutory scheme and at the legislative history to ascertain the legislature's intent and purpose. We must construe statutes in their entirety, assuming that the legislature chose the words of the statute purposely, and that the words chosen "convey some intent and have a meaning and a purpose" when considered within the context of the entire statute. Eastman Chem. Co. v. Johnson, 151 S.W.3d 503, 507 (Tenn. 2004) (citations omitted).
The court must construe tax statutes liberally against the taxing authority. Tax exemptions, however, are construed strictly against the taxpayer, who must carry the burden of demonstrating an entitlement to the exemption. Steele v. Indus. Dev. Bd. of the Metro. Gov't of Nashville and Davidson County, 950 S.W.2d 345, 348 (Tenn. 1997)(citations omitted). Tax exemptions will not be implied. Hutton v. Johnson, 956 S.W.2d 484, 488 (Tenn. 1997)(quoting American Cyanamid Co. v. Huddleston, 908 S.W.2d 396, 400 (Tenn. App. 1995). Rather, there is a presumption against exemption, "and any well founded doubt defeats a claimed exemption." Id.
With these rules in mind, we turn to the issue presented in this case.
There is no dispute in this case that GBP fabricates precast architectural concrete panels at its Ashland facility, and the Department does not contend that GBP would not be entitled to the manufacturer's exemption provided in section 67-6-206 if it did not also contract, or subcontract, for the installation of most of the concrete panels it fabricated during the tax period. Rather, the Department asserts GBP is not entitled to the tax exemption applicable to industrial machinery, raw materials and utilities because it did not qualify as a "manufacturer" for the purposes of the exemption where it contracted to install a majority of the concrete panels it fabricated. The Department submits that most of GBP's contracts for the tax period were contracts to deliver and install concrete panels in real property, and not contracts for the sale of fabricated panels. It asserts that GBP fabricated a majority of the panels it produces for its own use as a contractor. The Department argues that, in light of Security Fire Protection Co. v. Huddleston, 138 S.W.3d
829(Tenn. Ct. App. 2003) and Wiley Steel Fabricators v. Johnson, 179 S.W.3d 509 (Tenn. Ct. App. 2005), GBP cannot claim the sales and use tax exemptions available to manufacturers because it utilized the products it fabricated in fulfillment of its own installment contracts.
GBP, on the other hand, asserts it is a manufacturer and not an end-user of its own fabricated products. It asserts that its principal business is fabricating concrete panels, and that, for some customers during the tax period, it subcontracted for the installation of the panels as a convenience to the customer. It asserts that the majority of its gross revenue during the tax period was derived from the sale of the concrete panels it fabricated. If further asserts that, under Penske Truck Leasing Co. v. Huddleston, 795 S.W.2d 669 (Tenn. 1990) provisions in its contracts for the installation of the fabricated panels were severable from the provisions relating to sales. It asserts its primary business is fabricating concrete panels for resale, and that it is not primarily a contractor.
We begin our analysis by...
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