LaCrosse Queen, Inc. v. Wisconsin Dept. of Revenue

• Decision Date: 18 April 1997
• Docket Number: No. 95-2754,95-2754
• Citation: 208 Wis.2d 439,561 N.W.2d 686
• Parties: LaCROSSE QUEEN, INC., Petitioner-Appellant, v. WISCONSIN DEPARTMENT OF REVENUE, Respondent-Respondent-Petitioner.
• Court: Wisconsin Supreme Court

Page 686

561 N.W.2d 686

208 Wis.2d 439

LaCROSSE QUEEN, INC., Petitioner-Appellant, v. WISCONSIN DEPARTMENT OF REVENUE, Respondent-Respondent-Petitioner.

No. 95-2754.

Supreme Court of Wisconsin.

Argued Jan. 28, 1997.

Decided April 18, 1997.

For the respondent-respondent-petitioner the cause was argued by Gerald S. Wilcox, Assistant Attorney General, with whom on the briefs was James E. Doyle, Attorney General.

For the petitioner-appellant there was a brief by Paul J. Munson and McDonald & Munson, La Crosse, and oral argument by Paul J. Munson.

¶1 DONALD W. STEINMETZ, Justice

The issue in this case is whether a boat leased by La Crosse Queen, Inc. to Riverboats America, Inc. was used primarily in interstate commerce so as to exempt the gross receipts from said lease from sales tax pursuant to Wis. Stat. § 77.54(13) ¹ for the years from 1989 through 1991. Because we find that the La Crosse Queen was not engaged in interstate commerce during this time, we hold that La Crosse Queen, Inc., was not entitled to the tax exemption provided pursuant to Wis. Stat. § 77.54(13).

¶2 On October 14, 1992, the Department of Revenue (Department) issued an assessment of sales taxes against the taxpayer on the gross receipts from the lease payments. The taxpayer appealed, claiming that such gross receipts are exempt under Wis. Stat. § 77.54(13), since the La Crosse Queen has a burden of over 50 tons and is primarily engaged in interstate commerce. The Tax Appeals Commission (Commission) and the Dane County Circuit Court, the Honorable Michael B. Torphy, both held that La Crosse Queen, Inc. was not entitled to the exemption because it was not engaged in interstate commerce. Having concluded that La Crosse Queen, Inc. was not engaged in interstate commerce, neither the Commission nor the circuit court proceeded to address the issue of whether it was "primarily" engaged in said commerce. The court of appeals reversed the circuit court decision on the grounds that the taxpayer was engaged in interstate commerce, and remanded the case to the Commission to determine if the taxpayer was "primarily" engaged in interstate commerce. La Crosse Queen, Inc. v. Wisconsin Dept. of Revenue, 201 Wis.2d 537, 549 N.W.2d 261 (Ct.App.1996). We now reverse the court of appeals' decision.

¶3 During the years in issue, 1989 through 1991, the taxpayer was the owner and lessor of a boat known as the La Crosse Queen IV (La Crosse Queen). The boat, an excursion paddle wheeler exceeding 50 tons, was leased to a related corporation, Riverboats America, Inc., for the purpose of providing sightseeing and dinner cruises exclusively on the Mississippi River. The boat is operated under Interstate Commerce Commission (ICC) authority number WC-1172 which was transferred to taxpayer in 1975 when the boat was purchased from Roy A. Franz and the business was purchased from his corporation, Big Indian Boat Lines. The taxpayer notes in its brief that until the time of deregulation, the vessel was required to file tariff charges with the Interstate Commerce Commission.

¶4 The previous owner of the boat, Mr. Franz, had challenged the imposition of the sales tax on its sales of tickets for the cruises on the Mississippi claiming, among other things, that the sales tax resulted in an unconstitutional burden on interstate commerce. In an opinion authored by Dane County Reserve Circuit Judge, George R. Currie, the court held that the sales tax did not burden commerce because no interstate commerce was involved in Franz's operations. Franz v. Wisconsin Dept. of Revenue,Case No. 159-122 (Dane County Cir. Ct., July 30, 1979).

¶5 The taxpayer's president, Linda Sayther, conceded that her method of operation and its purpose during 1989, 1990, and 1991 was "basically the same" as that of Roy Franz, her predecessor. Thus, according to the La Crosse Queen's president, the primary purpose of the La Crosse Queen's operation during the period in question was recreation, entertainment, and dining. The cruises on the La Crosse Queen were advertised as one and one-half hour cruises on the Mississippi River. It is not contested that during her excursions from 1989 through 1991, the La Crosse Queen crossed between Wisconsin and Minnesota waters on the Mississippi River.

¶6 The La Crosse Queen's passengers are individuals and groups from Wisconsin and other states. On her northern trip, the La Crosse Queen loads at a wharf in La Crosse, travels up the river several miles to the lock and dam north of the I-90 bridge, turns around, and returns to the same wharf in La Crosse. Since there are no facilities where the La Crosse Queen can dock on either her northern or southern trip, the passengers never disembark until their return to the wharf in La Crosse. Thus, all passengers embark and disembark at the same dock in La Crosse, Wisconsin.

¶7 "Whether a person is engaged in interstate commerce is a question of law, and we review questions of law de novo." Town of LaPointe v. Madeline Island Ferry Line, Inc., 179 Wis.2d 726, 736, 508 N.W.2d 440 (Ct.App.1993) (citation omitted). This court may substitute our judgment for that of the Commission. See Frisch, Dudek & Slattery, Ltd. v. Wisconsin Dept. of Revenue, 133 Wis.2d 444, 446, 396 N.W.2d 355 (Ct.App.1986), citing Department of Revenue v. Milwaukee Refining Corp., 80 Wis.2d 44, 48, 257 N.W.2d 855 (1977). However, this court will accord due weight to an agency decision where the agency possesses particular expertise in an area of law. See id. In the case at bar, the Commission possesses no special expertise because it has faced the task of interpreting the term "interstate commerce" in light of Wis. Stat. § 77.54(13) on only one previous occasion. ² Therefore, we owe the decision of the Commission no deference.

¶8 Tax exemption statutes "are to be strictly construed against the granting of the same, and the one who claims an exemption must point to an express provision granting such exemption by language which clearly specify the same, and thus bring himself clearly within the terms thereof." Ramrod, Inc. v. Department of Revenue, 64 Wis.2d 499, 504, 219 N.W.2d 604 (1974), citing Fall River Canning Co. v. Department of Taxation, 3 Wis.2d 632, 637, 89 N.W.2d 203 (1958); Comet Co. v. Department of Taxation, 243 Wis. 117, 123, 9 N.W.2d 620 (1943). Doubts are to be "resolved against the exemption and in favor of taxability." Department of Revenue v. Greiling, 112 Wis.2d 602, 605, 334 N.W.2d 118 (1983), citing First Nat'l. Leasing Corp. v. Madison, 81 Wis.2d 205, 208, 260 N.W.2d 251 (1977).

¶9 The United States Supreme Court in Cincinnati P., B., S. & P. Packet Co. v. Bay, 200 U.S. 179, 26 S.Ct. 208, 50 L.Ed. 428 (1906) held that a contract governing a towing and barge business between various points in the state of Ohio did not involve interstate commerce simply because the boats "might sail over soil belonging to Kentucky in passing between two Ohio points." Id. at 183, 26 S.Ct. at 209. Likewise, the passengers in the instant case who embark and disembark at the same point in Wisconsin are in no way involved "with commerce among the states" simply because they might sail over Minnesota waters during their excursion.

¶10 When the taxpayer's boat picks up passengers at the wharf in La Crosse for the purpose of an excursion cruise either up or down the Mississippi River and then returns them to the same wharf in La Crosse, it is not conducting interstate commerce or interstate business. Although the La Crosse Queen crosses over into Minnesota waters, there is no commerce or business carried on between Wisconsin and Minnesota as a result of the excursion cruises. The people who use the taxpayer's boat are not using it for the purpose of being transported from Wisconsin to Minnesota, but rather for the purpose of recreation and entertainment.

¶11 The court of appeals and the taxpayer in this case rely on several cases in support of the contention that the La Crosse Queen was engaged in interstate commerce during 1989, 1990, and 1991. These cases are all readily distinguishable from the case at bar.

¶12 In Cornell Steamboat Co. v. United States, 321 U.S. 634, 64 S.Ct. 768, 88 L.Ed. 978 (1944), the Court held that the ship's transportation from one point in New York to another point in New York traversing New Jersey waters was subject to regulation by the Interstate Commerce Commission. Similarly, in Central Greyhound Lines, Inc. v. Mealey, 334 U.S. 653, 68 S.Ct. 1260, 92 L.Ed. 1633 (1948), the Court held that transportation between points within the same state, New York, over routes utilizing New Jersey and Pennsylvania highways was interstate commerce. The Court provided the following definition of interstate commerce:

The term 'interstate commerce' means commerce between any place in a State and any place in another State or between places in the same State through another State, whether such commerce moves wholly by motor vehicle or partly by motor vehicle and partly by rail, express, or water.

Id. at 661, 68 S.Ct. at 1265 (citations omitted).

¶13 The travel of the La Crosse Queen is distinguishable from that of the carriers in Cornell Steamboat and Central Greyhound Lines. In this case, the purpose of the excursions on the La Crosse Queen was recreation and entertainment; it was not intended by anybody to serve as transportation. Additionally, the voyages of the La Crosse Queen were not from one point in Wisconsin to another place in Minnesota, or even from one place in Wisconsin to another place in Wisconsin. Instead, the excursions on the La Crosse Queen during the years in issue started and finished at the same dock in the same city in the same state. Such a travel pattern is not within the purview of the definition of interstate commerce established in Central Greyhound Lines.

¶14 The taxpayer and the court of appeals also rely on two Wisconsin cases in support of the argument that the La Crosse Queen was engaged in...