Metropolitan Utilities Dist. of Omaha v. Balka
| Decision Date | 28 March 1997 |
| Docket Number | No. S-95-588,S-95-588 |
| Citation | 252 Neb. 172,560 N.W.2d 795 |
| Court | Nebraska Supreme Court |
| Parties | METROPOLITAN UTILITIES DISTRICT OF OMAHA, a municipal corporation and political subdivision of the State of Nebraska, Appellant, v. M. Berri BALKA, Tax Commissioner of the State of Nebraska, and State of Nebraska, Department of Revenue, Appellees. |
Syllabus by the Court
1. Administrative Law: Judgments: Appeal and Error. On an appeal under the Administrative Procedure Act, an appellate court reviews the judgment of the district court for errors appearing on the record and will not substitute its factual findings for those of the district court where competent evidence supports those findings.
2. Administrative Law: Judgments: Appeal and Error. When reviewing an order 3. Statutes: Appeal and Error. Statutory interpretation is a matter of law in connection with which an appellate court has an obligation to reach an independent, correct conclusion irrespective of the determination made by the court below.
of a district court under the Administrative Procedure Act for errors appearing on the record, the inquiry is whether the decision conforms to the law, is supported by competent evidence, and is neither arbitrary, capricious, nor unreasonable.
4. Statutes: Appeal and Error. Statutory language is to be given its plain and ordinary meaning, and an appellate court will not resort to interpretation to ascertain the meaning of statutory words which are plain, direct, and unambiguous.
5. Statutes: Taxation. Tax exemption provisions are to be strictly construed, and their operation will not be extended by construction. Property which is claimed to be exempt must clearly come within the provision granting exemption from taxation.
6. Statutes: Taxation: Proof. One claiming an exemption from taxation of the claimant or claimant's property must establish entitlement to the exemption, because a statute conferring an exemption from taxation is strictly construed.
7. Administrative Law: Statutes. Although construction of a statute by a department charged with enforcing it is not controlling, considerable weight will be given to such a construction, particularly when the Legislature has failed to take any action to change such an interpretation.
Ronald E. Bucher, Omaha, for appellant.
Don Stenberg, Attorney General, and L. Jay Bartel, Lincoln, for appellees.
Plaintiff-appellant Metropolitan Utilities District of Omaha (MUD) filed a claim seeking a $159,931.21 refund of Nebraska retail sales tax paid on electricity MUD purchased between October 1, 1991, and September 30, 1992, to use in its business. The Tax Commissioner (Commissioner) approved $14,426.92 of the requested refund, but denied the remainder of the claim because MUD's use of electricity to transport treated water from two treatment facilities into storage did not constitute "manufacturing" or "processing" under Neb.Rev.Stat. § 77-2704.13 (Cum.Supp.1992), and therefore, the electricity was not exempt from Nebraska retail sales tax. On appeal, the district court for Lancaster County affirmed the Commissioner's decision. We affirm.
MUD's four assignments of error can be consolidated into the following issue: Whether Nebraska Sales and Use Tax Regulation 1-089.02A(1), 316 Neb. Admin. Code, ch. 1, § 089.02A(1) (1994), is consistent with § 77-2704.13.
On an appeal under the Administrative Procedure Act, an appellate court reviews the judgment of the district court for errors appearing on the record and will not substitute its factual findings for those of the district court where competent evidence supports those findings. Rainbolt v. State, 250 Neb. 567, 550 N.W.2d 341 (1996); Knowlton v. Harvey, 249 Neb. 693, 545 N.W.2d 434 (1996).
When reviewing an order of a district court under the Administrative Procedure Act for errors appearing on the record, the inquiry is whether the decision conforms to the law, is supported by competent evidence, and is neither arbitrary, capricious, nor unreasonable. Rainbolt v. State, supra; Keys v. Department of Motor Vehicles, 249 Neb. 964, 546 N.W.2d 819 (1996).
Statutory interpretation is a matter of law in connection with which an appellate
court has an obligation to reach an independent, correct conclusion irrespective of the determination made by the court below. Van Ackeren v. Nebraska Bd. of [252 Neb. 174] Parole, 251 Neb. 477, 558 N.W.2d 48 (1997); Snipes v. Sperry Vickers, 251 Neb. 415, 557 N.W.2d 662 (1997).
MUD is a municipal corporation of the State of Nebraska engaged in the business of water treatment and distribution. The MUD water treatment system (1) obtains raw water from the Missouri River and wells along the Platte River; (2) transforms the raw water into treated water using sedimentation, clarification, disinfection, and filtration techniques; (3) transports the treated water from a treatment facility into covered storage tanks; (4) transports the treated water from storage into a distribution system; and (5) distributes the treated water to Omaha and the surrounding area.
MUD pays Nebraska sales tax on the electricity it purchases to transport treated water from its treatment facilities into storage. Between October 1, 1991, and September 30, 1992, MUD paid $159,931.21 in sales tax on electricity--a majority of which was purchased to transport treated water into storage at three of its treatment facilities: the "Platte River Plant," the "Florence Pumping Station," and the "Liquified Natural Gas Plant."
As a result, in June 1993, MUD filed a "Claim for Overpayment of Sales and Use Tax" form with the Department of Revenue, seeking a $159,931.21 sales tax refund. MUD contended that § 77-2704.13 permitted a refund of state sales tax because "[m]ore than 50 percent" of the amount of electricity purchased for use at its treatment facilities "was used ... directly in processing, manufacturing, or refining tangible personal property." Section 77-2704.13 provides, in relevant part:
Sales and use taxes shall not be imposed on the gross receipts from the sale, lease, or rental of and the storage, use, or other consumption in this state of:
....
(2) Sales and purchases of such energy sources or fuels ... when more than fifty percent of the amount purchased is for use directly in processing, manufacturing, or refining tangible personal property, in the generation of electricity, or by any hospital.
(Emphasis supplied.)
The Commissioner approved a $14,426.92 refund for sales tax MUD paid on electricity it purchased for use at the Liquified Natural Gas Plant but denied a refund of state sales tax on the electricity MUD purchased to use at the Platte River Plant and the Florence Pumping Station because, according to the record, more than 50 percent of the electricity used at these two treatment facilities went into "high service pumping," i.e., energy expended exclusively to transport treated water from the treatment facility into storage. Furthermore, citing § 089.02A(1), the Commissioner determined that the electricity MUD used at the Platte River and Florence treatment facilities was used merely to transport already treated water from a treatment facility into storage rather than for manufacturing or processing and that, therefore, the purchase of electricity was not exempt from sales tax under § 77-2704.13.
MUD appealed the Commissioner's decision to the district court for Lancaster County. After a hearing on the record, the district court affirmed the Commissioner's decision. The court found that the electricity at issue was "[purchased and] used [by MUD] merely to [transport] an already finished product [treated water] from the [Platte River and Florence treatment facilities into storage]." The court also concluded that the water underwent no change in form after being transformed from raw water into treated, drinkable water.
MUD appealed the judgment of the district court. We removed the case to this court's docket pursuant to the authority granted to us by Neb.Rev.Stat. § 24-1106(3) (Reissue 1995) to regulate the dockets of the Nebraska Court of Appeals and this court.
MUD contends that the district court erred in failing to find § 089.02A to be inconsistent with § 77-2704.13. The issue in this matter is whether MUD's use of electricity to transport treated water from its Platte River and Florence treatment facilities into storage warranted an exemption from state sales tax under § 77-2704.13.
In general, statutory language is to be given its plain and ordinary meaning, and an appellate court will not resort to interpretation to ascertain the meaning of statutory words which are plain,...
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