Mynsberge v. Department of State Revenue

• Decision Date: 09 September 1999
• Docket Number: No. 71T10-9608-TA-00097.,71T10-9608-TA-00097.
• Citation: 716 N.E.2d 629
• Parties: Richard C. MYNSBERGE d/b/a RCM Rentals, Petitioner, v. DEPARTMENT OF STATE REVENUE, Respondent.
• Court: Indiana Tax Court

716 N.E.2d 629

Richard C. MYNSBERGE d/b/a RCM Rentals, Petitioner, v. DEPARTMENT OF STATE REVENUE, Respondent.

No. 71T10-9608-TA-00097.

Tax Court of Indiana.

September 9, 1999.

Robert W. Mysliwiec, Jones Obenchain Ford Pankow Lewis & Woods, South Bend, Indiana, Attorney for Petitioner.

Jeffrey A. Modisett, Attorney General of Indiana, Ted J. Holaday, Deputy Attorney General, Indianapolis, Indiana, Attorneys for Respondent.

FISHER, J.

Richard C. Mynsberge d/b/a RCM Rentals (Mynsberge) appeals a final determination of the Department of State Revenue denying his claim for refund of gross retail taxes paid from the 1991 through 1994 tax years.

FACTS AND PROCEDURAL HISTORY

The facts are undisputed. Mynsberge leases buildings and equipment to Coppes Nappanee (Coppes), a manufacturer of kitchen cabinets, as part of his leasing business. Under the lease agreement between Mynsberge and Coppes, Coppes makes a monthly lease payment. Coppes also makes a monthly $7800 payment to Mynsberge for electricity, which is predominantly used by Coppes in its manufacturing business. Mynsberge is billed by NIPSCO for the electricity used by Coppes. If the bill for Coppes' electrical usage is less than $7800, Mynsberge refunds 75% of the difference between the $7800 payment and the electric bill.¹ Mynsberge paid a total of $11,492.11 in gross retail (sales) tax on its purchases of electricity from NIPSCO during the tax years at issue.²

Mynsberge filed a refund claim with the Department for the sales taxes it paid on these purchases.³ On May 29, 1996, the Department issued its final determination denying Mynsberge's refund claim. Mynsberge then commenced this original tax appeal. Both parties have moved for summary judgment.

ANALYSIS AND OPINION

Standard of Review

The Court reviews final determinations of the Department de novo and is bound by neither the evidence nor the issues presented at the administrative level. See IND.CODE ANN. § 6-8.1-9-1(d) (West Supp.1999); Indianapolis Fruit Co. v. Department of State Revenue, 691 N.E.2d 1379, 1382 (Ind.Tax Ct.1998).

Summary judgment is only appropriate where there is no genuine issue of material fact and the moving party is entitled to summary judgment as a matter of law. See IND. T.R. 56(C); Dana Corp. v. State Bd. of Tax Comm'rs, 694 N.E.2d 1244, 1246 (Ind.Tax Ct.1998). Cross motions for summary judgment do not alter this standard. See Matonovich v. State Bd. of Tax Comm'rs, 705 N.E.2d 1093, 1096 (Ind.Tax Ct.1999),

review denied. The summary judgment procedure is designed to terminate cases in which there is no factual dispute and that may be determined as a matter of law. See id. Questions of statutory interpretation are therefore particularly amenable to resolution by summary judgment. See id.

Discussion

Indiana imposes an excise tax (gross retail or sales tax) on certain sales made in Indiana. See IND.CODE ANN. § 6-2.5-2-1(a) (West 1989). This tax is not imposed on all sales taking place within Indiana, but rather on only those sales that constitute retail transactions. See Monarch Beverage Co. v. Department of State Revenue, 589 N.E.2d 1209, 1210 (Ind. Tax Ct.1992)

. The Indiana General Assembly has also enacted a number of exemptions from the gross retail tax. See IND.CODE ANN. §§ 6-2.5-5-1 to -38.2 (West 1989 & Supp.1999). Mynsberge contends that his purchases of electricity from NIPSCO do not constitute retail transactions and are therefore not subject to gross retail tax. In the alternative, Mynsberge contends that, even if his electricity purchases constitute retail transactions, they are exempt from gross retail tax under IND.CODE ANN. § 6-2.5-5-8 (West Supp. 1998), which exempts sales of tangible personal property acquired in the ordinary course of business for "resale, rental, or leasing." Both contentions will be dealt with in turn.

A "retail transaction" is "a transaction of a retail merchant that constitutes selling at retail as described in IC 6-2.5-4-1, that constitutes making a wholesale sale as described in IC 6-2.5-4-2, or that is described in any other section of IC 6-2.5-4." IND.CODE ANN. § 6-2.5-1-2(a) (West 1989); see also Cowden & Sons, Trucking, Inc. v. Department of State Revenue, 575 N.E.2d 718, 719 (Ind.Tax Ct.1991)

. One such retail transaction is described in IND.CODE ANN. § 6-2.5-4-5 (West 1989) (amended 1993):

(a) As used in this section, a "power subsidiary" means a corporation which is owned or controlled by one (1) or more public utilities that furnish or sell electrical energy, natural or artificial gas, water, steam, or steam heat and which produces power exclusively for the use of those public utilities.

(b) A power subsidiary or a person engaged as a public utility is a retail merchant making a retail transaction when the subsidiary or person furnishes or sells electrical energy, natural or artificial gas, water, steam, or steam heating service to a person for commercial or domestic consumption.

(c) Notwithstanding subsection (b), a power subsidiary or a person engaged as a public utility is not a retail merchant making a retail transaction when:

(1) the power subsidiary or person provides, installs, constructs, services, or removes tangible personal property which is used in connection with the furnishing of the services or commodities listed in subsection (b);

(2) the power subsidiary or person sells the services or commodities listed in subsection (b) to a public utility described in section 6 or 7 of this chapter, or to another public utility or power subsidiary described in this section; or

(3) the power subsidiary or person sells the services listed in subsection (b) to a person for use in manufacturing, mining, production, refining, oil extraction, mineral extraction, irrigation, agriculture, or horticulture.

However, this exclusion for sales of the services and commodities only applies if those sales are separately metered for the excepted uses listed in this subsection, or if those sales are not separately metered but are predominately used by the purchaser for the excepted uses listed in this subsection.⁴

Mynsberge contends that his purchases of electricity from NIPSCO do not fall under this statutory provision because Mynsberge does not consume the electricity, but rather resells the electricity to Coppes who then consumes the electricity in its manufacturing business.⁵ According to Mynsberge, one important part of this statutory provision is the requirement in subsection 6-2.5-4-5(b) that the electricity be sold to a "person for domestic or commercial consumption" in order for the sale of electricity to constitute a retail transaction. In Mynsberge's view, the quoted language means that the person to whom the electricity is sold must be the one to consume the electricity. Therefore, according to Mynsberge, because the electricity is not consumed by Mynsberge himself, his purchases of electricity from NIPSCO fall outside of the definition of a retail transaction and, as a result, are not subject to gross retail tax. The Court disagrees.

When the Court is confronted with a question of statutory interpretation, the Court's function is to give effect to the intent of the General Assembly in enacting the statutory provision. See Indianapolis Historic Partners v. State Bd. of Tax Comm'rs, 694 N.E.2d 1224, 1227 (Ind.Tax Ct.1998)

. In general, the best evidence of this intent is found in the language chosen by the General Assembly. See Associated Ins. Cos. v. Indiana Dep't of State Revenue, 655 N.E.2d 1271, 1273 (Ind.Tax Ct.1995), review denied. However, the legislative intent as ascertained from an act or statutory scheme as a whole will prevail over a strict literal reading of any one particular statutory provision. See Department of State Revenue v. Estate of Hardy, 703 N.E.2d 705, 710 (Ind.Tax Ct.1998) (citing State Natural Resources Comm'n v. AMAX Coal Co., 638 N.E.2d 418, 429 (Ind.1994); Indiana Eby-Brown v. Department of State Revenue, 648 N.E.2d 401, 403 (Ind.Tax Ct.1995),

review denied). Additionally, it is presumed that the General Assembly did not intend to enact a superfluous statutory provision, see Sangralea Boys Fund, Inc. v. State Bd. of Tax Comm'rs, 686 N.E.2d 954, 958 (Ind. Tax Ct.1997),

review denied, and therefore, the Court, when interpreting a statute, will endeavor to give meaning to every word in that statute. See Guinn v. Light, 558 N.E.2d 821, 823 (Ind.1990). Finally, section 6-2.5-4-5 is a tax imposition statutory provision. Therefore, it is to be strictly construed against the imposition of tax. See State Bd. of Tax Comm'rs v. Jewell Grain Co., 556 N.E.2d 920, 921 (Ind.1990); Tri-States Double Cola Bottling Co. v. Department of State Revenue, 706 N.E.2d 282, 285 n. 9 (Ind.Tax Ct.1999). However, the policy of strict construction will not override the plain language of a tax imposition provision. Cf. Hyatt Corp. v. Department of State Revenue, 695 N.E.2d 1051, 1053 (Ind.Tax Ct.1998)(policy of strict construction should not be used to contradict plain language of a tax exemption provision), review denied.

Section 6-2.5-4-5 governs which sales of utility services and commodities are retail transactions and which sales of utility services and commodities are not. Subsection 6-2.5-4-5(b) sets forth a general rule that makes sales of utility services and commodities to a person for domestic and commercial consumption fall within the definition of retail transaction. Then, under subsection 6-2.5-4-5(c), some of these utility sales are excluded from that definition. As a result, the Court must first determine whether Mynsberge's purchases of electricity from NIPSCO fall under the general rule set forth in subsection 6-2.5-4-5(b). Then, the Court must determine whether subsection 6-2.5-5-4(c) excludes those purchases from that general rule.

In analyzing subsection 6-2.5-4-5(b), the Court starts with the language chosen by the General Assembly. Subsection 6-2.5-4-5(b) deals with sales of utility services...