Najo Equip. Leasing, LLC v. Comm'r Revenue, W2014-01096-COA-R3-CV

CourtCourt of Appeals of Tennessee
Writing for the CourtJ. STEVEN STAFFORD, JUDGE
Docket NumberNo. W2014-01096-COA-R3-CV,W2014-01096-COA-R3-CV
Decision Date23 April 2015


No. W2014-01096-COA-R3-CV


Assigned on Briefs February 25, 2015
April 23, 2015

Appeal from the Chancery Court for Shelby County
Arnold B. Goldin, Chancellor

Taxpayer brought action against the Tennessee Department of Revenue ("Department") to challenge its assessment of business taxes against taxpayer. Taxpayer asserted it was entitled to an exemption for its leasing trucks and trailers to a public utility. Taxpayer and the Department filed cross-motions for summary judgment. The trial court granted summary judgment in favor of the Department finding that the exemption provision was unambiguous and did not apply to the taxpayer's business activities. On appeal, we hold that the exemption provision is ambiguous, but also that the taxpayer failed to meet its burden in proving it was entitled to the exemption. Accordingly, we affirm the trial court's grant of summary judgment in favor of the Department.

Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court Affirmed

J. STEVEN STAFFORD, P.J., W.S., delivered the opinion of the Court, in which BRANDON O. GIBSON J., and KENNY ARMSTRONG, J., joined.

Gary E. Veazey and Martin A. Grusin, Memphis, Tennessee, for the appellant, NAJO Equipment Leasing, LLC.

Herbert H. Slatery, III, Attorney General and Reporter; Andree S. Blumstein, Solicitor General; Talmage M. Watts, Senior Counsel, for the appellee, Commissioner of Revenue.

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The material facts concerning this appeal are undisputed and have been stipulated to by the parties, Appellant NAJO Equipment Leasing, LLC ("NAJO") and Appellee Commissioner of the Department of Revenue ("Department"). NAJO is a dual-member limited liability company formed under the laws of Tennessee and located in Shelby County, Tennessee. NAJO is the owner of trucks and trailers that it leases to another Tennessee corporation, JNJ Express. JNJ Express uses the trucks and trailers it leases from NAJO to provide transportation services in interstate commerce. It is undisputed that JNJ Express, a common carrier, is a public utility within the meaning of Tennessee Code Annotated Section 65-4-101(6) (2006).1 Accordingly, the Department has recognized that JNJ Express is exempt from business taxes pursuant to Tennessee Code Annotated Section 67-4-708(3)(C)(ix).2

On May 15, 2010, the Department, pursuant to the powers provided in Title 67 of the Tennessee Code, assessed NAJO for business taxes for the period from April 2001 through March 1, 2009. The assessment was in the total amount of $27,618.93, including tax, penalty, and interest through May 15, 2010. The income of NAJO on which the Department's assessment of business taxes was based was derived solely from NAJO's leases of trucks and trailers to JNJ Express. On October 6, 2010, the Department adjusted the assessment to remove interest erroneously charged for the period from August 9, 2010, through September 21, 2010. The revised assessment was in the amount of $28,001.68, including tax, penalty, and interest through October 31, 2010.3

On November 22, 2010, NAJO commenced this action challenging the Department's assessment of business taxes for the period from April 1, 2005, through March 31, 2009. NAJO filed a timely challenge to the assessment pursuant to the authority of Tennessee Code

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Annotated Section 67-1-1801.4 The Department filed a counterclaim seeking a judgment in the total amount of the assessment, plus later accruing interest, plus statutory expenses of litigation and attorney fees.

On January 30, 2014, both parties filed cross-motions for summary judgment. As mentioned above, the parties stipulated to the material facts for purposes of summary judgment. The Department argued in its motion that it properly assessed business taxes against NAJO pursuant to the Business Tax Act. The Department asserted that no exemption in the Business Tax Act applied to NAJO. NAJO argued that it was exempt from business taxes because it was a lessor of public utility property.

On April 4, 2014, the trial court heard the parties' cross-motions for summary judgment. After the hearing, the trial court ruled from the bench in favor of the Department. Noting that this was an issue of first impression with no guidance in the Business Tax Act's legislative history, the trial court entered its written Findings of Fact and Conclusions on Law on May 5, 2014. The trial court found that NAJO's leasing of trucks and trailers to JNJ Express constituted a "sale" within the meaning of the Business Tax Act and that the "exemption that NAJO claims is an exemption for revenues derived from services, not sales." After finding that the Department sufficiently proved it had the authority to tax NAJO and finding that NAJO failed to carry its burden in proving it was exempted, the trial court granted summary judgment in favor of the Department. Additionally, the trial court certified its order as final pursuant to Tennessee Rule of Civil Procedure 54.02. NAJO timely filed this appeal.5


NAJO presents one issue for appellate review, which we have restated: Whether the trial court erred in granting summary judgment in favor of the Department, finding that NAJO's gross receipts received from its lease of trucks and trailers to a common carrier are taxable under the Business Tax Act and are not exempt from being taxed under the exemption in Tennessee Code Annotated Section 67-4-708(3)(C)(xiii) created for "lessors of . . . public utility [properties]."

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Standard of Review

A trial court's decision to grant a motion for summary judgment presents a question of law. Our review is therefore de novo with no presumption of correctness afforded to the trial court's determination. Bain v. Wells, 936 S.W.2d 618, 622 (Tenn. 1997). This Court must make a fresh determination that the requirements of Tenn. R. Civ. P. 56 have been satisfied. Abshure v. Methodist Healthcare-Memphis Hosps., 325 S.W.3d 98, 103 (Tenn. 2010).

When reviewing the evidence, we must determine whether factual disputes exist. If we find a disputed fact, we must "determine whether the fact is material to the claim or defense upon which summary judgment is predicated and whether the disputed fact creates a genuine issue for trial." Mathews Partners, 2009 WL 3172134 at *3(citing Byrd, 847 S.W.2d at 214). "A disputed fact is material if it must be decided in order to resolve the substantive claim or defense at which the motion is directed." Byrd, 847 S.W.2d at 215. A genuine issue exists if "a reasonable jury could legitimately resolve the fact in favor of one side or the other." Id. "Summary Judgment is only appropriate when the facts and the legal conclusions drawn from the facts reasonably permit only one conclusion." Landry v. South Cumberland Amoco, et al., No. E2009-01354-COA-R3-CV, (Tenn. Ct. App. March 10, 2010) (citing Carvell v. Bottoms, 900 S.W.2d 23 (Tenn. 1995)).

The proper interpretation of a statute is an issue of law that may commonly be decided on summary judgment. We review the trial court's interpretation of a statute de novo with no presumption of correctness. See Lind v. Beaman Dodge, Inc., 356 S.W.3d 889, 895 (Tenn. 2011); Mills v. Fulmarque, 360 S.W.3d 362, 366 (Tenn. 2012). In construing a statute, our primary purpose is to give effect to the purpose of the legislature. Lipscomb v. Doe, 32 S.W.3d 840, 844 (Tenn. 2000). The Tennessee Supreme Court has outlined the applicable principles that apply to the question of statutory interpretation:

When dealing with statutory interpretation . . . our primary objective is to carry out legislative intent without broadening or restricting the statute beyond its intended scope. Houghton v. Aramark Educ. Res., Inc., 90 S.W.3d 676, 678 (Tenn. 2002). In construing legislative enactments, we presume that every word in a statute has meaning and purpose and should be given full effect if the obvious intention of the General Assembly is not violated by so doing. In re C.K.G., 173 S.W.3d 714, 722 (Tenn. 2005). When a statute is clear, we apply the plain meaning without complicating the task. Eastman Chem. Co. v. Johnson, 151 S.W.3d 503, 507 (Tenn. 2004). Our obligation is simply to enforce the written language. Abels ex rel. Hunt v. Genie

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Indus., Inc., 202 S.W.3d 99, 102 (Tenn. 2006).

Estate of French v. Stratford House, 333 S.W.3d 546, 554 (Tenn. 2011). With these principles in mind, we turn to the substance of the appeal.


This case requires us to interpret certain provisions in the Business Tax Act, codified at Tennessee Code Annotated Section 67-4-701 et seq.,6 and construe them properly according to Tennessee law. Specific canons of construction exist when interpreting tax statutes. See Crown Enters., Inc. v. Woods, 557 S.W.2d 491, 493 (Tenn. 1977). First, it is well-settled that laws imposing taxes must be construed strongly against the taxing authority. Id. (citing White v. Roden Elec. Supply Co., 536 S.W.2d 346 (1976)). Often, courts have interpreted this canon to mean that "if there are doubts or ambiguities contained in the statute, they must be resolved in favor of the taxpayer." Id. Still, when the "issue under consideration is whether a particular taxpayer is exempt from a tax, the opposite rule has developed." Id. Provisions providing an exemption for certain taxpayers must be "strongly construed against the person claiming the exemption." Id. (citing J. Hellerstein, State & Local Taxation 33 (1969)). Every presumption is against the exemption, and a "well-founded doubt" is fatal to the taxpayer's claim. Tibbals Flooring Co. v. Huddleston, 891 S.W.2d 196, 198 (Tenn. 1994). We begin our analysis with whether the Department met its burden by demonstrating it was entitled to assess NAJO for business taxes.

Business taxes are generally divided among four classifications. See generally Tenn. Code Ann. § 67-4-708. The determination of what...

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