Public Service Co. v. Nm Tax. & Rev. Dept.

• Decision Date: 09 March 2007
• Docket Number: No. 26,349.,26,349.
• Citation: 157 P.3d 85,2007 NMCA 050
• Parties: PUBLIC SERVICE COMPANY OF NEW MEXICO, a New Mexico corporation, Plaintiff-Appellant, v. NEW MEXICO TAXATION & REVENUE DEPARTMENT, a State Agency; and Jan Goodwin, as Secretary of the New Mexico Taxation & Revenue Department in her official capacity, Defendants-Appellees.
• Court: Court of Appeals of New Mexico

157 P.3d 85

2007 NMCA 050

PUBLIC SERVICE COMPANY OF NEW MEXICO, a New Mexico corporation, Plaintiff-Appellant, v. NEW MEXICO TAXATION & REVENUE DEPARTMENT, a State Agency; and Jan Goodwin, as Secretary of the New Mexico Taxation & Revenue Department in her official capacity, Defendants-Appellees.

No. 26,349.

Court of Appeals of New Mexico.

March 9, 2007.

Keleher & McLeod, P.A., Thomas C. Bird, Tracy J. Ahr, Anastasia S. Stevens, Margaret A. Foster, Albuquerque, NM, for Appellant.

Jeffrey W. Loubet, Special Assistant Attorney General, New Mexico Taxation and Revenue Department, Santa Fe, NM, for Appellees.

OPINION

PICKARD, Judge.

{1} Plaintiff, Public Service Company of New Mexico (PNM), a public utility in the business of generating and selling electricity, appeals from a district court order granting summary judgment in favor of Defendants, New Mexico Taxation and Revenue Department (the Department). On appeal, PNM challenges the Department's denial of a refund for a compensating tax levied upon PNM's purchase of turbines and related equipment for use in a generating plant in the City of Lordsburg, New Mexico. Both parties agree that the dispositive issue on appeal is whether PNM's sale of the turbines and related equipment was in the "ordinary course of business." We conclude that PNM's sale of the turbines and related equipment was not in the ordinary course of business, and we therefore affirm the district court's grant of summary judgment in favor of the Department.

BACKGROUND

{2} The material facts in this case are undisputed. PNM is a New Mexico corporation that sells electricity both within New Mexico and outside the state. In 2000, PNM purchased turbines and related equipment from GE Packaged Power, Inc. (GE) in Texas. The turbines and related equipment were to be used in the construction of a generating plant in Lordsburg, which was being financed by industrial revenue bonds. As part of this project, PNM planned to convey the plant site and equipment to Lordsburg, and Lordsburg would then lease the generating plant to PNM during the term of the bonds and eventually sell the plant back to PNM after full payment of the bonds.

{3} The turbines and related equipment were initially stored at a facility in Houston, Texas, and thereafter moved to Hobbs, New Mexico, prior to installation in the generating plant that was being constructed at a project site in Lordsburg. PNM reported and paid compensating tax in the amount of $1,522,294.61 on the value of the turbines and related equipment.

{4} PNM subsequently requested a ruling from the Department as to whether it was entitled to a refund with respect to the compensating tax paid. PNM initially claimed that it qualified as a purchasing agent for Lordsburg, which meant that the purchase of the turbines and related equipment would be treated as though it was purchased by Lordsburg for tax purposes, and PNM would therefore be entitled to a refund of the compensating tax paid. See NMSA 1978, § 7-9-54 (2003) (providing for a deduction from gross receipts for sale of tangible personal property, other than construction materials, to a government agency); 3.2.212.22(B) NMAC (2001) ("Receipts from the sale of tangible personal property to the private person who is acting as agent for the government with respect to the bond project are deductible under Section 7-9-54 NMSA 1978 if the tangible personal property is not an ingredient or component part of a construction project."). PNM withdrew its request for a ruling and filed a formal claim for a refund after the Department issued a preliminary determination contrary to PNM's position. The Department denied PNM's claim, and PNM filed suit.

{5} Prior to commencing this action against the Department, PNM filed a second claim for refund on the grounds that the transaction involving the turbines and related equipment was not subject to the compensating tax imposed by NMSA 1978, § 7-9-7 (1995), because the equipment was not acquired within the meaning of that statutory provision. The Department did not act on this second claim for refund and instead consented to PNM's incorporation of this claim within an amended complaint in its pending suit before the district court.

{6} Before the district court, both parties agreed that the dispositive issue as to PNM's entitlement to a refund was the definition of "ordinary course of business" within the Gross Receipts and Compensating Tax Act, NMSA 1978, §§ 7-9-1 to -100 (1966, as amended through 2006). Specifically, if PNM's resale of the turbines and related equipment was considered a sale in the ordinary course of business, PNM would be entitled to a refund of the compensating tax paid. On the other hand, if the sale was considered outside PNM's ordinary course of business, PNM would not be entitled to a refund of the compensating tax paid.

{7} Both parties filed motions for summary judgment. In its motion, PNM argued that it was entitled to summary judgment and a refund of the compensating tax paid because it resold the turbines and related equipment in the ordinary course of business. Alternatively, PNM argued that even if the definition of ordinary course was construed against it, the Department was statutorily estopped from denying a refund. The Department countered that it was entitled to summary judgment because PNM did not sell the turbines and related equipment in the ordinary course of business because the sale was highly unusual and not routine. Both parties stipulated to the fact that PNM had not previously bought and sold turbines and has not done so since the transaction at issue.

{8} The district court granted summary judgment in favor of the Department, finding that no material facts were in dispute and that PNM's purchase and resale of the turbines and related equipment were not in the ordinary course of business. Additionally, the district court found that none of the Department rulings or regulations cited by PNM supported a claim of estoppel by PNM. PNM appeals.

DISCUSSION

{9} PNM raises three issues on appeal: (1) whether the district court erred in concluding that "ordinary course of business" covers only those transactions by a business that are usual and routine; (2) whether the district court erred as a matter of law in determining that the Department was not estopped, based on previous Department regulations, from imposing a compensating tax on PNM; and (3) whether the district court erred in concluding that as a matter of law, the Department was not bound by the policy reflected in prior regulations and rulings interpreting the statutes incorporating the ordinary course of business standard. After briefly addressing the applicable standard of review and then discussing the relevant statutory provisions, we will analyze each of PNM's asserted errors in turn.

Standard of Review

{10} "The standard of review for a motion for summary judgment is whether there are any genuine issues of material fact and whether the moving party is entitled to summary judgment as a matter of law." Williams v. Cent. Consol. Sch. Dist., 1998-NMCA-006, ¶ 7, 124 N.M. 488, 952 P.2d 978; see also Johnson v. Yates Petroleum Corp., 1999-NMCA-066, ¶ 3, 127 N.M. 355, 981 P.2d 288 ("Summary judgment is the appropriate remedy if the facts are undisputed and it is only the legal interpretation of the facts that remains."). Where, as here, there are no genuine issues of material fact, we "conduct a de novo review of the district court's ruling to ascertain whether summary judgment was properly granted." Wiste v. Neff & Co., 1998-NMCA-165, ¶ 6, 126 N.M. 232, 967 P.2d 1172.

Pertinent Tax Code Provisions

{11} At issue in the present case is the application of the State's "compensating tax," which is a tax "designed to subject out-of-state sellers of goods that are used in New Mexico to a tax similar to the [gross receipts tax]." Kmart Corp. v. N.M. Taxation & Revenue Dep't, 2006-NMSC-006, ¶ 19, 139 N.M. 172, 131 P.3d 22; see also Siemens Energy & Automation, Inc. v. N.M. Taxation & Revenue Dep't, 119 N.M. 316, 322, 889 P.2d 1238, 1244 (Ct.App.1994) (stating that "[c]ompensating tax is paid by a New Mexico purchaser only if the sales occurred outside of New Mexico," whereas "[g]ross receipts tax is due from the seller on its receipts from the sales only if the sales occurred inside New Mexico"). New Mexico's compensating tax, as described in Section 7-9-7 of the Gross Receipts and Compensating Tax Act, "is imposed on the buyer where property or services were acquired as the result of a transaction which was not initially subject to the gross receipts tax, but because of the buyer's subsequent use of such property or services, should have been subject to the gross receipts tax." Continental Inn v. N.M. Taxation & Revenue Dep't, 113 N.M. 588, 589-90, 829 P.2d 946, 947-48 (Ct.App. 1992). Specifically, Section 7-9-7 provides that

A. For the privilege of using tangible property in New Mexico, there is imposed on the person using the property an excise tax equal to five percent of the value of tangible property that was:

(1) manufactured by the person using the property in the state;

(2) acquired outside this state as the result of a transaction that would have been subject to the gross receipts tax had it occurred within this state; or

(3) acquired as the result of a transaction which was not initially subject to the compensating tax imposed by Paragraph (2) of this subsection or the gross receipts tax but which transaction, because of the buyer's subsequent use of the property, should have been subject to the compensating tax imposed by Paragraph (2) of this subsection or the gross receipts tax.

{12} At issue in the present case is whether PNM's purchase and resale of turbines and related equipment is within the purview of Section 7-9-7. PNM argues that the compensating tax imposed in this case was inappropriate for two reasons. First, PNM argues that it did not "use"...