Revenue Cabinet v. Hubbard

• Decision Date: 21 December 2000
• Docket Number: No. 1999-SC-0171-DG.,No. 1999-SC-0992-DG.,1999-SC-0171-DG.,1999-SC-0992-DG.
• Citation: 37 S.W.3d 717
• Parties: REVENUE CABINET, Commonwealth of Kentucky, Appellant, v. Erika HUBBARD, Administrator of the Estate of Andy H. Hubbard, d/b/a Stone Age Dental Laboratory, and John W. Bianchi, D.M.D., Appellees, and Erika Hubbard, Administrator of the Estate of Andy H. Hubbard, d/b/a Stone Age Dental Laboratory, and John W. Bianchi, D.M.D., Cross-Appellants, v. Revenue Cabinet, Commonwealth of Kentucky, Cross-Appellee.
• Court: United States State Supreme Court — District of Kentucky

37 S.W.3d 717

REVENUE CABINET, Commonwealth of Kentucky, Appellant, v. Erika HUBBARD, Administrator of the Estate of Andy H. Hubbard, d/b/a Stone Age Dental Laboratory, and John W. Bianchi, D.M.D., Appellees, and Erika Hubbard, Administrator of the Estate of Andy H. Hubbard, d/b/a Stone Age Dental Laboratory, and John W. Bianchi, D.M.D., Cross-Appellants, v. Revenue Cabinet, Commonwealth of Kentucky, Cross-Appellee.

No. 1999-SC-0171-DG.

No. 1999-SC-0992-DG.

Supreme Court of Kentucky.

December 21, 2000.

Rehearing Denied March 22, 2001.

Lauren Anderson, Douglas M. Dowell, Revenue Cabinet, Division of Legal Services, Frankfort, Counsel for Appellant/Cross-Appellee.

H. Kent Hendrickson, Rice & Hendrickson, Harlan, Counsel for Appellees/Cross-Appellants.

JOHNSTONE, Justice.

Appellee, John W. Bianchi, D.M.D., purchased dental items, e.g., dentures, crowns, bridges, braces, etc., from Appellee, Stone Age Dental Laboratories. Bianchi paid sales taxes on these items. Bianchi requested a tax refund from the Revenue Cabinet (hereinafter "the Cabinet") for taxes paid on these items on grounds that these items are exempt from sales and use taxes pursuant to KRS 139.472. The Cabinet denied the request. The matter was appealed to the Kentucky Board of Tax Appeals, which affirmed the Cabinet's denial of the refund. Bianchi and Stone Age appealed to the Harlan Circuit Court which reversed the Kentucky Board of Tax Appeals. The Cabinet appealed to the Court of Appeals which affirmed in part and reversed in part. We granted discretionary review. We reverse and remand.

There are no facts in dispute in this case. The issue presented, statutory construction of KRS 139.472, is purely a matter of law and is subject to de novo review by this Court. Bob Hook Chevrolet Isuzu v. Commonwealth, Transportation Cabinet, Ky., 983 S.W.2d 488, 490-91 (1998).

We begin with the basic rule of statutory construction that tax exemptions are narrowly construed, and the party seeking the exemption has the burden to show that he, she, or it is entitled to the exemption. Delta Air Lines, Inc. v. Commonwealth, Revenue Cabinet, Ky., 689 S.W.2d 14, 17 (1985); see also KRS 139.260, which codifies this rule of construction.

Bianchi and Stone Age argue that KRS 139.472(2) exempts the dental items in question from Kentucky's sales and use tax. KRS 139.472(2) provides:

"Prosthetic devices and physical aids" for the purpose of this section shall mean and include artificial devices prescribed by a licensed physician, or individually designed, constructed or altered solely for the use of a particular crippled person so as to become a brace, support, supplement, correction or substitute for the bodily structure including the extremities of the individual; artificial limbs, artificial eyes, hearing aids prescribed by a licensed physician, or individually designed, constructed or altered solely for the use of a particular disabled person; crutches, walkers, hospital beds, wheelchairs and wheelchair lifting devices for the use of invalids and crippled persons; colostomy supplies, insulin and diabetic supplies, such as hypodermic syringes and needles, and sugar (urine and blood) testing materials purchased for use by diabetics.

Dentists are not licensed physicians within the meaning of the statute, thus we focus on the second part of the statute in order to determine whether the dental items in question qualify as "prosthetic devises . . . individually designed, constructed or altered solely for the use of a particular crippled person so as to become a brace, support, supplement, correction or substitute for the bodily structure ..." The resolution of this question turns on what is meant by the word "crippled."

Webster's New International Dictionary (2d ed.1960), defines "cripple" as:

(1) to deprive of the use of a limb and especially a leg;

(2) to deprive of capability for service or of strength, efficiency, or wholeness.

Under this definition, someone is physically "crippled" when he or she is deprived of the use of a limb. The statute embraces this definition of the term. The statute twice refers to "crippled person(s)." The second reference exempts "crutches, walkers, hospital beds, wheelchairs and wheelchair lifting devices for the use of invalids and crippled persons." Clearly, this exemption is limited to persons who have difficulty walking or are unable to walk.

The first reference in the statute exempts a prosthetic device "individually designed, constructed or altered solely for the use of a particular crippled person so as to become a brace, support, supplement, correction or substitute for the bodily structure including the extremities of the individual ...." (emphasis added). The Court of Appeals held that this part of the statute exempted the dental items in question.

"Extremity" is defined as: "A limb of the body; an arm or a leg; esp., the end part of it." Webster's New International Dictionary (2d ed.1960). The specific inclusion of the word "extremities" makes clear that limbs, and any part thereof, are included in the term "bodily structure." While we are unable to find a definition for the term "bodily structure," the use of the definite article "the" indicates that the statute refers to the entire body and not to discrete parts or components that could be considered a "bodily structure," e.g., the mouth. In other words, a person who needs dentures, crowns, bridges or braces for his or her teeth is not "crippled" within the meaning of the statute.

We find support for our construction of the statute in the Connecticut Supreme Court's construction of a similar statute in Dent-Craft Laboratories of Conn., Inc. v. Sullivan, Tax Commissional; 148 Conn. 94, 167 A.2d 714 (1961). The Dent-Craft Court was presented with the same issue as in this case, i.e., whether "the gross receipts derived by dental laboratories from sales of dentures to duly licensed dentists [are] exempt from sales tax" under Connecticut's applicable tax exemption statute. Id. at n. 1. The statute in question exempts in pertinent part:

Sales of...