Tri-State Generation & Transmission Ass'n, Inc. v. Department of Revenue, TRI-STATE

• Decision Date: 29 October 1981
• Docket Number: No. 81CA0216,TRI-STATE,81CA0216
• Citation: 636 P.2d 1335
• Parties: GENERATION & TRANSMISSION ASSOCIATION, INC., Plaintiff-Appellant, v. The DEPARTMENT OF REVENUE of the State of Colorado, and Alan N. Charnes, Executive Director of the Department of Revenue of the State of Colorado, Defendants-Appellees. . II
• Court: Colorado Court of Appeals

Page 1335

636 P.2d 1335

TRI-STATE GENERATION & TRANSMISSION ASSOCIATION, INC. Plaintiff-Appellant, v. The DEPARTMENT OF REVENUE of the State of Colorado, and Alan N. Charnes, Executive Director of the Department of Revenue of the State of Colorado Defendants-Appellees.

No. 81CA0216.

Colorado Court of Appeals, Div. II.

Oct. 29, 1981.

Holland & Hart, Bruce W. Sattler, John C. Siegesmund, III, Denver, for plaintiff-appellant.

J. D. MacFarlane, Atty. Gen., Richard F. Hennessey, Deputy Atty. Gen., Mary J. Mullarkey, Sol. Gen., Billy Shuman, Sp. Asst. Atty. Gen., Denver, for defendants-appellees.

KELLY, Judge.

Plaintiff, Tri-State Generation & Transmission Association, Inc. (Tri-State), contracted with the United States Bureau of Reclamation (United States) and two other utilities to construct and use a power transmission line between Hayden and Ault, Colorado. Defendant, Colorado Department of Revenue (Department), determined that, pursuant to § 39-26-202, C.R.S.1973, Tri-State was liable for use tax on items of tangible personal property used in the construction of the line. Tri-State claims it contracted only for a right to use the line and its payment of 36% of the construction cost represented the price of the lease, an intangible property right not subject to use tax. A trial de novo was held in the district court after the executive director of the Department decided that Tri-State was liable for the tax. Tri-State appeals the trial court's decision upholding the executive director's imposition of the tax, but does not dispute the amount of the tax. We affirm.

Tri-State is a non-profit utility engaged in purchasing, generating, and transmitting electricity to retail distributors in Nebraska, Wyoming, and Colorado. In 1975, Tri-State contracted with the United States, Platte River Power Authority (Platte River), and Colorado-Ute Electric Association, Inc., (Colorado-Ute) to construct a new power transmission line from Hayden to Ault, Colorado (Hayden-Ault line). The participants agreed that the United States would act as construction manager for part of the Hayden-Ault line and that Colorado-Ute would be the construction manager for another part of the project.

The contract specified that the United States and Colorado-Ute "shall own and have title to" the respective sections for which they acted as construction manager, but that "notwithstanding ownerships and titles, the Participants shall have Cost Responsibilities and Firm Capacity Entitlement (the right to future use) in the Hayden-Ault Addition" in certain stated percentages. The contract required the United States as title owner to grant Tri-State an "easement for the use and enjoyment of the facilities, including right-of-way ... to the extent of its Firm Capacity Entitlement therein."

Each participant was represented on an Engineering & Operating Committee, an Auditing Committee, and a Coordinating Committee which supervised the project. Tri-State advanced funds every month to cover construction costs in proportion to its share of the future use of the line, which was 36%. As construction manager, the United States caused this money to be spent on supplies and materials used to construct the line. The United States paid no sales or use tax on the materials. For the portion of the line constructed by the United States, Tri-State was required to insure against its share of any losses, and the United States was to cooperate with Tri-State in obtaining insurance.

The Department assessed a use tax against Tri-State for 36% of the materials used in constructing the Hayden-Ault line. The use tax statu...