USAir, Inc. v. Indiana Dept. of State Revenue

• Decision Date: 08 November 1993
• Docket Number: No. 49T05-9011-TA-00056,49T05-9011-TA-00056
• Citation: 623 N.E.2d 466
• Parties: USAIR, INC., Petitioner, v. INDIANA DEPARTMENT OF STATE REVENUE, Respondent.
• Court: Indiana Tax Court

Page 466

623 N.E.2d 466

USAIR, INC., Petitioner, v. INDIANA DEPARTMENT OF STATE REVENUE, Respondent.

No. 49T05-9011-TA-00056.

Tax Court of Indiana.

Nov. 8, 1993.

Barton T. Sprunger, Mark J. Richards, Ice, Miller, Donadio & Ryan, Indianapolis, for petitioner.

Pamela Carter, Atty. Gen. of Indiana, Joel Schiff, Deputy Atty. Gen., Indianapolis, for respondent.

FISHER, Judge.

This appeal calls on the court to reconsider the holding in USAir, Inc. v. Indiana Department of State Revenue (1989), Ind.Tax, 542 N.E.2d 1033, aff'd (1991), Ind., 582 N.E.2d 777 (USAir I). In that case, this court and our supreme court rejected the petitioner's claims of exemption from use tax. ¹ Now the same petitioner, USAir, Inc. (USAir), appeals another final determination of the respondent, the Indiana Department of State Revenue (the Department), claiming the same entitlement to use tax exemptions it raised in USAir I. USAir also claims it is not subject to imposition of the use tax, regardless of exempt status. The matter is before the court on the parties' cross motions for summary judgment.

FACTS AND HISTORY

In USAir I, USAir, an airline engaged in the public transportation of passengers and cargo, sought a refund of use tax paid on prepared meals and snacks it used for in-flight service to its passengers and crew. USAir based its claim on three theories. First, USAir argued the purchases were exempt under IND.CODE 6-2.5-5-8 as purchases for resale in the ordinary course of business. ² Second, USAir claimed it directly used or consumed the food in providing public transportation within the meaning of the exemption provided by IND.CODE 6-2.5-5-27. Finally, USAir claimed the food was exempt as food for human consumption under IND.CODE 6-2.5-5-20. The courts rejected all the claims. USAir I, 542 N.E.2d at 1036-39, 582 N.E.2d at 779-80.

The undisputed material facts in the present appeal remain largely the same as in USAir I. The Indianapolis International Airport is a USAir hub. USAir purchases meals, snacks, and soft drinks from Dobbs House, Inc., an Indianapolis caterer, both for flights originating from Indianapolis and for flights from other cities. Dobbs House, whose catering facility is located on the grounds of the Indianapolis International Airport, delivers the food for Indianapolis flights in individual serving trays. USAir places these trays in the cabins and USAir crews subsequently heat them for in-flight service to passengers and crew members. USAir does not serve the food in Indiana airspace, however, because the flights have already left Indiana by the time they reach the cruising altitude at which food is served. Dobbs House delivers the food for non-Indianapolis flights in cartons. USAir places these cartons in the bellies of planes leaving Indianapolis and transfers them onto other planes at airports outside Indiana for in-flight service on those other planes.

USAir paid no gross retail tax on the purchases from Dobbs. The Department assessed use tax, which USAir timely paid. USAir then filed a claim for refund and now appeals from the Department's denial of that claim.

DISCUSSION AND DECISION

Standard of Review

In reviewing appeals from the Department, the court is not bound by either the evidence or the issues presented at the administrative level. Instead, the court reviews the case de novo. Maurer v. Indiana Dep't of State Revenue (1993), Ind.Tax, 607 N.E.2d 985, 986 (citing IND.CODE 6-8.1-9-1(d); Hoosier Energy Rural Elec. Coop., Inc. v. Indiana Dep't of State Revenue (1988), Ind.Tax, 528 N.E.2d 867, 869, aff'd (1991), Ind., 572 N.E.2d 481, cert. denied (1991), --- U.S. ----, 112 S.Ct. 337, 116 L.Ed.2d 277). Although USAir bears the burden of proof to show it falls within the claimed exemptions, the Department bears the burden of proof to show imposition is proper in the first instance. Id. (citing Harlan Sprague Dawley, Inc. v. Indiana Dep't of State Revenue (1992), Ind.Tax, 605 N.E.2d 1222, 1225; Wechter v. Indiana Dep't of State Revenue (1989), Ind.Tax, 544 N.E.2d 221, 224, aff'd (1990), Ind., 553 N.E.2d 844). Moreover, because this is a summary judgment case, the court may grant summary judgment to either party only when no genuine issue of material fact exists and the party is entitled to judgment as a matter of law. Ind.Trial Rule 56(C); Fort Wayne Nat'l Corp. v. Indiana Dep't of State Revenue (1993), Ind.Tax, 621 N.E.2d 668, 670. Cross motions do not alter the standard of review. Caylor-Nickel Clinic, P.C. v. Indiana Dep't of State Revenue (1991), Ind.Tax, 569 N.E.2d 765, 766, aff'd (1992), Ind., 587 N.E.2d 1311.

Imposition of Use Tax

The use tax is "[a]n excise tax ... imposed on the storage, use, or consumption of tangible personal property in Indiana if the property was acquired in a retail transaction, regardless of the location of that transaction or of the retail merchant making that transaction." IND.CODE 6-2.5-3-2(a) (emphasis added). Like most states, Indiana has complementary sales and use taxes. See IND.CODE 6-2.5-3-4(a). See also Minneapolis Star & Tribune Co. v. Minnesota Comm'r of Revenue 1983), 460 U.S. 575, 581-82, 103 S.Ct. 1365, 1370, 75 L.Ed.2d 295, 302. The complementary formulation exists to ensure non-exempt retail transactions that escape sales tax liability are nonetheless taxed. See, e.g., Great American Airways v. Nevada State Tax Comm'n (1985), 101 Nev. 422, 705 P.2d 654, 657-58, n. 5, cert. denied (1986), 479 U.S. 817, 107 S.Ct. 74, 93 L.Ed.2d 31; Walter Hellerstein and Jerome Hellerstein, State Taxation v. 2, 16-2 (1992). Within IC 6-2.5-3, " '[u]se' means the exercise of any right or power of ownership over tangible personal property." IC 6-2.5-3-1(a) (emphasis added). " 'Storage' means the keeping or retention of tangible personal property in Indiana for any purpose except the subsequent use of that property solely outside Indiana." IC 6-2.5-3-1(b).

The conflict in the present case arises from the parties' competing interpretations of these definitions of "use" and "storage." The Department relies on IC 6-2.5-3-1(a) for the idea that USAir engages in a taxable "use" of the Dobbs House food, notwithstanding that USAir's passengers and crew do not eat the food in Indiana. ³ USAir, on the other hand, relies on IC 6-2.5-3-1(b) for the idea that use does not include Indiana activities incidental to storage for subsequent use outside this state. Each position is correct, but incomplete.

Under IC 6-2.5-3-1(a), a taxpayer "uses" tangible personal property when it "exercise[s] ... any right or power of ownership over [that] tangible personal property." IC 6-2.5-3-1(a) (emphasis added). Because the statute does not define "any," the court gives the word its plain, ordinary, and usual meaning. See Consolidation Coal Co. v. Indiana Dep't of State Revenue (1991), Ind., 583 N.E.2d 1199, 1201, aff'g (1989), Ind.Tax, 538 N.E.2d 309 (citing Spaulding v. International Bakers Serv. (1990), Ind., 550 N.E.2d 307, 309). "Any" means "one, no matter what one ... that is selected without restriction or limitation of choice." Webster's Third New International Dictionary 97 (1981). This is a broad definition, leading to a very low threshold of taxability. Almost any act not otherwise exempt will constitute a taxable use. Although Indiana courts have not previously addressed this question specifically, courts of other jurisdictions with similar statutory language have also construed "use" broadly. See, e.g., Broadmoor Hotel, Inc. v. Department of Revenue (1989), Colo.App., 773 P.2d 627 (hotel was liable for use tax on snacks made available to bar patrons); Magic II, Inc. v. Dubno (1988), 206 Conn. 253, 259, 537 A.2d 998, 1001, cert. denied (1988), 488 U.S. 819, 109 S.Ct. 59, 102 L.Ed.2d 37 (citing United Aircraft Corp. v. Connelly (1958), 145 Conn. 176, 181, 140 A.2d 486) ("extremely limited use is sufficient to constitute a 'taxable use' under the use tax"); United Aircraft Corp., 145 Conn. 176, 140 A.2d 486 (government contractor retained title during transport of property; this was a taxable use); McNamara v. D.H. Holmes Co. (1987), La.App., 505 So.2d 102, rev. denied, La., 506 So.2d 1224, aff'd (1988), 486 U.S. 24, 108 S.Ct. 1619, 100 L.Ed.2d 21 (department store's distribution of catalogs to in-state addresses was a taxable use); Louisville Title Agency v. Kosydar (1975), 43 Ohio St.2d 109, 113, 330 N.E.2d 899, 902 (allowing mechanics to install new equipment on a boat was subject to use tax because it "was an exercise of a right or power incidental to the ownership of the" boat); J.C. Penney Co. v. Olsen (1990), Tenn., 796 S.W.2d 943, 946 (citing Woods v. M.J. Kelley Co. (1980), Tenn., 592 S.W.2d 567, 571, cert. denied (1980), 447 U.S. 905, 100 S.Ct. 2987, 64 L.Ed.2d 854). ⁴

As broad as "use" is, however, it is not all-encompassing. The court must read the statute to give full effect to every word, Monarch Steel Co. v. State Bd. of Tax Comm'rs (1993), Ind.Tax, 611 N.E.2d 708, 713 (citing Maurer, 607 N.E.2d at 987), and strive to avoid an interpretation that would render any part of the statute meaningless. Faris Mailing, Inc. v. Indiana Dep't of State Revenue (1990), Ind.Tax, 557 N.E.2d 713, 716 (citing Foremost Life Ins. Co. v. Department of Ins. (1980), 274 Ind. 181, 186, 409 N.E.2d 1092, 1096). In addition to "use," IC 6-2.5-3-2(a) imposes tax on the "storage" or "consumption" of tangible personal property in Indiana, and the court must therefore read "use" in conjunction with "storage" and "consumption." ⁵

" 'Storage' means the keeping or retention of tangible personal property in Indiana for any purpose except the subsequent use of that property solely outside Indiana." IC 6-2.5-3-1(b). The exception for use outside Indiana "qualif[ies] or limit[s] the plain meaning of [the] statute's main clause by restraining it to except something that would otherwise be within its scope." Fort Wayne Nat'l Corp., 621 N.E.2d at 672 (citing Kirkpatrick v. King (1950), 228 Ind. 236,...