Wis. Dep't of Revenue v. Orbitz, L.L.C.
| Decision Date | 11 February 2016 |
| Docket Number | No. 2015AP200.,2015AP200. |
| Citation | 367 Wis.2d 593,877 N.W.2d 372,2016 WI App 22 |
| Parties | WISCONSIN DEPARTMENT OF REVENUE, Petitioner–Appellant, v. ORBITZ, L.L.C., Respondent–Respondent, Wisconsin Tax Appeals Commission, Respondent. |
| Court | Wisconsin Court of Appeals |
On behalf of the petitioner-appellant, the cause was submitted on the briefs of Maria S. Lazar, assistant attorney general, and Brad D. Schimel, attorney general.
On behalf of the respondent-respondent, the cause was submitted on the briefs of Timothy G. Schally and Robert L. Gordon of Michael Best & Friedrich LLP, Madison, and Elizabeth B. Herrington of McDermott Will & Emery LLP, Chicago, Illinois.
Before KLOPPENBURG, P.J., SHERMAN and BLANCHARD, JJ.
¶ 1 The Wisconsin Department of Revenue (DOR) appeals an order of the circuit court affirming a decision by the Tax Appeals Commission (Commission) that reversed tax assessments imposed by DOR against Orbitz, L.L.C. DOR contends that the Commission wrongly concluded that Orbitz's reservation facilitation services are not among the taxable services enumerated in WIS. STAT. § 77.52(2)(a) 1. (2005–06).1 For the reasons discussed below, we affirm.
¶ 2 The following facts are taken from the Commission's May 2014 decision.
¶ 3 Orbitz is an online travel company that contracts with hotels, which are not owned, operated, or managed by Orbitz, for the right to facilitate reservations for, and in the name of, travelers at "[n]et [r]ates," that are determined by the hotels. Via Orbitz's website, travelers can compare hotel availability and offerings throughout the world, including Wisconsin, and reserve hotel rooms.
¶ 4 The hotels that contract with Orbitz do not set aside certain rooms exclusively for Orbitz, nor does Orbitz pay hotels for rooms in advance and then turn around and resell them to travelers. Instead, Orbitz accesses the inventory databases of the hotels it has contracted with, checks availability for dates when the traveler desires to stay at the hotel, and makes a reservation request to the desired hotel in the traveler's name if a room is available for booking. When a traveler selects an available hotel room, Orbitz's website displays the total cost of the room to the traveler, which consists of two components: (1) the " ‘average price per night,’ " which is the "[n]et [r]ate" the hotel will receive plus a markup amount which will be retained by Orbitz; and (2) " ‘taxes and fees,’ " which includes a tax recovery charge (the estimate of taxes payable on the hotel's net rate) and any additional service fees or other applicable fees.
¶ 5 A traveler who books a hotel room through Orbitz pays Orbitz for a room upfront. Upon confirmation of the hotel booking, the hotel usually sends a confirmation number to Orbitz confirming the booking and the name of the traveler and Orbitz sends an email confirmation to the traveler. When the traveler arrives at the hotel, the hotel confirms the existence of the booking. If the hotel is unable to accommodate the reservation for any reason, the hotel, not Orbitz, is responsible for finding alternative accommodations for the traveler. After the traveler checks into a room, the hotel collects payment from Orbitz for the hotel's "[n]et [r]ate," the applicable taxes due on the "[n]et [r]ate," and any hotel-imposed fees. The hotel then remits the taxes owing on the "[n]et [r]ate" to the appropriate taxing authority. The markup amount is retained by Orbitz. During the time periods at issue in this case (2001–2006), retail sales tax was not collected from travelers on the markup amount, nor was retail sales tax remitted to DOR by Orbitz on the markup amounts Orbitz collected.
¶ 6 In 2008, DOR notified Orbitz that Orbitz owed an additional $111,253.39 in retail sales tax for the tax periods ending December 31, 2001, through December 31, 2006, on the markup amounts Orbitz collected as part of its reservation facilitation services. DOR asserted that Orbitz is an " ‘internet lodging provider’ " that provides lodging throughout Wisconsin and as such, the markup amount retained by Orbitz is subject to taxation under WIS. STAT. § 77.52(2)(a) 1. The amount assessed against Orbitz included the tax DOR maintained was owing on the markup amounts retained by Orbitz, as well as interest and late filing fees.
¶ 7 Orbitz petitioned DOR for a redetermination of its tax liability, which DOR denied. Orbitz appealed DOR's denial of its petition to the Commission. Both Orbitz and DOR moved the Commission for summary judgment. The Commission granted Orbitz's motion and denied DOR's motion. The Commission concluded that Orbitz does not provide a service that is taxable under WIS. STAT. § 77.52(2)(a) 1., stating, "[Section] 77.52(2)(a) does not clearly impose a tax on the mark[ ]up compensation Orbitz receive[d] from its customers for its reservation facilitation services; such ambiguity must be resolved in [Orbitz's] favor and against extending the reach of the taxing authority."
¶ 8 DOR sought judicial review of the Commission's decision. The circuit court affirmed the Commission's decision. DOR appeals.
¶ 9 The primary issue in this case is whether Orbitz's activities were taxable under WIS. STAT. § 77.52(2)(a) 1. Before we address this issue, we must first determine our standard of review.
¶ 10 In reviewing a decision of an administrative agency, it is the decision of the agency, rather than the decision of the circuit court, which is reviewed. Hilton v. DNR, 2006 WI 84, ¶ 15, 293 Wis.2d 1, 717 N.W.2d 166. This case requires us to review the Commission's interpretation of WIS. STAT. § 77.52(2)(a) 1. Statutory interpretation presents a question of law, which is subject to our independent review. State v. Cole, 2000 WI App 52, ¶ 3, 233 Wis.2d 577, 608 N.W.2d 432. In interpreting statutory language, we consider the scope, context, and structure of the statute, and in a manner that "avoid[s] absurd or unreasonable results." State ex rel. Kalal v. Circuit Court for Dane Cty., 2004 WI 58, ¶ 46, 271 Wis.2d 633, 681 N.W.2d 110. If our process of analysis yields a plain meaning, there is no ambiguity and we apply that plain meaning. Id.
¶ 11 An appellate court is not bound by an administrative agency's interpretation of a statute.
Neenah Foundry Co. v. LIRC, 2015 WI App 18, ¶ 16, 360 Wis.2d 459, 860 N.W.2d 524. Nevertheless, depending on the circumstances, we accord an agency's statutory interpretation one of three levels of deference—no weight, due weight, or great weight. City of Kenosha v. LIRC, 2011 WI App 51, ¶ 8, 332 Wis.2d 448, 797 N.W.2d 885. We have explained the levels of deference and when they apply as follows:
MercyCare Ins. Co. v. Wisconsin Comm'r of Ins., 2010 WI 87, ¶¶ 29–30, 328 Wis.2d 110, 786 N.W.2d 785 (internal citations omitted).
¶ 12 The parties disagree over the appropriate level of deference we should accord the Commission's interpretation and application of WIS. STAT. § 77.52(2)(a) 1. DOR argues that there are two reasons why we should give no deference to the Commission's interpretation of § 77.52(2)(a) 1. We reject both.
¶ 13 First, DOR argues that As we understand it, what DOR means to argue is that although the Commission has extensive experience interpreting § 77.52(2)(a) 1., it has never before applied § 77.52(2)(a) 1. to markup amounts collected by an online facilitator such as Orbitz on lodging reservations made vis-a-vis the online facilitator.
¶ 14 DOR's first impression argument misconstrues the meaning of "first impression" in this context. " ‘We have consistently held that an agency decision is not automatically one of first impression and subject to de novo review simply because the agency has been presented with a particular fact situation it has not previously ruled upon.’ " Neenah Foundry Co., 360 Wis.2d 459, ¶ 19, 860 N.W.2d 524 (quoted source omitted). "Rather, an issue of first impression refers to a situation in which an agency is...
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