Wisconsin Dept. of Revenue v. Sterling Custom Homes Corp., 77-030

Decision Date09 October 1979
Docket NumberNo. 77-030,77-030
Citation91 Wis.2d 675,283 N.W.2d 573
PartiesWISCONSIN DEPARTMENT OF REVENUE, Petitioner-Appellant, v. STERLING CUSTOM HOMES CORPORATION, Respondent.
CourtWisconsin Supreme Court

Bronson C. La Follette, Atty. Gen., and John E. Armstrong, Asst. Atty. Gen., for petitioner-appellant.

Foley & Lardner, Boardman, Suhr, Curry & Field, and James F. Lorimer, Madison, for respondent; Thomas G. Ragatz, Madison, Thomas A. Schuessler, Fond du Lac, of counsel.

HEFFERNAN, Justice.

The only question on this appeal is whether the taxpayer, Sterling Custom Homes Corporation, a maker of unique custom-designed homes, is, under the facts of this case, a contractor engaged in real property construction activities and a consumer of tangible personal property within the meaning of sec. 77.51(4)(i) 1 and 77.51(18), Stats. 2

We conclude that, under the statutes, Sterling Homes was a contractor and a consumer of personal property; and, accordingly, the sales tax was to be levied upon the transfer of materials to Sterling Homes. We affirm the judgment of the trial court.

The litigation arises out of the assessment of certain sales taxes levied by the Wisconsin Department of Revenue upon Sterling Homes between December 1, 1969, and August 31, 1974. A petition filed by Sterling Homes for redetermination and refund of these taxes was denied by the Department. The Department's action was reversed by the Wisconsin Tax Appeals Commission; and, on appeal by the Department pursuant to ch. 227, Stats., the circuit court affirmed the Tax Appeals Commission's decision and entered judgment, which had the effect of finding that transfers made by Sterling Homes were not taxable.

In reaching our conclusion that Sterling Homes was a contractor and a consumer of the goods, we look to the general scope of its activities in its home-construction enterprise. The facts are undisputed. Accordingly, only a question of law is presented on this appeal.

During the period for which the taxpayer claimed refund, it was in the business of prefabricating custom-designed homes, which ranged in price from $20,000 to $200,000. The homes sold in Wisconsin were prefabricated at the taxpayer's Fond du Lac, Wisconsin, plant. The taxpayer marketed homes through regional managers, who sold the prefabricated homes to local builders. The taxpayer's sales agreements were with these builders and not the ultimate home owners. The builders executed separate agreements with the home owners and determined the eventual price to be charged for the finished homes. The design process was usually initiated by the builder or a prospective home owner, who came to the taxpayer with rough sketches and ideas for the taxpayer to incorporate into formal sales drawings. Once a sales drawing was satisfactory, the builder and sometimes the home owner specified in detail the materials that were to be incorporated into the house. The taxpayer and the builder then completed a specification sheet, which detailed and priced every portion of the house. After that agreement was reached, the taxpayer prepared and supplied the builder with detailed plans for the house foundation. Although the builder was responsible for the actual installation of the foundation, the taxpayer coordinated its foundation plans with its prefabricated components to insure that the prefabricated house fit the foundation properly.

The taxpayer prided itself on building unique custom-designed houses, rather than mass producing stock models. The components of any one house prefabricated by the taxpayer were unique and were not interchangeable with the components of any other house built by the taxpayer. The record makes clear that the prefabricated components were only useful in the construction of the particular house for which Sterling Homes and the builder contracted. Sterling Homes did not maintain an inventory of either individual components or of completed house packages.

The taxpayer prefabricated each house at its plant in Fond du Lac in a regular sequence. It first built the wall sections, then the deck and floor sections, the roof, and finally the interior and trim. The house packages fabricated by Sterling Homes did not include "mechanicals," such as plumbing, wiring, heating, and drywall. The builders hired subcontractors to perform that work.

When the foundation was completed and the builder was ready to erect the house, the taxpayer loaded the components in the sequence that conformed to the order that the components would be used at the job site. The components were delivered to the job site by the taxpayer's trucks and drivers. At the job site, the larger components were unloaded by crane. The crane operators were hired by the builder, but were usually selected by one of the taxpayer's salesmen. The smaller components, such as trim, were unloaded by the taxpayer's employees and were placed in the portion of the house where they would be installed. Although the drivers' only defined on-site responsibility was to keep a report in respect to the erection, they often helped or supervised, because they were very familiar with the process. There was evidence that they "probably know more about putting a package together than any builder . . . because this is all they do. Every day they erect another house." The drivers have basic carpentry knowledge and are able to read a blueprint. Although the...

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8 cases
  • Advance Pipe & Supply Co., Inc. v. Wisconsin Dept. of Revenue
    • United States
    • Wisconsin Court of Appeals
    • January 9, 1986
    ...of their activities. It is the substance and reality of those activities which are determinative. Department of Revenue v. Sterling Custom Homes, 91 Wis.2d 675, 679, 283 N.W.2d 573, 575 (1979). The facts are undisputed. Historically, on-site laborers built manholes brick by brick from the b......
  • Kohler Co. v. Wisconsin Dept. of Revenue
    • United States
    • Wisconsin Court of Appeals
    • September 25, 1985
    ...realities of a taxpayer's activities that are determinative of the Department's power to tax.' Department of Revenue v. Sterling Custom Homes, 91 Wis.2d 675, 679, 283 N.W.2d 573, 575 (1979). Because it is necessary to determine whether Kohler acquired the decorative materials for 'use or co......
  • Madison Newspapers, Inc. v. DOR
    • United States
    • Wisconsin Court of Appeals
    • June 10, 1999
    ...sets out a vendor-customer type arrangement, it is controlling on our analysis.4 We disagree. [11] In DOR v. Sterling Custom Homes Corp., 91 Wis. 2d 675, 679, 283 N.W.2d. 573, 575 (1979), a sales tax exemption case, the court held that where an element of an exemption is at issue, we are to......
  • Wisconsin Dept. of Revenue v. Bailey-Bohrman Steel Corp., BAILEY-BOHRMAN
    • United States
    • Wisconsin Supreme Court
    • February 7, 1980
    ...facts are undisputed, whether or not the taxpayer is a manufacturer poses only a question of law. Department of Revenue v. Sterling Custom Homes, 91 Wis.2d 675, 677, 283 N.W.2d 573 (1979). Where, as here, the material facts are undisputed and only a question of law is presented, this court ......
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