Wisconsin Dept. of Revenue v. Milwaukee Refining Corp.

• Decision Date: 04 October 1977
• Docket Number: No. 75-694,75-694
• Parties: WISCONSIN DEPARTMENT OF REVENUE, Appellant, v. MILWAUKEE REFINING CORPORATION, Respondent.
• Court: Wisconsin Supreme Court

Page 855

257 N.W.2d 855

80 Wis.2d 44

WISCONSIN DEPARTMENT OF REVENUE, Appellant, v. MILWAUKEE REFINING CORPORATION, Respondent.

No. 75-694.

Supreme Court of Wisconsin.

Argued Sept. 6, 1977.

Decided Oct. 4, 1977.

This is a sales tax case. The appeal is by the Department of Revenue (hereinafter Department) from a judgment which affirmed a decision by the Wisconsin Tax Appeals Commission (hereinafter Commission) reversing a determination by the Department of the taxability of sales made by the Milwaukee Refining Company, respondent.

The facts are not in dispute. The taxpayer is in the business of selling various gold alloys to practicing dentists who use it to repair their patients' teeth. The taxpayer does not manufacture or refine any of the gold it sells, but rather purchases it from third parties in the form of small bars. These bars are then sold unaltered to dentists who use the gold in the course of rendering professional services to provide inlays, bridges and partials. The taxpayer sells no other products.

The alloys sold by the taxpayer vary in content and hardness, and are grouped in three basic categories: Type A, Type B and Type C. Type A is a soft alloy used for inlays which are not subject to much stress. Type C, which is also referred to as Milwaukee Formula # 2, is used for fixed bridge work. Type B alloys are further categorized as hard inlay, which is used for inlays and bulky three-quarter crowns; Milwaukee Formula # 1, which is used for inlays, three-quarter crowns and abutments; and Universal Formula A, which is very hard and is used for partials and clasps and saddles and bars.

None of the dentists who purchased alloys from the taxpayer gave the latter resale certificates. The Department, taking the position that dentists are the ultimate users and consumers of such alloys, assessed sales taxes against the taxpayer based upon the gross receipts from such sales during the period of September, 1969 to March, 1973.

The taxpayer petitioned the Wisconsin Tax Appeals Commission for a review of the Department's ruling. Only the taxability of the sales, not the measure of the tax, was at issue. The Commission, finding that the sales were not made at retail by a retailer, ordered the assessment cancelled. The circuit court affirmed.

Allan P. Hubbard, Asst. Atty. Gen. (argued), with whom on the brief was Bronson C. La Follette, Atty. Gen., for appellant.

Robert L. Mann, Milwaukee (argued), Kohner, Mann & Kailas, Milwaukee, on the brief, for respondent.

Frank J. Pelisek, John K. MacIver and Michael, Best & Friedrich, Milwaukee, filed brief, for Wis. Dental Ass'n, Inc., amicus curiae.

HANLEY, Justice.

Two issues are presented on this appeal:

1. Were the sales made by the taxpayer during the period in question sales made at retail by a retailer as those terms are used in sec. 77.52(1), Stats.?

2. Were the sales, if made by a retailer, exempt from the sales tax?

Sales Made at Retail by a Retailer

The first matter to be determined on this appeal is the standard of review to be applied. In Dept. of Revenue v. Smith Harvestore Products, 72 Wis.2d 60, 240 N.W.2d 357 (1976), this court held that the question of whether facts found by an administrative commission fulfill a particular legal standard is one of law properly reviewable by this court. Moreover, while due deference must be accorded an agency's application of the law to the found facts when the agency has particular competence or expertise in the matter at hand (Chevrolet Division, G. M. C. v. Industrial Comm., 31 Wis.2d 481, 488, 143 N.W.2d 532 (1966); sec. 227.20(2), Stats.), this court has held that such deference is not required when this court is as competent as the agency to decide the question involved. Dept. of Revenue v. Smith Harvestore Products, supra ; Pabst v. Dept. of Revenue, 19 Wis.2d 313, 120 N.W.2d 77 (1963). Finally, when the material facts are not disputed, and only matters of law are in issue, this court may review the record ab initio and substitute its own judgment for that of the Commission. H. Samuels Co. v. Dept. of Revenue, 70 Wis.2d 1076, 1083-84, 236 N.W.2d 250 (1975).

The second matter to be determined on this appeal is the standard of construction to be applied to the statute imposing the tax. This court has consistently applied two fundamental rules of construction to the imposition language of taxing statutes: (1) when statutory language is clear and unambiguous no judicial rule of construction is permitted, and the court must arrive at the intention of the legislature by giving the language its ordinary and accepted meaning; and (2) a tax cannot be imposed without clear and express language for that purpose, and where ambiguity and doubt exist, it must be resolved in favor of the person upon whom it is sought to impose the tax. National Amusement Co. v. Dept. of Revenue, 41 Wis.2d 261, 266-67, 163 N.W.2d 625 (1969); Recht-Goldin-Siegal Const. v. Dept. of Revenue, 64 Wis.2d 303, 306, 219 N.W.2d 379 (1974).

This court has consistently used the same test for ambiguity:

"A statute or portion thereof is ambiguous when it is capable of being understood by reasonably well-informed persons in either of two or more senses." Recht-Goldin-Siegal Const. v. Department of Revenue, 64 Wis.2d at 306, 219 N.W.2d at 380.

However, a court is not to search for doubt in an effort to defeat an obvious legislative intention. Telemark Co. v. Department of Taxation, 28 Wis.2d 637, 640, 137 N.W.2d 407 (1965).

The current sales and use tax is a general taxing plan under which everything is taxable at the retail level unless specifically exempted. H. Samuels Co. v. Dept. of Revenue, supra, 70 Wis.2d at 1077-78, 236 N.W.2d 250. Sec. 77.52(1), Stats., imposes the tax on the retail sale:

"77.52. Imposition of retail sales tax. (1) For the privilege of selling . . . tangible personal property, including accessories, components, attachments, parts, supplies and materials, at retail a tax is hereby imposed upon all retailers at the rate of (4)% of the gross receipts from the sale . . . ." (emphasis supplied).

"Sale at retail" is defined by sec. 77.51(4), Stats.:

"(4) 'Sale', 'sale, lease or rental', 'retail sale', 'sale at retail', or equivalent terms include any one or all of the following: the transfer of the ownership of, title to, possession of, or enjoyment of tangible personal property or services for use or consumption but not for resale as tangible personal property or services . . . ." (emphasis supplied).

The taxpayer initially contends that the taxability of its sales to dentists is dependent upon the statute and not upon the non-taxability of its purchasers. While it is true that the taxability of the taxpayer's sales transactions must be founded on the statute imposing the tax, the Wisconsin sales taxing plan clearly provides that the level at which the tax is to be collected is determined by identifying the retail sale. Sec. 77.52(1), Stats., imposes the tax for the privilege of selling at retail on all retailers, and sec. 77.51(4) defines a sale at retail as being a sale to one who uses or consumes, but in any event does not resell the property. By this method of elimination, the level at which the tax is generally imposed is determined. In this sense, the taxability of the taxpayer's sales are directly dependent upon the taxability of the use to which the dentists put the alloy.

The taxpayer is correct, however, in asserting that the identification of the retail sale is not dependent upon the ultimate taxation of the dentist's utilization of the materials. Generally, the Wisconsin sales tax imposes the tax on the sale of all property at the retail level. Any sale not at the retail level is not burdened by the tax. Nevertheless, certain types of tangible personal property may be sold at retail without being taxed, including medicines (sec. 77.54(14), Stats.) and artificial teeth (sec. 77.54(22)(c), Stats.). These provisions exempt these items from taxation at the retail sale; they do not shift the tax burden to another previous sale.

It is therefore necessary to identify, in what may be a series of commercial conveyances, where the retail sale of dental alloys occurs by determining whether dentists acquire the alloy for "use or consumption but not for resale as tangible property or services."

Sec. 77.51(15), Stats., defines the term "use":

"(15) 'Use' includes the exercise of any right or power over tangible personal property incident to the ownership, possession or enjoyment of that property . . . ."

The term "consumption" is not defined by the statute, but is defined by Webster's Third New International Dictionary, 490 (1967) as follows:

"1a: the act or action of consuming or destroying . . . b: the wasting, using up, or wearing away of something . . . 2: the utilization of economic goods in the satisfaction of wants or in the process of production resulting in immediate destruction (as in the eating of foods), gradual wear and deterioration (as in the habitation of dwellings) no change aside from natural decay (as in the enjoyment of art objects), or transformation into other goods (as in manufacturing) . . . "

"Consumption" goes further than "use" in that the exercise of consumptive rights or powers over the property renders it, through destruction or deterioration, less useful to others for the same purpose. Regardless, the use or consumption must be final in the commercial sense that the property will not be resold to another as tangible property or services.

We think that this phrase, as used by the legislature to identify the retail sale, is plain and unambiguous. Read together, "use or consumption but not for...