Xerox Corp. v. Wisconsin Dept. of Revenue

• Decision Date: 30 July 2009
• Docket Number: No. 2007AP2884.,2007AP2884.
• Citation: 2009 WI App 113,772 N.W.2d 677
• Parties: XEROX CORPORATION, Petitioner-Appellant<SMALL><SUP>&#x2020;</SUP></SMALL> v. WISCONSIN DEPARTMENT OF REVENUE, Respondent-Respondent, City of Milwaukee and City of La Crosse, Intervenors-Respondents.
• Court: Wisconsin Court of Appeals

772 N.W.2d 677

2009 WI App 113

XEROX CORPORATION, Petitioner-Appellant^† v. WISCONSIN DEPARTMENT OF REVENUE, Respondent-Respondent City of Milwaukee and City of La Crosse, Intervenors-Respondents.

No. 2007AP2884.

Court of Appeals of Wisconsin.

Submitted on Briefs November 12, 2008.

Opinion Filed July 30, 2009.

On behalf of the petitioner-appellant, the cause was submitted on the briefs of Maureen A. McGinnity of Foley & Lardner LLP, Milwaukee, for Appellant.

On behalf of the respondent-respondent, the cause was submitted on the brief of F. Thomas Creeron III, assistant attorney general, and J.B. Van Hollen, attorney general, for Respondent.

Before HIGGINBOTHAM, P.J., VERGERONT and CURRY, JJ.¹

¶ 1 HIGGINBOTHAM, P.J

This is a personal property tax case. The issue is whether certain Xerox Corporation multifunction copier/printer/scanner/fax devices (MFDs) leased to consumers by Xerox are exempt from personal property taxes under WIS. STAT. § 70.11(39) (2007-08).² The Tax Appeals Commission concluded that the MFDs were nonexempt under the statute, and the circuit court agreed. Xerox appeals, contending that the Commission's decision is entitled to no deference and that the MFDs are not taxable under the applicable statutes. Xerox also contends it was denied due process as a result of alleged procedural errors below. We conclude, applying great weight deference, that the Commission's decision was based on a reasonable interpretation and application of § 70.11(39). We also reject Xerox's due process arguments. Accordingly, we affirm the circuit court's order affirming the Commission's order.

BACKGROUND

¶ 2 The following facts are taken from the Commission's February 2005 and March 2007 decisions. Xerox filed property tax returns in 2001 with the cities of La Crosse and Milwaukee, reporting the MFDs at issue in this case as exempt. The cities separately issued notices to Xerox reclassifying the MFDs as nonexempt. Xerox appealed the property reclassifications with the State Board of Assessors. The Board of Assessors issued tax determinations granting Xerox's appeals in part, concluding that certain property was exempt, but that the MFDs were nonexempt. Xerox appealed the Board of Assessors determinations to the Tax Appeals Commission, which consolidated the appeals. The Department of Revenue was added as an intervening respondent; thus, the respondents on appeal to the Tax Commission were the Department of Revenue, the City of Milwaukee, and the City of La Crosse (collectively, the Department).

¶ 3 Commissioner Don Millis presided over an August 2003 hearing held in this matter. However, Millis left the Commission in July 2004 for a position with a private law firm before a decision was rendered.

¶ 4 In February 2005, the Commission issued a decision and order affirming the Board of Assessors determinations. The issue before the Commission was whether the MFDs should be classified as copiers and fax machines, which are not exempt from taxation under WIS. STAT. § 70.11(39),³ or as computers, servers, electronic peripheral equipment and printers, which are exempt under the same statute. Applying § 70.11(39) to its findings of fact, the Commission concluded that Xerox did not meet its burden of establishing that the Board erroneously categorized the property at issue as nonexempt.

¶ 5 Xerox sought judicial review of the Commission's decision. Dane County Case No.2005-CV-3250. Dane County Circuit Court Judge Sarah O'Brien concluded that the Commission failed to comply with a requirement under WIS. STAT. § 73.01(4)(b) that the commissioner presiding over a hearing "report" to the Commission, and remanded for the Commission to consult with former Commissioner Millis.

¶ 6 On remand, Millis reviewed the record and provided a memorandum to the Commission which included proposed revisions to the Commission's findings of fact. In a March 2007 decision, the Commission rejected Millis' proposed findings and stood by its original determination.

¶ 7 Xerox sought judicial review of the Commission's second decision by filing a renewed petition directly with Judge O'Brien. The Department objected to Xerox filing the renewed petition in Judge O'Brien's court, arguing that the petition should be treated as a new case, and therefore should have been filed in the clerk of courts office. In a May 15, 2007 order, Judge O'Brien agreed, and, again, the new case was randomly assigned to Judge O'Brien. Dane County Case No. 2007-CV-1767. The Department then filed a request for substitution of judge. Xerox objected to the substitution request, and filed motions in Case Nos. 2005-CV-3250 and 2007-CV-1767 seeking reconsideration of Judge O'Brien's decision to treat the petition as a new action. Judge O'Brien did not rule on the motion for reconsideration, and the case was reassigned to Judge Angela Bartell. Judge Bartell subsequently issued an order upholding the Commission's February 2005 and March 2007 decisions. Xerox appeals.

DISCUSSION

¶ 8 Xerox contends that the Commission erred in concluding that under WIS. STAT. § 70.11(39) certain MFDs leased by Xerox were nonexempt as copiers and fax machines, arguing that they are exempt as computers, servers, electronic peripheral equipment and printers. In an appeal following a decision of the Tax Appeals Commission, we review the Commission's decision, not the circuit court's. Ho-Chunk Nation v. DOR, 2009 WI 48, ¶ 12, 317 Wis.2d 553, 766 N.W.2d 738.

¶ 9 In the discussion that follows, we begin by addressing two allegations of procedural unfairness brought by Xerox, and conclude that these allegations lack merit. Second, we summarize the Commission's factual findings. Third, we set forth the Commission's analysis and its conclusion that the MFDs at issue are nonexempt under WIS. STAT. § 70.11(39). Fourth, we address the parties' arguments regarding standard of review, and conclude that the Commission's interpretation and application of § 70.11(39) is entitled to great weight deference. Fifth, applying the great weight standard, we conclude that the Commission's determination that the MFDs at issue were exempt was based on a reasonable interpretation and application of WIS. STAT. § 70.11(39), and therefore affirm the circuit court's order upholding the Commission's decision.

I. Alleged Procedural Errors

¶ 10 Xerox first argues that the Department should not have been allowed to substitute against Judge O'Brien in the circuit court. Xerox contends that Judge O'Brien erred in concluding that its renewed petition for review following remand was properly treated as a new petition, noting that the cases on which Judge O'Brien relied involved issues of jurisdiction and not judicial assignment. The Department responds that Xerox has forfeited⁴ this argument, and that Xerox should have sought a supervisory writ to prohibit Judge Bartell from presiding over the renewed petition, but failed to do so. See State ex rel. Town of Delavan v. Circuit Court for Walworth County, 167 Wis.2d 719, 721 and n. 2, 482 N.W.2d 899 (1992) (petitioner in a judicial review of an agency decision filed a supervisory writ to prevent the circuit court judge from taking further action and to direct the court to rule on a motion for judicial substitution). We agree with the Department.

¶ 11 We conclude that Xerox forfeited its challenge to the judicial substitution by failing to appeal Judge O'Brien's order granting the Department's request that the renewed petition be filed as a new petition in the clerk of courts' office, and by failing to seek a supervisory writ to stay the proceedings before Judge Bartell. Moreover, even if it had not forfeited this argument, we fail to perceive how Xerox might have been harmed by the alleged error, given that our review is of the agency's decision, not the circuit court's. See PRN Assoc. LLC v. DOA, 2008 WI App 103, ¶ 12, 313 Wis.2d 263, 756 N.W.2d 580 (court of appeals reviews decision of agency, not that of circuit court, in an administrative review).

¶ 12 In its second claim of procedural error, Xerox contends that it was denied due process by the Department's rejection of former Commissioner Millis' revised proposed factual findings following the circuit court's remand for the Commission to consult with Millis. Whether a party was afforded due process is a legal question that we review de novo. See Daniels v. Wisconsin Chiropractic Examining Bd., 2008 WI App 59, ¶ 4, 309 Wis.2d 485, 750 N.W.2d 951. The present issue also involves statutory interpretation and the scope of the Commission's authority, matters of law subject to independent review. See Sands v. Whitnall Sch. Dist., 2008 WI 89, ¶ 14, 312 Wis.2d 1, 754 N.W.2d 439; Albrechtsen v. DWD, 2005 WI App 241, ¶ 8, 288 Wis.2d 144, 708 N.W.2d 1.

¶ 13 The circuit court concluded that the Commission failed to comply with the procedural requirement of WIS. STAT. § 73.01(4)(b), which "impaired the correctness of the proceeding and the correctness of the action." Section 73.01(4)(b) requires that a hearing examiner or commissioner hearing a matter must "report" to the Commission. The statute provides in pertinent part:

Any matter required to be heard by the commission may be heard by any member of the commission or its hearing examiner and reported to the commission, and hearings of matters pending before it shall be assigned to members of the commission or its hearing examiner by the chairperson.

Sec. 73.01(4)(b). The procedural failure identified by the circuit court was that the Commission did not "consult" with Commissioner Millis prior to issuing its decision. Judge O'Brien concluded that the reporting requirement in § 73.01(4)(b) "requires the presiding commissioner to report his findings and observations to the non-present commissioners where issues of credibility, the weight of the evidence, and the drawing of factual inferences are involved." Applying that test to the instant facts, Judge O'Brien concluded that...