Wisconsin Tax Appeals Commission Docket No. 00-S-215

STATE OF WISCONSIN

TAX APPEALS COMMISSION

FREIGHT LIME AND SAND HAULING, INC.

P.O. Box 574

Green Lake, WI 54941-0574,

Petitioner,

vs.

WISCONSIN DEPARTMENT OF REVENUE

P.O. Box 8907

Madison, WI 53708-8907,

Respondent.

DOCKET NO. 00-S-215

RULING AND ORDER

DON M. MILLIS, COMMISSION CHAIRPERSON:

This matter comes before the Commission on each party's motion for summary judgment. Each party has submitted briefs with respect to the motions for summary judgment. Petitioner is represented by Foley & Lardner, by Attorneys Leonard S. Sosnowski and Maureen A. McGinnity. Respondent is represented by Attorney Sheree Robertson.

Based upon the submissions of the parties and the record in this matter, the Commission finds, rules, and orders as follows:

UNDISPUTED MATERIAL FACTS

1. Petitioner is a Wisconsin corporation and a contract motor carrier licensed by the Wisconsin Department of Transportation. During the period at issue--January 1, 1992 through December 31, 1998--petitioner was in the business of hauling a variety of items in three distinct divisions or lines of its business.

2. One division hauled bulk materials such as sand, lime, and other aggregates for factories and other uses. Another division hauled bulk food grade product throughout the United States. Petitioner's purchases of trucks and related equipment for these divisions are not at issue in this matter.

3. In its third division (its "waste hauling business"), petitioner contracted with disposal companies to transport waste between the disposal companies' transfer stations and their disposal sites. Waste Management of Wisconsin, Inc. ("Waste Management") and Superior Services, Inc. ("Superior") were customers of petitioner's waste hauling business.

4. Waste Management and Superior picked up waste from homes and businesses in municipalities with which these companies contracted and transported the waste to their respective intermediate transfer stations. Petitioner would then haul the waste from these transfer stations to disposal sites designated by Waste Management and Superior. During the period that petitioner hauled waste, the ultimate control over the waste remained with petitioner's customers.

5. Petitioner was paid by Waste Management and Superior based on the volume of waste it hauled. Petitioner's fee was set as an amount per ton of waste, with a minimum load guarantee.

6. The waste hauled by petitioner had no positive economic value and was not marketable at the time petitioner hauled it.

7. Petitioner did not pay sales or use tax on its purchases of trucks and related equipment for its waste hauling business, relying on the exemption set forth in section 77.54(5)(b) of the Statutes.

8. Under the date of February 15, 2000, respondent issued a sales/use tax assessment against petitioner for the period at issue in the principal amount of $184,778.51, plus interest and late fee. On or about April 7, 2000, petitioner filed with respondent its petition for redetermination objecting to much of the assessment.

9. Under the date of August 28, 2000, respondent granted in part and denied in part the petition for redetermination. Petitioner then filed a timely petition for review with the Commission.

APPLICABLE STATUTES

77.54 General exemptions. There are exempted from the taxes imposed by this subchapter:
* * *
(5) The gross receipts from the sale of and the storage, use or other consumption of:
* * *
(b) Motor trucks, truck tractors, road tractors, buses, trailers and semi-trailers, and accessories, attachments, parts, supplies and materials therefor, sold to common or contract carriers who use such motor trucks, truck tractors, road tractors, buses, trailers and semitrailers exclusively as common or contract carriers . . . .
194.01 Definitions. In this chapter, unless the context otherwise requires:
* * *
(2) "Contract motor carrier" means any person engaged in the transportation by motor vehicle over a regular or irregular route upon the public highways of property for hire.
* * *
(4) "For hire" means for compensation, and includes compensation obtained by a motor carrier indirectly, by subtraction from the purchase price or addition to the selling price of property transported, where the purchase or sale thereof is not a bona fide purchase or sale. Any person who pretends to purchase property to be transported by such person or who purchases property immediately prior to and sells it immediately after the transportation thereof shall be deemed to be transporting the property for hire and not a bona fide purchaser or seller thereof. The rental of a motor vehicle to a person for transportation of the person's property which rental directly or indirectly includes the services of a driver shall be deemed to be transpor-tation for hire and not private carriage. This subsection does not apply to motor vehicle operations which are conducted merely as an incident to or in furtherance of any business or industrial activity.

CONCLUSIONS OF LAW

1. There is no genuine issue of material fact, and this matter is appropriate for summary judgment as a matter of law.

2. Petitioner is entitled to the exemption under section 77.54(5)(b) of the Statutes because the destination of the waste hauled by petitioner is determined by petitioner's customers, not petitioner.

RULING

Ordinarily, a petitioner bears the burden to show that respondent's action on a petition for redetermination is incorrect. However, because this matter comes before the Commission on motions for summary judgment, neither party will prevail on its motion unless the party demonstrates it is entitled to summary judgment as a matter of law. Grams v. Boss, 97 Wis. 2d 332, 338 (1980). In this case, there is no genuine issue of material fact.

The threshold issue in this case is whether the Commission should adhere to its prior decisions that limit the application of the exemption found in section 77.54(5)(b) of the Statutes to contract carriers that transport property that has value. Petitioner argues that value of property transported is immaterial to this exemption. We now agree. To the extent prior decisions of the Commission held that property transported has to have value in order to qualify for the exemption in section 77.54(5)(b), these holdings are to be disregarded.⁽¹⁾

Section 77.54(5)(b) exempts from the sales and use tax a variety of vehicles, parts, supplies, and accessories sold to contract carriers that use such items as contract carriers. There is no definition of "contract carrier" in chapter 77. However, our Supreme Court has determined that it is appropriate to look to the Motor Vehicle Transportation Act in chapter 194 for the definition of contract carrier. Gensler v. Dep't of Revenue, 70 Wis. 2d 1108, 1114 (1975).

Section 194.01(2) of the Statutes defines "contract motor carrier" as "any person engaged in the transportation by motor vehicle over a regular or irregular route upon the public highways of property for hire." (Emphasis supplied.) In J. M. Disposal Service, Inc. v. Dep't of Revenue, 8 WTAC 122, Wis. Tax Rptr. (CCH) ¶200-585 (1970), aff'd Wis. Tax Rptr. (CCH) ¶200-622 (Dane Co. Cir. Ct. 1970), the Commission based its holding, at least in part, on its belief that "property" in section 194.01 is limited to property that has value.

On appeal, the Dane County Circuit Court affirmed the Commission's holding, but did not explicitly comment on whether section 194.01(2) applied only to carriers hauling property that has value. Instead, the Court held that the definition of "contract carrier" does not include the operator of a disposal service that is free to haul or use the material as it wishes, without regard to the supplier of the waste. J. M. Disposal, Wis. Tax Rptr. (CCH) ¶200-622 at 2.

In retrospect, the Commission's holding in J. M Disposal does not mandate a conclusion that section 194.01(2) only applies to property with value. In fact, the Commission also premised its holding on the fact that the refuse hauler in J. M. Disposal was free to dispose of the waste as it saw fit. 8 WTAC at 124.⁽²⁾

We believe that the important distinction between a disposal firm (which may dispose of waste as it sees fit, without regard to the wishes of the waste generator) and a contract carrier is that the latter is mandated to transport property owned by another to a party or place of the shipper's choosing, and that a contract carrier does not take title to the property. The value of the property is immaterial.

In this case, petitioner has no choice as to the destination of the waste it hauls. Here, Waste Management and Superior determine the destinations of the waste transported by petitioner.

In Superior Hazardous Waste Group, Inc. v. Dep't of Revenue, Wis. Tax Rptr. (CCH) ¶400-377 (WTAC 1998), the Commission made its strongest statement for the idea that the definition of "contract carrier" was limited to a carrier that hauled property with value. The Commission's decision in Superior Hazardous Waste was based, in part, on the Commission's prior decisions in J. M. Disposal and Rieder. As indicated above, these decisions were, in fact, ambiguous on the necessity that property have value in the definition of section 194.01(2), and the same result could be reached on other grounds. To the extent that Superior Hazardous Waste concluded that J. M. Disposal and Rieder stood for the proposition that property transported by a carrier must have positive value for the carrier to be considered a contract carrier under section 77.54(5)(b), we now conclude that holding was in error.

In retrospect, it appears that the Commission's problem in these past decisions was to focus on the term "property" in section 194.01(2). The more meaningful inquiry is to look to the meaning of "for hire." Section 194.01(4) makes it clear that "for hire" means that the carrier is being compensated for transporting the property, not disposing of it or taking title to it. For example, section 194.01(4) provides that, in circumstances when a carrier's compensation is in the form of "subtraction from the purchase price or addition to the selling price," the transportation is "for hire" when the purchase or sale is not bona fide. Reading section 194.01(2) in the light of this definition leads us to conclude that the "transportation . . . of property for hire" includes the service of hauling of property--regardless of its value--from one place to another in exchange for payment. What "transportation . . . for hire" does not include is the removal of property--regardless of its value--with little or no specific concern⁽³⁾ on the part of the person contracting for disposal as to its ultimate destination. This latter service is "disposal" not "transportation . . . for hire."⁽⁴⁾ We believe this is the more logical distinction than the Commission's holding in Superior Hazardous Waste.

Exemption statutes are matters of legislative grace and are to be strictly construed against granting an exemption. Ladish Malting Co. v. Dep't of Revenue, 98 Wis. 2d 496, 502 (1980); Ramrod, Inc. v. Dep't of Revenue, 64 Wis. 2d 499, 504 (1974). Doubts as to the applicability of the exemption are to be resolved against the exemption and in favor of taxability. Revenue Dep't v. Greiling, 112 Wis. 2d 602, 605 (1983). Accordingly, we cannot conclude that the exemption for contract carriers extends to disposal services.

However, the construction of tax exemptions are not to be the narrowest possible or unreasonable. Columbia Hospital Assn. v. Milwaukee, 35 Wis. 2d 660, 668 (1967). We believe that construing the definition of contract carrier in section 77.54(5)(b) to apply only to carriers that transport property with positive value is unreasonably narrow. The important point is to distinguish contract carriers that transport property for hire from disposal services.

In this case, petitioner does not operate a disposal service. Petitioner's waste hauling business moves property--albeit worthless property--from point A to point B as designated by its customers. There is no material difference between what petitioner does and what other contract carriers do when they transport property of others for hire.

ORDER

1. Respondent's motion for summary judgment is denied;

2. Petitioner's motion for summary judgment is granted, and respondent's action on the petition for redetermination is reversed.

Dated at Madison, Wisconsin, this 20th day of November, 2002.

WISCONSIN TAX APPEALS COMMISSION

Don M. Millis, Commission Chairperson

Thomas M. Boykoff, Commissioner

Richard F. Raemisch, Commissioner

ATTACHMENT: "NOTICE OF APPEAL INFORMATION"

CONCURRING OPINION

I concur to emphasize the Commission's present conclusion that no language in either §§ 77.54(5)(b) or 194.01(2) requires property transported by a contract carrier to have positive, negative or no "value."

In § 194.01(2), a "contract motor carrier" is defined as a person who, for hire, transports "property" by motor vehicle over public highways. Statutory interpretation begins with the language of the statute. Alberte v. Anew Health Care Services, Inc., 232 Wis. 2d 587, 592 (2000). A statute which is not ambiguous must be applied as written, without examining its legislative history, context or application. State v. Waalen, 130 Wis. 2d 18, 24 (1986).

This commission cannot rewrite the subject statute. Even if we believed the statute to be unfair, we cannot go beyond legitimate construction when, as here, the meaning is plain and unambiguous. Nor can words be read into or out of a statute for the purpose of saving or supporting an interpretation. See, State v. Hall, 207 Wis. 2d 54, 82 (1997). In addition, we "have no right or power to amend a statute by the insertion of additional language." In Interest of G & L.P., 119 Wis. 2d 349, 354 (1984). Therefore, the Commission should not interpret the word "value" in § 194.01(2) to add the concept of property with no value.

Furthermore, the Commission is acting within its authority to reverse or narrow its earlier decisions. The Wisconsin Supreme Court has stated:

. . . it is well-settled that administrative agencies are not bound by stare decisis: "Consistency, of course, is a virtue both in administrative and in judicial determinations, but inconsistencies in determinations arising by comparison are not proof of arbitrariness or capriciousness." Robertson Transport. Co. v. Public Serv. Comm., 39 Wis. 2d 653, 661, 159 N.W. 2d 636, 640 (1968). . . .

Nelson Bros. v. Revenue Dep't, 152 Wis. 2d 746, 756 (1989). Also see Ridgewood Associates v. Dep't of Revenue, Wis. Tax Rptr. (CCH) ¶ 400-477 (2000), aff'd Wis. Tax Rptr. (CCH) ¶ 400-487 (Dane Co. Circ. Ct. 2000).

Respectfully submitted

Thomas M. Boykoff, Commissioner

¹ Petitioner also argues that the Commission's construction of section 77.54(5)(b) in prior cases violates the constitutional guarantee of equal protection. Because we find for petitioner on other grounds, we need not consider this challenge.

² Similarly, the Commission's decision in Rieder v. Dep't of Revenue, Wis. Tax Rptr. (CCH) ¶200-641 (WTAC 1970), does not explicitly address the issue of the waste's value, and the result in Rieder can be explained on different grounds.

³ The distinction being drawn here is between transportation for hire, where the person contracting for the transportation has a specific destination in mind, versus disposal, where the person contracting for the disposal has little or no expectation of the destination for the property. We are not presented with a case that enables us to determine precisely where transportation for hire ends and disposal begins. We merely conclude that the activity of petitioner in this case was transportation for hire. It is conceivable that a person contracting for disposal might have some concern as to the ultimate destination of the property disposed. For example, a waste generator would want its waste disposed of so as to avoid CERCLA liability. These facts are not presented here.

⁴ Respondent offered evidence that the Wisconsin Department of Transportation and its predecessor in regulation of motor carriers, the Wisconsin Public Service Commission, have long excluded haulers of waste materials from the definition of contract carrier under the theory that waste has no value and, therefore, is not property. While this is at best persuasive authority, we are not compelled to agree with this reasoning in light of the reasonably clear definition of "for hire" in section 194.01(4).