Title: Morton Buildings, Inc. v. VT Dept. of Taxes

State: vermont

Issuer: Vermont Supreme Court

Document:

Morton Buildings, Inc. v. Dept. of Taxes  (97-002); 167 Vt. 371; 705 A.2d 1384

[Opinion Filed 26-Dec-1997]

[Motion for Reargument Denied 15-Jan-1998]

       NOTICE:  This opinion is subject to motions for reargument under
  V.R.A.P. 40 as well as formal revision before publication in the Vermont
  Reports.  Readers are requested to notify the Reporter of Decisions,
  Vermont Supreme Court, 109 State Street, Montpelier, Vermont 05609-0801 of
  any errors in order that corrections may be made before this opinion goes
  to press.

                            No. 97-002

Morton Buildings, Inc.                       Supreme Court

                                             On Appeal from
    v.                                       Washington Superior Court

Vermont Department of Taxes                  September Term, 1997

Alan W. Cheever, J.

       Paul P. Hanlon, Montpelier, and Abraham M. Stanger and Lisa Barse
  Bernstein of Seyfarth, Shaw, Fairweather & Geraldson, New York, New York,
  for Plaintiff-Appellee.

       J. Wallace Malley, Jr., Acting Attorney General, and  Danforth
  Cardozo, III, Special Assistant Attorney General, Montpelier, for
  Defendant-Appellant.

PRESENT:  Dooley, Morse, Johnson and Skoglund, JJ., and Gibson, J.
          (Ret.), Specially Assigned

       DOOLEY, J.   The Vermont Department of Taxes appeals a Washington
  Superior Court order granting a use tax refund to Morton Buildings, Inc. 
  The issue is whether Morton must pay a use tax on raw materials it
  purchased outside of Vermont, assembled into building components at its
  Gettysburg, Pennsylvania factory, and then brought into Vermont to
  construct prefabricated buildings.  We hold that Morton must pay the use
  tax on the materials pursuant to 32 V.S.A. § 9773(1), and reverse the
  superior court decision.

       Morton originally sought a refund of use taxes paid between July 1987
  and February 1990.  The department denied the refund, and the Commissioner
  of Taxes affirmed, ruling that the building components were essentially the
  same as the raw materials Morton had purchased at retail.  Because Morton
  had not paid sales tax on these materials, the Commissioner ruled that it
  must pay a use tax pursuant to 32 V.S.A. § 9773(1).  On appeal, the
  superior court disagreed, concluding that the fabricated components Morton
  brought into Vermont were not the same as

 

  the items of tangible personal property Morton had bought at retail and, as
  a result, they were not taxable.(FN1)  The department appealed to this Court.

       The parties have stipulated to the facts.  Morton is an Illinois
  corporation, with its principal place of business in Illinois and a Vermont
  sales office in Rutland.  It is engaged in the production, sale and onsite
  erection of prefabricated timber-frame, metal-sheathed warehouses and other
  buildings for use by farm and industry.  The overall style of the buildings
  is uniform, but the customer specifies the dimensions of the building and
  the location of doors, windows and skylights.

       Morton purchases raw materials used in its business in bulk from
  vendors outside Vermont and stores them in its own warehouses outside
  Vermont.  The principal materials are steel and lumber.  Morton pays no
  sales tax to any state on its purchase of the raw materials.

       Morton makes building components destined for Vermont customers in its
  factory in Gettysburg, Pennsylvania.  When an order is received, Morton
  withdraws the necessary raw materials from storage and makes them into
  various building components in accordance with the customer's
  specifications for the building.  The building components include trusses,
  lower columns, upper columns, purlins, metal panels and overhead rafters. 
  Making these building components involves sawing the lumber to different
  lengths and angles, drilling holes as needed, and assembling the cut lumber
  using metal gussets, connector plates or nails.  Morton also makes metal
  panels (from galvanized cold-rolled steel), which it uses to construct the
  building's interior and exterior walls and roof panels.

       Morton delivers the completed building components, along with windows,
  doors and other items purchased by Morton in their final form, to the
  customer's site.  The erection and

 

  installation of the building on site is a "turnkey" project, taking about
  four to five days. Morton's employees supply all the labor for
  transportation, loading, unloading, and erection of the building.  The
  erection and installation of a Morton building represents a permanent
  improvement to real property in Vermont for sales-and-use-tax purposes.

       In reviewing this case, we must afford deference to the Commissioner's
  determination, and his findings should not be set aside unless clearly
  erroneous.  Bigelow v. Department of Taxes, 163 Vt. 33, 35,