Title: Wisconsin Department of Revenue v. River City Refuse Removal, Inc.

State: wisconsin

Issuer: Wisconsin Supreme Court

Document:

2007 WI 27 
 
SUPREME COURT OF WISCONSIN 
 
 
 
 
 
CASE NO.: 
2004AP2468 
 
 
COMPLETE TITLE: 
 
 
Wisconsin Department of Revenue, 
          Petitioner-Respondent-Petitioner, 
     v. 
River City Refuse Removal, Inc., 
          Respondent-Appellant. 
 
 
 
 
REVIEW OF A DECISION OF THE COURT OF APPEALS 
2006 WI App 34 
Reported at: 289 Wis. 2d 628, 712 N.W.2d 351 
(Ct. App. 2006—Published) 
 
 
OPINION FILED: 
March 8, 2007   
SUBMITTED ON BRIEFS: 
        
ORAL ARGUMENT: 
October 13, 2006   
 
 
SOURCE OF APPEAL: 
 
 
COURT: 
Circuit   
 
COUNTY: 
Dane   
 
JUDGE: 
Gerald C. Nichol 
 
 
 
JUSTICES: 
 
 
CONCURRED: 
        
 
DISSENTED: 
ABRAHAMSON, C.J., dissents (opinion filed). 
BRADLEY, J., joins the dissent.   
 
NOT PARTICIPATING:         
 
 
 
ATTORNEYS: 
 
For the petitioner-respondent-petitioner the cause was 
argued by F. Thomas Creeron III, assistant attorney general, 
with whom on the briefs was Peggy A. Lautenschlager, attorney 
general. 
 
For the respondent-appellant there was a brief by James R. 
Lowe, Barbara J. Janaszek, and Whyte Hirschboeck Dudek S.C., 
Milwaukee, and oral argument by Barbara J. Janaszek. 
 
An amicus curiae brief was filed by Timothy G. Schally, 
Robert A. Schnur, and Michael Best & Friedrich LLP, Milwaukee, 
on behalf of the Milwaukee Symphony Orchestra, Inc., the 
Milwaukee Ballet Company, Inc., the Florentine Opera Company, 
Inc., 
the 
Skylight 
Opera 
Theatre 
Corp., 
and 
the 
United 
Performing Arts Fund, Inc. 
 
 
2007 WI 27
NOTICE 
This opinion is subject to further 
editing and modification.  The final 
version will appear in the bound 
volume of the official reports.   
No.  2004AP2468  
(L.C. No. 
2003CV2774) 
STATE OF WISCONSIN  
 
 
   : 
IN SUPREME COURT 
 
 
Wisconsin Department of Revenue, 
 
          Petitioner-Respondent-Petitioner, 
 
     v. 
 
River City Refuse Removal, Inc., 
 
          Respondent-Appellant. 
 
 
 
FILED 
 
MAR 8, 2007 
 
A. John Voelker 
Acting Clerk of Supreme 
Court 
 
 
 
 
 
REVIEW of a decision of the Court of Appeals.  Affirmed.   
 
¶1 
JON P. WILCOX, J.   This is a review of a published 
court of appeals decision, Wisconsin Department of Revenue v. 
River 
City 
Refuse 
Removal, 
Inc., 
2006 
WI 
App 
34, 
289 
Wis. 2d 628, 712 N.W.2d 351.  The court of appeals reversed the 
order of the Dane County Circuit Court, Gerald C. Nichol, Judge.   
The circuit court had reversed the Tax Appeals Commission 
(Commission) order and reinstated the assessment made by the 
Wisconsin Department of Revenue (Department). 
¶2 
Two issues are before this court.  First, whether the 
fixed assets River City Refuse Removal, Inc. (River City) 
No. 
2004AP2468   
 
2 
 
received 
through 
intercompany 
transfers 
with 
wholly-owned 
subsidiaries of its parent company are subject to use tax.  We 
hold that they are not in this case because of the lack of the 
requisite "retailer" or "purchase" necessary for the transfers 
to fall within the scope of Wis. Stat. § 77.53(1)(1993-94).1   
¶3 
Second, whether River City satisfied its burden to 
show that its nonpayment of taxes was due to good cause and not 
due to neglect, pursuant to Wis. Stat. § 77.60(3).  We hold that 
River City satisfied its burden.  River City need not pay a 
negligence penalty.  Accordingly, we affirm the court of 
appeals.    
I. 
BACKGROUND 
¶4 
River City was a stock corporation organized under 
Wisconsin law, with its principal place of business in Eau 
Claire, Wisconsin.2  It collected refuse and recyclables in 
Wisconsin for residences and businesses.  River City held a 
Wisconsin consumer use tax permit, which is required for 
businesses that regularly acquire taxable items from sellers who 
do not collect tax.   
                                                 
1 All subsequent references to the Wisconsin Statutes are to 
the 1993-94 version, unless otherwise stated.  
 
2 River City was organized in 1978 as a wholly-owned 
subsidiary of Browning-Ferris Industries (BFI).  In October 1997 
all BFI subsidiaries were combined into one entity: BFI Waste 
Systems of North America, Inc.  We refer to River City 
throughout this opinion because it was the business entity at 
the time of the audit at issue in this case. 
No. 
2004AP2468   
 
3 
 
¶5 
River City was a wholly-owned subsidiary of Browning-
Ferris 
Industries 
(BFI).3 
 
 
BFI 
was 
a 
publicly 
traded 
corporation, 
which 
had 
a 
number 
of 
other 
wholly-owned 
subsidiaries in a number of different states (BFI subsidiaries), 
including Browning-Ferris Industries of Wisconsin, Inc. (BFI-
Wisconsin); Town & Country Waste, Inc.; Troy Area Landfill; BFI 
of Illinois; Woodlake Sanitary Service, Inc.; Browning-Ferris 
Industries of Minnesota, Inc.; and BFI Medical Waste Systems of 
Minnesota, Inc.    
¶6 
BFI and its subsidiaries were accrual basis taxpayers, 
meaning they recognized transactions at the time they occurred.  
Accounting entries for a liability or expense were made 
irrespective of the receipt or disbursement of a payment. 
¶7 
BFI maintained consolidated financial statements for 
all of its wholly-owned subsidiaries.  Such a practice is in 
accordance with generally accepted accounting principles (GAAP). 
BFI also filed a consolidated federal income tax return for all 
of its wholly-owned subsidiaries.  River City filed a separate 
Wisconsin tax return, pursuant to state law.4    
¶8 
BFI 
would 
assess 
the 
equipment 
needs 
of 
its 
subsidiaries and direct the transfer of assets accordingly.  For 
                                                 
3 Allied Waste Industries, Inc., which trades on the New 
York Stock Exchange, bought out BFI in August of 1999 for a 
reported $9.1 billion dollars. 
4 Wisconsin adheres to the legal-entity theory, which 
requires "each separate legal entity . . . to file its own 
separate return."  Interstate Fin. Corp. v. Dep't. of Taxation, 
28 Wis. 2d 262, 273, 137 N.W.2d 38 (1965).   
No. 
2004AP2468   
 
4 
 
accounting purposes, three sets of books would be involved: the 
sending subsidiary's, the receiving subsidiary's, and BFI's.  
The subsidiaries each had an intercompany payables account and 
an intercompany receivables account.  The receiving subsidiary 
would add the net book value of assets to its intercompany 
payables account.  Net book value would be arrived at by 
subtracting the accumulated depreciation previously taken by the 
sending subsidiary from the original purchase price.  The 
sending subsidiary would subtract the same value from its 
intercompany receivables account.  Subsidiaries did not exchange 
money for the intercompany transfers.  BFI took responsibility 
for reconciling each subsidiary's receivables and payables in 
BFI's books, with the intercompany transfers netting zero on 
BFI's consolidated financial statement. 
¶9 
After 
the 
intercompany 
transfer, 
the 
receiving 
subsidiary would continue to depreciate the assets.  The net 
book value would be used as the initial cost basis.  Any gains 
over the initial cost basis would be reported as income if the 
assets were sold. 
¶10 In BFI's Policy and Procedure Manual, BFI identified 
tax liability as a potentially adverse effect of intercompany 
transfers. 
 
The 
manual 
warned 
that 
"such 
transfers 
may 
inadvertently trigger foreign and U.S. tax consequences without 
careful study."       
¶11 River City took part in intercompany transfers.  When 
River City received fixed assets from other BFI subsidiaries, it 
would receive all rights to, and ownership of, the transferred 
No. 
2004AP2468   
 
5 
 
assets.  River City would retitle the assets in its name and 
recognize the transfers in its financial records.  It paid no 
tax at the time of retitling.  In recognizing the transfers, 
River City followed the procedure provided by BFI. 
¶12 The Department audited River City from October 1, 
1993, to September 30, 1997 (period under review).  The audit 
identified five categories of transactions for which River City 
did not pay use tax: (1) purchases of miscellaneous items; (2) 
purchases of motor fuel with respect to which the Department had 
issued Wis. Stat. § 78.75 motor fuel tax refunds; (3) transfers 
of non-fixed assets from other BFI subsidiaries, including 
tangible personal property such as books, videos, labels, 
posters, 
brochures, 
florescent bulbs, and containers; (4) 
purchases of recycling and waste reduction assets; and (5) 
transfers of fixed assets from other BFI subsidiaries, including 
trucks, tractors, and tractor-trailers that were between two and 
four years old.  Related to the first category, River City did 
not appeal the audit.  It conceded that it owed tax.  
¶13 Related to the latter four categories, River City 
disagreed with the audit.  Believing that River City needed to 
pay use tax, the Department sent River City a notice of field 
audit action (assessment), which assessed River City a total of 
$144,010.03.  The total included $88,877.86 for unpaid use tax, 
$32,912.70 for interest, and $22,219.47 as a negligence penalty.  
The assessment covered the period under review. 
¶14 After receiving the Department's assessment, River 
City filed a petition for redetermination with the Department's 
No. 
2004AP2468   
 
6 
 
appellate bureau.  In the petition, River City contended that 
the intercompany transfers were not subject to use tax, the 
recycling and waste reduction assets were exempt from the use 
tax, and that the audit had miscalculated the motor fuel sales 
tax.  The Department denied it.   
¶15 River City then filed a petition for the Commission to 
review 
the 
Department's 
denial 
of 
its 
petition 
for 
redetermination. 
 
The 
petition 
sought 
review 
related 
to 
intercompany transfers and the recycling and waste reduction 
assets.  It did not seek review related to the motor fuel.     
¶16 As litigation related to this case proceeded, BFI-
Wisconsin 
and 
the 
Department 
litigated 
similar 
issues.  
Browning-Ferris 
Indus. 
of 
Wisconsin, 
Inc. 
v. 
DOR, 
No. 
2004AP3091, unpublished slip op. (Wis. Ct. App. June 28, 2001), 
aff'g slip op., No. 00-CV-418 (Dane Co. Cir. Ct. Sept. 28, 
2000), aff'g Wis. Tax Rptr. (CCH) ¶400-469 (WTAC 2000), petition 
for review denied 2001 WI 117, 247 Wis. 2d 1036, 635 N.W.2d 784.  
In BFI-Wisconsin's case, the Commission reached the following 
conclusions 
of 
law: 
BFI-Wisconsin's 
recycling 
and 
waste 
reduction activities were not exempt from use tax, sales tax 
applied to its sales and rentals of compactors to customers, use 
tax did not apply to intercompany transfers, and the motor fuel 
tax applied.   
¶17 After the Commission issued its order in Browning-
Ferris Industries of Wisconsin, Wis. Tax Rptr. (CCH) ¶ 400-469 
(WTAC 2000), the Department issued a notice of nonacquiescene 
related to the Commission's order pertaining to the intercompany 
No. 
2004AP2468   
 
7 
 
transfers.  The Department issued the notice pursuant to 
Wis. Stat. § 73.01(4)(e)2.  Its effect was that although the 
Commission's order related to intercompany transfers was binding 
in Browning-Ferris Industries of Wisconsin, Wis. Tax Rptr. (CCH) 
¶ 400-469 (WTAC 2000), "the [c]ommission's conclusions of law, 
the rationale, and construction of statutes . . . related to the 
issue of the intercompany transfers [were] not binding upon or 
required to be followed by the [Department] in other cases." 
¶18 BFI-Wisconsin appealed to the circuit court, but 
related to only the applicability of the recycling and waste 
reduction use tax exemption.5  The circuit court affirmed the 
Commission's order.  Browning-Ferris Indus. of Wisconsin v. DOR, 
No. 00-CV-418, unpublished slip op., (Dane Co. Cir. Ct. Sept. 
28, 2000).   BFI-Wisconsin appealed the circuit court's order, 
which the court of appeals affirmed.  Browning-Ferris, 246 
Wis. 2d 990.  BFI-Wisconsin's petition for review was denied by 
this court on September 19, 2001.  Browning-Ferris Indus. of 
Wisconsin v. DOR, 2001 WI 17, 247 Wis. 2d 1036, 635 N.W.2d 784. 
                                                 
5 BFI-Wisconsin did not seek judicial review of the 
Commission's order as it related to either the taxability of the 
sales and rentals of compactors or the motor fuel tax.   
 
In 
providing 
context 
for 
this 
case, 
the 
Commission 
recounted the procedural history of Browning-Ferris Industries 
of Wisconsin.  After explaining that the Department issued the 
notice of nonacquiescene, the Commission stated that BFI-
Wisconsin "appealed the Commission's other conclusions of law." 
This seems to indicate that BFI-Wisconsin sought judicial review 
of the Commission's order related to the taxability of the 
compactors and motor fuel, which was not the case. 
No. 
2004AP2468   
 
8 
 
¶19 Based on the outcome of Browning-Ferris, during the 
course of the Commission's review of this case, River City 
agreed to pay tax for both the recycling and waste reduction 
assets and the non-fixed assets received from intercompany 
transfers.  Therefore, the Commission considered the taxability 
of only the transferred fixed assets and the applicability of 
the negligence penalty. 
¶20 In considering the taxability of the fixed assets, and 
the applicability of the negligence penalty in this case, the 
Commission granted River City's motion for summary judgment.  It 
concluded that intercompany transfers between BFI subsidiaries 
were not subject to use tax.  The subsidiaries were not 
Wis. Stat. § 77.51(13) 
retailers 
and 
there 
was 
not 
a 
Wis. Stat. § 77.51(12) purchase.  The Commission also concluded 
that River City had satisfied its burden of showing that its 
nonpayment of tax was "due to good cause and not due to 
neglect."  Therefore, River City did not need to pay the 
Wis. Stat. § 77.60(3) negligence penalty.     
¶21 The Department appealed to the circuit court.  The 
circuit court reversed the Commission's order and it reinstated 
the assessment and the negligence penalty.  In reviewing the 
Commission's order, the circuit court provided no deference to 
the Commission.  Concerning the use tax issue, the circuit court 
characterized the issue as one of "very nearly first impression" 
that necessitated case law interpretation as much as statutory 
interpretation.  It concluded that River City owed the amount 
assessed because the subsidiaries were § 77.51(13) retailers 
No. 
2004AP2468   
 
9 
 
and, pursuant to § 77.51(12)(a), River City purchased the fixed 
assets.   
¶22 Concerning the negligence penalty, the circuit court 
reviewed the imposition of it de novo because it directly 
depended on the disposition of the use tax issue.  The circuit 
court concluded that River City had not satisfied its burden and 
that the negligence penalty was properly imposed.   
¶23 River City appealed to the court of appeals, which 
reversed 
the 
circuit 
court's 
order 
and 
reinstated 
the 
Commission's ruling and order.  Related to the taxability of the 
intercompany transfers, the court of appeals concluded that the 
Commission's interpretation of the use tax statute was entitled 
to due weight deference.  It held that the Commission's 
interpretation was reasonable and that the Department failed to 
offer a more reasonable interpretation. 
¶24 Related to the negligence penalty, the court of 
appeals concluded that the Commission's interpretation of the 
penalty statute was entitled to great weight deference.  It held 
that 
the 
Commission's 
determination 
that 
River 
City 
had 
satisfied its burden that its nonpayment was "due to good cause 
and not due to neglect" was reasonable.  Therefore, the court of 
appeals 
reversed 
the 
circuit 
court 
and 
reinstated 
the 
Commission's ruling and order. 
¶25 The Department sought review in this court, which we 
granted.       
II. 
STANDARD OF REVIEW 
No. 
2004AP2468   
 
10 
 
¶26 This 
case 
requires 
us 
to 
interpret 
Wis. Stat. §§ 77.53(1) and 77.60(3).  Statutory interpretation 
presents 
a 
question 
of 
law 
that 
we 
review 
de 
novo.  
Harnischfeger Corp. v. LIRC, 196 Wis. 2d 650, 659, 539 N.W.2d 98 
(1995).  In interpreting statutes, we primarily focus on the 
statutory language.  State ex rel. Kalal v. Cir. Ct. for Dane 
County, 2004 WI 58, ¶44, 271 Wis. 2d 633, 681 N.W.2d 110.  
"[S]tatutory language is interpreted in the context in which it 
is used; not in isolation but as part of a whole; in relation to 
the language of surrounding or closely-related statutes; and 
reasonably, to avoid absurd or unreasonable results."  Id., ¶46.  
We 
assume 
that 
the 
statutory 
language 
expresses 
the 
legislature's intent.  Id., ¶44.  When it manifests a clear 
meaning, our inquiry ceases and we will apply that meaning.  
Lincoln Sav. Bank, S.A. v. DOR, 215 Wis. 2d 430, 443, 573 
N.W.2d 522 (1998).   
A. 
Ambiguity 
¶27 Only when a statute is ambiguous do courts apply rules 
of statutory construction or look to extrinsic evidence of the 
legislature's intent, such as an agency's interpretation.  UFE 
Inc. v. LIRC, 201 Wis. 2d 274, 281, 548 N.W.2d 57 (1996).  
"'Statutory 
interpretation 
involves 
the 
ascertainment 
of 
meaning, not a search for ambiguity.'"  Kalal, 271 Wis. 2d 633, 
¶47 (quoting Bruno v. Milwaukee County, 2003 WI 28, ¶25, 260 
Wis. 2d 633, 660 N.W.2d 656).  Ambiguity exists only when a 
statute reasonably gives rise to two or more interpretations.   
Bruno, 260 Wis. 2d 633, ¶25.  Mere disagreement about the 
No. 
2004AP2468   
 
11 
 
meaning of the statute is not enough to constitute ambiguity.  
Kalal, 271 Wis. 2d 633, ¶47.  "[W]hen a case comes before this 
court it is obvious that people disagree as to the meaning to be 
given to a statute.  This is not controlling.  The court must 
determine 
whether 
'well-informed persons' could have been 
confused."  Recht-Goldin-Siegal Constr., Inc. v. DOR, 64 
Wis. 2d 303, 306, 219 N.W.2d 379 (1974).     
   
¶28 In interpreting §§ 77.53(1) and 77.60(3), therefore, 
we first determine whether either is ambiguous.   
¶29 The relevant part of Wis. Stat. § 77.53(1) provides 
that use tax is "[a]n excise tax . . . levied and imposed . . . 
on the storage, use or other consumption in this state of 
tangible personal property purchased from any retailer, at the 
rate of 5% of the sales price of that property."  The issue 
before this court related to use tax is whether the intercompany 
transfers fall within the scope of the use tax statute.  The 
legislature defined "retailer," in the section applicable to 
this case, using the term "seller."  Wis. Stat. § 77.51(13)(a).  
"Seller" is defined by the scope of the sales tax statute.  
Wis. Stat. § 77.51(17).  The sales tax statute imposes sales tax 
on a "retailer."  Wis. Stat. § 77.52(1).  A "retailer" is a 
"seller," and a "seller" collects "sales tax."  Use tax applies 
to 
purchases 
from 
a 
"retailer." 
 
Wis. Stat. § 77.53(1).  
Juxtaposed, the statutes raise ambiguity related to the scope of 
the use tax.  Because ambiguity exists related to § 77.53(1), we 
will consider extrinsic evidence to ascertain the legislature 
intent, such as the Commission's interpretation.   
No. 
2004AP2468   
 
12 
 
¶30 Wisconsin Statute § 77.60(3) provides the following:  
If due to neglect an incorrect return is filed, the 
entire tax finally determined shall be subject to a 
penalty of 25% . . . of the tax exclusive of interest 
or other penalty.  A person filing an incorrect return 
shall have the burden of proving that the error or 
errors were due to good cause and not due to neglect. 
Unlike § 77.53(1), this language from § 77.60(3) does not 
reasonably give rise to multiple interpretations.  It is not 
ambiguous.  Therefore, extrinsic evidence, such as agency 
interpretations, will not be necessary in interpreting it.  We 
will apply the statute's plain meaning. 
B. 
Extrinsic Sources Used in Interpreting Ambiguous Statutes 
¶31 Because § 77.53(1) is ambiguous, we will apply rules 
of 
statutory 
construction. 
 
Specifically, 
we 
avoid 
a 
construction of statutes that makes any part of the statute 
superfluous.  Kollasch v. Adamany, 104 Wis. 2d 552, 563, 313 
N.W.2d 47 (1981).  We also will resolve ambiguities in favor of 
the party upon whom the state seeks to impose a tax.  Id. at 
561; Kearney & Trecker Corp. v. DOR, 91 Wis. 2d 746, 753, 284 
N.W.2d 61 (1979).  Because the state seeks to impose the use tax 
on River City, ambiguities will be resolved in River City's 
favor.  
¶32 In 
addition 
to 
applying 
rules 
of 
statutory 
construction, we will consider extrinsic sources such as the 
Commission's interpretation of the statute.  We are not bound by 
an agency's interpretation of statutory language, but we do at 
times defer to an agency when presented with an ambiguous 
statute.  UFE, 201 Wis. 2d at 284; State ex rel. Parker v. 
No. 
2004AP2468   
 
13 
 
Sullivan, 184 Wis. 2d 668, 699, 517 N.W.2d 449 (1994).  Three 
possible levels of deference apply based on "the comparative 
institutional capabilities and qualifications of the court and 
the administrative agency."  Id.  The levels are great weight 
deference, due weight deference, or no deference.   
¶33 Great weight deference applies when the following 
requirements are met:  
(1) the agency was charged by the legislature with the 
duty of administrating the statute; (2) that the 
interpretation of the agency is one of long-standing; 
(3) 
that 
the 
agency 
employed 
its 
expertise 
or 
specialized knowledge in forming the interpretation; 
and (4) that the agency's interpretation will provide 
uniformity and consistency in the application of the 
statute. 
Harnischfeger, 196 Wis. 2d at 660.  Great weight deference 
applies because of an agency's experience, technical competence, 
and specialized knowledge, which aid the agency in interpreting 
and applying the statute.  Kelley Co. v. Marquardt, 172 
Wis. 2d 234, 244-45, 493 N.W.2d 68 (1992).  When great weight 
deference 
applies, 
courts 
sustain 
any 
reasonable 
agency 
interpretation that is not contrary to the clear meaning of the 
statute.  Even if a more reasonable interpretation exists, 
courts will sustain the agency's.  UFE, 201 Wis. 2d at 287.  On 
the 
other 
hand, 
an 
agency's 
statutory 
interpretation 
is 
unreasonable if it "directly contravenes the words of the 
statute, it is clearly contrary to legislative intent or it is 
without rational basis."  Harnischfeger, 196 Wis. 2d at 662.  
The party seeking to overturn the agency's interpretation has 
No. 
2004AP2468   
 
14 
 
the burden of showing the interpretation is unreasonable.  Id. 
at 661. 
¶34 We apply due weight deference when an agency has some 
experience in the area, but not the type of experience that puts 
it in a better position to interpret the statute than the court.  
UFE, 201 Wis. 2d at 286.  Deference applies in such cases 
because the legislature granted the agency enforcement power 
related to the statute.  Id.  When due weight deference applies, 
courts sustain an agency's reasonable statutory interpretations, 
unless the court finds another interpretation to be more 
reasonable.  Id. at 286-87. 
¶35 No deference applies when an agency addresses an issue 
that is clearly one of first impression or has inconsistently 
addressed the issue when it has been presented previously.  Id. 
at 285.  Neither of these situations exist related to the 
Commission's interpretation of either § 77.53(1) or § 77.60(3).6 
¶36 In considering the Commission's interpretation of 
§ 77.53(1), due weight deference is appropriate.  The Commission 
has expertise related to use tax.  However, the Commission did 
not rely on that expertise and specialized knowledge in 
interpreting the scope of the use tax statute.  It depended on 
case 
law. 
 Courts have expertise related to case law.  
Accordingly, the Commission was not in a better position than 
                                                 
6 As a point of emphasis, the court will review the 
§ 77.60(3) issue de novo because the statute lacks ambiguity.  
We will give the Commission's interpretation of § 77.60(3) no 
deference because of the lack of ambiguity, not because the 
Commission lacks experience or has previously been inconsistent. 
No. 
2004AP2468   
 
15 
 
the courts to interpret § 77.53(1), and the related statutory 
definitions.  Due weight deference is appropriate because the 
Commission has experience and specialized knowledge, but not the 
type that puts it in a better position than the courts. 
III. USE TAX 
¶37 We must interpret § 77.53(1) to determine whether the 
intercompany transfers River City received from other BFI 
subsidiaries are subject to use tax.  The relevant part of Wis. 
Stat. § 77.53(1) provides the following: "[a]n excise tax . . . 
levied and imposed . . . on the storage, use or other 
consumption 
in 
this 
state 
of 
tangible 
personal 
property 
purchased from any retailer, at the rate of 5% of the sales 
price of that property."  To determine whether use tax applies 
to the intercompany transfers, the BFI subsidiaries that 
transferred the fixed assets must be considered "retailers" and 
River City must have "purchased" the fixed assets.  If either of 
these do not apply to this case, use tax does not apply to the 
intercompany transfers.  The Commission, in concluding that the 
BFI subsidiaries were not "retailers" and the fixed assets were 
not a "purchase," provided two independent rationales for the 
state to not impose use tax.    
A.  Retailer 
¶38 In considering the term "retailer," the focus is on 
BFI subsidiaries that transferred the fixed assets to River 
City.  It is not an examination where we determine whether River 
City constituted a "retailer." 
No. 
2004AP2468   
 
16 
 
¶39 The Commission concluded that the BFI subsidiaries 
that transferred assets to River City were not "retailers."  We 
conclude that the Commission's interpretation of § 77.51(13) is 
reasonable because the BFI subsidiaries do not fall within the 
scope of any of the definitions provided in § 77.51(13).   
¶40 The Department contended that the BFI subsidiaries 
fell within the scope of three provisions of § 77.51(13): (a), 
(am), and (b).  As addressed below, we do not find any of the 
Department's interpretations to be more reasonable than the 
Commission's.  
¶41 A § 77.51(13)(a) retailer is "[e]very seller who makes 
any sale of tangible personal property or taxable service."  The 
type of transaction that makes a person a § 77.51(13)(a) 
retailer is a "mercantile one[]."  Kollasch, 104 Wis. 2d at 568; 
Frisch, Dudek and Slattery, Ltd. v. DOR, 133 Wis. 2d 444, 448, 
396 N.W.2d 355 (Ct. App. 1986).  The Kollasch court reached this 
conclusion by interpreting the statutory language.  After noting 
the ambiguity caused by juxtaposing statutory definitions, the 
court resorted to dictionary definitions.  It noted that a 
"retailer" 
was 
"'one 
that 
retails 
something 
. 
. 
. 
specif(ically): a merchant middleman who sells goods mainly to 
ultimate consumers.'"  Kollasch, 104 Wis. 2d at 566 (quoting 
Webster's 
Third 
International 
Dictionary 
(unab. 
1976)).  
"Merchant" means "'a buyer and seller of commodities for profit; 
. . . the operator of a retail business.'"  Id. (quoting 
Webster's Third International Dictionary (unab. 1976)).  Based 
on the dictionary definitions of "retailer" and "merchant,"  the 
No. 
2004AP2468   
 
17 
 
Kollasch court concluded that mercantile intent must be present 
for a person to be considered a § 77.51(13)(a) retailer. 
¶42 Analysis related to § 77.51(13)(a) focuses on the 
specifics of the transaction involved.  Id.; Frisch, 133 
Wis. 2d at 449.  As noted in Kollasch, "[t]he meaning of the 
word 'retailer' . . . depends on the transaction to which it 
relates."  Kollasch, 104 Wis. 2d at 566.  For instance, the 
specifics of the transaction itself, rather than the profit 
motive of the Frisch law firm overall, determined whether it was 
a retailer when it charged clients for photocopies.  Frisch, 133 
Wis. 2d at 449. 
¶43 The BFI subsidiaries lacked the necessary mercantile 
intent in transferring fixed assets to River City to qualify as 
§ 77.51(13)(a) retailers.  They were not merchant middlemen in 
the business of transferring fixed assets.  They transferred 
selected assets that they could no longer use as effectively as 
River City.  They also did not make a profit from transferring 
the assets to River City.  Although, BFI generally benefited 
from 
relocating 
assets 
where 
they 
could 
be 
used 
most 
effectively, 
Wisconsin 
is 
a 
legal 
entity 
theory 
state.  
Interstate Fin. Corp. v. Dep't. of Taxation, 28 Wis. 2d 262, 
273, 137 N.W.2d 38 (1965).  We treat wholly-owned subsidiaries 
as independent legal entities, rather than as merely a part of 
the corporate shareholder.  The BFI subsidiaries, as independent 
legal entities, did not have the requisite mercantile intent in 
transferring the assets at issue in this case.  They were not 
§ 77.51(13)(a) retailers.      
No. 
2004AP2468   
 
18 
 
¶44 A § 77.51(13)(am) retailer is "[a]ny person making any 
retail sale of a motor vehicle . . . [or] trailer . . .  
registered or titled, or required to be registered or titled, 
under the laws of this state or of the United States."  The 
Department contended that the nature of the fixed assets 
transferred (i.e., trucks, tractors, and trailers) made this 
section applicable to this case.  River City countered that the 
BFI subsidiaries did not fall within § 77.51(13)(am) because an 
intercompany transfer was not a "retail" sale.  It emphasized 
the presence of the term "retail" as an adjective for "sale" in 
§ 77.51(13)(am), which does not exist in § 77.51(13)(a).   
¶45 The applicability of § 77.51(13)(am) turns on the 
meaning of "retail sale."  The statutory definition of "sale" 
begins by stating that "'Sale', 'sale, lease or rental', 'retail 
sale', 'sale at retail', or equivalent terms include any one or 
all of the following . . . ."  Wis. Stat. § 77.51(14).  The 
legislature did not provide any independent definition for the 
term "retail."  Although the legislature mentions "sale" and 
"retail sale" in its definition of "sale," it must have some 
meaning or the inclusion of the word "retail" in § 77.51(13)(am) 
would be superfluous.  We avoid a construction of a statute that 
results in words being superfluous.  Kollasch, 104 Wis. 2d at 
563.   
¶46 Words and phrases of statutes "shall be construed 
according 
to 
common 
and 
approved 
usage."  
Wis. Stat. § 990.01(1).  Accordingly, we resort to dictionary 
definitions 
in 
discerning 
legislative 
intent 
when 
the 
No. 
2004AP2468   
 
19 
 
legislature has not provided a definition.  Kollasch, 104 
Wis. 2d at 566.  "Retail," when used as an adjective, means 
"[o]f, relating to, or engaged in the sale of goods or 
commodities at retail."  The American Heritage Dictionary of the 
English Language 1539 (3d ed. 1992).  "Retail," when used as a 
noun, means "[t]he sale of goods or commodities in small 
quantities directly to consumers."  Id.  "[I]n small quantities" 
denotes that a characteristic of "retail" is having an inventory 
of goods and commodities, from which sales occur directly to 
consumers.  Merely passing along an isolated asset in a 
transaction is not enough to constitute "retail."  In including 
"retail" as an adjective to "sale" in § 77.51(13)(am), the 
legislature conveyed its intent that taxes apply to only certain 
retailers that sell smaller quantities of goods from an 
inventory directly to consumers.   
¶47 The intercompany transfers of fixed assets done by BFI 
subsidiaries do not qualify as "retail" sales because they   
lack the requisite retail nature that the legislature intended.  
The BFI subsidiaries merely passed along isolated assets to 
River City, without selling smaller quantities of an inventory 
directly 
to 
a 
consumer. 
 
They 
were 
not 
§ 77.51(13)(am) 
retailers.                     
¶48 A Wis. Stat. § 77.51(13)(b) retailer, in pertinent 
part, is "[e]very person engaged in the business of making sales 
of tangible personal property for storage, use or consumption."  
The BFI subsidiaries that transferred the fixed assets to River 
City were not engaged in the business of transferring fixed 
No. 
2004AP2468   
 
20 
 
assets.  The BFI subsidiaries, like River City, were engaged in 
the business of collecting refuse.  In the context of a 
publicly-traded corporation that reported annual revenues of 
over five billion dollars, River City receiving fixed assets 
valued at less than 1.2 million dollars over a four-year term 
clearly does not constitute BFI subsidiaries engaging in the 
business of transferring fixed assets.7  BFI subsidiaries were 
not § 77.51(13)(b) retailers.  Accordingly, the BFI subsidiaries 
do not constitute retailers based on any of the definitions 
provided in § 77.51(13).   
B. 
Purchase 
¶49 Wisconsin Statute § 77.51(12)(a) defines "purchase" as 
follows: 
"Any 
transfer 
of 
title, 
possession, 
ownership, 
enjoyment, or use by: cash or credit transaction, exchange, 
barter, lease or rental, conditional or otherwise, in any manner 
or by any means whatever of tangible personal property for a 
consideration."  The legislature has not provided a definition 
of "consideration" that applies to the subchapter on general 
sale and use tax.   
                                                 
7 A look at the approximate dollar figures involved 
illustrates 
why 
BFI 
subsidiaries 
are 
clearly 
not 
Wis. Stat. § 77.51(13)(b) retailers engaged in the business of 
transferring fixed assets.  River City received fixed assets 
worth $1,180,531.81 over a four-year period, according to the 
Department audit.  Annually, that is an average of $295,132.95.  
BFI had eight subsidiaries.  If all of the subsidiaries took 
part in the intercompany transfers to the same extent as River 
City, 
annually 
the 
fixed 
assets 
transferred 
would 
value 
$2,361,063.60, which would be less than 0.05% of BFI annual 
revenues. 
No. 
2004AP2468   
 
21 
 
¶50 Courts, however, have defined consideration.  It may 
arise when there is a benefit to the promisor or a detriment to 
the 
promisee, 
First 
Wisconsin 
National 
Bank 
v. 
Oby, 
52 
Wis. 2d 1, 6, 188 N.W.2d 454 (1971), such as a change in 
financial position.  Hardscrabble Ski Area v. First Nat'l Bank, 
42 Wis. 2d 334, 344, 166 N.W.2d 191 (1969).  It may also arise 
from "[m]utual promises for future performances of acts by the 
parties . . . if each of the promises is capable of being 
performed, are given in exchange for each other, and are 
mutually binding upon the parties."  MADCAP I, LLC v. McNamee, 
2005 WI App 173, ¶8, 284 Wis. 2d 774, 702 N.W.2d 16.  Promises 
that are "performable, concurrent, and mutually binding upon 
both parties at the same time" constitute consideration.  Stack 
v. Roth Bros. Co., 162 Wis. 281, 288, 156 N.W. 148 (1916).  
¶51 The Restatement (Second) of Contracts § 71 (1981) 
provides that "[t]o constitute consideration, a performance or a 
return promise 
must be bargained for."  § 71(1).  The 
performance or return promise is bargained for if "it is sought 
by the promisor in exchange for his promise and is given by the 
promisee in exchange for that promise."  § 71(2).  The requisite 
bargaining typically involves each party inducing the other to 
act.     
¶52 In this case, River City received fixed assets from 
BFI subsidiaries and gave nothing in return.  There is no 
evidence of a payment.  There is no evidence that River City 
made any promises to the BFI subsidiaries.  The BFI subsidiaries 
acted and got nothing in return.  Accordingly, we conclude that 
No. 
2004AP2468   
 
22 
 
the requisite consideration did not exist for the intercompany 
transfers to be "purchases" pursuant to § 77.51(12)(a). 
¶53 The Department contended that consideration existed 
based on a number of different rationales.  We find none of them 
to be more reasonable than the Commission's conclusion that the 
intercompany transfers were something other than "purchases" for 
use tax purposes.   
¶54 First, the Department contended that even though the 
BFI subsidiaries did not reap a bargained for benefit, BFI did.  
Wisconsin, however, follows the legal-entity theory.  Interstate 
Fin. 
Corp., 
28 
Wis. 2d at 
273. 
 
We 
treat 
wholly-owned 
subsidiaries as independent legal entities, rather than as 
merely a part of the corporate shareholder.  Treating the BFI 
subsidiaries as independent corporations, there is no evidence 
that the subsidiaries got anything in return for transferring 
the fixed assets to River City.    
¶55 Second, the Department also contended that Wisconsin 
has a statutory scheme that taxes all transfers of tangible 
personal 
property, 
unless 
an 
explicit 
exemption 
applies.  
Because River City has not identified an explicit exemption that 
applies to the intercompany transfers, the argument goes, some 
tax must apply.  This ignores the nuances of the statutory 
scheme.  For instance, this court has held that a § 77.51(13)(a) 
retailer must have mercantile intent.  Kollasch, 104 Wis. 2d at 
568.  Therefore, in a case where the person transferring 
tangible personal property lacks mercantile intent, he or she 
will not be subject to tax, even though no explicit exemption 
No. 
2004AP2468   
 
23 
 
applies.  The Department's assertion that Wisconsin has a 
statutory scheme that taxes all transfers of tangible personal 
property, unless an explicit exemption applies, is incorrect.     
¶56 Finally, the Department contended that River City's 
bookkeeping manifested the necessary consideration for the 
intercompany transfers to be consideration.  Consideration 
existed as a matter of law, the argument goes, as soon as it 
made an entry in its intercompany payables account.  In support 
of this, the Department relied on its interpretation of 
§ 77.51(14) and an Ohio Supreme Court decision, Hawthorn 
Mellody, Inc. v. Lindley, 417 N.E.2d 1257 (Ohio 1981).  An 
examination of both of these indicates the Department's final 
contention is also unpersuasive.  
¶57 According to the Department, because a § 77.51(14) 
sale occurred consideration must have arisen when River City 
entered a liability in its intercompany payables account.8  
However, the occurrence of a § 77.51(14) sale is not the issue 
before this court.  Focusing on whether or not a sale occurred 
is not relevant because the legislature did not include 
consideration as an element of a § 77.51(14) sale, as it did in 
defining "purchase."  The recognition of a sale would be 
significant only if Wisconsin's statutory scheme imposed a tax 
on all transfers of tangible personal property.  Then, either a 
sales tax or use tax would be owed once the determination of a 
                                                 
8 Section 77.51(14) defines "sale," in pertinent part, as 
"any one or all of the following: the transfer of the ownership 
of, title to, possession of, or enjoyment of tangible personal 
property." 
No. 
2004AP2468   
 
24 
 
sale had been made.  As noted above, Wisconsin does not have 
such a statutory scheme.  Analysis of § 77.51(14) merely diverts 
the 
analysis 
away 
from 
determining 
whether 
a 
"purchase" 
occurred.            
¶58 The Department's citation of the Ohio Supreme Court 
decision is also unpersuasive because the court interpreted a 
distinguishable statutory scheme.  The court interpreted a 
definition of "sale."  Hawthorn Mellody, 417 N.E.2d at 1262.  We 
are interpreting the definition of "purchase."  The Ohio 
Legislature made the decision to "broadly define consideration."  
Id.  The Wisconsin Legislature has not defined "consideration" 
at all.  The Hawthorn Mellody taxpayer sought an exception, so 
the court construed the statute strictly, noting that the 
taxpayer had a "heavy burden to overcome."  Id.  River City does 
not seek an exception, but seeks to avoid imposition of a tax, 
which we construe in favor of the taxpayer.  Kearney & Trecker, 
91 Wis. 2d at 753.  River City, therefore, does not face the 
same heavy burden.  The Hawthorn Mellody court held that because 
accrual 
entries 
reflect 
the 
existence 
of 
an 
expense 
or 
liability, 
the 
entries 
themselves 
created 
consideration.  
Because of the distinct statutory scheme, we find this holding 
unpersuasive related to this case. 
¶59 The Department's contentions do not result in an 
interpretation that is more reasonable than the Commission's.  
We conclude that the necessary consideration did not exist to 
deem the intercompany transfers "purchases."  Accordingly, the 
No. 
2004AP2468   
 
25 
 
transfers do not fall within the scope of § 77.53(1) and River 
City does not owe use tax for the transfers.     
IV. 
NEGLIGENCE PENALTY 
¶60 Wisconsin Statute § 77.60(3) provides the following:  
If due to neglect an incorrect return is filed, the 
entire tax finally determined shall be subject to a 
penalty of 25% . . . of the tax exclusive of interest 
or other penalty.  A person filing an incorrect return 
shall have the burden of proving that the error or 
errors were due to good cause and not due to neglect. 
As noted above, this language does not reasonably give rise to 
multiple interpretations.  It is not ambiguous.  Therefore, 
extrinsic sources, such as agency interpretations, will not be 
necessary in interpreting it.  We will apply the statute's plain 
meaning.  Based on the plain language, River City has the burden 
of proving that it filed an incorrect return due to good cause 
and not due to neglect. 
¶61 The Department's field audit had a section enumerating 
its findings of neglect that justified imposing the negligence 
penalty.  It referred to both the recycling and waste reduction 
assets and the intercompany transfer assets as "the [two] major 
areas of contention in this audit," and that both had been 
addressed in the previous audit.           
¶62 The 
litigation 
between 
BFI-Wisconsin 
and 
the 
Department that overlapped with this case gave River City good 
cause for filing its return.  Related to the intercompany 
transfers, River City filed its return in a manner consistent 
with the Commission's conclusion in Browning-Ferris.  Concerning 
the portion of the assessment related to the recycling exemption 
No. 
2004AP2468   
 
26 
 
issue, Browning-Ferris did not resolve the issue until seven 
years after the audit period.  Accordingly, we conclude that 
River City has satisfied its burden.  The negligence penalty 
need not be paid.   
¶63 The Department contended that its stated rationale for 
the assessment of neglect should not be considered because the 
statute places the burden on the taxpayer to prove a lack of 
neglect. 
 
The 
legislature, 
however, 
specified 
that 
the 
Department would have to make a finding of neglect before 
imposing the negligence penalty.   
¶64 Section 77.60(3) begins, "[i]f due to neglect an 
incorrect return is filed."  This means that there must be a 
finding of neglect before the Department can impose the penalty.  
If this were not the case, the legislature could have provided 
the following: "If an incorrect return is filed . . . ."  This 
would not require a finding of neglect on the part of the 
Department as a prerequisite to impose a negligence penalty.  
Therefore, to give meaning to the words of the statute, the 
Department must make some finding of neglect to impose the 
negligence penalty.  It is due to the inclusion of "[i]f due to 
neglect," that the Department's findings of neglect is pertinent 
to determining whether a negligence penalty is appropriate. 
V. 
CONCLUSION 
¶65 The intercompany transfers River City participated in 
do not fall within Wisconsin's use tax statute.  The BFI 
subsidiaries 
did 
not 
constitute 
retailers 
pursuant 
to 
§ 77.51(13).  The requisite consideration did not exist for the 
No. 
2004AP2468   
 
27 
 
transfers to be considered § 77.51(12)(a) purchases.  River City 
also satisfied its burden of showing that it had good cause for 
filing its return.  Accordingly, we affirm the court of appeals. 
By the Court.—The decision of the court of appeals is 
affirmed. 
 
 
 
 
 
No.  2004AP2468.ssa 
 
1 
 
¶66 SHIRLEY S. ABRAHAMSON, C.J.   (dissenting).  I agree 
with the Department of Revenue and the circuit court and would 
reverse the decision of the Tax Appeals Commission.    
¶67 In a thirty-seven-page, well-analyzed, well-reasoned 
and thorough opinion, the circuit court for Dane County, Judge 
Gerald C. Nichol, concluded that "River City's acquisitions of 
fixed assets through intercompany transfers were 'purchases' 
from a 'retailer' and are thus subject to the use tax.  
Furthermore, River City's failure to report all of its tax 
obligations was not due to good cause and was negligent."   
¶68 I agree and find little need to substitute my own 
analysis for that of the circuit court.  Instead, I shall quote 
from or refer to relevant passages from the circuit court's 
extensive opinion.  
I 
¶69 As to the first issue, whether the transfers were 
subject to use tax, the circuit court properly declined to give 
any deference to the Tax Appeals Commission's interpretation of 
the statutes because the issue was very nearly one of first 
impression.   
¶70 The 
circuit 
court 
initially 
observed 
that 
the 
corporations were separate entities for state tax purposes:  
River City is a separate legal corporate entity from 
BFI and all other BFI subsidiaries.  For state tax 
purposes, each subsidiary is properly viewed as an 
independent entity, and accordingly, should also be 
treated as such in the context of this case.  Wis. DOR 
v. River City Refuse Removal, Inc., No. 2003CV2774, at 
14 
(Wis. 
Cir. 
Ct. 
Dane 
County, 
Aug. 
2, 
2004) 
(hereinafter "Circuit Court Memorandum Decision and 
Order"). 
No.  2004AP2468.ssa 
 
2 
 
¶71 The circuit court then held that the subsidiaries from 
which River City acquired the fixed assets were "retailers" 
under § 77.51(13)(b) and § 77.51(13)(am), based on the following 
analysis: 
• "These transfers gave River City all rights [of] ownership 
of the assets.  The fixed assets included various motor 
vehicles as well as other related assets between two and 
four years old.  All motor vehicles acquired through these 
intercompany transfers were re-titled in River City's 
name.  All fixed assets acquired in this manner were then 
depreciated on River City's income and franchise tax 
returns."  Circuit Court Memorandum Decision and Order at 
10. 
• Kollasch v. Adamany, 104 Wis. 2d 552, 568, 313 N.W.2d 47 
(1981), holds that "[t]he construction which we give to 
'retailer' 
applies 
the 
sec. 
77.51(7)(b), 
Stats., 
definition to all person [sic] 'engaged in the business of 
making sales.'  Those person [sic] are, by statute, 
required to pay a tax on the gross receipts of all retail 
sales that they enter into unless they can point to a 
specific exemption from the tax.  Sec. 77.51(7)(a) 
requires persons who are not in the business of making 
sales to pay the sales tax if they are sellers——i.e., 
engaging in a transaction for which the gross receipts are 
subject to the sales tax pursuant to sec. 77.52(1).  The 
type of transactions which make one a sec. 77.51(7)(a) 
retailer are mercantile ones."  Circuit Court Memorandum 
Decision and Order at 17. 
• Accordingly, "there were two types of retailers under the 
statutes," including "persons who are not engaged in the 
business of making sales, but who engage in a transaction 
for which the gross receipts are subject to the sales 
tax."  Circuit Court Memorandum Decision and Order at 18. 
• "The acquisitions made by River City from the various 
subsidiaries were neither isolated nor sporadic sales.  
Indeed, these acquisitions were constant in occurrence and 
[were] 
a 
vital 
means 
of 
supporting 
the 
company's 
operations.  The subsidiaries were in the 'business' of 
making sales under § 77.51(13)(b) because they were 
engaged in the transactions with the 'object of gain, 
benefit, or advantage, either direct or indirect' under 
§ 77.51(1).  At least one of the subsidiaries that 
transferred assets to River City held a seller's permit, 
which renders all sales made by that subsidiary subject to 
taxation, absent an exemption.  Furthermore, River City 
No.  2004AP2468.ssa 
 
3 
 
held a consumer use tax permit, because it made numerous 
purchases of taxable goods without sales tax being charged 
by the seller. The use tax permit fulfills the same 
purpose as the sales tax permit, and as such, River City's 
holding of the use tax permit further indicates to this 
Court that the parties from which River City acquired the 
fixed assets should properly be considered retailers."  
Circuit Court Memorandum Decision and Order at 24-25. 
• "Furthermore, a considerable number of the fixed assets 
that River City acquired were motor vehicles.  These motor 
vehicles were received by River City and subsequently re-
titled in River City's name.  The legislature placed 
specific focus on sellers of motor vehicles by enacting 
§ 77.51(13)(am), which provides that a retailer is also 
'any 
person 
making 
any 
retail 
sale 
of 
a 
motor 
vehicle . . . registered or titled, or required to be 
registered or titled . . . .'"  Circuit Court Memorandum 
Decision and Order at 25. 
¶72 The circuit court also held that the acquisitions of 
fixed assets from other BFI subsidiaries were "purchases" under 
§ 77.51(12)(a), reasoning as follows: 
• Even though the intercompany transfers did not involve an 
exchange of money, "consideration can exist just by intent 
on behalf of the parties to be bound to the contract." 
Circuit Court Memorandum Decision and Order at 27. 
• "The bookkeeping entries actually show that there was 
intent by the parties to be bound to the transaction.  The 
entries made in River City's payables account do show a 
promise to pay for the liabilities the company has 
accrued.  The subsidiaries from which River City acquired 
the assets have corresponding entries in their receivable 
accounts that show an expectation of payment from River 
City.  Certainly, if the parent company BFI sold off one 
of these subsidiaries to an outside interest, the new 
owner would acquire all the assets and liabilities that 
their newly acquired company had incurred on its books."  
In other words, "[b]y recording the liabilities and 
receivables 
on 
their 
books, 
these 
subsidiaries 
are 
confirming that the transactions took place and are 
accurate depictions of the financial status of the 
companies.  The entries show that the parties intended to 
be bound to the transactions."  Circuit Court Memorandum 
Decision and Order at 27-28. 
• "The changes in River City's financial records clearly 
results in consideration in the state of Wisconsin.  A 
change of financial position constitutes consideration.  
No.  2004AP2468.ssa 
 
4 
 
Hardscrabble Ski Area v. First Nat. Bank, 42 Wis. 2d 334, 
344, 166 N.W.2d 191 (1969).  The acquisition of assets and 
the related bookkeeping entries changed the financial 
position of River City.  After acquiring the fixed assets, 
River City was able to deduct depreciation expenses.  
These deductions then reduced River City's taxable income.  
This is an obvious benefit to River City that fulfills the 
definition of consideration."  Circuit Court Memorandum 
Decision and Order at 28. 
• "The bookkeeping entries are far more than some type of 
inventory 
tracking 
system. 
 
The 
entries 
themselves 
materially affect the financial value of the company." 
Circuit Court Memorandum Decision and Order at 29. 
• "[T]he Court also finds ample evidence in the record that 
indicates that River City did, in fact, make payments for 
those assets."  Circuit Court Memorandum Decision and 
Order at 30.   
• Furthermore, "[t]he assets acquired by River City were 
subsequently depreciated.  But, in order to depreciate the 
assets, River City must have incurred a cost for those 
assets.  Under the accrual method of accounting, the 
amount that is expended or will be expended must be 
incurred before the company can use the amount in 
computing its expense deduction.  Treas. Reg. § 1.446-
1(c)(1)(ii)(B).  Thus, if River City did not, as it 
consistently asserts, acquire the assets in exchange for 
some form of remuneration, then it would have no cost 
basis for depreciating those assets."  Circuit Court 
Memorandum Decision and Order at 31. 
¶73 
The 
circuit 
court 
properly 
concluded 
that 
"the 
intercompany transfers were 'purchases' from a 'retailer' and 
thus subject to the use tax."  Circuit Court Memorandum Decision 
and Order at 29. 
II 
¶74 
As to the second issue, the circuit court properly 
gave no deference to the Tax Appeals Commission on the question 
whether the assessment of a negligence penalty was warranted 
because the penalty directly pertained to the disposition of the 
first issue, which the circuit court determined independently of 
the Tax Appeals Commission.   
No.  2004AP2468.ssa 
 
5 
 
¶75 
The circuit court then concluded that the negligence 
penalty was properly imposed upon River City.  Important to the 
circuit 
court's 
analysis 
were 
two 
principles: 
1) 
"under 
§ 77.60(3) neglect is determined as of the date the tax return 
is filed," and 2) "the same statute places the burden of proof 
on the person filing an incorrect return to demonstrate that the 
errors were for good cause and not due to neglect."  Circuit 
Court Memorandum Decision and Order at 34. 
¶76 
The circuit court reasoned as follows: 
• "River City's position is that it was reasonable in not 
changing its tax reporting practices because it was waiting 
for the outcome of litigation by BFI-Wisconsin of the same 
issues.  However, the timing of that litigation does not 
support River City's argument."  Circuit Court Memorandum 
Decision and Order at 35. 
• River City "was aware as a result of the previous audit 
that the DOR considered both activities to be taxable."  
Circuit Court Memorandum Decision and Order at 35. 
• "Despite that knowledge, River City failed to properly 
report its tax obligations.  The litigation involving BFI-
Wisconsin was not commenced until four years after the end 
of the first fiscal year of the audit.  It is untenable 
that a taxpayer could ignore its tax obligations until 
discovered by the DOR, and then avoid the negligence 
penalty because a separate company was litigating the same 
issues, well past the filing date when the neglect was 
determined."  Circuit Court Memorandum Decision and Order 
at 36. 
• "An appropriate course of action would have been for River 
City to report the activities that it knew to be considered 
taxable and then file for a refund pending the outcome of 
any subsequent litigation."  Circuit Court Memorandum 
Decision and Order at 36. 
¶77 The circuit court properly held that River City had 
not met its burden "to show that its failure to report its tax 
obligations was due to good cause and not neglect."  Circuit 
Court Memorandum Decision and Order at 36.  
No.  2004AP2468.ssa 
 
6 
 
¶78 I agree with the rationale offered by and the 
conclusions reached by the circuit court.  I would reverse the 
court of appeals and hold that River City is liable for both the 
use tax and the negligence penalty assessed by the Department of 
Revenue. 
III 
¶79 I write further to express a caution about the method 
advanced in the majority opinion for determining what level of 
deference 
to 
afford 
to 
the 
Tax 
Appeals 
Commission's 
interpretation of a statute. 
¶80 Relying on UFE Inc. v. LIRC, 201 Wis. 2d 274, 548 
N.W.2d 57 (1996), the majority opinion announces that "[w]e are 
not bound by an agency's interpretation of statutory language, 
but we do at times defer to an agency when presented with an 
ambiguous statute."  Majority op., ¶32. 
¶81 Essentially, the majority opinion concludes that if a 
statute is plain on its face, that is, not ambiguous, then no 
extrinsic sources, including agency interpretations, need be 
consulted to determine the statute's meaning.1  Put another way, 
if a statute's meaning is unambiguous and obvious from the text, 
then 
the 
court's 
interpretation 
is 
the 
only 
reasonable 
                                                 
1 Majority op., ¶¶29-30, 32.  I find it surprising that the 
majority opinion treats an agency's interpretation of a statute 
as an extrinsic source.  The usual extrinsic source is 
"legislative history."  I wonder whether under the majority's 
rubric prior case law interpreting a statute in question would 
also be considered an "extrinsic source," to be used only when a 
statute is deemed ambiguous. 
No.  2004AP2468.ssa 
 
7 
 
interpretation of a statute and no deference need be given to an 
agency's interpretation.2 
¶82 The majority opinion explains its approach as follows: 
"As a point of emphasis, the court will review the § 77.60(3) 
issue de novo because the statute lacks ambiguity.  We will give 
the Commission's interpretation of § 77.60(3) no deference 
because of the lack of ambiguity, not because the Commission 
lacks experience or has previously been inconsistent."  Majority 
op., ¶35 n.6. 
¶83 I believe this approach to deference to an agency's 
interpretation of a statute is problematic. 
¶84 Traditionally, this court has not considered, as a 
threshold inquiry, whether a statute is ambiguous before 
examining whether to accord deference to an agency's statutory 
interpretation.3  The court instead has stated that it decides 
questions of law but under some circumstances may accord 
deference to an agency's interpretation.   
¶85 Rather than analyzing such questions as the experience 
an agency has with a certain statute, its specialized knowledge 
in a field, and whether it has been specially charged by the 
                                                 
2 I also do not understand the reason for the majority's 
comparison of the reasonableness of the positions of the 
Department of Revenue and the Tax Appeals Commission.  See 
majority op., ¶¶40, 53, 59.  The court is reviewing the 
statutory interpretation and the decision of the Tax Appeals 
Commission, not reviewing the Department of Revenue. 
3 For an extensive discussion of the method traditionally 
used to determine what level of deference to afford an agency's 
statutory interpretation, including the numerous cases in which 
it was applied, see Racine Harley-Davidson v. Div. of Hearings & 
Appeals, 2006 WI 86, 292 Wis. 2d 549, 717 N.W.2d 184. 
No.  2004AP2468.ssa 
 
8 
 
legislature to administer the statute to determine whether a 
certain level of deference should be afforded to an agency's 
interpretation, the majority opinion today allows courts to 
bypass 
this 
analysis 
by 
simply 
declaring 
the 
statute 
"unambiguous" and offering the court's interpretation of the 
statute.  Whether deference is given to an agency's statutory 
interpretation should not fall prey to the easily manipulated 
test of "ambiguity." 
¶86 As 
I 
have 
previously 
written, 
"[t]he 
ambiguous/unambiguous, literal, plain meaning debate is a word 
game.  The characterizations of 'ambiguous,' 'unambiguous,' 
'literal,' and 'plain meaning' are in the eyes of the beholder 
and appear to be conclusory labels a court pins on a statute."4 
¶87 The two methods of determining the deference, if any, 
to afford an agency's interpretation of statutes——the one 
advocated 
today 
by 
the 
majority 
opinion 
and 
the 
one 
traditionally used——may ultimately reach the same result.  To 
avoid confusion and debate in future cases about the correct 
analysis, I would continue to apply the analysis traditionally 
employed for according deference to statutory interpretation of 
an administrative agency.  
¶88 For the foregoing reasons, I dissent. 
                                                 
4 Teschendorf v. State Farm Ins. Cos., 2006 WI 89, ¶67, 293 
Wis. 2d 123, 
717 
N.W.2d 258 
(Abrahamson, 
C.J., 
concurring) 
(listing other cases describing the problematic aspects of the 
inquiry into ambiguity). 
No.  2004AP2468.ssa 
 
9 
 
¶89 I am authorized to state that Justice ANN WALSH 
BRADLEY joins this opinion. 
No.  2004AP2468.ssa 
 
 
 
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