Title: STATE OF WYOMING BY AND THROUGH THE WYOMING DEPARTMENT OF REVENUE V. HANOVER COMPRESSION, LP

State: wyoming

Issuer: Wyoming Supreme Court

Document:

STATE OF WYOMING BY AND THROUGH THE WYOMING DEPARTMENT OF REVENUE V. HANOVER COMPRESSION, LP2008 WY 138Case Number: S-07-0264Decided: 11/21/2008NOTICE:  This opinion is subject to formal revision before publication in Pacific Reporter Third.  Readers are requested to notify the Clerk of the Supreme Court, Supreme Court Building, Cheyenne, Wyoming 82002, of any typographical or other formal errors so that correction may be made before final publication in the permanent volume.
OCTOBER 
TERM, A.D. 2008

 
 
STATE 
OF WYOMING BY AND THROUGH THE WYOMING DEPARTMENT 
OF REVENUE,Appellant(Petitioner),v.HANOVER COMPRESSION, 
LPAppellee(Respondent).

 
 
W.R.A.P. 
12.09(b) Certification

from 
the DistrictCourtofLaramieCounty

The 
Honorable Nicholas G. Kalokathis, Judge

 
 

Representing 
Appellant:

Bruce 
A. Salzburg, Attorney General; Michael L. Hubbard, Deputy Attorney General; 
Martin L. Hardsocg, Senior Assistant Attorney General; William F. Russell, 
Senior Assistant Attorney General.  
Argument by Mr. Russell.

 
 

Representing 
Appellee:

Nicole 
Crighton and Jesse R. Adams, III of Oreck, Crighton, Adams & Chase, LLC, 
Boulder, Colorado.  Argument by Mr. 
Adams.

 
 
Before 
VOIGT, C.J., and GOLDEN, HILL, KITE, and BURKE, 
JJ.

 
 
VOIGT, 
Chief Justice.

 
 
[¶1]      In this case, the 
Wyoming Department of Revenue ("Department") challenges the Board of 
Equalization ("Board") determination that certain income received by Hanover 
Compression, LP ("Hanover") for the operation and maintenance of compressor 
facilities was exempt from sales tax.  
Finding no error, we will affirm.

 
 
ISSUE

 
 
[¶2]      Whether the 
compressor facilities maintained by Hanover fall within the definition of real 
property found in Wyo. Stat. Ann. § 39-15-101(a)(v) (LexisNexis 2007)?

 
 
FACTS

 
 
[¶3]      Williams Field 
Services Company ("Williams"), who is not a party to this matter, owns natural 
gas compressors located at Saddle Ridge and FrewenLake 
compressor stations in Wyoming.  
Hanover 
operated and maintained the compressor facilities pursuant to a contract with 
Williams.  Williams paid Hanover to monitor the 
operation of the compressor facilities and ensure they functioned within the 
appropriate parameters.

 
 
[¶4]      In the fall of 
2006, the Wyoming Department of Audit conducted a sales and use tax audit of 
Hanover's 
operations for the period of January 1, 2002 though December 31, 2004.  The audit revealed that Hanover had not been 
paying sales tax on the income received for its work on the Williams compressor 
facilities.  The Department of 
Revenue, based on the audit findings, issued an assessment to Hanover seeking to collect sales tax allegedly owed by 
Hanover during 
the audit period.

 
 
[¶5]      Hanover appealed the 
Department's determination and assessment to the Board.  Under Wyoming tax law, sales taxes are collected on 
income received for repair, operation, and improvement to personal property.1  However, no sales taxes are paid on such 
services to real property.  Therefore, the question before the Board 
was whether the compressor facilities were to be considered real or personal 
property.  The Department considered 
them personal property and argued that income received by Hanover for its work on 
the compressor facilities was subject to sales tax.  Hanover contended that the compressor 
facilities were real property and the income was exempt from sales tax. 

 
 
[¶6]      A hearing 
convened on May 15, 2007.  The Board 
reversed the Department's determination and concluded that the compressor 
facilities were real property and therefore Hanover was not required to pay sales tax on 
its income related to the service of the compressor facilities.  The Department filed a Petition for 
Review of Administrative Action in the district court, and the parties filed a 
joint motion to certify that matter to this Court.

 
 
STANDARD 
OF REVIEW

 
 
[¶7]                  
            
When we review cases certified to this Court pursuant to W.R.A.P. 
12.09(b), we apply the appellate standards applicable to the court of the first 
instance.  State ex rel. Wyo. 
Dep't of Revenue v. Buggy Bath Unlimited, Inc., 2001 WY 27, ¶ 5, 18 P.3d 1182, 1185 
(Wyo. 2001); see also Union Tel. Co. v. Wyo. Pub. Serv. Comm'n, 907 P.2d 340, 341-42 (Wyo. 1995). Wyo. Stat. 
Ann. § 16-3-114 (LexisNexis 2005) 
governs judicial review of administrative decisions. Buggy Bath Unlimited, Inc., ¶ 5, 18 P.3d  at 1185; Everheart 
v. S & L Indust., 957 P.2d 847, 851 (Wyo. 1998).

 
 

When 
an appealing party contests an agency's findings of fact, we examine the entire 
record to determine if the agency's findings are supported by substantial 
evidence.  RT Commc'ns, Inc. v. 
State Bd. of Equalization, 
11 P.3d 915, 920 (Wyo. 2000). If the agency's findings of fact are supported by 
substantial evidence, we will not substitute our judgment for that of the agency 
and will uphold the factual findings on appeal. 
 Id.

 
 
. 
. . .

 
 

We 
review an agency's conclusions of law de novo. Wyo. Dep't of Revenue v. 
Guthrie, 2005 WY 79, ¶ 13, 
115 P.3d 1086, 1091 (Wyo. 2005).  If 
a conclusion of law is in accord with the law, it is affirmed.  Airtouch Commc'ns, Inc. v. Dep't of 
Revenue, 2003 WY 114, ¶ 10, 
76 P.3d 342, 347 [(Wyo. 2003)]. "However, when the agency has failed to properly 
invoke and apply the correct rule of law, we correct the agency's error."  Id. 
This case requires interpretation of the relevant tax statutes.  Statutory interpretation is a question of 
law. Powder River Coal Co. v. Wyo. State Bd. of Equalization, 2002 WY 5, ¶ 6, 38 P.3d 423, 426 
(Wyo. 2002); Chevron U.S.A., Inc. v. State, 918 P.2d 980, 983 (Wyo. 
1996).

 
 

Powder 
River Coal Co. v. Wyo. Dep't of Revenue, 
2006 WY 137, ¶¶ 7-9, 145 P.3d 442, 445-46 (Wyo. 2006). 

 
 
DISCUSSION

 
 
[¶8]      Our analysis of 
whether the Board was correct in determining that the compressor facilities are 
real property and that Hanover is therefore not responsible for 
payment of sales tax, is twofold.  
First, we must determine whether the Board's interpretation of Wyo. Stat. 
Ann. § 39-15-101(a)(v) was in accord with the law.  Second, we must review the Board's 
application of the statute to the facts, and ensure that the Board's decision is 
supported by substantial evidence.  
We turn first to the legal question, which is one of statutory 
interpretation.

 
 
In 
interpreting statutes, our primary consideration is to determine the 
legislature's intent.  All statutes 
must be construed in pari materia 
and, in ascertaining the meaning of a given law, all statutes relating to the 
same subject or having the same general purpose must be considered and construed 
in harmony.  Statutory construction 
is a question of law, so our standard of review is de novo.  We endeavor to interpret statutes in 
accordance with the legislature's intent.  
We begin by making an inquiry respecting the ordinary and obvious meaning 
of the words employed according to their arrangement and connection.  We construe the statute as a whole, 
giving effect to every word, clause, and sentence, and we construe all parts of 
the statute in pari materia.  When a statute is sufficiently clear and 
unambiguous, we give effect to the plain and ordinary meaning of the words and 
do not resort to the rules of statutory construction.  Wyoming Board of Outfitters and Professional Guides 
v. Clark, 2001 WY 78, ¶ 12, 30 P.3d 36, ¶ 12 (Wyo. 2001); Murphy v. State Canvassing Board, 12 P.3d 677, 679 (Wyo. 2000).  
Moreover, we must not give a statute a meaning that will nullify its 
operation if it is susceptible of another interpretation.  Billis v. State, 800 P.2d 401, 413 
(Wyo. 1990) (citing McGuire v. McGuire, 608 P.2d 1278, 1283 
(Wyo. 
1980)).  

 
 
            
Moreover, we will not enlarge, stretch, expand, or extend a statute to 
matters that do not fall within its express provisions.  Gray v. Stratton Real Estate, 2001 WY 
125, ¶ 5, 36 P.3d 1127, ¶ 5 (Wyo. 2001);  
Bowen v. State, Wyoming 
Real Estate Commission, 900 P.2d 1140, 1143 (Wyo. 1995).  

 
 

Loberg 
v. Wyo. Workers' Safety & Comp. Div., 
2004 WY 48, ¶ 5, 88 P.3d 1045, ¶ 5 (Wyo. 2004) (quoting Board of County Comm'rs of Teton County v. 
Crow, 2003 WY 40, ¶¶ 40-41, 65 P.3d 720, ¶¶ 40-41 (Wyo. 2003)).  Only if we determine the language of a 
statute is ambiguous will we proceed to the next step, which involves applying 
general principles of statutory construction to the language of the statute in 
order to construe any ambiguous language to accurately reflect the intent of the 
legislature.  If this Court 
determines that the language of the statute is not ambiguous, there is no room 
for further construction.  We will 
apply the language of the statute using its ordinary and obvious 
meaning.

 
 

BP 
Am. Prod. Co. v. Wyo. Dep't of Revenue, 
2005 WY 60, ¶ 15, 112 P.3d 596, 604 (Wyo. 2005).

 
 
[¶9]      With these 
concepts in mind, we turn to the specific language of relevant statutes.  First, Wyo. Stat. Ann. § 
39-15-103(a)(i)(J) (LexisNexis 2007) provides:

 
 

(a)       
Taxable 
event.  The following shall 
apply.

(i) 
Except 
as provided by W.S. 39-15-105, there is levied an excise tax 
upon:

. 
. . .

(J)               
The sales price paid for services performed for the repair, alteration or 
improvement of tangible personal property;

 
 
The 
statutes do not define personal property; however, real property, for purposes 
of assessing sales taxes, is defined in Wyo. Stat. Ann. § 39-15-101(a)(v)(A) 
through (D) (LexisNexis Supp. 
2008).  

 

(v)    "Real property" means land 
and appurtenances, including structures affixed thereto.  An article shall be considered real 
property if:

(A)     It is buried or 
embedded; or

(B)     It is physically or 
constructively annexed to the real property; and

(C)    It is adapted to the use of 
the real property; and

(D)    Considering the purpose for 
which the annexation was made, one can reasonably infer that it was the intent 
of the annexing party to make the article a permanent part of the real 
property.

 
 
[¶10]   The Board interpreted the 
definition of real property found in the above statute as 
follows:

 
 
77.   There is an important difference 
between the first sentence incorporating the original real property definition, 
and the added language of the second sentence.  The first sentence refers to land and 
appurtenances, and structures affixed thereto, which over time have 
unquestionably been viewed as real property.  They are neither portable nor easily 
moved.

 
 
78.   In contrast, the second sentence of 
the statute added in 1999, refers to an "article."  Such term is not statutorily defined, 
thus a determination of legislative intent allows consideration of the undefined 
term according to its common meaning.  Fraternal Order of Eagles Sheridan Aerie No. 
186, Inc. v. State of Wyoming, 2006 WY 4, ¶ 53, Fn. 17, 126 P.3d 847, 865 
(Wyo. 2006).  An "article" by common 
definition and understanding indicates something quite different from an 
appurtenance or a structure.  An 
article is, in common understanding, an item which is portable, which is easily 
movable such as an article of clothing or an article of luggage.  Black's Law Dictionary, p. 106 
(7th Ed. 1999); Webster's New 
World College Dictionary, p. 80 (4th Ed. 
2002).

 
 
79.   The Legislature, by adding the 
"article" sentence to the definition of real property, in effect included within 
the definition of real property for sales and use tax purposes two distinct 
types of property.  The definition 
now includes first, traditional land, appurtenances, and structures, and 
secondly, "articles" which, while generally portable and moveable, are to be 
considered real property if certain requirements are 
fulfilled.

 
 
Applying 
that interpretation to the facts before it, the Board then 
found:

 
 
86.   The compressor buildings at both 
Frewen Lake and Saddle Ridge, along with the compressor units as housed 
and attached are structures affixed to land, and thus real property as 
defined by the first sentence of Wyo. Stat. Ann. § 39-15-101(a)(v).  

 
 
[¶11]   On appeal, the Department 
challenges the Board's conclusion that compressor facilities are real 
property.  The Department does not 
dispute the Board's conclusion that the compressor facilities are "structures," 
as set forth in the first sentence § 39-15-101(a)(v).  In its brief, the Department states: 

 
 
In 
short, neither party appealed the conclusion that the first and second sentences 
in the definition of "real property" are mutually exclusive.  And neither party appealed the finding 
that the compressors are "structures" as defined by the first sentence of the 
statute.  Consequently, the only 
issue before this Court is whether the compressors are real property within the 
meaning of "land and appurtenances, including structures affixed thereto." 

 
 
Instead 
of challenging the Board's interpretation of the statute, the Department now 
argues that even if the compressor facilities are "structures" under the 
statute, a common law analysis of fixtures should be applied and these 
"structures" should be considered personal property.  Specifically, the Department relies on a 
common law three-part test used to determine if a chattel is appurtenant to real 
estate.  In response, Hanover contends that the 
Board's unchallenged finding that the compressor facilities are "structures" is 
in accordance with the law, supported by substantial evidence, and therefore 
must be affirmed.

 
 
[¶12]   With regard to the Board's 
interpretation of the statute, we agree with Hanover (and the Department) that, 
as a matter of law, the Board properly interpreted the plain language of Wyo. 
Stat. Ann. § 39-15-101(a)(v).  With 
regard to the application of that statute to this case, we will briefly look to 
the plain and ordinary meaning of the terms "structure" and "affixed" to 
determine if the Board's ultimate finding is correct.  According to Webster's a "structure" is simply 
"something constructed or built." Webster's Third New International 
Dictionary 2267 (3d ed. 1993).  
Another definition, from Black's 
Law Dictionary defines "structure" as "[a]ny construction, production or 
piece of work artificially built up or composed of parts purposefully joined 
together ."  Black's Law Dictionary 1464 (8th ed. 
1999).  The term "affixed" is 
defined as:  "to attach physically 
(as by nails or glue) . . . to attach in any way."  Webster's Third New International 
Dictionary 36 (3d ed. 1993). 

 
 
[¶13]   The Board described the compressor 
facilities as follows:

 
 
86.   . . .  Each compressor building is affixed to a 
concrete foundation or pad.  Each 
compressor unit, composed of an engine, compressor, associated piping, and in 
some instances a cooler, as aligned on a skid, is bolted to a concrete 
foundation.  The compressor unit is 
attached by jack-bolts with concrete grout added around the unit to prevent its 
high vibration levels from causing it to creep out of alignment on the 
foundation.  The unit is then 
hard-wired and plumbed into the compressor building.

 
 
. 
. . . 

 
 
88.   The structural nature of the 
compressor units as affixed within and attached to the compressor buildings is 
reinforced by the extensive procedures required to remove a compressor 
unit.  The compressor building must 
be removed.  The compressor unit 
must be broken free from the foundation with jack hammers.  The piping and cooler must be 
removed.  The unit must then be 
removed with a crane.  

 
 
[¶14]   Comparing the description of the 
compressor facilities to the plain meaning of the terms "structure" and 
"affixed," it is clear that the compressor facilities fit within the statutory 
definition of real property.  As 
noted previously, the department does not dispute that the compressor facilities 
are "structures" under the statute; rather, the Department attempts to classify 
them as personal property by applying a common law analysis of fixtures.   The Department's position, 
however, runs afoul of two important principles of statutory construction.  First, as we have said, we give effect 
to the plain and ordinary meaning of the words and will not resort to the rules 
of statutory construction when a statute is clear and unambiguous.  Wyo. Bd. of Outfitters & Prof'l Guides 
v. Clark, 2001 WY 78, ¶ 12, 30 P.3d 36, 41 (Wyo. 2001).  As applied to the facts presented here, 
the statute is plain and unambiguous that the compressor facilities are real 
property, and therefore we find it unnecessary and inappropriate to look any 
further than the language of the statute.  

 
 
[¶15]   Second, the Department's argument 
concerning the law of fixtures focuses on when goods, or items of personal 
property, "become so related to particular real property that an interest in 
them arises under real property law." Wyo. Stat. Ann. § 34.1-9-102(a)(xli) 
(LexisNexis 2007).  This analysis is unnecessary, however, 
inasmuch as the second sentence of § 39-15-101(a)(v) addresses when "an 
article," typically considered personal property, may be "considered real 
property."  Applying a fixtures 
analysis would make this portion of the statute unnecessary, and we have said we 
will not give a statute a meaning that nullifies its operation if it is 
susceptible to another interpretation.  
Billis v. State, 800 P.2d 401, 
413 (Wyo. 
1990).

 
 
CONCLUSION

 
 
[¶16]   The Board's interpretation of the 
statutory definition of real property found in Wyo. Stat. Ann. § 39-15-101(a)(v) 
is in accord with the law.  
Likewise, the Board's factual determination that the compressor 
facilities fit within that statutory definition is supported by substantial 
evidence.  Therefore, we 
affirm.

 
 

FOOTNOTES

1The 
specific statutory provisions will be cited and discussed in the "Discussion" 
section below (see infra ¶ 
8).