Title: Burlington Electric Dept. v. Dept. of Taxes

State: vermont

Issuer: Vermont Supreme Court

Document:

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, 111 State Street, Montpelier, Vermont 05602 of any errors in order
that corrections may be made before this opinion goes to press.
 
 
                                No. 89-235
 
 
Burlington Electric Department               Supreme Court
 
                                             On Appeal From
     v.                                      Washington Superior Court
 
Vermont Department of Taxes                  April Term, 1990
 
 
Alan W. Cheever, J.
 
King & King, Waitsfield, for plaintiff-appellant
 
Jeffrey L. Amestoy, Attorney General, and Jacqueline A. Hughes, Assistant
  Attorney General, Montpelier, for defendant-appellee
 
 
PRESENT:  Allen, C.J., Peck, Gibson and Morse, JJ.
 
 
     ALLEN, C.J.   The Burlington Electric Department (BED) appeals from a
decision of the Washington Superior Court affirming the Commissioner of
Taxes' assessment of a sales and use tax upon the purchase of woodchips used
to produce electricity at the Joseph C. McNeil Generating Station in which
BED had a 50% ownership interest.  We affirm.
     The Station is a wood-fired steam electric generating plant.  Woodchips
are blown by air into a firebox where they are burned to release heat.  The
hot gases from the fire heat the boiler firebox, converting pressurized
water into steam.  The steam turns a turbine generator to produce electric
current.
     The Department of Taxes levied a sales and use tax assessment against
BED in the amount of $191,781.50 for woodchips purchased between September,
1983 and February, 1986.  The parties stipulated to the facts of the case
and the Commissioner affirmed the Department's assessment.  BED appealed to
the superior court, which affirmed the Commissioner's decision, ruling that
woodchips were fuel and therefore subject to taxation.
     32 V.S.A. { 9771 imposes a 4% tax upon receipts from the sale of
tangible personal property sold at retail in Vermont.  "Sold at retail" is
defined as "the sale of tangible personal property to any person for any
purpose, other than for resale."  32 V.S.A. { 9701(5).  Therefore, all sales
of tangible personal property in Vermont are subject to sales tax unless
they do not qualify as a retail sale or are otherwise made exempt.
     This dispute focuses on whether the woodchips are taxable as fuel or
exempt as a raw material within the meaning of 32 V.S.A. { 9741(14).
Section 9741 provides in pertinent part:

            Receipts from the following shall be exempt from the
         tax on retail sales imposed under section 9771 of this
         title and the use tax imposed under section 9773 of this
         title.
                                 . . . .
 
            (14) Tangible personal property which becomes an
         ingredient or component part of, or is consumed or
         destroyed or loses its identity in the manufacture of
         tangible personal property for sale but does not include
         fuel and electricity; . . . .
 
     The first two clauses of the { 9741(14) "manufacturing" exemption
apply to two classes of tangible personal property:  "raw materials" and so-
called "consumables."  The parties agree that woodchips constitute tangible
personal property as defined by 32 V.S.A. { 9701(7) and that electricity is
manufactured tangible personal property within the meaning of { 9741(14).
The parties disagree, however, over the applicability of the language which
excludes fuel and electricity from the manufacturing exemption and thereby
subjects them to the sales and use tax.
     BED raises two arguments on appeal.  First, BED contends that the fuel
and electricity exclusion modifies only the consumables clause.  Since
woodchips constitute raw materials, the argument continues, the fuel and
electricity exemption does not apply, thereby rendering woodchips exempt
like all other raw materials.  Second, BED asserts that the imposition of
sales and use tax on the purchases of woodchips results in discriminatory,
double taxation in violation of the equal protection clause of the
Fourteenth Amendment of the United States Constitution and the proportional
contribution clause of Chapter I, Article 9 of the Vermont Constitution.  We
disagree with BED on both points.
                                    I.
     The resolution of whether woodchips are taxable fuel or exempt as raw
materials turns on the construction 32 V.S.A. { 9741(14).  When construing a
statute, our primary objective is to effectuate the intent of the
Legislature.  Spears v. Town of Enosburg, No. 88-327, slip op. at 3 (Vt.
Oct. 27, 1989).  We begin with the presumption that the Legislature intended
the statutory language to carry its plain, ordinary meaning.  State v.
Harty, 147 Vt. 400, 402,