Case Name: SCOTT PAPER COMPANY v. STATE TAX ASSESSOR
Court: Maine Supreme Judicial Court
Jurisdiction: Maine
Decision Date: 1992-07-17
Citations: 610 A.2d 275
Docket Number: 
Parties: SCOTT PAPER COMPANY v. STATE TAX ASSESSOR.
Judges: Before WATHEN, C.J., and ROBERTS, GLASSMAN, CLIFFORD and COLLINS, JJ.
Reporter: West's Atlantic Reporter, Second Series
Volume: 610
Pages: 275–279

Head Matter:
SCOTT PAPER COMPANY v. STATE TAX ASSESSOR.
Supreme Judicial Court of Maine.
Argued Jan. 21, 1992.
Decided July 17, 1992.
Sarah H. Beard, James G. Good (orally), Pierce, Atwood, Scribner, Allen, Smith & Lancaster, Portland, for plaintiff.
Michael E. Carpenter, Atty. Gen., Crom-bie J.D. Garrett (orally), Deputy Atty. Gen., David E. Bauer, Asst. Atty. Gen., Augusta, for defendant.
Before WATHEN, C.J., and ROBERTS, GLASSMAN, CLIFFORD and COLLINS, JJ.

Opinion:
WATHEN, Chief Justice.
The State Tax Assessor appeals from a summary judgment granted in favor of Scott Paper Company. On appeal, the State argues that the Superior Court (Ken-nebec County, Chandler, J.) misinterpreted the production machinery and equipment exemption (36 M.R.S.A. § 1760(31) (1990)) to Maine's sale and use tax. The State contends that in order to qualify for the exemption the purchaser of equipment or machinery must continue to own the property while it is used for the exempt purpose. Finding no error in the judgment of the Superior Court, we affirm.
The undisputed facts concerning Scott's purchase and use of the equipment may be briefly summarized as follows: In 1980, Scott's Board of Directors approved the construction of a biomass boiler cogeneration facility at its S.D. Warren mill in West-brook. The facility occupies approximately ten acres and was custom designed for the mill and forms an integral part of the production process. Primarily, the equipment at issue was purchased by Scott and incorporated into the facility during the sixteen months following Board approval of construction. At the end of the sixteen-month period and before operation of the facility commenced, Scott entered into negotiations with General Electric Credit Corporation (GECC) and transferred the facility to GECC as part of a financing arrangement. Simultaneously, GECC leased the facility back to Scott for a term of twenty-five years with an option for renewal by Scott for the remainder of the facility's useful life. Scott constructed the facility without any assurance that financing would be available and would have continued to own and use the facility even in the absence of financing. Pursuant to its lease with GECC, Scott has retained exclusive use and possession of the facility. Scott has maintained the facility, controlled its operation, and determined its operating standards.
Acting pursuant to 36 M.R.S.A. § 1861 (1990), the State assessed a use tax on the initial transaction in which Scott purchased the equipment installed in the cogeneration facility. Scott unsuccessfully petitioned for reconsideration of the assessment, arguing that by purchasing and using the equipment it came within the terms of the exemption provided in 36 M.R.S.A. § 1760(31). On a petition for review, the Superior Court accepted Scott's argument and granted summary judgment with regard to the equipment at issue. This appeal followed.
It is the State's position that the Superior Court misinterpreted 36 M.R.S.A. § 1760(31) and erred in finding that Scott met its burden of establishing that the exemption applies. Silverman v. Town of Alton, 451 A.2d 103, 105 (Me.1982). The applicable exemption reads as follows:
No tax on sales, storage or use shall be collected upon or in connection with:
Sales of new machinery or equipment for use by the purchaser directly and primarily in the production of tangible personal property, which property is intended to be sold or leased ultimately for final use or consumption....
36 M.R.S.A. § 1760(31) (1990). Use is defined as "the exercise of any right or power over tangible personal property incident to its ownership when purchased by the user at retail sale_" 36 M.R.S.A. § 1752(21) (1990). The State argues that Scott's possession and storage of the equipment, constituted a taxable use of tangible personal property because the equipment was not used for the exempt purpose prior to the sale to GECC. There is no dispute that, had Scott not sold the equipment to GECC, the exemption would apply.
By affidavit, the Director of the Audit Division of the Bureau of Taxation asserts that since section 1760(31) was first enacted in 1973, the Bureau "has taken the position that a person is entitled to [the machinery and equipment exemption] only if he owns the equipment at the time of its use for an exempt purpose." The documentary exhibits offered in support of the Director's assertion consists of a series of letters written in response to taxpayer inquiries over the years. The letters, however, state the proposition somewhat differently: "Where property is purchased by the manufacturer for purposes of selling to the bank with a leaseback arrangement, it would not be considered purchased for use in production by the purchaser." The State extrapolates from this statement the interpretation that a purchase, followed by a sale and leaseback of equipment, does not qualify for the exemption unless the original purchaser actually uses the equipment for the exempt purpose prior to the secondary sale. Although we are ordinarily required to defer to assessor's interpretation of the statute, the plain meaning of a statute always controls over an inconsistent administrative interpretation. Brousseau v. Maine Employment Sec. Comm'n, 470 A.2d 327, 330 (Me.1984).
The parties argue at length whether use by a lessee qualifies as an exempt use, but we need not address that issue. The exemption is extended to the purchase of new machinery for use by the purchaser in the production of tangible personal property. On the facts before us, it is undisputed that the equipment was purchased by Scott for its use in the production of paper products. Unlike the situations addressed in the first of the letters submitted by the State, here the taxpayer did not purchase the equipment for the purpose of selling it to a financier with a leaseback arrangement. Rather the equipment was purchased for use in the production process and the financing arrangements occurred long after the purchase that is alleged to be the source of tax liability. Moreover, Scott has made actual use of the equipment primarily and directly in its production processes, albeit after selling to GECC and leasing back. The literal terms of subsection 31 have been complied with.
The entry is:
Judgment of the Superior Court affirmed.
CLIFFORD and COLLINS, JJ., concurring.
. There is nothing to suggest that Scott purchased the equipment for the purpose of placing it in storage. Naturally the process of construction and installation necessarily involved both possession and storage.