Opinion ID: 2168802
Heading Depth: 1
Heading Rank: 5

Heading: postage charges as cost of transportation

Text: The term cost of transportation is not defined in chapter 77, entitled Revenue and Taxation, of the Nebraska Revised Statutes. A statute is open for construction to determine its meaning only when the language used requires interpretation or may reasonably be considered ambiguous. Neb. Account. & Disc. v. Citizens for Resp. Judges, 256 Neb. 95, 588 N.W.2d 807 (1999). The term cost of transportation is ambiguous. On its face, it neither includes nor excludes postage charges. Therefore, we shall construe the term cost of transportation, as used in § 77-2702.07(1)(c) (gross receipts) and § 77-2702.17(1)(c) (sales price), to determine whether it includes postage charges. Section 77-2702.07 provides the following definition for gross receipts: (1) Gross receipts shall mean the total amount of the sale or lease or rental price, as the case may be, of the retail sales of retailers valued in money whether received in money or otherwise, without any deduction on account of any of the following: . . . . (c) The cost of transportation of the tangible personal property prior to its sale to the purchaser. (Emphasis supplied.) The definition for sales price, found at § 77-2702.17, provides: (1) Sales price shall mean the total amount for which tangible personal property is sold valued in money whether paid in money or otherwise, without any deduction on account of: . . . . (c) The cost of transportation of the tangible personal property. The total amount for which tangible personal property is sold shall include any services which are a part of the sale and any amount for which credit is given to the purchaser by the seller. (Emphasis supplied.) Under these statutory definitions, transportation costs are taxable as gross receipts when the transportation of the tangible personal property occurs prior to the retail sale. There is no reference to transportation costs when the transportation occurs after the retail sale. A 1985 amendment to the Nebraska Revenue Act of 1967, however, dictates the treatment of costs for transportation after a retail sale. See 1985 Neb. Laws, L.B. 715. Before 1985, Neb.Rev.Stat. § 77-2702 (Cum.Supp.1984) contained specific exclusions for the cost of transportation of tangible personal property after a retail sale. In addition to the language cited above, the definition for gross receipts went on to provide: Gross receipts does not include any of the following: ... (vii) Charges for transportation of tangible personal property after sale. § 77-2702(4)(d)(vii). The definition of sales price contained similar language: Sales price does not include any of the following:... (vii) Charges for transportation of tangible personal property after sale. § 77-2702(15)(b)(vii). In general terms, this meant that transportation costs were excluded from the sales price and gross receipts if transportation of the property occurred after the retail sale. These exclusions were deleted in 1985. See 1985 Neb. Laws, L.B. 715. The 1985 amendment indicates the Legislature's intent to expand the reach of the sales and use tax. Since 1985, all transportation costs have gone into the calculation of gross receipts. The expansive nature of the 1985 amendment aids our interpretation of §§ 77-2702.07(1)(c) and 77-2702.17(1)(c); we shall read the term cost of transportation as broadly as possible so as to achieve the purpose of the sales and use tax provisions as amended in 1985. See Southeast Rur. Vol. Fire Dept. v. Neb. Dept. of Rev., 251 Neb. 852, 864, 560 N.W.2d 436, 444 (1997) (when a challenged statute is susceptible of more than one reasonable construction, a court uses the construction that will achieve the purposes of the statute and preserve the statute's validity). In addition, Nebraska Sales and Use Tax Regulation 1-079 is instructive in our analysis of whether postage is a cost of transportation. Regulation 1-079 was adopted by the Department under its authority to adopt regulations implementing the sales and use tax statutes. Agency regulations, properly adopted and filed with the Secretary of State of Nebraska, have the effect of statutory law. Lackawanna Leather Co. v. Nebraska Dept. of Revenue, 259 Neb. 100, 608 N.W.2d 177 (2000). We are mindful of the fact that the revised regulation 1-079 did not come into effect until January 24, 1993. The outcome of this appeal, however, turns on our interpretation of §§ 77-2702.07(1)(c) and 77-2702.17(1)(c), not on the validity of regulation 1-079. Therefore, we will consider the regulation only as a guide to our interpretation of §§ 77-2702.07(1)(c) and 77-2702.17(1)(c). Regulation 1-079, 316 Neb. Admin. Code, ch. 1, § 079 (1994), which interprets § 77-2702.07 (gross receipts) and § 77-2702.17 (sales price), provides: 079.01 Charges for delivery, freight, postage, shipping, or transportation of an item are taxable whenever the item is taxable and the charges for delivery are paid to the retailer of the item. 079.02 Charges for delivery, freight, postage, shipping, or transportation that are paid to a person other than the retailer are exempt. (Emphasis supplied.) From this regulation, it is clear that the State interprets the definitions of gross receipts and sales price to include postage as a cost of transportation. Although construction of a statute by a department charged with enforcing it is not controlling, considerable weight will be given to such a construction, particularly when the Legislature has failed to take any action to change such an interpretation. Metropolitan Utilities Dist. v. Balka, 252 Neb. 172, 560 N.W.2d 795 (1997). In light of regulation 1-079 and the expansive nature of the 1985 amendments to § 77-2702, we conclude that postage is included in the gross receipts and sales price as a cost of transportation under §§ 77-2702.07(1)(c) and 77-2702.17(1)(c). Therefore, Affiliated Foods is liable for sales tax on the postage used to mail advertising flyers to its members' customers.