Court Opinion

ID: 871288
Source: CourtListenerOpinion
Date Created: 2013-05-25 02:15:29.296326+00
Date Added: 2024-06-11T15:36:09.639266
License: Public Domain

***FOR PUBLICATION IN WEST’S HAWAI'I REPORTS AND PACIFIC REPORTER***

            IN THE SUPREME COURT OF THE STATE OF HAWAI'I

                                ---o0o---                     Electronically Filed
                                                              Supreme Court
                                                              SCWC-29597
                         COMPUSA STORES LP,

                   Respondent/Taxpayer-Appellant,
            14-FEB-2011
                                                              11:14 AM
                                    vs.

             DEPARTMENT OF TAXATION, STATE OF HAWAI'I,

                       Petitioner/Appellee.

                             NO. SCWC-29597

          CERTIORARI TO THE INTERMEDIATE COURT OF APPEALS

                            (TX05-0065)

                           FEBRUARY 14, 2011

         RECKTENWALD, C.J., NAKAYAMA, ACOBA, AND DUFFY, JJ.,

        AND CIRCUIT JUDGE LEE, ASSIGNED BY REASON ON VACANCY

             OPINION OF THE COURT BY RECKTENWALD, C.J.

           This case arises out of the assessment of the Hawai'i

use tax by the State of Hawai'i, Department of Taxation

(Department) against CompUSA Stores L.P. (CompUSA) on goods that

were transported from the mainland to CompUSA’s retail stores in

Hawai'i during the period between July 1, 1999 and December 31,

2002.   During that period, CompUSA caused consumer electronics

goods from various mainland vendors to be shipped to Hawai'i in

order to restock CompUSA’s retail stores in this state.

           Hawai'i Revised Statutes (HRS) § 238-2 (1993), quoted

infra, governs the applicability of the Hawai'i use tax.            CompUSA

appealed the assessment of the tax in the Land and Tax Appeal

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Court (tax appeal court),1
 arguing that it was not subject to the

use tax under In re Tax Appeal of Baker & Taylor, Inc. v.

Kawafuchi, 103 Hawai'i 359, 361-62, 372, 82 P.3d 804, 806-07, 817

(2004) (holding that the use tax did not apply to a mainland

seller who sold and shipped books to the Hawai'i State Library).

CompUSA moved for summary judgment.        The Department cross-moved,

contending that Baker & Taylor was not applicable to the instant

case and that the plain language of HRS § 238-2 compelled the

assessment of the use tax against CompUSA.           The tax appeal court

granted the Department’s motion and denied CompUSA’s motion,

holding that Baker & Taylor was distinguishable and that the use

tax applied to CompUSA.     The court entered a judgment against

CompUSA in the amount of $1,705,337.71.         CompUSA appealed.

          The Intermediate Court of Appeals (ICA) vacated the tax

appeal court’s judgment and remanded for further proceedings,

holding that Baker & Taylor was controlling and that, pursuant to

that case, CompUSA was not liable for the tax.          The Department

seeks review of the ICA’s judgment.

          As discussed further infra, we conclude that the ICA

erred in its analysis of HRS § 238-2 and Baker & Taylor. 

Specifically, we hold that Baker & Taylor is distinguishable

because the taxpayer in that case, a mainland seller, did not

“use in this State” the imported goods, as required by HRS

     1

          The Honorable Gary W.B. Chang presided.

                                    -2­
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§ 238-2.    See HRS § 238-2; Baker & Taylor, 103 Hawai'i at 361-62,

82 P.3d at 806-07.      CompUSA, on the other hand, used the goods in

Hawai'i by “keeping of the property” in this state “for sale[.]”

HRS § 238-1 (1993), quoted infra.          CompUSA’s transportation of

the goods to Hawai'i for resale to Hawai'i customers also

satisfied the other requirements of HRS § 238-2.            We, therefore,

vacate the ICA’s judgment and affirm the tax appeal court’s

judgment.

                              I.   Background

A.    Background Facts and Tax Appeal Court Proceedings

            The following facts are taken from the record on appeal,

including CompUSA’s undisputed admissions of fact and answers to

the Department’s interrogatories.          CompUSA’s corporate

headquarters are located in Dallas, Texas.          CompUSA held a Hawai'i

general excise tax license during the relevant period.2             It also

maintained two retail stores in Hawai'i, where it engaged in

“retail sale[s] of computers, computer components, consumer

electronics, and related other products and services[.]”3

            CompUSA did not manufacture the goods it sold to its

Hawai'i customers.     According to CompUSA, mainland vendors shipped

      2

            CompUSA, in response to the Department’s request for admission,
confirmed that it held a Hawai'i GET license. Although this admission does
not specifically state that CompUSA was licensed during the period for which
the use tax was assessed, CompUSA’s Opening Brief to the ICA specifically
stated that “during the [relevant period], CompUSA was a licensed taxpayer[.]”

      3

            CompUSA stated in its Opening Brief to the ICA that it has since
closed its Hawai'i stores.

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products either to its mainland consolidation centers (“cross­

dock” shipment) and then to its Hawai'i retail stores, or directly

to its Hawai'i retail stores (“drop shipment”).           In both types of

shipment, vendors shipped the goods pursuant to “F.O.B. Origin”

contracts, which, according to CompUSA, meant that the title and

risk of loss passed to CompUSA on the mainland (the origin of the

shipment).4    CompUSA maintained that “[a]ll purchasing decisions

and all ordering of inventory sold at the retail stores [were]

conducted and managed from” its headquarters in Texas.                CompUSA

did not pay the use tax at the time of the shipments at issue.

            On June 9, 2004, the Department issued tax assessments

requiring CompUSA to pay, inter alia, a use tax pursuant to

HRS § 238-2(2)(A)5
 on CompUSA’s “imports for resale.”            (Formatting

      4
            This court has interpreted F.O.B. provisions in shipment contracts
as follows: “The term FOB generally designates where title to goods passes
from the seller to the buyer. See Black’s Law Dictionary 642 (6th ed. 1990).”
Baker & Taylor, 103 Hawai'i at 362, 82 P.3d at 807.

      5
            During the relevant period, HRS § 238-2 (1993) provided, in

relevant part:

                  There is hereby levied an excise tax on the use

            in this State of tangible personal property which is

            imported, or purchased from an unlicensed seller, for

            use in this State. The tax imposed by this chapter

            shall accrue when the property is acquired by the

            importer or purchaser and becomes subject to the

            taxing jurisdiction of the State. The rates of the tax

            hereby imposed and the exemptions thereof are as

            follows:

                  . . . . 

                  (2) If the importer or purchaser is licensed

            under chapter 237 and is (A) a retailer or other

            person importing or purchasing for purposes of resale,

            not exempted by paragraph (1) . . ., the tax shall be

            one-half of one per cent of the purchase price of the

            property, if the purchase and sale are consummated in

                                                                   (continued...)

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altered).    CompUSA filed a notice of appeal of the assessment with

the tax appeal court.

            In the tax appeal court, CompUSA moved for summary

judgment, arguing, inter alia, that under this court’s decision in

Baker & Taylor,6
 CompUSA was not subject to the use tax on the

goods which it owned prior to shipment from the mainland to

Hawai'i.    The Department cross-moved for summary judgment,

contending that the plain language of HRS § 238-2 and Hawai'i

Administrative Rules (HAR) § 18-238-27
 compelled the application of

      5
       (...continued)

            Hawaii; or, if there is no purchase price applicable

            thereto, or if the purchase or sale is consummated

            outside of Hawaii, then one-half of one per cent of

            the value of such property.

                  (3) In all other cases, four per cent of the

            value of the property.

            HRS § 238-2 was amended during the relevant period. 1999 Haw.

Sess. Laws Act 71, § 8 at 117-118; 2000 Haw. Sess. Laws Act 198, § 8 at 477­
78; 2000 Haw. Sess. Laws Act 271, § 2 at 940-41. However, these amendments

did not materially affect the quoted portions of the statute and are,

therefore, not relevant to the instant case. Accordingly, this opinion refers

to the 1993 version of the statute unless otherwise noted.

      6
            As noted previously, in Baker & Taylor, this court held that the
use tax did not apply to a mainland seller who sold and shipped, F.O.B.
origin, books to the Hawai'i State Library. 103 Hawai'i at 361-62, 372, 82
P.3d at 806-07, 817.

      7
            HAR § 18-238-2(b) (1998) implements HRS § 238-2 and provides, in

relevant part:

                  [I]f the importer or purchaser is licensed under

            the general excise tax law, chapter 237, HRS, and is

            (1) a retailer or other person importing or purchasing

            for purposes of resale and not exempted by subsection

            (a), . . . the tax shall be one-half of one per cent

            of the purchase price of such tangible personal

            property, if the purchase and sale are consummated in

            Hawaii, or, if there is no purchase price applicable

            thereto, or if the purchase or sale is consummated

            outside of Hawaii, then one-half of one per cent of

            the landed value of such property imported into

            Hawaii. . . .

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the use tax to CompUSA, and that the facts in Baker & Taylor were

distinguishable.    At the hearing on the cross-motions, the tax

appeal court ruled from the bench, holding that Baker & Taylor did

not apply to the facts of the instant case and that CompUSA’s

transactions were subject to the use tax pursuant to HRS § 238-2. 

The court stated:

                [W]hat we are dealing with is a situation where

          the legislature is attempting to level the playing

          field between local vendors or sellers and mainland

          sellers, and there appears to be a concern that

          mainland sellers, because they may not be subject to

          the excise tax, wholesale tax, may have a huge

          advantage over the local vendors. And so, that could

          be one of the reasons underlying the use tax in the

          case at bar.

                The Court does agree that the use tax is viewed

          generally as a tax that compliments [sic] the general

          excise tax on gross revenues, and I think that this

          Court is most persuaded by two facts that distinguish

          the case at bar from the Baker & Taylor case. First of

          all, the Court does not believe that the Baker &

          Taylor case involved a sale from the publisher, or

          manufacturer, of the books to Baker & Taylor. Contrast

          that with the facts in the case at bar, which clearly

          shows that CompUSA is not the manufacturer of these

          products but instead purchases these products from a

          mainland manufacturer. So, that is one factual

          distinction of significance.

                The second fact of significant distinction in

          the case at bar is that we do not have a sales

          transaction comparable to the sale between Baker &

          Taylor and the library, Hawaii State Public Library

          System. Instead, we have one retailer that happens to

          be a national corporation, CompUSA. So, the

          distribution center of CompUSA does not have to sell

          any merchandise or inventory to the Hawaii retail

          stores.

                So, we do not have -- the two primary distinct

          -- facts distinguishing the case at bar from the Baker

          & Taylor case is, number one, the existence of a

          purchase transaction between the manufacturer and

          CompUSA, and secondly, the absence of a sales

          transaction between mainland CompUSA and Hawaii

          CompUSA that is comparable to the transaction of the

          book sales from Baker & Taylor [sic] to the Hawaii

          State Library.

                Those two facts are critical when we look at

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           Justice Acoba’s analysis in Baker & Taylor, because

           Justice Acoba noted at page 372 of the Hawaii public

           -- Hawaii cite of Baker & Taylor that the books were

           sold directly from Baker & Taylor [sic] to the

           library, and therefore, Baker & Taylor [sic] did not

           import the books from an unlicensed seller. The Court

           believes that is a significant point that

           distinguishes Baker & Taylor from the case at bar.

                 In the case at bar, there does appear to be an

           unlicensed seller[,] that is all of the component or

           product manufacturers that sold product to CompUSA for

           the purpose of retail or resale here at Hawaii.

                  Justice Acoba went on to say that Baker & Taylor

           [sic] did not purchase the books and resell the goods

           to the library. That is also a fact of distinction

           from the case at bar, where we did have CompUSA

           purchasing the inventory or products for sale on the

           mainland. They purchased it on the mainland for the

           purpose of reselling it here in Hawaii to the ultimate

           user.

                 So, we have a situation that does appear to fall

           within Section 238-2 Subsection 2 Subsection A, which

           states, “If the importer or purchaser is licensed

           under Chapter 237 and is a retailer or other person

           importing or purchasing for the purposes of resale,”

           et cetera.

                 The Court does find and conclude that the

           CompUSA series of transactions fall within Section

           238-2 Subsection 2 Subsection A, and therefore, for

           these and any other good cause shown in the record,

           the Court will respectfully grant the [Department’s]

           motion for summary judgment and deny [CompUSA’s]

           motion for summary judgment.

           On December 22, 2008, the tax appeal court issued its

order granting the Department’s motion for summary judgment.                On

that day, the court also issued its order denying CompUSA’s motion

for summary judgment.      Finally, on the same day, the tax appeal

court entered a judgment in favor of the Department and against

CompUSA, pursuant to the above orders.          On January 21, 2009,

CompUSA timely filed a notice of appeal. 

B.   ICA Appeal

           In its Opening Brief, CompUSA argued that this court’s

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decision in Baker & Taylor precluded the assessment of the use tax

against CompUSA.     CompUSA contended that the distinctions on which

the tax appeal court relied in its oral ruling were non-existent. 

            Addressing the first purported distinction, CompUSA

relied on a stipulation of facts from Baker & Taylor, which

CompUSA submitted to the tax appeal court as an exhibit in support

of its memorandum in opposition of the Department’s motion for

summary judgment.     Citing the stipulation, CompUSA argued that the

taxpayer in that case was a “wholesaler” who, similar to CompUSA,

purchased the goods from third-party suppliers and shipped them

into Hawai'i.8    Addressing the second purported distinction,

CompUSA argued that its transactions were similar to the ones in

Baker & Taylor because “[i]n both cases, there [was] a purchase

transaction outside the State of Hawaii between a

manufacturer/publisher and the taxpayer[, where] the taxpayer then

[brought] its own goods into the State[, and where] there [was]

only one sales transaction in the State[.]”

            Finally, CompUSA discussed the 2004 legislative

amendments to HRS chapter 238.9        CompUSA contended that retroactive 

      8
            Stipulated Fact 4 specifically referred to the taxpayer in Baker &

Taylor as “one of the largest wholesalers of books in the world[.]”

      9

            In 2004, the legislature made several amendments to the use tax

statute in response to Baker & Taylor. 2004 Haw. Sess. Laws Act 114, § 1 at

431 (“The purpose of this Act is to clarify current use tax laws in light of

Baker & Taylor[.]”). The following passages highlight the relevant

differences between the pre- and post-amendment text of the definitional

provisions of HRS chapter 238. HRS § 238-1 (1993) defined “import” as

“includ[ing] importation into the State from any other part of the United

States or its possessions or from any foreign country, whether in interstate

                                                                  (continued...)

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application of the 2004 legislative amendments was

unconstitutional under the Due Process clause, in contravention of

      9
       (...continued)

or foreign commerce, or both.” The 2004 amendments, on the other hand,

contain the following definition:

                  (1) The importation into the State of tangible

            property, services, or contracting owned, purchased

            from an unlicensed seller, or however acquired, from

            any other part of the United States or its possessions

            or from any foreign country, whether in interstate or

            foreign commerce, or both[.]; and

                  (2) The sale and delivery of tangible personal

            property owned, purchased from an unlicensed seller,

            or however acquired, by a seller who is or should be

            licensed under the general excise tax law from an

            out-of-state location to an in-state purchaser,

            regardless of the free on board point or the place

            where title to the property transfers to the

            purchaser. 

2004 Haw. Sess. Laws Act 114, § 2 at 431-32 (formatting in original).

            In addition, the definition of “use” in the 1993 version of the

statute read as follows:

                  any use, whether the use is of such nature as to

            cause the property to be appreciably consumed or not,

            or the keeping of the property for such use or for

            sale, and shall include the exercise of any right or

            power over tangible personal property incident to the

            ownership of that property, but the term “use” shall

            not include [a number of exceptions].

HRS § 238-1 (1993).

            However, the definition of “use” in the 2004 amendments includes:

                  any use, whether the use is of such nature as to

            cause the property, services, or contracting to be

            appreciably consumed or not, or the keeping of the

            property or services for such use or for sale, [and

            shall include] the exercise of any right or power over

            tangible or intangible personal property incident to

            the ownership of that property, and shall include

            control over tangible or intangible property by a

            seller who is licensed or who should be licensed under

            chapter 237, who directs the importation of the

            property into the [S]tate for sale and delivery to a

            purchaser in the State, liability and free on board

            (FOB) to the contrary notwithstanding, regardless of

            where title passes . . . .

2004 Haw. Sess. Laws Act 114, § 2 at 432 (formatting in original).

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the judiciary’s “exclusive power to interpret the law,” and

invalid as a legislative attempt “to overrule” the judiciary.10

(Formatting altered).

            In its Answering Brief, the Department reiterated its

position that the plain language of HRS §§ 238-1, 238-2 and HAR

§ 18-238-2 subjected CompUSA to the use tax.           Specifically, the

Department argued that the statutes and the administrative rule

clearly apply to a Hawai'i-licensed retailer who purchased goods

from an unlicensed seller outside of Hawai'i and imported such

goods into the state in order to sell them at retail to the

general public in Hawai'i.      The Department also reiterated its

contention that Baker & Taylor was distinguishable from the

instant case because, unlike CompUSA, the taxpayer in Baker &

Taylor 1) did not direct a third-party supplier to ship goods to

Hawai'i; 2) relinquished title to the goods on the mainland before

shipping them to Hawai'i; and 3) did not ship the goods to Hawai'i

with the purpose of reselling them here.

            The Department also argued that CompUSA’s contentions

regarding the 2004 legislative amendments to HRS chapter 238 were

“irrelevant” because the tax appeal court did not rule on the

issue.   Finally, the Department contended that the amendments

constituted a clarification, rather than a substantive change, of

      10

            There is no indication that the tax appeal court relied on the

2004 amendments in granting the Department’s motion for summary judgment.

According to CompUSA’s Reply Brief in the ICA, CompUSA made this argument to

“protect its position on [] appeal” in the event the ICA addressed the

retroactive application of the 2004 amendments.

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the statutory language.

          In its Memorandum Opinion, the ICA held that CompUSA was

not subject to the use tax on the goods in question.            As to the

relevance of Baker & Taylor, the ICA first noted that, “[a]lthough

not specifically stated in the . . . opinion, the parties in that

case stipulated and the court, without a doubt, understood that

[the taxpayer there] was a wholesaler of books and other

educational materials to institutional and commercial customers.” 

(Footnote omitted).     The ICA relied on the copy of the Baker &

Taylor stipulation, which CompUSA submitted to the tax appeal

court as an exhibit to its memorandum in opposition of the

Department’s motion for summary judgment.         The Department did not,

in the tax appeal court or the ICA, object to the introduction of

the Baker & Taylor stipulation.

          The ICA applied Baker & Taylor as follows:

                 In this case, as in Baker & Taylor, there was no

          purchase or importation from an unlicensed seller

          because CompUSA itself was the supplier. The

          [Department] argues that CompUSA necessarily purchased

          its goods from unlicensed vendors such as Apple, HP,

          Belkin, Palm, etc. However, so did Baker, which was

          stipulated to be a book wholesaler, not a publisher or

          manufacturer. CompUSA, like Baker, completed its

          third-party purchase transactions on the mainland and

          then shipped the goods to Hawai'i. CompUSA, like
          Baker, sold goods it owned to its customers in

          Hawai'i. The supreme court, in Baker & Taylor,
          treated this transaction as an initial sale of the

          taxpayer’s goods, rather than a resale of goods

          purchased from an unlicensed third-party vendor. We

          must apply the same analysis in this case. Like the

          taxpayer in Baker & Taylor, CompUSA could not be said

          to have imported or purchased goods from itself, and

          therefore was not liable for payment of the use tax

          under the law in effect during the [relevant period].

          The ICA, accordingly, held that Baker & Taylor compelled

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the conclusion that CompUSA was not subject to the use tax. 

           The ICA also rejected the Department’s argument that

HAR § 18-238-2 required a different result, reasoning that an

administrative rule “cannot contradict the statute.”             With regard

to the 2004 legislative amendments, the ICA held that the

amendments constituted a modification, not a “clarification,” of

the existing law.     The ICA did not apply the modified statute to

the instant case, implicitly holding that the amendments did not

apply retroactively to CompUSA’s pre-amendment conduct.               The ICA

further noted that the purpose of the amendments was to close “a

loophole in the use tax law” of which the taxpayer in Baker &

Taylor “successfully availed itself . . . by shipping goods it

already owned to Hawai'i, rather than goods purchased directly from

non-licensed mainland sellers.”

           The ICA filed its judgment on August 30, 2010, vacating

the tax appeal court’s judgment and remanding for further

proceedings consistent with the memorandum opinion.            The

Department timely filed its application on November 22, 2010. 

CompUSA filed a timely response on December 7, 2010.

C.   Application and Response

           In its application, the Department argues that the ICA

erred in holding that the use tax did not apply to CompUSA.11               The

     11

           Specifically, the Department raises the following questions:

                 1.    Whether the [ICA] correctly interpreted

           and applied Hawaii’s use tax law, Chapter 238, [HRS].

                                                                    (continued...)

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Department argues that the purpose of the use tax, as set forth in

its legislative history, was to “tax[] the value of goods

purchased directly from non-licensed sellers and brought into the

State for resale.”     (Quoting S. Conf. Comm. Rep. No. 6, in 1965

Senate Journal, at 814) (emphasis omitted).           The Department also

relies on the plain language of HRS § 238-2, reasoning that

property is taxable if it was “either (1) imported for resale in

Hawaii or (2) purchased from an unlicensed seller for resale in

Hawaii[.]”    (Emphasis in original) (footnote omitted).             The

Department also argues that the ICA’s decision “nullifies the use

tax law for the tax years at issue because its decision means that

there would be no instance where the use tax would apply.”

           Finally, the Department contends that the ICA’s reading

of Baker & Taylor improperly assumed “facts [that] are clearly

unsupported by the Baker & Taylor record on appeal[.]”

Specifically, the Department challenges the ICA’s conclusions that

1) the taxpayer in Baker & Taylor purchased goods on the mainland

and then shipped them to Hawai'i; and 2) the transaction was “the

initial sale of the taxpayer’s goods, rather than a resale of

goods purchased from an unlicensed third-party vendor.”12

     11
       (...continued)

                  2.    Whether the ICA erred in its

            interpretation and application of [Baker & Taylor] to

            the facts of this case.

     12

            In our view, this argument somewhat mischaracterizes the ICA’s

decision. The ICA did not state that the transaction in Baker & Taylor was in

fact an initial sale, rather than a resale. Instead, the ICA concluded that

                                                                  (continued...)

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(Internal quotation marks omitted).

            CompUSA, in its response, argues that the ICA correctly

applied Baker & Taylor to the instant case.           Alleging that the

Department is principally concerned with “state tax revenues,”

CompUSA notes that “laws should be applied according to their

plain language, and not with reference to revenue enhancement.” 

CompUSA urges this court to “apply the plain language of the

statute, and not rely on legislative history to create an issue.” 

It also reiterates the arguments in its ICA briefs, contending

that Baker & Taylor is applicable to the case at bar.             CompUSA

argues that it was similarly situated to the taxpayer in Baker &

Taylor because CompUSA “purchased goods on the mainland, brought

them to Hawaii, and sold them in Hawaii to its customers.”

Finally, CompUSA contends that “there is little practical reason

for this court to revisit its no [sic] decision” in Baker & Taylor

because the 2004 legislative amendments to the use tax statute

eliminated “what the ICA characterized as a ‘loophole’[.]” 

(Formatting altered) (footnote omitted).

                          II.   Standard of Review

            The appellate court reviews a “grant or denial of

summary judgment de novo.”       Querubin v. Thronas, 107 Hawai'i 48,

56, 109 P.3d 689, 697 (2005).

      12
       (...continued)

this court treated that transaction as an initial sale. The distinction is

important because the Department argues that the ICA “assumed facts that were

never in the record or stated in the Baker & Taylor opinion.” 

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            This court has explained that: 

                  [S]ummary judgment is appropriate if the pleadings,

            depositions, answers to interrogatories, and admissions on

            file, together with the affidavits, if any, show that there is

            no genuine issue as to any material fact and that the moving

            party is entitled to judgment as a matter of law. A fact is

            material if proof of that fact would have the effect of

            establishing or refuting one of the essential elements of a

            cause of action or defense asserted by the parties. The

            evidence must be viewed in the light most favorable to the

            non-moving party. In other words, we must view all of the

            evidence and the inferences drawn therefrom in the light most

            favorable to the party opposing the motion.

Id. (citations omitted) (brackets in original); see also Hawai'i

Rules of Civil Procedure Rule 56(e).

                               III.   Discussion

A.	   The plain language of HRS §§ 238-1 and 238-2 compels the

      application of the use tax to CompUSA

            The dispositive issue in this case is whether HRS

chapter 238 requires the assessment of the use tax against the

goods which CompUSA transported from the mainland to its Hawai'i

retail stores.

            The use tax is closely connected with Hawaii’s general

excise tax (GET).      In re Hawaiian Flour Mills, Inc., 76 Hawai'i 1,

13, 868 P.2d 419, 431 (1994); In re Habilitat, Inc., 65 Haw. 199,

209, 649 P.2d 1126, 1133-34 (1982).          The GET places a 0.5% tax on

the business of manufacturing and wholesaling in Hawai'i, resulting

in a price differential between the products made and sold

wholesale locally and the same products made and sold wholesale on

the mainland.     HRS §§ 237-13(1)-(2) (1993); Habilitat, 65 Haw. at

209, 649 P.2d at 1133-34.        “In the absence of a use tax that

complements a GET, sellers of goods acquired out-of-state

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theoretically enjoy a competitive advantage over sellers of goods

acquired in-state: . . . out-of-state products would be less

expensive than in-state products, the prices of which would

presumably reflect some pass-on of the GET.”           Flour Mills, 76

Hawai'i at 13, 868 P.2d at 431; see Habilitat, 65 Haw. at 209, 649

P.2d at 1133-34.

            The Department assessed a use tax on CompUSA’s “imports

for resale” for the period between July 1, 1999 and December 31,

2002, pursuant to HRS § 238-2(2)(A).         (Formatting altered).         The

relevant language of HRS § 238-2 during that period was as

follows:

                  There is hereby levied an excise tax on the use

            in this State of tangible personal property which is

            imported, or purchased from an unlicensed seller, for

            use in this State. The tax imposed by this chapter

            shall accrue when the property is acquired by the

            importer or purchaser and becomes subject to the

            taxing jurisdiction of the State. The rates of the tax

            hereby imposed and the exemptions thereof are as

            follows:

                  . . . . 

                  (2) If the importer or purchaser is licensed

            under chapter 237 and is (A) a retailer or other

            person importing or purchasing for purposes of resale,

            not exempted by paragraph (1), or (B) a manufacturer

            importing or purchasing material or commodities which

            are to be incorporated by the manufacturer into a

            finished or saleable product (including the container

            or package in which the product is contained) wherein

            it will remain in such form as to be perceptible to

            the senses, and which finished or saleable product is

            to be sold at retail in this State, in such manner as

            to result in a further tax on the activity of the

            manufacturer in selling such products at retail, or

            (C) a contractor importing or purchasing material or

            commodities which are to be incorporated by the

            contractor into the finished work or project required

            by the contract and which will remain in such finished

            work or project in such form as to be perceptible to

            the senses, the tax shall be one-half of one per cent

            of the purchase price of the property, if the purchase

            and sale are consummated in Hawaii; or, if there is no

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          purchase price applicable thereto, or if the purchase
          or sale is consummated outside of Hawai'i, then
          one-half of one per cent of the value of such
          property.

                (3) In all other cases, four per cent of the

          value of the property.

HRS § 238-2 (1993) (emphasis added).

          The plain language of HRS § 238-2(2)(A) set forth the

following requirements for the imposition of the use tax pursuant

to that subsection: 1) the taxpayer is licensed under HRS chapter

237; 2) the taxpayer is a retailer; and 3) the taxpayer imported

or purchased the goods for purposes of resale.          HRS § 238-2(2)(A).

The introductory paragraph of HRS § 238-2 also made clear that the

tax was levied on “the use in this State.”         Thus, the taxpayer

must have used the imported or purchased goods within the state in

order to be subject to the tax.       In other words, HRS § 238-2

imposed a tax on the purchaser of out-of-state goods for using the

goods within the state.     Such imposition is wholly consistent with

the statute’s purpose of minimizing the price advantage of out-of­

state goods.   See Flour Mills, 76 Hawai'i at 13, 868 P.2d at 431;

Habilitat, 65 Haw. at 209, 649 P.2d at 1133-34.

          Finally, the introductory paragraph of HRS § 238-2

provided another prerequisite to the imposition of the use tax. 

Where the tax is premised on the purchase (rather than

importation) of goods, the purchase must be “from an unlicensed

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seller[.]”13   HRS § 238-2.

            Turning to the facts of the instant case, CompUSA

admitted that during the relevant period it held a Hawai'i general

excise license.     CompUSA also was a “retailer” under the statute.

During the relevant period, HRS § 238-1 (1993) provided, as it

does now, that the word “retailer” for purposes of the use tax is

defined in chapter 237.       HRS § 237-16 (1993) provided that

retailing includes “the sale of tangible personal property, for

consumption or use by the purchaser and not for resale[.]”14                It is

undisputed that CompUSA engaged in such sales at its Hawai'i retail

stores.

            The requirement that the taxpayer use the goods in the

state is also met here.       HRS § 238-1 defined “use” as “any use[,]”

      13
            The punctuation in the introductory paragraph makes clear that the
“unlicensed seller” qualifier applies only to purchases and not to imports:
“property which is imported, or purchased from an unlicensed seller, for use
in this State.” HRS § 238-2. Although some statements in Baker & Taylor may
be read to apply the “unlicensed seller” requirement to imports, such reading
of Baker & Taylor would be unreasonable in light of the clear language of the
statute. HRS § 238-2 (applying the use tax to “property which is imported, or
purchased from an unlicensed seller, for use in this State”); cf. Baker &
Taylor, 103 Hawai'i at 372, 82 P.3d at 817 (“Therefore [the taxpayer] did not
import the books from an unlicensed seller.”).

      14

            HRS 237-16 (1993) imposed a GET on “certain retailing[.]” It

stated that “[p]ersons on whom a tax is imposed by this section hereinafter

are called ‘retailers’.” Id. HRS 237-16 was amended during the relevant

period in ways that do not materially affect the quoted portions of the

statute. 1999 Haw. Sess. Laws Act 71, § 7 at 116-17; 2000 Haw. Sess. Laws Act

198, § 5 at 474. In addition, HRS § 237-16 was repealed in 2003, 2003 Haw.

Sess. Laws Act 135, § 11 at 329, and the definition of “retailer” set forth in

HRS § 237-16 (1993) was incorporated into HRS § 237-1. 2003 Haw. Sess. Laws

Act 135, § 1 at 318. In any event, HRS § 237-16 was operative during the

relevant period in this case.

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including “keeping of the property . . . for sale[.]”15               CompUSA

admitted that the products in question were shipped to its Hawai'i

stores, from which it sold the products to Hawai'i customers.

Therefore, on the undisputed facts, CompUSA “ke[pt] the property

. . . for sale” “in this State.”        HRS § 238-1 and 238-2.          Such

“keeping of the property . . . for sale” constituted a use of the

property in this state, as required under HRS § 238-2.                HRS

§ 238-2 (“There is hereby levied an excise tax on the use in this

State of tangible personal property which is imported, or

purchased from an unlicensed seller, for use in this State.”)

(emphasis added).

            The next requirement for imposing the use tax under HRS

§ 238-2(2)(A) is that the taxpayer “import[] or purchas[e] [the

goods] for purposes of resale[.]”          HRS § 238-2(2)(A).     HRS § 238-1

(1993) provided the following definitions of “import” and

“purchase”:

                   “Import” (or any nounal, verbal, adverbial,

            adjective, or other equivalent of the term) includes

            importation into the State from any other part of the

            United States or its possessions or from any foreign

            country, whether in interstate or foreign commerce, or

            both.

                  . . . . 

                  “Purchase” and “sale” mean and refer to any

            transfer, exchange, or barter, conditional or

      15

            HRS § 238-1 was amended during the relevant period. 1999 Haw.

Sess. Laws Act 70, § 4 at 102-05; 2000 Haw. Sess. Laws Act 27, § 2 at 51; 2000

Haw. Sess. Laws Act 38, § 3 at 68-69; 2000 Haw. Sess. Laws Act 198, § 7 at

475-77; 2001 Haw. Sess. Laws Act 210, § 3 at 530-32; 2002 Haw. Sess. Laws Act

40, § 8 at 126. However, these amendments did not materially affect the

quoted portions of the statute and are, therefore, not relevant to the instant

case. Accordingly, this opinion refers to the 1993 version of the statute

unless otherwise noted.

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           otherwise, in any manner or by any means, wheresoever

           consummated, of tangible personal property for a

           consideration.

           The term “importation” is defined as “[t]he bringing of

goods into a country from another country,” Black’s Law Dictionary

824 (9th ed. 2009), or “the act or practice of bringing in (as

merchandise) from an outside or foreign source,” Webster’s Third

New International Dictionary 1135 (3d ed. 1966).           The statutory

definition clarified that the term includes the transfer of goods

into Hawai'i from another state or a territory of the United

States.   HRS § 238-1.    Thus, the act of bringing goods from

outside of Hawai'i into the state constitutes “importation.”

           In the instant case, CompUSA admitted that it directed

the transport of goods from its mainland consolidation centers or

suppliers to its Hawai'i retail stores.        Therefore, it imported the

goods into the state.     It is also clear from the undisputed facts

that CompUSA did so “for purposes of resale,” HRS § 238-2(2)(A),

because it transported the goods from the mainland in order to

restock its Hawai'i retail stores.

           Moreover, CompUSA’s responses to the Department’s

interrogatories and requests for admission make clear that it also

“purchas[ed]” the goods “for purposes of resale[.]”           HRS

§ 238-2(2)(A).    According to CompUSA, some of the goods in

question were shipped by CompUSA’s mainland suppliers directly to

its Hawai'i stores as drop shipments.        Therefore, on the undisputed

facts, when CompUSA purchased goods from its mainland suppliers

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for drop shipments, it intended to resell them in Hawai'i.

          CompUSA also purchased goods with intent to resell them

in Hawai'i when it ordered cross-dock shipment goods from its

suppliers.   With cross-dock shipments, mainland suppliers would

ship the purchased goods to a CompUSA mainland consolidation

center, from which CompUSA would ship the goods to its Hawai'i

stores.   CompUSA stated in its response to an interrogatory that:
                CompUSA utilized a software system during the

          [relevant period] to analyze the inventory and sales

          for the retail stores and make future sale forecasts. 

          . . . Based on the analysis performed using this

          software in Dallas, goods are allocated to the various

          retail stores, including the two Hawaii stores.

                . . . .

                . . . Vendors’ goods bound for Hawaii are served

          by the cross-dock at La Palma, California. 

(Emphasis added).

          Additionally, in support of its motion for summary

judgment, CompUSA submitted a declaration from Joe Miller, who was

its “replenishment buyer” and the “Director of Replenishment”

during the relevant period.      As such, he “was involved in the day-

to-day purchasing and allocating process[.]”          The declaration

described how the software system was utilized to purchase goods

for restocking CompUSA’s Hawai'i stores:
                9.    . . . I was one of the people integrally

          involved with [the development of the software

          system].

                . . . . 

                13.   During the [relevant period] . . ., 12

          [employees] were replenishment buyers who used the

          system on a daily basis for purchasing (i.e. direct-

          to-store orders through drop shipment) and allocating

          (i.e., ordering products to be shipped to individual

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          stores through cross-docks).

                . . . . 

                16.   . . . As a team, we would forecast what

          individual CompUSA retail stores may need, including

          the stores in Hawaii. We based this on a combination

          of factors, including previous years’ data,

          seasonability, reports, and forecasts from the finance

          department. We then input this information into the

          [software system], and the system calculated how much

          of any particular good to order.

(Emphasis added).

          Therefore, on the undisputed facts, CompUSA determined

the amount of restocking required at its Hawai'i stores and ordered

the goods from the mainland suppliers based on that determination.

CompUSA, therefore, purchased the goods from the suppliers with

the purpose of reselling the same goods in Hawai'i.

          As previously noted, in order to impose the use tax on

the basis of a purchase, the purchase must be from an “unlicensed

seller[.]”   HRS § 238-2.     HRS § 238-1 defined “unlicensed seller”

as a seller who is not subject to the Hawai'i GET.          As the ICA

stated, it is undisputed that the goods which CompUSA purchased

from its mainland suppliers “did not subject the third-party

vendors to the Hawai'i [GET].”      Therefore, the “unlicensed seller”

requirement is satisfied in this case.

          In sum, the plain language of the use tax statute, as

applied to the undisputed facts of the instant case, compels the

conclusion that CompUSA is liable for the use tax because it is a

“retailer” licensed under HRS chapter 237, it used the goods in

Hawai'i, and it did so after it imported and purchased them “for

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purposes of resale[.]”       See HRS § 238-1 and 238-2. 

B. 	 CompUSA’s reliance on Baker & Taylor is misplaced because

     CompUSA’s circumstances are not analogous to those of the

     taxpayer in that case

            CompUSA argues that it is not subject to the use tax

under this court’s decision in Baker & Taylor.            In that case, this

court held that a mainland seller was not subject to the use tax

on books which it sold and shipped, F.O.B. mainland, to the Hawai'i

State Library (library).       Baker & Taylor, 103 Hawai'i at 361-62,

372, 82 P.3d at 806-07, 817.        The taxpayer had no offices or

employees based in Hawai'i and did not hold a Hawai'i GET license

during the relevant period.        Id. at 361-62, 82 P.3d at 806-07.

Its employees visited Hawai'i on several occasions to meet with

representatives of the library in order to discuss a contract to

sell books to the library.        Id. at 362-63, 82 P.3d at 807-08.

After the contract was formed, the taxpayer shipped the books from

the mainland to the library pursuant to an “FOB point of shipment”

contract.16   Id. at 362, 82 P.3d at 807.         This court explained

that, under that contract, the “title passed from [the taxpayer]

to the customer at the loading docks on the mainland[.]”              Id.

            This court held that the use tax did not apply to the

taxpayer in that case because “[t]he sale of books was directly

      16

            This court also noted that, prior to the transactions in question,
the taxpayer had also made sales to Hawai'i customers pursuant to “FOB Hawai'i”
contracts. Id. at 362, 82 P.3d at 807. However, the taxpayer did not
challenge the assessment of the use tax against those sales. Id. at 372, 82
P.3d at 817 (“[The taxpayer] argues that inasmuch as it was stipulated that
title passed on the mainland, [the taxpayer] did not own the goods when they
arrived in Hawai'i.”).

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from [the taxpayer] to the [l]ibrary.”            Id. at 372, 82 P.3d at

817.    The court stated that:

                   [The taxpayer] did not import the books from an

             unlicensed seller. Furthermore, [the taxpayer] did not

             purchase the books and “resell” the goods to the

             [l]ibrary. Under the circumstances of this case [the

             taxpayer] could not import from itself or purchase

             from itself. Therefore, [the taxpayer] is not subject

             to the use tax under the plain language of HRS

             § 238-1.

Id.

             CompUSA argues that it was similarly situated to the

taxpayer in Baker & Taylor because it owned the goods before they

were shipped to Hawai'i, and, therefore, it “could not import from

itself or purchase from itself.”          (Internal quotation marks

omitted).     However, the taxpayer in Baker & Taylor was in a

significantly different position from CompUSA.             As noted above,

the use tax attaches to the use of goods in this state and is

imposed on the purchaser of the goods who makes such use of them.

HRS § 238-2.      The taxpayer in Baker & Taylor did not use the books

in Hawai'i.     Once it sold the books and once the title passed on

the mainland, it no longer owned them, and it had no presence in

Hawai'i to make any use of them.          See id. at 361-62, 372, 82 P.3d

at 806-07, 817.       CompUSA, on the other hand, was the purchaser of

the goods in the instant case.          It had the title to the goods by

the time they arrived in Hawai'i, and it used the goods by “keeping

[them] for sale[.]”        HRS § 238-1.

             Thus, CompUSA’s suppliers, and not CompUSA, were

comparable to the taxpayer in Baker & Taylor because, once the

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title to the goods passed from the suppliers on the mainland, they

could no longer import or purchase from themselves under the

reasoning in Baker & Taylor.17       See Baker & Taylor, 103 Hawai'i at

372, 82 P.3d at 817.      CompUSA, on the other hand, was in exactly

the opposite position: it could and did use the goods in Hawai'i

after the title passed on the mainland.          That is, unlike in Baker

& Taylor, where the title passed from the taxpayer before the

goods reached Hawai'i, the title here passed to the taxpayer on the

mainland.    Thus, unlike the taxpayer in Baker & Taylor, CompUSA

had the title to the goods when they arrived in Hawai'i, where

CompUSA “used” the goods by keeping them for resale.

            This court also stated in Baker & Taylor that the

taxpayer “did not import the books from an unlicensed seller”

because “[t]he sale of books was directly from [the taxpayer] to

the [l]ibrary.”     Id.   It could be argued that this language allows

any Hawai'i purchaser to avoid the use tax on the resale of goods

purchased directly from mainland.         However, such an interpretation

conflicts with this court’s case law and the very purpose of the

use tax.    As this court has declared, “the enactment of the use

tax in 1965 was prompted in part by the ‘substantial volume of

      17

            It should be noted that it is no longer clear that CompUSA’s

suppliers or similarly situated companies can rely on Baker & Taylor to avoid

the use tax. The 2004 amendments to HRS chapter 238 provide that the

definitions of “import” and “use” operate notwithstanding the F.O.B. point or

where the title to the goods passes. 2004 Haw. Sess. Laws Act 114, § 1 at

431-32. The legislature also provided that the amendments “shall take effect

retroactive to taxable years beginning after December 31, 1998.” 2004 Haw.

Sess. Laws Act 114, § 7 at 435. However, because CompUSA is subject to the

use tax statute notwithstanding the 2004 amendments, this court need not

decide whether the 2004 amendments apply retroactively.

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sales by unlicensed sellers to local buyers (that) . . . escape(d)

taxation because such sales . . . (were) accomplished directly

between buyer and seller without the services of an

intermediary.’”    Habilitat, 65 Haw. at 209, 649 P.2d at 1134

(emphasis added) (alterations in original) (quoting H. Conf. Comm.

Rep. No. 21, in 1965 House Journal, at 843).

            When read in the factual context of the case, the above

quote from Baker & Taylor clarifies that the use tax did not apply

to the out-of-state seller who sold directly to a Hawai'i customer.

See Baker & Taylor, 103 Hawai'i at 361-62, 82 P.3d at 806-07

(noting that the taxpayer had no staff, offices, or real estate in

Hawai'i).   Baker & Taylor did not, however, hold that the in-state

purchaser, i.e. the person “us[ing the goods] in this State,” HRS

§ 238-2, is also free from the use tax.         If both the seller and

the purchaser were relieved of the tax burden, then the use tax

would not accomplish its goal of minimizing the price advantage of

buying directly from a mainland seller.         Habilitat, 65 Haw. at

200, 209, 649 P.2d at 1128, 1134 (holding that a Hawai'i purchaser

of mainland goods was subject to the use tax when it “directed the

unlicensed sellers to transmit the purchased goods to [its Hawai'i

customers].”).

            Because Baker & Taylor is distinguishable from the case

at bar, the analysis of the use tax statute set forth in Part

III.A of this opinion controls.       Therefore, CompUSA is liable for

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the use tax under HRS § 238-2(2)(A).18

                               IV. Conclusion

            On the undisputed facts, the use tax applies to CompUSA

as a matter of law.      Therefore, the tax appeal court properly

granted the Department’s motion for summary judgment and denied

CompUSA’s motion for summary judgment, and the ICA erred in

vacating the tax appeal court’s judgment.

            Accordingly, we vacate the judgment of the ICA and

affirm the judgment of the tax appeal court.

Ray K. Kamikawa and Leroy E. /s/ Mark E. Recktenwald

Colombe (Chun, Kerr, Dodd,

Beaman & Wong) for           /s/ Paula A. Nakayama

respondent/

taxpayer-appellant.          /s/ Simeon R. Acoba

Hugh R. Jones and Damien A.        /s/ James E. Duffy, Jr.

Elefante, Deputy Attorneys

General, for                       /s/ Randal K.O. Lee

petitioner/appellee.

      18

            In addition, because Baker & Taylor is distinguishable from this

case, this court need not reach the question whether the 2004 legislative

amendments to HRS chapter 238 apply retroactively.

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