Court Opinion

ID: 8203194
Source: CourtListenerOpinion
Date Created: 2022-09-09 23:46:38.939443+00
Date Added: 2024-06-11T16:41:01.504459
License: Public Domain

SHIRLEY S. ABRAHAMSON, C.J.
¶ 66. {dissenting). I agree with the Department of Revenue and the circuit court and would reverse the decision of the Tax Appeals Commission.
¶ 67. In a thirty-seven-page, well-analyzed, well-reasoned and thorough opinion, the circuit court for Dane County, Judge Gerald C. Nichol, concluded that "River City's acquisitions of fixed assets through inter-company transfers were 'purchases' from a 'retailer' and are thus subject to the use tax. Furthermore, River City's failure to report all of its tax obligations was not due to good cause and was negligent."
¶ 68. I agree and find little need to substitute my own analysis for that of the circuit court. Instead, I shall quote from or refer to relevant passages from the circuit court's extensive opinion.
I
¶ 69. As to the first issue, whether the transfers were subject to use tax, the circuit court properly declined to give any deference to the Tax Appeals Commission's interpretation of the statutes because the issue was very nearly one of first impression.
¶ 70. The circuit court initially observed that the corporations were separate entities for state tax purposes:
*593River City is a separate legal corporate entity from BFI and all other BFI subsidiaries. For state tax purposes, each subsidiary is properly viewed as an independent entity, and accordingly, should also be treated as such in the context of this case. Wis. DOR v. River City Refuse Removal, Inc., No. 2003CV2774, at 14 (Wis. Cir. Ct. Dane County, Aug. 2, 2004) (hereinafter "Circuit Court Memorandum Decision and Order").
¶ 71. The circuit court then held that the subsidiaries from which River City acquired the fixed assets were "retailers" under § 77.51(13)(b) and § 77.51(13)(am), based on the following analysis:
• "These transfers gave River City all rights [ofl ownership of the assets. The fixed assets included various motor vehicles as well as other related assets between two and four years old. All motor vehicles acquired through these intercompany transfers were re-titled in River City's name. All fixed assets acquired in this manner were then depreciated on River City's income and franchise tax returns." Circuit Court Memorandum Decision and Order at 10.
• Kollasch v. Adamany, 104 Wis. 2d 552, 568, 313 N.W.2d 47 (1981), holds that "[t]he construction which we give to 'retailer' applies the sec. 77.51(7)(b), Stats., definition to all person [sic] 'engaged in the business of making sales.' Those person [sic] are, by statute, required to pay a tax on the gross receipts of all retail sales that they enter into unless they can point to a specific exemption from the tax. Sec. 77.51(7)(a) requires persons who are not in the business of making sales to pay the sales tax if they are sellers — i.e., engaging in a transaction for which the gross receipts are subject to the sales tax pursuant to sec. 77.52(1). The type of transactions which make one a sec. 77.51(7)(a) retailer are mercantile ones." Circuit Court Memorandum Decision and Order at 17.
*594• Accordingly, "there were two types of retailers under the statutes," including "persons who are not engaged in the business of making sales, but who engage in a transaction for which the gross receipts are subject to the sales tax." Circuit Court Memorandum Decision and Order at 18.
• "The acquisitions made by River City from the various subsidiaries were neither isolated nor sporadic sales. Indeed, these acquisitions were constant in occurrence and [were] a vital means of supporting the company's operations. The subsidiaries were in the 'business' of making sales under § 77.51(13)(b) because they were engaged in the transactions with the 'object of gain, benefit, or advantage, either direct or indirect' under § 77.51(1). At least one of the subsidiaries that transferred assets to River City held a seller's permit, which renders all sales made by that subsidiary subject to taxation, absent an exemption. Furthermore, River City held a consumer use tax permit, because it made numerous purchases of taxable goods without sales tax being charged by the seller. The use tax permit fulfills the same purpose as the sales tax permit, and as such, River City's holding of the use tax permit further indicates to this Court that the parties from which River City acquired the fixed assets should properly be considered retailers." Circuit Court Memorandum Decision and Order at 24-25.
• "Furthermore, a considerable number of the fixed assets that River City acquired were motor vehicles. These motor vehicles were received by River City and subsequently re-titled in River City's name. The legislature placed specific focus on sellers of motor vehicles by enacting § 77.51(13)(am), which provides that a retailer is also 'any person making any retail sale of a motor vehicle... registered or titled, or required to be registered or titled....'" Circuit Court Memorandum Decision and Order at 25.
*595¶ 72. The circuit court also held that the acquisitions of fixed assets from other BFI subsidiaries were "purchases" under § 77.51(12)(a), reasoning as follows:
• Even though the intercompany transfers did not involve an exchange of money, "consideration can exist just by intent on behalf of the parties to be bound to the contract." Circuit Cotut Memorandum Decision and Order at 27.
• "The bookkeeping entries actually show that there was intent by the parties to be bound to the transaction. The entries made in River City's payables account do show a promise to pay for the liabilities the company has accrued. The subsidiaries from which River City acquired the assets have corresponding entries in their receivable accounts that show an expectation of payment from River City. Certainly, if the parent company BFI sold off one of these subsidiaries to an outside interest, the new owner would acquire all the assets and liabilities that their newly acquired company had incurred on its books." In other words, "[b]y recording the liabilities and receivables on their hooks, these subsidiaries are confirming that the transactions took place and are accurate depictions of the financial status of the companies. The entries show that the parties intended to be bound to the transactions." Circuit Court Memorandum Decision and Order at 27-28.
• "The changes in River City's financial records clearly results in consideration in thé state of Wisconsin. A change of financial position constitutes consideration. Hardscrabble Ski Area v. First Nat. Bank, 42 Wis. 2d 334, 344, 166 N.W.2d 191 (1969). The acquisition of assets and the related bookkeeping entries changed the financial position of River City. After acquiring the fixed assets, River City was able to deduct depreciation expenses. These deductions then reduced River City's taxable income. This is an obvi*596ous benefit to River City that fulfills the definition of consideration." Circuit Court Memorandum Decision and Order at 28.
• "The bookkeeping entries are far more than some type of inventory tracking system. The entries themselves materially affect the financial value of the company." Circuit Court Memorandum Decision and Order at 29.
• "[T]he Court also finds ample evidence in the record that indicates that River City did, in fact, make payments for those assets." Circuit Court Memorandum Decision and Order at 30.
• Furthermore, "[t]he assets acquired by River City were subsequently depreciated. But, in order to depreciate the assets, River City must have incurred a cost for those assets. Under the accrual method of accounting, the amount that is expended or will be expended must be incurred before the company can use the amount in computing its expense deduction. Treas. Reg. § 1.446-l(c)(l)(ii)(B). Thus, if River City did not, as it consistently asserts, acquire the assets in exchange for some form of remuneration, then it would have no cost basis for depreciating those assets." Circuit Court Memorandum Decision and Order at 31.
¶ 73. The circuit court properly concluded that "the intercompany transfers were 'purchases' from a 'retailer' and thus subject to the use tax." Circuit Court Memorandum Decision and Order at 29.
HH HH
¶ 74. As to the second issue, the circuit court properly gave no deference to the Tax Appeals Commission on the question whether the assessment of a negligence penalty was warranted because the penalty *597directly pertained to the disposition of the first issue, which the circuit court determined independently of the Tax Appeals Commission.
¶ 75. The circuit court then concluded that the negligence penalty was properly imposed upon River City. Important to the circuit court's analysis were two principles: 1) "under § 77.60(3) neglect is determined as of the date the tax return is filed," and 2) "the same statute places the burden of proof on the person filing an incorrect return to demonstrate that the errors were for good cause and not due to neglect." Circuit Court Memorandum Decision and Order at 34.
¶ 76. The circuit court reasoned as follows:
• "River City's position is that it was reasonable in not changing its tax reporting practices because it was waiting for the outcome of litigation by BFI-Wisconsin of the same issues. However, the timing of that litigation does not support River City's argument." Circuit Court Memorandum Decision and Order at 35.
• River City "was aware as a result of the previous audit that the DOR considered both activities to be taxable." Circuit Court Memorandum Decision and Order at 35.
• "Despite that knowledge, River City failed to properly report its tax obligations. The litigation involving BFI-Wisconsin was not commenced until four years after the end of the first fiscal year of the audit. It is untenable that a taxpayer could ignore its tax obligations until discovered by the DOR, and then avoid the negligence penalty because a separate company was litigating the same issues, well past the filing date when the neglect was determined." Circuit Court Memorandum Decision and Order at 36.
• "An appropriate course of action would have been for River City to report the activities that it knew to be considered taxable and then file for a refund pending the outcome of any subsequent litigation." Circuit Court Memorandum Decision and Order at 36.
*598¶ 77. The circuit court properly held that River City had not met its burden "to show that its failure to report its tax obligations was due to good cause and not neglect." Circuit Court Memorandum Decision and Order at 36.
¶ 78. I agree with the rationale offered by and the conclusions reached by the circuit court. I would reverse the court of appeals and hold that River City is liable for both the use tax and the negligence penalty assessed by the Department of Revenue.
J-H HH 1 — 4
¶ 79. I write further to express a caution about the method advanced in the majority opinion for determining what level of deference to afford to the Tax Appeals Commission's interpretation of a statute.
¶ 80. Relying on UFE Inc. v. LIRC, 201 Wis. 2d 274, 548 N.W.2d 57 (1996), the majority opinion announces that "[w]e are not bound by an agency's interpretation of statutory language, but we do at times defer to an agency when presented with an ambiguous statute." Majority op., ¶ 32.
¶ 81. Essentially, the majority opinion concludes that if a statute is plain on its face, that is, not ambiguous, then no extrinsic sources, including agency interpretations, need be consulted to determine the statute's meaning.1 Put another way, if a statute's *599meaning is unambiguous and obvious from the text, then the court's interpretation is the only reasonable interpretation of a statute and no deference need be given to an agency's interpretation.2
¶ 82. The majority opinion explains its approach as follows: "As a point of emphasis, the court will review the § 77.60(3) issue de novo because the statute lacks ambiguity. We will give the Commission's interpretation of § 77.60(3) no deference because of the lack of ambiguity, not because the Commission lacks experience or has previously been inconsistent." Majority op., ¶ 35 n.6.
¶ 83. I believe this approach to deference to an agency's interpretation of a statute is problematic.
¶ 84. Traditionally, this court has not considered, as a threshold inquiry, whether a statute is ambiguous before examining whether to accord deference to an agency's statutory interpretation.3 The court instead has stated that it decides questions of law but under some circumstances may accord deference to an agency's interpretation.
¶ 85. Rather than analyzing such questions as the experience an agency has with a certain statute, its specialized knowledge in a field, and whether it has been specially charged by the legislature to administer *600the statute to determine whether a certain level of deference should be afforded to an agency's interpretation, the majority opinion today allows courts to bypass this analysis by simply declaring the statute "unambiguous" and offering the court's interpretation of the statute. Whether deference is given to an agency's statutory interpretation should not fall prey to the easily manipulated test of "ambiguity."
¶ 86. As I have previously written, "[t]he ambiguous/unambiguous, literal, plain meaning debate is a word game. The characterizations of 'ambiguous,' 'unambiguous,' 'literal,' and 'plain meaning' are in the eyes of the beholder and appear to be conclusory labels a court pins on a statute."4
¶ 87. The two methods of determining the deference, if any, to afford an agency's interpretation of statutes — the one advocated today by the majority opinion and the one traditionally used — may ultimately reach the same result. To avoid confusion and debate in future cases about the correct analysis, I would continue to apply the analysis traditionally employed for according deference to statutory interpretation of an administrative agency.
¶ 88. For the foregoing reasons, I dissent.
¶ 89. I am authorized to state that Justice ANN WALSH BRADLEY joins this opinion.

 Majority op., ¶¶ 29-30, 32. I find it surprising that the majority opinion treats an agency's interpretation of a statute as an extrinsic source. The usual extrinsic source is "legislative history." I wonder whether under the majority's rubric prior case law interpreting a statute in question would also be considered an "extrinsic source," to be used only when a statute is deemed ambiguous.

 I also do not understand the reason for the majority's comparison of the reasonableness of the positions of the Department of Revenue and the Tax Appeals Commission. See majority op., ¶¶ 40, 53, 59. The court is reviewing the statutory interpretation and the decision of the Tax Appeals Commission, not reviewing the Department of Revenue.

 For an extensive discussion of the method traditionally used to determine what level of deference to afford an agency's statutory interpretation, including the numerous cases in which it was applied, see Racine Harley-Davidson v. Div. of Hearings & Appeals, 2006 WI 86, 292 Wis. 2d 549, 717 N.W.2d 184.

 Teschendorf v. State Farm Ins. Cos., 2006 WI 89, ¶ 67, 293 Wis. 2d 123, 717 N.W.2d 258 (Abrahamson, C.J., concurring) (listing other cases describing the problematic aspects of the inquiiy into ambiguity).