Mesa Leasing Limited v. City of Burlington
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Mesa Leasing Limited v. City of Burlington (98-037); 169 Vt. 93; 730 A.2d 1102
[Filed 19-Feb-1999]
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
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No. 98-037
Mesa Leasing Limited Supreme Court
On Appeal from
v. Chittenden Superior Court
City of Burlington January Term, 1999
Linda Levitt, J.
Joseph F. Obuchowski of Roesler, Whittlesey, Meekings & Amidon,
Burlington, for Plaintiff-Appellant
Kenneth A. Schatz and Kimberlee J. Sturtevant, Office of the City
Attorney, Burlington, for Defendant-Appellee
PRESENT: Amestoy, C.J., Morse, Johnson and Skoglund, JJ.
MORSE, J. The owner of a commercial excursion vessel operating out
of the City of Burlington appeals the superior court's determination that
the City had the authority to impose a personal property tax upon the
vessel for years in which it was not physically present in Burlington on
April 1, the statutory day of assessment. We conclude that the vessel had
a tax situs in Burlington for the years in question, and thus affirm the
superior court's judgment.
The facts are not in dispute. The subject property is the Spirit of
Ethan Allen II, a cruise vessel that operates on Lake Champlain from April
to November out of the Burlington Community Boathouse. The vessel's
owner, Mesa Leasing Limited, leases the vessel to Green Mountain Boat
Lines Limited. The principal shareholders of both corporations are the
same two persons.
The Spirit of Ethan Allen II arrived in Burlington on April 2 for the
1995 sailing season, which ended in November of that year. The vessel
returned to Burlington on April 4, 1996 for
the 1996 sailing season. During the periods that the vessel was not in
operation out of Burlington, it was being stored in the Town of Shelburne
Shipyard. In addition to paying personal property taxes, Green Mountain
paid the City $8,800 per year in 1995 and 1996 for the right to dock the
vessel in Burlington. No town other than Burlington has imposed personal
property taxes on the vessel.
The issue is whether the City had the authority to impose a personal
property tax on the Spirit of Ethan Allen II for years in which the vessel
was not physically located in Burlington on April 1. Vessels used for
income producing purposes may be taxed as personal property in accordance
with 32 V.S.A. § 3691. See 32 V.S.A. § 3692. Under the general rule set
forth in § 3691, taxable tangible personal property "shall be set in the
list to the last owner thereof on April 1 in each year, in the town . . .
where such property is situated." In response to the parties' opposing
summary judgment motions, the superior court ruled that April 1 is the date
for establishing ownership, not the location of the property, and that
because the income generating use of the Spirit of Ethan Allen II is in
Burlington, Burlington is the permanent situs for tax purposes.
On appeal, Mesa Leasing argues that because the Spirit of Ethan Allen
II was not physically located in Burlington on April 1 for the years in
question, the City had no authority under § 3691 to impose a personal
property tax. On the other side, the City reiterates the superior court's
conclusion that Burlington is the place from which the income producing
vessel operates and thus the tax situs for purposes of §§ 3691-3692.
We agree with the superior court that § 3691 does not preclude a town
from imposing a personal property tax upon property not physically located
in that town on April 1. April 1 is merely the day of assessment, an
arbitrary day from which towns commence the process of determining which
properties will be taxed at what value. See 32 V.S.A. § 4001(a) (on April
1, state shall furnish towns inventory forms requiring taxpayers to list
all taxable real and personal property); 32 V.S.A. § 4041 (on April 1,
listers shall proceed to take up such inventories
and examine property that they are required to appraise); 32 V.S.A. § 4044
(taxable personal estate shall be appraised at its fair market value on
April 1). Inclusion of the April 1 assessment day in § 3691 does not
suggest that personal property may be taxed only by towns in which the
property is physically located on that particular day. See Buchanan County
v. State Tax Comm'n, 407 S.W.2d 910, 914 (Mo. 1966) (statute providing
that personal property shall be taxed in county where property is
"situated" on stated day "is not the same as providing that the property
shall be taxable where `physically present' on that day"). Construing the
statute in such a manner would defeat its purpose by allowing owners to
remove their property from the taxing jurisdiction for a brief period to
avoid the tax. See Braun v. Board of Dental Examiners, 167 Vt. 110, 117,
702 A.2d 124, 128 (1997) (Legislature is presumed not to intend
interpretation of statute that would lead to irrational consequences); In
re G.F., 142 Vt. 273, 279, 455 A.2d 805, 808 (1982) (statutes must not be
construed in manner that will render them ineffective).
There is nearly universal agreement that personal property is
"situated" for tax purposes at its tax situs, which requires a sufficient
nexus between the property and the taxing jurisdiction. See Zantop Air
Transport v. County of San Bernardino, 54 Cal. Rptr. 813, 816 (Ct. App.
1966) (word "situated" as used in state constitution and tax code is
synonymous with "situs"); Assessors of Sheffield v. J.F. White Contracting
Co., 130 N.E.2d 696, 698 (Mass. 1955) (word "situated" in tax statute has
same meaning as "situs"); Colonial Life & Accident Ins. Co. v. South
Carolina Tax Comm'n, 103 S.E.2d 908, 919 (S.C. 1958) (in statute defining
investment income based upon where real or personal property is situated,
word "situated" means tax situs and not physical location of property).
Because of its mobility, personal property may have a tax situs in one or
more places where it has "a more or less permanent location." Buchanan,
407 S.W.2d at 914 (word "situated" refers to place where personal property
is regularly kept). The crucial inquiry is whether the property's
contacts with the taxing jurisdiction are sufficient to justify imposition
of the tax there. See Reeves v. Island Creek Fuel & Transp. Co., 230 S.W.2d 924, 927 (Ky. 1950) (permanency sufficient to impose personal
property tax exists in counties where property
is being used consistently and continually rather than spasmodically and
temporarily); Flying Tiger v. Board of Assessors, 535 N.E.2d 231, 234
(Mass. 1989) ("some degree" of permanence is required before personal
property is considered "situated" in district for local tax purposes);
George M. Brewster & Son v. Borough of Bogota, 90 A.2d 58, 61 (N.J. Super.
Ct. App. Div. 1952) (uses of property and circumstances of its being in
taxing district are determinants of permanence). That determination must
be made on a case-by-case basis.
Here, the Spirit of Ethan Allen II operates solely out of the
Burlington Community Boathouse, but is at the Shelburne Shipyards for
winter storage between November and April every year. As the City points
out, all of the vessel's income from its commercial operations are derived
directly from its contacts with Burlington. Without question, the vessel's
consistent and continuous contacts with Burlington for a significant
portion of the years in question, during which time the vessel's owners
benefitted from city services and protection, were sufficient to create a
tax situs there.
The parties do not address whether the Spirit of Ethan Allen II had
also attained a tax situs in the Town of Shelburne, or whether the City of
Burlington was entitled to only an apportioned share of the assessed value
of the vessel. In cases involving interstate transportation, many federal
and state courts have relied upon the Due Process and Commerce Clauses in
approving apportionment of personal property taxes levied by multiple
local jurisdictions having sufficient contacts with the subject property.
See Sea-Land Serv., Inc. v. County of Alameda, 528 P.2d 56, 63 (Cal. 1974)
(en banc) (in series of decisions, United States Supreme Court has approved
apportioned property taxes levied by multiple local jurisdictions having
sufficient contact with vehicles engaged in interstate commerce); Beelman
Truck Co. v. Ste. Genevieve County, 861 S.W.2d 557, 559 (Mo. 1993) (en
banc) (property used in interstate commerce may have tax situs in more
than one state; each state in which property has tax situs may tax property
so long as it does so on reasonably apportioned basis); Atkinson Dredging
Co. v. Thomas, 223 S.E.2d 592, 595 (S.C. 1976) (several federal and state jurisdictions
require apportionment of personal property taxes on property that is
engaged in interstate commerce and that has sufficient contacts with more
than one taxing authority during tax year); cf. Peabody Coal Co. v. State
Tax Comm'n, 731 S.W.2d 837, 838 (Mo. 1987) (en banc) (it makes no
difference whether any other state has tried to impose tax on subject
property; existence in another state of constitutional authority to do so
is enough to preclude Missouri from levying unapportioned tax). Part of
the reasoning behind apportioning personal property taxes among
jurisdictions having sufficient contacts with the subject property is that
imposition of such a tax should be related to the services and protection
provided by each jurisdiction. See Zantop Air Transport, 54 Cal. Rptr. at
818 (due process is concerned with whether tax is related to
opportunities, benefits, or protection afforded by taxing jurisdiction);
Annotation, Situs of Tangible Personal Property for Purposes of Property
Taxation, 2 A.L.R.4th 432, 438 (1980) (power of taxation is based upon
assumption that taxing authority is benefitting property owner by
providing protection, added value, or creation or maintenance of public
conveniences).
In this case, although all of the vessel's commercial activities take
place solely from its Burlington dock during the sailing season, one could
argue that the maintenance and repair operations that presumably occur
during the off-season while the vessel is in winter storage are no less
essential to running the business. Personal property requires maintenance
and protection even when it is not in operation for its intended use. See
Ships and Power Equip. Corp. v. San Diego County, 209 P.2d 143, 145 (Cal.
Dist. Ct. App. 1949) (for purposes of personal property tax, vessel that
is completely inoperative is no different than any other movable tangible
personal property). Further, the Spirit of Ethan Allen II presumably
receives police and fire protection as well as the benefit of marina
facilities in the Town of Shelburne during its winter storage.
Nevertheless, considering that this case does not involve a dispute
between jurisdictions, that Mesa Leasing has not argued in the alternative
for apportionment, and that apportionment of personal property taxes is
not required by statute, cf. 32 V.S.A. 4606 (when part of piece of real
estate has been transferred in any year, listers shall make such
apportionment of assessments
thereon as they seem just), we will not disturb the superior court's
judgment. Apportionment is not required simply because an item of
personal property is not always in the same place. See Peabody Coal Co.,
731 S.W.2d at 839. Nor is there any requirement that the benefits
conferred by the taxing jurisdiction be received over the entire period
for which the tax is levied. See Atkinson Dredging, 223 S.E.2d at 595,
596 (unapportioned tax on appellant's property did not violate due process
even though property was located and taxed in another jurisdiction for
portion of tax year).
Affirmed.
FOR THE COURT:
_________________________________________
Associate Justice
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