Citation Partners, LLC v. Wis. Dep't of Revenue
Annotate this Case
Justia Opinion Summary
Want to stay in the know about new opinions from the Wisconsin Supreme Court?
Sign up for free summaries delivered directly to your inbox. Learn More ›
You already receive new opinion summaries from Wisconsin Supreme Court. Did you know we offer summary newsletters for even more practice areas and jurisdictions? Explore them here.
The Supreme Court affirmed the opinion of the court of appeals reversing the decision of the circuit court reversing the judgment of the tax appeals commission concluding that the sales tax exemption in Wisconsin Act 185, which expanded an existing sales tax exemption to include the sale of aircraft parts or maintenance, did not apply to Lessees' payments for aircraft repairs and engine maintenance, holding that the court of appeals did not err.
Citation Partners, LLC owned an aircraft that it leased to Lessees. Citation Partners charged per-flight-hour rates for aircraft repairs and maintenance as part of the total amount Lessees paid to lease the aircraft, which rates corresponded to the amount Citation Partners spent on repairs and maintenance. Citation Partners argued that this portion of the lease payment was tax exempt because it was a sale of aircraft parts or maintenance. The Supreme Court disagreed, holding that the court of appeals correctly found that the payments were not exempt from sales tax under the plain language of the statutes.
Download PDF
2023 WI 16 SUPREME COURT OF WISCONSIN CASE NO.: 2020AP1683 COMPLETE TITLE: Citation Partners, LLC, Petitioner-Respondent-Petitioner, v. Wisconsin Department of Revenue, Respondent-Appellant. REVIEW OF DECISION OF THE COURT OF APPEALS Reported at 400 Wis. 2d 260, 968 N.W.2d 734 PDC No: 2021 WI App 86 - Published OPINION FILED: SUBMITTED ON BRIEFS: ORAL ARGUMENT: SOURCE OF APPEAL: COURT: COUNTY: JUDGE: March 1, 2023 October 17, 2022 Circuit Dodge Martin J. De Vries JUSTICES: DALLET, J., delivered the majority opinion of the Court, in which ANN WALSH BRADLEY, HAGEDORN, and KAROFSKY, JJ., joined. ROGGENSACK, J., filed a dissenting opinion, in which ZIEGLER, C.J., and REBECCA GRASSL BRADLEY, J., joined. NOT PARTICIPATING: ATTORNEYS: For the petitioner-respondent-petitioner, there were briefs filed by Frederic J. Brounder, J. Wesley Webendorfer, and DeWitt LLP, Madison. There was an oral argument by J. Wesley Webendorfer. For the respondent-appellant, there was a brief filed by Anthony D. Russomanno, assistant attorney general, with whom on the brief was Joshua L. Kaul, attorney general. There was an oral argument by Anthony D. Russomanno, general. 2 assistant attorney 2023 WI 16 NOTICE This opinion is subject to further editing and modification. The final version will appear in the bound volume of the official reports. No. 2020AP1683 (L.C. No. 2019CV612) STATE OF WISCONSIN : IN SUPREME COURT Citation Partners, LLC, FILED Petitioner-Respondent-Petitioner, MAR 1, 2023 v. Wisconsin Department of Revenue, Sheila T. Reiff Clerk of Supreme Court Respondent-Appellant. DALLET, J., delivered the majority opinion of the Court, in which ANN WALSH BRADLEY, HAGEDORN, and KAROFSKY, JJ., joined. ROGGENSACK, J., filed a dissenting opinion, in which ZIEGLER, C.J., and REBECCA GRASSL BRADLEY, J., joined. REVIEW of a decision of the Court of Appeals. ¶1 REBECCA FRANK DALLET, J. Affirmed. Wisconsin imposes a five percent tax on the sale or lease of tangible personal property, including aircraft, as well as on select services. The tax applies to the "sales price"——that is, "the total amount of consideration" paid for a sale, lease, or service, deductions for the seller's or lessor's costs. with no See Wis. Stat. No. §§ 77.52(1)(a), 77.51(15b)(a) (2013-14).1 2020AP1683 The sale of aircraft parts and maintenance, however, are exempt from sales tax. See Wis. Stat. §§ 77.52(2)(a)10., 77.54(5)(a)3. ¶2 Citation Partners, LLC owns an leases to third parties, the Lessees. aircraft which it As part of the total amount the Lessees pay to lease the aircraft, Citation Partners charges per-flight-hour rates for aircraft repairs and engine maintenance. Partners Those spends on rates correspond aircraft repairs to the and amount engine Citation maintenance. Citation Partners argues that this portion of the lease payment is tax exempt maintenance. because We it is disagree. a The sale of aircraft per-flight-hour parts charges or for aircraft repairs and engine maintenance are taxable because they are part of the total amount of consideration the Lessees pay to lease Citation Partners' aircraft. We therefore affirm the court of appeals' decision. I ¶3 Citation Partners owns an aircraft that it leases to the Lessees. Dry Lease, The Lessees signed a contract called the Aircraft defining the responsibilities they and Partners have with regard to the lease of the aircraft. Citation The Dry Lease requires the Lessees to notify Citation Partners if the aircraft needs repairs or maintenance. If so, Citation Partners is responsible for scheduling and paying for all repairs or All subsequent references to the Wisconsin Statutes are to the 2013-14 version. 1 2 No. maintenance.2 It does not perform any of the 2020AP1683 repairs or maintenance itself. ¶4 In addition to the Dry Lease, the Lessees entered into a Side Agreement with Citation Partners that sets forth the financial terms for the lease of the aircraft. The Side Agreement includes costs-per-flight-hour that Citation Partners charges the Lessees for aircraft repairs and engine maintenance. Those charges are substantially similar to the amount Citation Partners spends when it purchases aircraft repairs and engine maintenance directly from vendors. ¶5 In 2013, the Legislature passed Wisconsin Act 185, which expanded an existing sales tax exemption to include the sale of aircraft parts or maintenance. See 2013 Wis. Act 185. After the Act took effect, Citation Partners stopped collecting sales tax on the amounts it charged Lessees for aircraft repairs and engine maintenance. In 2017, the Wisconsin Department of Revenue notified Citation Partners that unpaid sales taxes were due on those amounts. ¶6 sales Citation Partners appealed, claiming that the Act 185 tax aircraft exemption repairs and applied engine to the Lessees' maintenance because payments they for were a dollar-for-dollar "reimbursement" to Citation Partners for those costs. The Tax Appeals Commission disagreed, concluding that The Lessees have limited authority to incur up to $5,000 of necessary maintenance and repair work for the aircraft without the prior written approval from Citation Partners. The Lessees will be reimbursed by Citation Partners upon receipt of proof of payment. 2 3 No. 2020AP1683 the payments were not reimbursements and that Act 185 did not apply to any portion of the payments Citation Partners received from the Lessees. decision on the The circuit court3 reversed the Commission's grounds that an agency relationship between Citation Partners and the Lessees. existed According to the circuit court, this relationship meant that the payments for aircraft repairs and engine maintenance were tax exempt, since those payments would be tax-free if they were made directly by the Lessees to the vendors. ¶7 The court of appeals reversed. Citation Partners, LLC v. DOR, 2021 WI App 86, ¶35, 400 Wis. 2d 260, 968 N.W.2d 734. In its view, irrelevant. not exempt the existence Id., ¶32. from sales of an agency relationship was Instead, it held that the payments were tax under the plain language of the statutes, which apply sales tax to "the total amount paid on an aircraft lease," without "any deduction for the portions of a lease attributed to aircraft maintenance or engine maintenance, which are the costs and expenses of running an aircraft leasing business." Id., ¶24. II ¶8 We review the Commission's decision rather than the circuit court's. See Friendly Vill. Nursing & Rehab, LLC v. DWD, 2022 WI 4, ¶13, 400 Wis. 2d 277, 969 N.W.2d 245. In doing so, we defer to the Commission's findings of fact so long as The Honorable Martin Circuit Court presided. 3 J. De 4 Vries of the Dodge County No. 2020AP1683 they are supported by substantial evidence, but we review its legal conclusions de novo. Id. III ¶9 In order to determine whether the Lessees' cost-per- flight-hour payments to Citation Partners for aircraft repairs and engine maintenance are taxable, we analyze the tax statutes. "When interpreting statutes, we start with the text, and if its meaning is plain on its face, we stop there." Clean Wis., Inc. v. DNR, 2021 WI 72, ¶10, 398 Wis. 2d 433, 961 N.W.2d 611. In assessing the plain meaning of the text, "[w]e also consider the broader statutory context, interpreting language consistently with how it is used in closely related statutes." Duncan v. Asset Recovery Specialists, Inc., 2022 WI 1, ¶9, 400 Wis. 2d 1, 968 N.W.2d 661. After analyzing the relevant statutes, we then consider what effect, if any, Citation Partners' arguments about the law of agency has on our interpretation. A ¶10 Wisconsin imposes a five percent tax on the "sales price" for tangible personal property like aircraft that is sold or leased. § 77.52(1)(a). "[S]ales price" is defined broadly as "the total amount of consideration, . . . for which tangible personal property . . . [is] § 77.51(15b)(a). therefore the The "sales sold, "total amount price," is licensed, of [or] leased." consideration," calculated "without and any deduction for" "[t]he seller's cost of the property or items, 5 No. 2020AP1683 property, or goods . . . sold," or "[t]he cost of materials used, labor or service cost, . . . and any other expense of the seller." Id. (a)1.-2. Thus, §§ 77.52(1)(a) and § 77.51(15b)(a) together state that the total amount of consideration paid for a lease——the "sales price"——is taxable, with no deduction for the lessor's costs. ¶11 See § 77.51(15b)(a)1.-2. To calculate the total "sales price" that the Lessees pay Citation Partners to lease the Aircraft, we simply multiply the number of flight hours by the total of all the costs-perflight-hour.4 The Side Agreement breaks the total costs-per- flight-hour down into different hourly rates, including a base rate ($724.50/hour), Airplane Repairs ($488/hour), and Engine TAP Costs ($292.26/hour).5 The Lessees have to pay all of these costs in order to lease the aircraft. The sum of those costs—— including for aircraft repair and engine maintenance——is thus "the total amount of consideration . . . for which [the aircraft is] . . . leased" § 77.51(15b)(a). If and there is were therefore taxable. any remaining doubt See as to whether Citation Partners' costs for aircraft repairs and engine maintenance can § 77.51(15b)(a) be deducted confirms that from the the "total sales price, amount of consideration" must be calculated "without any deduction" for Citation Partners' costs. Id. (emphasis added). In addition, the Lessees also pay $1.00 per rental period to lease the aircraft. 4 These hourly rates reflect those in the Side Agreement as of January 1, 2015. 5 6 No. ¶12 Citation Partners argues that the 2020AP1683 payments are taxable because they are not consideration at all. not That is because, in its view, Citation Partners simply hands the money the Lessees pay for repairs and maintenance over to the vendors that provide those services. But consideration is "any act of the plaintiff from which the defendant . . . derives a benefit or advantage." Consideration, Black's Law Dictionary (11th ed. 2019); see also DOR v. River City Refuse Removal, Inc., 2007 WI 27, ¶50, 299 Wis. 2d 561, 729 N.W.2d 396 (explaining that consideration "may arise when there is a benefit to the promisor or a detriment to the promisee"). And Citation Partners clearly benefits from these payments by passing along to its Lessees the costs of maintaining its aircraft. For that payments are——by definition——consideration. reason, these See River City, 299 Wis. 2d 561, ¶50 (consideration includes "a change in financial position"). Additionally, accepting Citation Partners' argument that it receives no consideration from the Lessees' payments for aircraft payment repairs and corresponds engine to maintenance anticipated part of § 77.51(15b)(a) meaningless. simply repair because costs would that render See State ex rel. Kalal v. Cir. Ct. for Dane Cnty., 2004 WI 58, ¶46, 271 Wis. 2d 633, 681 N.W.2d 110 ("Statutory language is read where possible to give reasonable effect surplusage."). not clear "sales what to every word, in order to avoid After all, if Citation Partners is right, it is § 77.51(15b)(a) price"——the "total means amount 7 when of it says that the consideration"——is No. 2020AP1683 calculated "without any deduction" for Citation Partners' costs. § 77.51(15b)(a) ¶13 (emphasis added). Citation Partners claims that the costs-per-flight- hour that it receives for aircraft parts and engine maintenance are nevertheless exemptions which tax related exempts the exempt. to It aircraft: sale of points Wis. "parts Stat. used to to § two statutory 77.54(5)(a)3., modify or repair aircraft," and Wis. Stat. § 77.52(2)(a)10., which exempts the sale of "repair, service, . . . and maintenance of any aircraft or aircraft parts." Citation Partners argues that since the plain language of both exemptions covers the costs of aircraft repairs and engine maintenance, then "the reimbursement payments that Citation Partners receives from the Lessees are exempt from sales tax." ¶14 We disagree because neither of these statutory exemptions applies to the payments Citation Partners receives from the Lessees. its Lessees "parts Simply put, Citation Partners does not sell used to modify or repair aircraft," "repair, service, . . . and maintenance of any aircraft." §§ 77.54(5)(a)3., 77.52(2)(a)10. Lessees. or See It leases its aircraft to the And as explained previously, the statutes already make clear that the total amount of consideration paid on an aircraft lease is taxable without any deduction for the Lessor's costs. See §§ 77.51(15b)(a), 77.52(1)(a). When Citation Partners (or the Lessees for that matter) buy aircraft repairs or engine maintenance directly, those transactions are tax-exempt. But when Citation Partners passes those costs along to its customers 8 No. 2020AP1683 as part of the total amount of consideration in a lease, that transaction is taxable. ¶15 For example, if the plane's landing gear breaks and Citation Partners purchases parts from a business in Wisconsin, that transaction because the is exempt business sold under § Citation modify or repair [the] aircraft." would not have to charge 77.54(5)(a)3. the Partners See id. usual That is "parts used to Thus, the seller five percent sales tax. Likewise, when Citation Partners pays a maintenance company to service the aircraft's engine, that transaction is exempt from the sales tax maintenance under § company service, . . . and 77.52(2)(a)10. sold That Citation maintenance is because Partners of . . . an[] the "repair, aircraft part[]." See id. ¶16 Under Act 185 then, sales engine maintenance are tax-exempt. of aircraft repairs or But when Citation Partners turns around and leases its aircraft, it is not selling aircraft repairs Thus, or engine because maintenance. Citation Partners' It is leasing activities fall an aircraft.6 outside the text of the exemptions, the total lease price is taxable. For this reason, the general rule in § 77.51(15b)(a) and the specific exemptions in §§ 77.54(5)(a)3. and 77.52(2)(a)10. relate to different subject matters and are not in conflict. These statutes simply apply to different types of transactions. And because there is no conflict, the general-specific canon is inapposite. See Kramer v. City of Hayward, 57 Wis. 2d 302, 31011, 203 N.W.2d 871 (1973); see also Townsend v. ChartSwap, LLC, 2021 WI 86, ¶39, 399 Wis. 2d 599, 967 N.W.2d 21 (Dallet, J., concurring) ("The general-specific canon applies only to statutes that both address the same subject matter and conflict with one another such that harmonizing them is impossible."). 6 9 No. 2020AP1683 B ¶17 Citation Partners tries to circumvent the plain language of the statutes by arguing that it is the Lessees' agent when it purchases aircraft repairs and engine maintenance. And for that reason, the per-flight-hour reimbursements for aircraft repairs and engine maintenance are akin to the Lessees purchasing those repairs and maintenance directly. ¶18 results An agency relationship is a "fiduciary relation which from the manifestation of consent by one person to another that the other shall act on his behalf and subject to his control." James W. Thomas Constr. Co. v. City of Madison, 79 Wis. 2d 345, 352, 255 N.W.2d 551 (1977). an agency demonstrate relationship that (1) to the exist, Lessees Thus, in order for Citation manifested Partners consent to must have Citation Partners act on their behalf with respect to aircraft repairs and engine maintenance and (2) the Lessees had the right to control Citation Partners' conduct in that regard. ¶19 Citation Partners relies on the lease See id. documents "provid[ing] the framework for the agency relationship." as It points out that the Dry Lease makes the Lessees responsible for "inspect[ing] the Aircraft" and notifying Citation Partners if "any repair or maintenance should be completed." Additionally, the Dry Lease contains an indemnification provision under which the Lessees are "ultimately responsible for all obligations, expenses and disbursements asserted against Citation Partners arising out of the operation of the Aircraft." 10 No. ¶20 2020AP1683 Rather than prove an agency relationship exists, the lease documents reveal the opposite. The Dry Lease states that Citation Partners——not the Lessees——"shall schedule and pay for all repairs and maintenance." And that decision is not "directed" by the Lessees just because they must notify Citation Partners of aircraft. necessary maintenance upon inspection of the Rather, the Lessees' inspection obligation is limited to confirming that the aircraft is flightworthy before using it. Likewise, under the Dry Lease, the Lessees have only limited authority to purchase repairs and maintenance up to $5,000, and are reimbursed Additionally, by Citation although the Partners parties if entered they into a do so. new Side Agreement in 2015 which states that the Lessees are "responsible for fixed and indirect operating expenses and charges attributable to the operation and maintenance of the Aircraft," including "[s]cheduled and unscheduled maintenance," nothing in that Agreement or the Dry Lease suggests that the Lessees control Citation Partners' aircraft-maintenance activities. ¶21 The otherwise. Citation indemnification provision does not demonstrate In that provision, the Lessees agree to indemnify Partners "from and against any and liabilities, demands, obligations, losses, damages, all claims, . . . which may be imposed on, incurred by or asserted against [Citation Partners], in any way relating to or arising out of this Lease, and/or the operation of the Aircraft, . . . ." alone, standard create an indemnification agency relationship. 11 language To like But standing this reiterate, does an not agency No. 2020AP1683 relationship requires that one party have the right to control the other's conduct. 2d 345, at 352. grants the See James W. Thomas Constr. Co., 79 Wis. And nothing in this indemnification provision Lessees the right to control Citation Partners. Instead, the Dry Lease and the Side Agreement demonstrate that Citation Partners, the owner of the aircraft, is the one in charge of repairs and engine maintenance, and that the Lessees do not control how Citation Partners fulfills that responsibility. IV ¶22 Wisconsin imposes a five percent sales tax on the sale or lease of tangible personal property like Citation Partners' aircraft. lease The tax applies to the total "sales price" of the unless there is an applicable exemption. Two such exemptions exist for the sale of aircraft parts and maintenance, but neither apply to the Lessees' payments to Citation Partners for aircraft repairs and engine maintenance. Accordingly, we hold that the total amount of consideration the Lessees pay to lease Citation Partners' aircraft is taxable, and affirm the court of appeals' decision. By the Court.—The decision affirmed. 12 of the court of appeals is No. ¶23 Wis. PATIENCE DRAKE ROGGENSACK, J. Act 185, the § 77.52(2)(a)10. to alteration . . . of any (dissenting). legislature exempt enacted the aircraft or 2020AP1683.pdr Wis. "repair, aircraft In 2013 Stat. service, parts" and Wis. Stat. § 77.54(5)(a)3. to exempt the "[p]arts used to modify or repair aircraft" from state sales taxes. claimed exemption from state This case involves a sales taxes for aircraft maintenance services and aircraft parts. The majority opinion never 77.54(5)(a)3, interprets §§ 77.52(2)(a)10. or address aircraft repairs and aircraft parts. which It skips over the plain meaning of those two statutes, and instead, it interprets Wis. Stat. §§ 77.51(15b)(a) and 77.52(1)(a), neither of which contains the word, "aircraft," nor does either statute mention aircraft parts or aircraft maintenance. ¶24 I interpret Wis. Stat. §§ 77.52(2)(a)10. and 77.54(5)(a)3., the statutes relevant to Citation Partners, LLC's claim. The plain meaning of those statutes grants Citation Partners the sales tax exemption it seeks. opinion chooses to follow the Because the majority error-strewn path of the Tax Appeals Commission (TAC), which contravenes the clear statutory direction aircraft to exempt maintenance the from sales state price of sales aircraft taxes, I parts and respectfully dissent. I. ¶25 aircraft BACKGROUND Citation Partners, that leases it to LLC owns parties 1 a Cessna related to Citation the C12 limited No. liability operate company under and two to one unrelated documents: the 2020AP1683.pdr party. Aircraft The Dry parties Lease and individual Side Agreements that each lessee signs. ¶26 of a Section One of the Dry Lease describes the structure "Rental Citation Period" Partners. valuable for It sets consideration" Citation Partners. the as aircraft's one a dollar use "and lessee's and return to other good and payment to initial Section Two provides that the lease term is one year, unless terminated earlier by either party with ten days notice. Section Four talks about scheduling use of the aircraft and what is required to do so. Section Five requires Citation Partners to insure the aircraft. ¶27 Section Six places certain geographic and other restrictions on aircraft use and creates obligations for the lessees. and Section Nine requires lessees to inspect the aircraft maintenance records prior to each rental period and to notify Citation Partners and not to operate the aircraft until all repairs and maintenance are completed. schedules and maintenance. initially Section interpreted in pays Nineteen accordance with Citation Partners vendors for requires that the lease be of the State of the laws repairs and Wisconsin. ¶28 The Side Agreements financial are commitments individual of lessees memoranda concerning the to Citation Partners. Each Side Agreement states the hourly charge for flight time, the lessee's obligation to pay a stated amount for aircraft repairs and for engine maintenance and a listing of 2 No. 2020AP1683.pdr expenses specific to flights that are allocated only to the lessee who incurred. its was using the aircraft when the charges were Accordingly, Citation Partners charges each lessee proportionate share of aircraft repairs and engine maintenance that Citation Partners initially pays to vendors. However, the Side Agreements contain more components than those two charges. ¶29 Prior to 2015, Citation Partners charged state sales taxes on all components of the Dry Lease and Side Agreements and remitted the collections to Department of Revenue (DOR). Because the effective date of 2013 Wis. Act 185 was July 2014, Citation Partners filed for a refund of taxes collected for periods granted of time the after refund. the effective Subsequently, date of however, Act 185. DOR DOR demanded repayment. ¶30 Citation Partners appealed DOR's decision to the TAC, which agreed with DOR. Citation Partners then sought review in circuit court, which reversed the TAC. the court of appeals, which The TAC sought review in reversed the circuit court. Citation Partners petitioned for review here, which petition we granted. II. A. ¶31 DISCUSSION Standard of Review We review the TAC's decision, not that of the circuit court or the court of appeals. MercyCare Ins. Co. v. Wis. Comm'r of Ins., 2010 WI 87, ¶25, 328 Wis. 2d 110, 786 N.W.2d 785. 3 No. ¶32 This statutes. present dispute The requires interpretation questions of law us to and interpret application requiring 2020AP1683.pdr our and of apply statutes independent review. Milwaukee Police Ass'n v. City of Milwaukee, 2018 WI 86, ¶17, 383 Wis. 2d 247, 914 N.W.2d 597; Solowicz v. Forward Geneva Nat'l, LLC, 2010 WI 20, ¶13, 323 Wis. 2d 556, 780 N.W.2d 111. However, as we do so, we benefit from the discussions of the circuit court and court of appeals. TAC on questions of law. Id. We owe no deference to Tetra Tech EC, Inc. v. DOR, 2018 WI 75, ¶84, 382 Wis. 2d 496, 914 N.W.2d 21; see also Patience Drake Roggensack, Elected to Decide: Is the Decision-Avoidance Doctrine of Great Weight Deference Appropriate in This Court of Last Resort?, 89 Marq. L. Rev. 541 (2006). B. 1. ¶33 Statutory Interpretation Principles of Statutory Interpretation We begin statutory interpretation with examination of the words the legislature chose to use in statutory enactments that are under review here. is interpreted in the When we do so, "statutory language context in which it is used; not in isolation but as part of a whole; in relation to the language of surrounding or closely-related statutes; avoid absurd or unreasonable results." Comm'n, 2022 WI 64, ¶50, 403 and reasonably, to Teigen v. Wis. Elections Wis. 2d 607, 976 N.W.2d 519 (quoting State ex rel. Kalal v. Cir. Ct. for Dane Cnty., 2004 WI 58, ¶46, 271 Wis. 2d 633, 681 N.W.2d 110); Antonin Scalia & Bryan Texts, A. Garner, 180, 183 Reading (2012) Law: The (explaining 4 Interpretation that the of Legal general-specific canon applies to statutory construction No. 2020AP1683.pdr "when conflicting provisions simply cannot be reconciled"). ¶34 Statutory analysis. history is central to a plain meaning As we have explained, a "review of statutory history is part of a plain meaning analysis" because it is part of the context in which we interpret statutory terms. Richards v. Badger Mut. Ins. Co., 2008 WI 52, ¶22, 309 Wis. 2d 541, 749 N.W.2d 581; see also Kalal, 271 Wis. 2d 633, ¶52 n.9 (citing Cass R. Sunstein, Interpreting Statutes in the Regulatory State, 103 Harv. L. Rev. 405, 430 (1989)). 2. ¶35 Wisconsin Stat. §§ 77.52(2)(a)10. and 77.54(5)(a)3. 2013 relevant here: Wis. Act 185 enacted two statutes that are Wis. Stat. §§ 77.52(2)(a)10. and 77.54(5)(a)3. As enacted, § 77.52(2)(a)10. provides in relevant part: For the privilege of selling, licensing, performing or furnishing the services described under par. (a) . . . . (a) The tax imposed following types of services: herein applies to the . . . . 10. Except for the repair, service, alteration, fitting, cleaning, painting, coating, towing, inspection, and maintenance of any aircraft or aircraft parts; Section 77.52(2)(a)10. is broadly stated. to "any aircraft or aircraft parts." The statute applies (Emphasis added.) There is no statutory limitation on the statute's use that refers to whether the "selling, licensing, performing or furnishing" of aircraft parts or services are set out in a written agreement or performed without a written agreement. 5 There is no limitation No. 2020AP1683.pdr on whether the person responsible for that financial obligation pays the vendor directly or pays another who has paid the vendor on that person's behalf. ¶36 Wisconsin Stat. § 77.54 is not a newcomer to Wisconsin statutes. tax. It sets out "General exemptions" from state sales Section 77.54's exemptions are many and diverse, ranging from tractors and machines, § 77.54(3)(a), to the sales price for tickets § 77.54(9), to to elementary the sales and secondary price of school ballet and activities, tap shoes, § 77.54(67)(a)12.a. ¶37 2013 Wis. Act 185 added a relevant exemption to the many-faceted exemptions of Wis. Stat. § 77.54 with the enactment of § 77.54(5)(a)3. The amended statute provides a new exemption: The sales price from the sale of and the storage, use or other consumption of; . . . . 3. Parts used to modify or repair aircraft. It exempts the "sales price" of aircraft parts from sales taxes, just as § 77.54(67)(a)12.a. exempts the sales price of ballet and tap shoes from sales taxes. Nothing in § 77.54(5)(a)3. limits its exemption when the obligation to pay for aircraft parts is set out in written agreements. legislature has done for the myriad Once again, just as the of exemptions contained within § 77.54, the legislature granted a broad exemption for the sales price of aircraft parts. ¶38 words In the dispute before us, the plain meaning of the the legislature chose when 6 it enacted Wis. Stat. No. §§ 77.52(2)(a)10. and 77.54(5)(a)3. describe 2020AP1683.pdr both specific exemptions from sales taxes for the repair and maintenance of aircraft and general exemptions from sales tax for the "sales price" of aircraft parts used to modify or repair an aircraft. ¶39 Prior to the above-described statutory changes, aircraft parts and maintenance were not exempt from state sales tax, unless the aircraft was used by "certified or licensed carriers of commerce," attachments persons or Wis. Stat. to aircraft property in interstate § 77.54(5)(a)1., were "sold to or the persons or foreign aircraft and who not are residents of this state and who will not use such aircraft in this state," § 77.54(5)(a)2.1 Clearly, the legislature knew how to limit exemptions from sales tax for aircraft if it chose to do so. However, in the enactment of Wis. Stat. §§ 77.52(2)(a)10. and 77.54(5)(a)3., the legislature chose to provide the exemption for the "sales price" of "any aircraft or aircraft parts." (Emphasis added.) Accordingly, applying the plain meaning of the words the legislature chose, I conclude §§ 77.52(2)(a)10. and 77.54(5)(a)3. grant exemptions that Citation Partners seeks. 2013 Wis. Act 185 repealed Wis. Stat. § 77.54(5)(a) and renumbered the statute as Wis. Stat. §§ 77.54(5)(a)1. and 77.54(5)(a)2. Act 185 did not change the quoted language. 1 7 No. 3. ¶40 2020AP1683.pdr TAC Decision As required, I review the TAC decision, beginning with its factual statements. In reviewing TAC findings of fact, we apply the "'substantial evidence' standard." Hilton ex rel. Pages Homeowners' Ass'n v. DNR, 2006 WI 84, ¶16, 293 Wis. 2d 1, 717 N.W.2d 166 (citations omitted). Wisconsin Stat. § 227.57(6) requires us to set aside or remand an agency action "if the agency's decision depends on any finding of fact not supported by substantial evidence in the record."2 ¶41 The test is based on the Id. evidence of record, and whether reasonable minds would conclude that there are material factual findings conclusions. Id. that underlie TAC's erroneous legal In this matter, we are concerned about how TAC's factual findings affected its decision not to apply Wis. Stat. §§ 77.52(2)(a)10. under review here. TAC's material conclusion are 77.54(5)(a)3. to the transaction As explained below, I conclude that the factual not and findings supported by that underlie substantial its evidence, legal and therefore, TAC's decision must be set aside. Wisconsin Stat. § 227.57(6) provides: "The court shall, however, set aside agency action or remand the case to the agency if it finds that the agency's action depends on any finding of fact that is not supported by substantial evidence in the record." 2 Wisconsin Stat. § 73.015(2) provides that "[a]ny adverse determination of the tax appeals commission is subject to review in the manner provided in [Wis. Stat.] ch. 227." 8 No. a. ¶42 2020AP1683.pdr Factual Errors TAC appears to misread the relevant Side Agreements that are in the record. In one of TAC's errors, it says: Below the hourly fee descriptions, the Side Agreement clarifies the parties' responsibilities for expenses. The Lessor's list includes scheduled and unscheduled maintenance. The Lessee's list does not include any maintenance related expenses.[3] This TAC statement is completely incorrect. ¶43 says The relevant Side Agreement, dated January 1, 2015, the opposite of what TAC finds. The Side Agreement actually provides: Lessee will be responsible for fixed and indirect operating expenses and charges attributable to the operation and maintenance of the Aircraft. These expenses and costs include, but are not limited to: . . . Scheduled and unscheduled maintenance.[4] ¶44 legal The TAC's conclusions. factual TAC inaccuracy errs when leads it it to ignores incorrect the plain statements in the Side Agreement and says: The Dry Lease, with its Side Agreement, does not confer a responsibility for maintenance on the Lessee. To the contrary, it is the Lessor who is expressly responsible for the repairs and maintenance. Because the Lessees are not obligated to maintain the aircraft, they are not reimbursing the Lessor for something paid on their behalf.[5] As the quote above from Record 6-35 shows, under the Side Agreement, the lessees are obligated to pay for repairs and 3 TAC decision, R. 22-13 (emphasis added). 4 R. 6-35 (P. App 0053) (emphasis added). 5 R. 22-15. 9 No. maintenance of the aircraft. 2020AP1683.pdr Therefore, Citation Partners is being reimbursed under the Side Agreement for obligations of the lessees that it paid on their behalves. ¶45 In addition to its misreading of record exhibits, the TAC ignores the Stipulation of Facts that the parties jointly submitted.6 That stipulation in paragraph 3 states, "the Side Agreements and invoices to lessees expressly provided for dollar for dollar reimbursement by each of the lessees of the Aircraft of both engine maintenance cost and Aircraft maintenance cost."7 Notwithstanding that factual stipulation the TAC says, That starting point, reimbursement, presupposes that each Lessee was obligated to pay for repair and maintenance such that the Lessor, in effect, paid the expenses on behalf of the Lessees. That is not what happens under these Agreements.[8] However, reimbursement from Citation Partners for parties paid represented in the the the lessees lessees Factual for is expenses exactly Stipulation what that that the they provided to TAC, as well as under other record exhibits. ¶46 Accordingly, TAC's material factual findings are not supported by substantial evidence, and they must be set aside based on documents in the record and the Stipulation of Facts The majority opinion also ignores the parties' Stipulation of Facts that was submitted to and accepted by TAC and is part of the record before us. That Stipulation is critical to understanding the facts that drive the matter that is now before the court. 6 7 R. 9-4 (P. App 0061). 8 R. 22-14. 10 No. that the parties provided to the TAC. 2020AP1683.pdr Pages Homeowners' Ass'n, 293 Wis. 2d 1, ¶16. b. ¶47 Legal Conclusions TAC's legal conclusions are grounded in its erroneous factual findings. As with the majority opinion, the TAC does not interpret the statutes that are at issue here. Instead, it interprets Wis. Stat. § 77.51(15b)(a), which does not mention aircraft maintenance, aircraft parts or aircraft in any regard.9 Nevertheless, TAC concludes that "expenditures for those repairs and maintenance parts and services are not separately exempt when incorporated into the lease payments of a subsequent lease of the entire Aircraft."10 ¶48 Rather, it is Wis. Stat. § 77.54(5)(a)3. that creates an "exemption" for the "sales price" of "[p]arts used to modify or repair aircraft," and Wis. Stat. § 77.52(2)(a)10. that sets sales of painting, "repair, coating, service, towing, alteration, inspection and fitting, cleaning, maintenance of any aircraft or aircraft parts" outside the scope of state sales taxes. Nothing in either statute changes those exemptions when an aircraft is leased. Stated otherwise, there is nothing in either statute that limits its use when obligations to pay for aircraft maintenance and parts are incurred pursuant to written documents rather than directly to the vendors. The word "aircraft" also does not appear in Wis. Stat. § 77.52(1)(a), which is relied on by the majority opinion. Majority op., ¶10. 9 10 TAC decision, R. 22-16 (P. App 0038). 11 No. ¶49 In addition, §§ 77.52(2)(a)10. the TAC's use 77.52(2)(a)10. a plain reading and 77.54(5)(a)3. of and dispute before the terms. Therefore, Wis. Stat. than of Wis. Stat. cannot be reconciled with § 77.51(15b)(a). 77.54(5)(a)3. court 2020AP1683.pdr are are §§ 77.54(5)(a)3. more Sections specific to § 77.51(15b)(a)'s the general and 77.52(2)(a)10., which are more specific in addressing sales taxes on the sales price of aircraft services and aircraft parts, control the outcome of Citation Partners' claim for state sales tax exemption. RadLAX Gateway Hotel, LLC v. Amalgamated Bank, 566 U.S. 639, 645 (2012) (explaining "it is a commonplace of statutory construction that the specific governs the general."). most frequently applied to Furthermore, this canon is statutes in which a general prohibition is contradicted by a specific permission, just as we have here. Id.; see also Scalia, Reading Law, at 183. TAC's legal conclusion is based on its interpretation of a broad sales tax statute and is contrary to the plain meaning of Act 185's amendments aircraft to sales parts and taxes owed services on that the were sales price granted by for Act any 185. Accordingly, TAC's decision must be set aside.11 ¶50 Furthermore, although the plain meaning of the words chosen by the legislature for Act 185's enactments clearly grant the exemption Citation Partners seeks, I note that the Legislative Council Act Memo describes comprehensive use of Act 185's provisions: The majority opinion does not review TAC's decision, either as to the facts TAC found or the reasoning underlying TAC's legal conclusion. 11 12 No. 2020AP1683.pdr 2013 Wisconsin Act 185 adds a comprehensive exemption for aircraft parts to the list of aviation-related sales and use tax exemptions under existing law, described above. Under the Act, sales of aircraft parts are exempt from sales and use tax regardless of how the aircraft is used. The Act also creates a sales and use tax exemption for the repair and maintenance of any aircraft and aircraft parts. Although legislative history is not part of a plain meaning statutory analysis, we have used it to confirm a plain meaning interpretation, as I do here. III. ¶51 I 77.54(5)(a)3., claim. interpret the Kalal, 271 Wis. 2d 633, ¶51. CONCLUSION Wis. statutes Stat. relevant §§ 77.52(2)(a)10. to Citation and Partners' The plain meaning of those statutes grants Citation Partners the sales tax exemption it seeks. Because the majority opinion chooses to follow the error-strewn path of the TAC, which contravenes clear statutory direction to exempt the sales price of aircraft parts and aircraft maintenance from state sales taxes, I respectfully dissent. ¶52 I am authorized to state that Chief Justice ANNETTE KINGSLAND ZIEGLER and Justice REBECCA GRASSL BRADLEY join this dissent. 13 No. 1 2020AP1683.pdr
Some case metadata and case summaries were written with the help of AI, which can produce inaccuracies. You should read the full case before relying on it for legal research purposes.
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
