Big Blue Express v. Nebraska Dept. of Rev.
309 Neb. 838
| Neb. | 2021Background
- Big Blue Express, a Nebraska corporation, purchased a 2/3 interest in a 2009 Embraer Phenom 100 from a Kansas seller in April 2011 and paid no sales or use tax. Robinson’s Hangar bought the remaining interest.
- Big Blue signed joint ownership/management and multiple "use" agreements that contemplated leasing flight hours; written agreements charged $1,100–$1,300 per flight hour and shifted operating costs to lessees.
- Most leases were to the owner/related entities (Schneider and affiliated companies); over half of invoiced flight hours were billed to Schneider personally. Many invoices were issued late and collected only after the Department contacted Big Blue; interest for late payments was not charged.
- Leasing revenue (237.69 hours from May 2011–Dec 2013) averaged far below operating costs; parent company CVE made substantial capital infusions to Big Blue despite not using the aircraft.
- The Nebraska Department of Revenue assessed a use-tax deficiency of $161,373.31 (tax, penalty, interest). The Tax Commissioner and the Lancaster County District Court found Big Blue failed to prove the purchase qualified as a nontaxable "sale for resale," and Big Blue appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether purchase qualified as a sale for resale (exempt from sales/use tax) | Big Blue: bought to lease at fair-market rates in the normal course of business; therefore sale for resale under §77-2701.34 | Dept: leases were largely to related parties, not arm's-length; rates and conduct did not show leasing in the normal course of business | Court: Affirmed — Big Blue failed to meet burden; purchase not a sale for resale |
| Whether Big Blue is entitled to equitable recoupment / credit for sales taxes paid by related lessees | Big Blue: related lessees paid sales tax on leases and therefore Big Blue should get offset/credit (equitable recoupment) | Dept: Tax Commissioner rejected this interpretation of §77-2704.28; the argument was not preserved for APA review | Court: Not preserved — declined to address equitable recoupment on appeal |
| Proper interpretation of §77-2704.28 (leases between related companies) | Big Blue: statute should be read to give lessor/lessee allocation options and not impose tax on a lessor who otherwise qualifies for sale-for-resale | Dept: statute exempts related lessees only if lessor previously paid tax; second sentence imposes liability on lessor when leasing to related company | Court: Did not decide the statutory construction (unnecessary); noted language is ambiguous and left resolution to the Legislature |
Key Cases Cited
- Intralot, Inc. v. Nebraska Dept. of Rev., 276 Neb. 708, 757 N.W.2d 182 (Neb. 2008) (discussing sale-for-resale and burden of proof)
- Prokop v. Lower Loup Natural Resources Dist., 302 Neb. 10, 921 N.W.2d 375 (Neb. 2019) (APA standard of review for district court decisions)
- Devonair Enterprises, L.L.C. v. Dep’t of Treasury, 297 Mich. App. 90, 823 N.W.2d 328 (Mich. Ct. App. 2012) (similar facts; leasing not in normal course of business where rates and usage insufficient)
- Pi In The Sky, L.L.C. v. Testa, 56 Ohio St. 3d 113, 119 N.E.3d 417 (Ohio 2018) (single-member entity leasing exclusively to related member insufficient to show business leasing)
- Lackawanna Leather Co. v. Nebraska Dept. of Rev., 259 Neb. 100, 608 N.W.2d 177 (Neb. 2000) (use-tax/sales-tax relationship and application)