Big Blue Express v. Nebraska Dept. of Rev.
309 Neb. 838
| Neb. | 2021Background
- Big Blue Express, a Nebraska corporation majority-owned by CVE and controlled by Michael Schneider, bought a 2/3 interest in a 2009 Embraer Phenom from a Kansas seller for $2,821,500 and paid no sales or use tax.
- Big Blue executed joint ownership/management and multiple written and oral "use" agreements allocating flight hours and permitting each owner (and affiliates) to lease the plane; Big Blue was identified as the manager and hangared the plane in Nebraska.
- Big Blue issued flight-hour invoices (rates $1,100–$1,300/hr) primarily to Schneider and related entities; many invoices were prepared or collected late, and substantial payments came from Schneider’s investment account.
- Leasing revenue was Big Blue’s primary operating income but was far below operating costs; CVE repeatedly infused capital into Big Blue despite not using the plane.
- The Nebraska Department of Revenue assessed a $161,373.31 use-tax deficiency. The Tax Commissioner and the Lancaster County District Court concluded Big Blue failed to prove the purchase qualified as a nontaxable “sale for resale”; Big Blue appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the airplane purchase was a nontaxable "sale for resale" (leased in normal course of business at fair market value) | Big Blue: purchased to lease at fair market rates in the normal course of business; thus exempt. | Dept: leases were to related parties, not arm’s-length; rates and conduct didn’t show leasing in normal course; Big Blue failed to prove element. | Court: Affirmed — substantial evidence supports district court that Big Blue did not lease in the normal course of business; not a sale for resale. |
| Whether § 77-2704.28 (leases between related companies) required tax on the purchase or exempted related lessees | Big Blue: § 77-2704.28 does not impose tax on lessor when purchase otherwise qualifies as sale-for-resale; related lessees would be exempt. | Dept: statute exempts certain lessees but the lessor may have tax liability calculated as if lessee bought property; applies even if related leasing occurs. | Court: Did not decide § 77-2704.28 issue — unnecessary because sale-for-resale ruling disposes of case; noted statutory language is ambiguous and left to Legislature to clarify. |
| Whether Big Blue is entitled to equitable recoupment / offset for sales tax paid by related lessees | Big Blue: may offset its deficiency by sales taxes paid by related entities (equitable recoupment or § 77-2709 credit). | Dept: Tax Commissioner rejected credit under § 77-2709; equitable recoupment argument was not preserved below and the Commissioner rejected the underlying statutory interpretation. | Court: Declined to address equitable recoupment — argument not preserved for APA review because the issue was rejected below and not appealed to district court. |
| Standard of review and burden of proof in APA appeal | Big Blue: challenged district court findings. | Dept: findings are supported and APA standards apply. | Court: Applied APA standard — review for conformity to law and for competent evidence; affirmed district court findings. |
Key Cases Cited
- Devonair Enter., L.L.C. v. Dep’t of Treasury, 297 Mich. App. 90, 823 N.W.2d 328 (Mich. Ct. App. 2012) (similar facts; leasing to related parties and insufficient leasing activity defeated sale-for-resale claim)
- Pi In The Sky, L.L.C. v. Testa, 119 N.E.3d 417 (Ohio 2018) (airplane leased only to related member with minimal marketing and low hourly rate did not qualify as engaging in business for resale)
- Intralot, Inc. v. Nebraska Dept. of Rev., 276 Neb. 708, 757 N.W.2d 182 (Neb. 2008) (burden of proof and treatment of sale-for-resale in Nebraska tax law)
- Prokop v. Lower Loup NRD, 302 Neb. 10, 921 N.W.2d 375 (Neb. 2019) (standard of review for district-court APA appeals)
- Lackawanna Leather Co. v. Nebraska Dept. of Rev., 259 Neb. 100, 608 N.W.2d 177 (Neb. 2000) (explanation of use tax principles)