Tetra Tech EC, Inc. v. Wisconsin Department of Revenue
890 N.W.2d 598
Wis. Ct. App.2016Background
- EPA ordered remediation of PCBs in the Fox River; paper companies formed Fox River Remediation and hired Tetra Tech as general contractor; Tetra Tech subcontracted Stuyvesant Dredging, Inc. (SDI) to separate dredged material into components (desand and dewater fine sediments) for disposal.
- Department of Revenue audited (2007–09 years) and issued written notices to Fox River Remediation and Tetra Tech, concluding SDI's work was taxable under Wis. Stat. § 77.52(2)(a)10. (repair/service/etc.); the notices did not cite § 77.52(2)(a)11. (producing/fabricating/processing).
- The Department later invoked § 77.52(2)(a)11. before the Tax Appeals Commission as an alternative basis; the commission accepted that SDI’s separation activity constituted "processing" of tangible personal property and therefore taxable, and held § 77.59(3) did not bar the Department from asserting a new legal theory before the commission.
- Fox River Remediation and Tetra Tech challenged the commission’s decision in circuit court; the court affirmed; defendants appealed to the court of appeals.
- The court of appeals applied "great weight" deference to the commission’s statutory interpretation and upheld: (1) SDI’s activities reasonably fall within "processing" under § 77.52(2)(a)11.; and (2) § 77.59(3) does not preclude the Department from asserting an alternative legal basis before the commission even if not stated in the written notice.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether SDI's separation/dewatering is "processing" taxable under § 77.52(2)(a)11. | SDI's activity is merely "separation," not an enumerated taxable service; broad dictionary reading would convert narrow service tax into a general tax. | Department/Commission: activity fits ordinary meaning of "processing" (prepare/treat/convert) and is within the provision limited to tangible personal property. | Court upheld commission: reasonable to treat SDI's work as "processing"; dictionary definition appropriate; statutory structure limits reach to tangible personal property. |
| Whether the Department may raise § 77.52(2)(a)11. before the commission though it was not in the written notice under § 77.59(3). | Department violated § 77.59(3) (requirement of written determination) and raising after-the-fact legal theory is unfair and violates due process. | Department: § 77.59(3) requires a written notice but does not mandate listing every possible legal theory; commission practice permits new issues; fairness concerns insufficient. | Court upheld commission: § 77.59(3) does not preclude advancing alternative legal theories to the commission; no persuasive due process violation shown. |
Key Cases Cited
- Xerox Corp. v. Department of Revenue, 321 Wis. 2d 181 (court of appeals) (framework for great weight deference to tax agency interpretations)
- DOR v. A. Gagliano Co., 284 Wis. 2d 741 (appellate framing of deference tiers)
- Zip Sort, Inc. v. Department of Revenue, 247 Wis. 2d 295 (context for when no deference applies)
- Milwaukee Symphony Orchestra, Inc. v. Department of Revenue, 324 Wis. 2d 68 (agency charged with administering tax code supports deference)
- State ex rel. Kalal v. Circuit Court for Dane County, 271 Wis. 2d 633 (statutory interpretation principles; avoid surplusage)
- Pawlowski v. American Family Mutual Ins. Co., 322 Wis. 2d 21 (use of disjunctive language can broaden statutory coverage)
- Barron Electric Co-op. v. Public Service Commission, 212 Wis. 2d 752 (deference where agency's decisions involve policy and expertise)