*1 Department Revenue, Petitioner-Respondent,

v. Welding Manufacturing Company, Inc., Johnson & Respondent-Appellant. Bodies, a/k/a Johnson Truck Appeals Court of 3, No. 99 - 2429. Submitted on March 2000. Decided briefs July 2000 WI App 179 (Also 193.) reported in 617 N.W.2d *3 of the the cause respondent-appellant, On behalf R. on the briefs of Steven Duback and was submitted LLP, Quarles Brady Patricia A. Hintz & Milwaukee. On of the the cause petitioner-respondent, behalf Anderson, on the brief of Peter C. assis- was submitted and James E. Doyle, attorney attorney general, tant general. JJ. Dykman, P.J., Deininger,

Before Eich and DEININGER, Welding 1. J. Johnson & Man- ¶ order Inc., a circuit court ufacturing Company, appeals Commis- Appeals reversed a decision of the Tax which by the sale sion. The commission concluded corporation Minnesota of certain truck Johnson to a exempt from Wisconsin sales tax under Wis. bodies was 77.54(5)(a) (1997-98).1 For the reasons which Stat. correctly follow, conclude that commission we exempt tax, determined that the sale was from sales accordingly, appealed we reverse the order.

BACKGROUND 77.54(5) provides, in rele- 2. Wisconsin part, gross receipts vant as follows: "The from the sale persons of... truck sold to who are not residents bodies state and not use such . . . trucks for this who will of which made in truck bodies were this state other- than in the removal of such . . . trucks this wise from [are exempted imposed state subchapter]" (emphasis from the taxes this added). 77.54(5)(a). §See The dispute meaning empha- in case is this over of the phrase, purchaser sized when the of truck is a bodies corporation significant which does a volume ofbusiness incorporated but is The Tax elsewhere. Appeals following facts, Commission found the which largely undisputed: are [Johnsonjs principal place business (cid:127) Lake,

located in Rice Wisconsin. It has been engaged manufacturing in the business of and sell- ing truck bodies Rice Lake since 1931.

2. All of the truck bodies involved this case Lake, by [Johnson] were manufactured in Rice sold ("Schwan's")... Enterprises, to Schwan's Sales Inc. representatives [John- delivered to Schwan's at *4 sonjs [Johnsonjs plant. Rice Lake Schwan's largest many years. customer and has been for 1 All references to the Wisconsin Statutes are to the 1997-98 version unless noted. otherwise organized

3. Schwan's is a corporation under the laws of the State of Minnesota. It existing .incorporated was under the laws of Minnesota on in April continuously and has been exis- incorporated tence and under the laws of Minnesota are, corporate since that date. Its headquarters been, during at all times its existence has in Mar- shall, corporate Minnesota. The address of its Drive, Marshall, headquarters College is 115 West Minnesota 56258-1796. in

4. Schwan's does business all 50 states of the United States. years immediately preceding [For

5. the three bodies, its truck made purchase of the Schwan's Wisconsin, approximately of its total sales in 3.75% maintained of its fixed assets approximately 2.5% here, and to Wiscon- paid payroll about 3.2% its time, During sin-based this Schwan's employees. higher only had sales and in six or seven payroll states, larger eight and a fixed asset value in or year, nine. In each Schwan's Wisconsin sales million, totaled some its was payroll $70 million, in about and its fixed asset value this $14 averaged state over million. The number $17.5 total ranged from employees of Schwan's in Wisconsin years question.] 822 to 907 for the permanent places 6. Schwan's has of business throughout at 19 locations Wisconsin. ... Schwan's a total of 28 truck purchased [Johnson].

bodies from Three of these truck bodies assigned by were installed on trucks Schwan's to Schwan's located in Wisconsin. The other 25 depots assigned by truck installed on trucks bodies were Indiana, depots Schwan's to Schwan's located Illinois, Minnesota, Iowa, Missouri, Washington, Mexico, Ohio, Ten- Michigan, Pennsylvania, New nessee, York, and Arizona. These 25 trucks New have not been and will not be used Schwan's *5 in removing Wisconsin otherwise than them from Lake, Wisconsin, plant [Johnson]'s Rice at the taking time of Schwan's initial delivery of the truck bodies which had petitioner installed on their chas- delivery taken, sis. When initial was the 25 trucks all picked up directly were from [ removed John- plant by son]'s Rice Lake a Schwan's driver to principal place Marshall, Schwan's of business in Minnesota, they assigned after which were to the various non-Wisconsin locations described above. charged

8. [Johnson] Schwan's and collected county 5.5% Wisconsin state and sales tax on all 28 truck bodies it sold to Schwan's . . . and it remitted [the such tax to Department Revenue].

9. Based on information [John- furnished to by son] Schwan's that 25 of the 28 truck bodies were —after initial removal from Rice Lake to Marshall, Schwan's locations Minne- assigned by Schwan's to be used depots at sota — Wisconsin, located outside prepared [Johnson] filed department] [the with a claim for refund seek- ing recovery of the . . . Wisconsin sales tax it had charged and collected from respect Schwan's with to the 25 non-Wisconsin destination truck bodies. [Johnson]'s

10. claim for refund was . filed . . in the form of an amended sales and use tax return .... The claim for refund was a for total of $28,806.26 of Wisconsin sales tax [Johnson] had col- paid lected and to department], [the measured $523,748 the aggregate of prices paid sales for the 25 non-Wisconsin destination truck bodies 7., described in above. [Johnson]'s

11. basis seeking recovery the sales tax was and is that the sales of the 25 non- Wisconsin destination truck bodies to Schwan's are exempt 77.54(5)(a), Stats., under Wis. because they were sales made to a person who is not a resi- dent of Wisconsin and who will not use the trucks made otherwise the truck bodies were for which in their removal from Wisconsin. than [Johnson]'s denied department] [The

12. claim.... refund department] [Johnson] [the ... filed with objecting to the for redetermination petition *6 refund claim.

denial of its [Johnson]'s denied department] [The ... for redetermination. petition appealed department's ¶ the denial of 3. Johnson commission, a tax refund to the its claim for sales department's The commis- the action. reversed which purposes the term "resident" for sion noted that the question exemption in is not defined either sales tax no rule, and "there have been statute or administrative interpreting 'resident' the word court cases pur- applied corporation for sales and use tax to a as poses." reasoned that However, the commission interpreting . other Wis- courts . . "because Wisconsin consistently found statutes, have consin taxation corporation's incorporation," its state of residence to be language Chapter in 77 or "there is no and because anywhere implying a different in our case law even legislature pre- purposes," the tax definition for sales apply sumably definition to Wis. intended the same 77.54(5)(a). § Stat. petition department's for review of 4. On circuit court concluded decision,

the commission's interpretation although commission's was that, determine resi- reasonable, more reasonable to "it is exemptions dency under of sales tax 77.54(5)(a) extent of busi- the nature and based on The court therefore ..." ness activities Wisconsin. determination, and Johnson reversed the commission's appeals the circuit court's action.

249

ANALYSIS acknowledged ¶ 5. As the commission in its deci- granting exemptions sion, statutes tax are "matters of legislative grace," taxpayer and a who claims an exemption property must establish that the or transac- clearly terms, tion at issue is within its with all doubts being taxability. Department resolved favor of See Greiling, Revenue v. 2dWis. 334 N.W.2d (1983). exemp- "However, of an tion need not be unreasonable or the narrowest possible." Id.

¶ 6. Our role is to determine whether the com- concluding mission erred in that Johnson established clearly that its sale of truck bodies to Schwan's was within the terms of the from sales tax 77.54(5)(a). granted under Wis. We review the directly, determination commission's not the circuit *7 court's it, decision to reverse and we owe no deference analysis question to the circuit court's on this of statu- tory interpretation. See Citizens' Util. Bd. v. Public Serv. Comm'n, 537, 211 543-44, Wis. 2d 565 N.W.2d (Ct. 1997). App. 554 Whether should we defer to the interpretation commission's of the term "resident" in 77.54(5)(a), however, so, and if extent, to what are dispute parties. matters in the between supreme ¶ 7. The court has described the hierar- chy of deference under which a court is to an review agency's statutory interpretation administrative as fol- lows:

First, if the agency's administrative experience, technical competence, and specialized knowledge agency aid the in its interpretation application

250 [law], is entitled to agency of the the determination provides of "great weight." The second level review one of agency "very nearly" if the decision is that weight" "due or impression first it is entitled to review, de The lowest level of the "great bearing." standard, the applied is where it is clear from novo the case is one of first agency precedent lack of agency agency spe- for the and the lacks impression determining experience or expertise cial question presented. 290-91, DILHR, 284, 169 2d 485 N.W.2d

Jicha v. Wis. omitted). (1992) (citations department, The not 256 urges surprisingly, inter the commission's us to review argues pretation that we must novo, de while Johnson agree give weight." that the it "due We with Johnson residency corporate interpretation commission's for the sales tax under review weight from this court. entitled to due deference Zignego explained Co., DOR, Inc. v. 8. We (Ct. App. 590 819, 823-24, 211 2d 565 N.W.2d Wis. weight 1997), give to the due deference that we will interpretation of a statute if it "has some commission's developed exper- experience area, in an has not but position necessarily places to it in a better tise that regarding judgments of the make (citing LIRC, 201 UFE Inc. v. Wis. statute than a court" (1996)). decision to 286-87, Our 2d N.W.2d recog- largely weight on our deference rests accord due charged legislature commission has nition that the enforcing interpreting statutes,2 the taxation with 73.01(4)(a) ("Subject provisions to the 2 SeeWis. Stat. authority final shall be the judicial review . . . the commission *8 questions determination of law and hearing of all for the department's the tax determina- arising appeals under" of fact and on the fact that the commission has "had at least analyze opportunity one position... to the issue and formulate a Inc., See UFE 201 Wis. 2d at 286. previously ¶ 9. The commission has considered corporation whether a purposes is a resident of Wisconsin for exemption from the state's sales tax under 77.54(5)(a). § Aviation, See K-C DOR, Inc. v. Wis. Stat. (Wis. App. 91-S-177, 1994 WL 182752 Tax Comm'n May 9,1994). refurbishing by At issue was whether the company by a Wisconsin of aircraft owned certain cor- porations qualified exemption for the as "aircraft . . . persons sold to who are not state," residents of this parallels which the for truck bodies under 77.54(5)(a). § The commission concluded that the department deeming purchaser-corpora- erred in solely they tions Wisconsin residents because did holding "business in this state as evidenced . . . filing Wisconsin Seller's Permit and/or ofWisconsin tax returns." Id. at *2. The commission also concluded that the record before it "contains no facts which would bring questioned corporations within the ambit" of precedents from other states which had found resi- dency for sales tax based on the existence of significant business volume within their states. Id. at open question any *4. It thus left of whether of the purchaser-corporations "may abe Wisconsin resident meaning 77.54(5)(a), depending within the on the [its employees nature and offices, extent of and sales in Wisconsin]." Id. at *3.

¶ 10. Because of the commission's second conclu- department argues Aviation, sion K-C that we any should not accord deference to the commission's present interpretation. department The notes, cor- 77.59(6)(b) tions.); Co., see also Zignego WlS. Inc. v. DOR, (Ct. 1997). 211 Wis. 2d App. 565 N.W.2d 590 *9 judicial rectly, of the commission's that de novo review "position appropriate interpretation if of a statute is its provide so as to no issue has been so inconsistent on the Newspapers, guidance." DOR, Madison Inc. v. real See (Ct. 1999). App. 2d 599 N.W.2d 51 228 Wis. disagree, however, that this has occurred with We respect present to the issue.

¶ in its K- noted, the commission 11. As we have open question of whether a C Aviation decision left corporation state, in another but which does domiciled may significant Wisconsin, deemed a be business questions. It this state for sales tax resident of ruling, question present a in its with returned to the establishing purchaser in this it that the record before significant of case, Schwan's, did indeed have a volume present activity In in Wisconsin. its sales and business ruling, noted its earlier discussion the commission "unsupported dictum" declared it issue, but specific facts" had before it on which "no been because might then reconciled addressed. It the issue have been pre- holding in K-CAviation with its and discussion its conclusions: sent found, unequivocally as [in Aviation] then K-C

We statutory here, specific in the absence of we do non-resi- denial of authority, [department]'s 77.54(5)(a) improper. was dency under WlS. § us, factor in our determining In the case before is a non-resi- foreign corporation that a conclusion 77.54(5)(a) is that no purposes dent include 77 which would Chapter exists provision a as Wisconsin corporation, a Minnesota petitioner, purposes. "resident" for sales tax present that the commission's 12. We conclude state," as of this "residents of the words 77.54(5)(a), way used in STAT. in no WlS. contradicts principal ruling foreign its in K-C that a Aviation cor- poration does not become "resident" for sales tax "solely doing reason of its business this necessary legal argu- state." Because the facts and squarely presented present ments were first appeal, in the present ruling the commission's addresses and prior *10 resolves the issue it deferred its decision. We present thus do not view the commission's being decision as ruling Aviation, inconsistent with its in K-C and provided guidance" the commission has "real on the present issue in its decision. statutory Thus, in view of the commission's law, to rule on issues

mandate of Wisconsin tax and its experience, addressing present limited, in albeit issue, we accord its of WlS. Stat. 77.54(5)(a) weight Accordingly, due deference.3 we uphold interpretation, long will its so as it is reasona- comports purpose and statute, ble with the of the and provided interpretation" that a "more reasonable is not Newspapers, Inc., available. See Madison 228 Wis. 2d at 758-59. any depart-

¶ 14. Neither WlS. Stat. ch. 77 nor ment rule defines the term "residents of this state" as 77.54(5)(a). used in asserts, Wis. Stat. Johnson and applied concluded, term, commission that the when 3 (or We note that predecessor, the commission its the Wis Appeals) consin Board experience addressing of Tax also has corporation's the issue of a purposes residence for ofWisconsin's tax, corporation's income and that it has concluded that a "resi dence" in that context incorporation. is also its state of See Enter., Dep't Taxation, Franan Inc. v. 5 WBTA 80 of (1962); Briggs Corp. see also & Department Stratton v. Taxa of (1946). tion, 160, 248 Wis. 21 N.W.2d 441 corporation corporation, domiciled Wis- means a to a incorporated under the laws is, that is consin, that one support, In each cites the Wisconsin this state. of regarding corpo- Supreme similar conclusion Court's taxing unapportioned purposes residence for of rate Department Briggs Corp. & v. income. See Stratton of (1946). The Taxation, 160, 21 248 Wis. N.W.2d argues, department concluded, court and the circuit corporation's of this residence for the that a exemption should turn on "the nature sales tax sup- [its] In in Wisconsin." extent of business activities interpretation, department points port to a of this construing Appeals of the California Court of decision virtually sales from the California identical Corp. Equalization, 189 v. Bd. tax. See Garrett State 1961) (conclud- (Cal. App. App. Ct. 2d 510-11 Cal. [purchaser- ing adopt "to the view that corporations] in this state did not have a factual abode light simply the uncontra- unrealistic in ... be would companies places ... had of business dicted facts. Both employees numerous in California staffed *11 during years grossing the dollars millions of question"). disputed is thus

¶ the term 15. conclude that We legislature ambiguous, it has not defined in that the (and do) reasonably persons could well-informed meaning. proper Inc., 201 Wis. 2d UFE its See differ on weight Accordingly, "due deference" under our at 283. accept the commission's review, we will standard of ambiguity, resolving interpretation are unless we the department's proffered alternative that the convinced are not so id. at 288. We reasonable. See is more convinced. agree First, we with the commission that legislature,

the it when enacted the presumedly supreme 1961,4 was aware of the court's holdings purposes, corpo- that, earlier for income tax a ration's incorporation. residence is determined its state of Johnson, 239, State v. 207 Wis. 2d Cf. (1997) (concluding 246, 558 N.W.2d 375 that courts may presume legislature prior judicial the of aware statutes). interpretations department, The attempting reasoning to refute the commission's in this regard, argument effect, Johnson's to the same legislature presumed asserts that the should not be to supreme have intended that the court's corporate residence for income tax would apply newly also to its enacted sales tax statute. argues Rather, it that it is more reasonable to conclude legislature import that the Wisconsin intended to corporate California definition of residence, as set forth previously in the decision, cited Garrett because of the similarity language employed of the in the Wisconsin reject argument. and California statutes. We this It is legislature no more reasonable to assume that import freshly-minted judicial intended to construc- tion of a state, statute from a distant than it is to presume legislature's awareness of the Supreme Court's consistent construction over a twenty-year period analogous of an term in our tax own statutes. agree

¶ 17. We also with Johnson it is not adopt department's proposed more reasonable to corporate "facts and circumstances" test for residence 77.54(5)(a) opt "bright under Wis. than to for the 4The language commission stated in its decision that the at issue parties was first enacted in and both make similar arguments in their assertions to this court. *12 ruling. in

line" rule enunciated the commission's The department's interpretation circuit court endorsed the Schwan's is a that "whether resident of Wisconsin 77.54(5)(a). meaning depends within the . . on the nature and extent of Schwan's in business activities reviewing findings Wisconsin." After the commission's respect activities, with to Schwan's business court concluded that those activities were "such that purchase resident," Schwan's is a and that its of truck exempt from Johnson bodies was thus not under the court, however, The trial statute. did not indicate its activity decision how much business enough in Wisconsin was foreign corporation to declare a a state resident purposes of the sales tax statute. points during pro ¶ 18. Johnson out that these ceedings, department variously has articulated corporation if tests that would deem a to be a resident it presence Wisconsin," has a "substantial business "permanent presence," finally business a "substan permanent presence tial, in Wisconsin." The department, however, court, like the circuit avoids dis cussing activity much how business might required corporation's pres for a be "business "permanent," "substantial," ence" to be or or both. The line-drawing "[s]ome department concedes that could necessary" proffered interpretation, be under its but claims that it "not much as to render would be so place incorpora unworkable a standard other than Although recognize "[i]n taxation, tion." we certainty expected," absolute cannot be had or see Plywood Corp. City of Algoma, 2 United States v. Wis. (1958), 2d Youngstown 87 N.W.2d 481 sub nom. aff'd Bowers, Sheet & Tube Co. v. 358 U.S. 534 (1959), we cannot conclude that it is more reasonable to corporation's residency define a for sales tax *13 upon varying being dependent as facts and circum- way stances, easily it is to define the term in a that is than by taxpayers department's ascertainable and the auditors alike.

CONCLUSION interpretation ¶ 19. Because the commission's presented reasonable, and we have not been with an reasonable, that is more we reverse the appealed that, order and direct on remand to the circuit affirming court, an order entered the be commission's decision and order.

By the Court. —Order reversed and cause remanded. (dissenting).

¶20. DYKMAN, P.J. For the three years preceding January 1997, Schwan's Wisconsin employees 822 and numbered between 907. Its Wiscon- payroll sin was between million and $13.4 $14.2 million, and its Wisconsin sales were between $66.6 million and million. The value of Schwan's Wis- $74.2 property consin was between million and $16.9 $18.5 figures might place million. While these not Schwan's top corporations, on the list of the ten Wisconsin it is possible presence not to describe Schwan's in Wiscon- insignificant. sin as applicable

¶ 21. The tax rule is well established exemption "[T]ax a substantial line of cases. stat- strictly against granting utes 'are to be construed the exemption same, the point the one who claims an must express provision granting to an such by language clearly specif[ies] same, which the " bring clearly thus himself within the terms thereof.'

258 Newspapers, DOR, 745, Madison Inc. v. 228 Wis. 2d (Ct. 1999) App. (quoting 51 La Crosse 599 N.W.2d Queen, DOR, 2d Inc. v. 208 Wis. 561 N.W.2d (1997)); Ramrod, DOR, Inc. v. 2d see also 64 Wis. (1974). "Any 499, 504, 219 N.W.2d 604 doubts or ambi- guities exemption applies as are to to whether be against person resolved in favor of taxation and claiming exemption." Newspapers, Madison Wis. 2d at 760. majority phrase

¶ 22. The concludes that *14 77.54(5) in "residents of this state" Wis. is ambiguous, might corporation's in that it mean a state might incorporation, or it mean a state where a cor- significant agree. poration I does business. Where the majority I and differ is the conclusion to be drawn from majority

this observation. The concludes that since either of definitions of "residents of this state" is two accept reasonable, it will the definition chosen Appeals Tax Commission. I conclude that courts and commissions by published appellate decisions,

alike are bound court including Newspapers, upon Madison and the cases Newspapers majority relies. The can- which Madison Newspapers requiring rule not follow Madison "language clearly specif[ies] [exemption]," which 228 Wis. 2d at and at the same time find favor of exemption ambiguous. is The Tax Johnson where the Appeals Commission, court, the circuit and this court ambiguities apply must the rule that as to whether an exemption applies taxation. The are resolved favor of granting majority's determination that the statute an truck manufactured Wisconsin bodies ambiguous only to one conclusion: the should lead subject sales tax. That is truck bodies are to Wisconsin agree. concluded, I I there- the circuit court what respectfully fore dissent.