439 N.W.2d 619 | Wis. Ct. App. | 1989
L & W Construction Company, Inc. (L & W) appeals from a judgment confirming a determination by the Wisconsin Tax Appeals Commission that the Wisconsin Department of Revenue correctly denied L & W a sales tax reduction in its franchise income tax pursuant to sec. 71.043(2), Stats. (1985-86),
The case presents stipulated facts. L & W is a corporate general partner in two Wisconsin partnerships. L & W owns a one-half partnership interest in North Lake Sand & Gravel Co. (North Lake) and a one-third partnership interest in Standard Asphalt Products (Standard Asphalt). For tax year 1983, the partnerships each paid the cost, plus sales and use tax, of fuel and electricity used in their manufacturing processes. Each partnership deducted the amount of this sales and use tax in calculating partnership income or loss. Standard Asphalt reported a loss and North Lake reported a profit for tax year 1983.
L & W filed a 1983 corporate income tax return reporting its distributive share of the partnerships’
The sole issue in this case is whether a corporate taxpayer which is a general partner in a partnership is entitled to claim the corporate tax credit allowed for the sales and use tax paid by the partnership. Section 71.043(2), Stats., states in relevant part:
(2) The tax imposed upon or measured by corporation net income ... may be reduced by an amount equal to the sales and use tax under ch. 77 paid by the corporation in such taxable year on fuel and electricity consumed in manufacturing tangible personal property in this state. [Emphasis added.]
As noted, both parties have stipulated to the facts. L & W does not dispute that the contested sales and use taxes were paid out of partnership funds. However, L & W argues, under the “aggregate theory” of partnership law, that L & W has “paid” a portion of these partnerships’ sales taxes based on its ownership interest. Therefore, L & W argues that it is entitled to claim this amount as a tax credit under sec. 71.043(2), Stats.,
Under the “aggregate theory,” L & W reasons that it, as a partner, is ultimately responsible for all partnership debts. Since all of the partnerships’ assets belong to the partners, and since cash assets were used to pay the sales taxes, L & W contends that it in reality has paid the sales taxes at issue.
We have no quarrel with L & W’s “aggregate theory” of partnership law, nor that, under this theory, it has ultimately paid the sales tax. We also accept arguendo L & W’s contention that the “aggregate theory” may have some application in other areas of the tax code. We disagree, however, that the “aggregate theory” of partnership law applies to the sales and use tax credit contemplated by sec. 71.043(2), Stats.
The interpretation of a statute presents a question of law. State v. Barnes, 127 Wis. 2d 34, 37, 377 N.W.2d 624, 625 (Ct. App. 1985). Also, the application of a statute to a set of facts is a question of law. Wisconsin Dep’t. of Revenue v. Gordon, 127 Wis. 2d 71, 73, 377 N.W.2d 212, 213 (Ct. App. 1985). When the facts are
In construing sec. 71.043(2), Stats., we are to give effect to the intent of the legislature. See Marshall-Wisconsin Co. v. Juneau Square Corp., 139 Wis. 2d 112, 133, 406 N.W.2d 764, 772 (1987). We must ascertain that intent by first looking to the language of the statute itself and giving the language its ordinary and accepted meaning. Gordon, 127 Wis. 2d at 73-74, 377 N.W.2d at 213.
The language of sec. 71.043(2), Stats., is unambiguous. Gordon, 127 Wis. 2d at 74, 377 N.W.2d at 213. The plain meaning of sec. 71.043(2) is that a corporation which pays sales and use taxes on fuel and electricity consumed in manufacturing tangible personal property may obtain an income tax credit in the amount of the sales and use tax paid that year. Sec. 71.043(2). If, as in this case, a different entity owned by the corporation actually pays the sales and use taxes, there is no statutory provision for a tax credit to the corporation.
L & W’s liability for partnership debts is merely contingent or secondary to that of the partnerships. It is undisputed that the partnerships in this case paid their own fuel and electricity bills, plus sales and use taxes. The possibility that L & W could have become liable for these obligations had the partnerships failed to pay
We see the issue before us not as one of partnership law but rather one of tax law. Tax exemptions, deductions and privileges are matters of legislative grace and are to be strictly construed against the taxpayer. Ramrod, Inc. v. Department of Revenue, 64 Wis. 2d 499, 504, 219 N.W.2d 604, 607 (1974). We conclude that a tax credit falls within this category and is subject to the same strict scrutiny.
Because L & W did not directly pay the partnerships’ costs of fuel and electricity, nor the resultant sales and use tax, it has not met the burden of showing that it is clearly within the terms of the credit statute. Thus, L & W is not entitled to the sec. 71.043(2), Stats., income tax reduction for the sales and use tax paid by the partnerships.
By the Court.-Judgment affirmed.
Section 71.043(2), Stats. (1985-86), was amended by sec. 1273k, 1987 Wis. Act 27, which was then repealed and recreated by sec. 2, 1987 Wis. Act 312. The provisions of sec. 71.043(2), Stats. (1985-86), are not contained in secs. 71.28(3)(b) and 71.47(2b)(b), Stats., effective January 1, 1989. All references in this opinion to sec. 71.043(2) are to sec. 71.043, Stats. (1985-86).
Partnerships are not required to file income tax returns in the name of the partnership. Sec. 71.02, Stats. Rather, the named partners must report their distributive share of partnership income on their own income tax returns. Id.