NAJO EQUIPMENT LEASING, LLC v. COMMISSIONER OF REVENUE
Court of Appeals of Tennessee, AT JACKSON.
Assigned on Briefs February 25, 2015. Filed April 23, 2015.
Application for Permission to Appeal Denied by Supreme Court October 16, 2015
469 S.W.3d 763
Herbert H. Slatery, III, Attorney General and Reporter; Andree S. Blumstein, Solicitor General; Talmage M. Watts, Senior Counsel, for the appellee, Commissioner of Revenue.
OPINION
J. Steven Stafford, P.J., W.S., delivered the opinion of the Court, in which Brandon O. Gibson J., and Kenny Armstrong, J., joined.
Taxpayer brought action against the Tennessee Department of Revenue (“Department“) to challenge its assessment of business taxes against taxpayer. Taxpayer asserted it was entitled to an exemption for its leasing trucks and trailers to a public utility. Taxpayer and the Department filed cross-motions for summary judgment. The trial court granted summary judgment in favor of the Department finding that the exemption provision was unambiguous and did not apply to the taxpayer‘s business activities. On appeal, we hold that the exemption provision is ambiguous, but also that the taxpayer failed to meet its burden in proving it was entitled to the exemption. Accordingly, we affirm the trial court‘s grant of summary judgment in favor of the Department.
Background
The material facts concerning this appeal are undisputed and have been stipulated to by the parties, Appellant NAJO Equipment Leasing, LLC (“NAJO“) and Appellee Commissioner of the Department of Revenue (“Department“). NAJO is a dual-member limited liability company formed under the laws of Tennessee and located in Shelby County, Tennessee. NAJO is the owner of trucks and trailers that it leases to another Tennessee corporation, JNJ Express. JNJ Express uses the trucks and trailers it leases from NAJO to provide transportation services in interstate commerce. It is undisputed that JNJ Express, a common carrier, is a public utility within the meaning of
On May 15, 2010, the Department, pursuant to the powers provided in Title 67 of the Tennessee Code, assessed NAJO for business taxes for the period from April 2001 through March 1, 2009. The assessment was in the total amount of $27,618.93, including tax, penalty, and interest through May 15, 2010. The income of NAJO on which the Department‘s assessment of business taxes was based was derived solely from NAJO‘s leases of trucks and trailers to JNJ Express. On October 6, 2010, the Department adjusted the assessment to remove interest errone
On November 22, 2010, NAJO commenced this action challenging the Department‘s assessment of business taxes for the period from April 1, 2005, through March 31, 2009. NAJO filed a timely challenge to the assessment pursuant to the authority of
On January 30, 2014, both parties filed cross-motions for summary judgment. As mentioned above, the parties stipulated to the material facts for purposes of summary judgment. The Department argued in its motion that it properly assessed business taxes against NAJO pursuant to the Business Tax Act. The Department asserted that no exemption in the Business Tax Act applied to NAJO. NAJO argued that it was exempt from business taxes because it was a lessor of public utility property.
On April 4, 2014, the trial court heard the parties’ cross-motions for summary judgment. After the hearing, the trial court ruled from the bench in favor of the Department. Noting that this was an issue of first impression with no guidance in the Business Tax Act‘s legislative history, the trial court entered its written Findings of Fact and Conclusions on Law on May 5, 2014. The trial court found that NAJO‘s leasing of trucks and trailers to JNJ Express constituted a “sale” within the meaning of the Business Tax Act and that the “exemption that NAJO claims is an exemption for revenues derived from services, not sales.” After finding that the Department sufficiently proved it had the authority to tax NAJO and finding that NAJO failed to carry its burden in proving it was exempted, the trial court granted summary judgment in favor of the Department. Additionally, the trial court certified its order as final pursuant to Tennessee Rule of Civil Procedure 54.02. NAJO timely filed this appeal.5
Issue
NAJO presents one issue for appellate review, which we have restated: Whether the trial court erred in granting summary judgment in favor of the Department, finding that NAJO‘s gross receipts received from its lease of trucks and trailers to a common carrier are taxable under the Business Tax Act and are not exempt from being taxed under the exemption in
Standard of Review
A trial court‘s decision to grant a motion for summary judgment presents a question
When reviewing the evidence, we must determine whether factual disputes exist. If we find a disputed fact, we must “determine whether the fact is material to the claim or defense upon which summary judgment is predicated and whether the disputed fact creates a genuine issue for trial.” Mathews Partners, LLC v. Lemme, 2009 WL 3172134 at *3 (citing Byrd, 847 S.W.2d at 214). “A disputed fact is material if it must be decided in order to resolve the substantive claim or defense at which the motion is directed.” Byrd, 847 S.W.2d at 215. A genuine issue exists if “a reasonable jury could legitimately resolve the fact in favor of one side or the other.” Id. “Summary Judgment is only appropriate when the facts and the legal conclusions drawn from the facts reasonably permit only one conclusion.” Landry v. South Cumberland Amoco, et al., 2010 WL 845390 (Tenn. Ct. App. March 10, 2010) (citing Carvell v. Bottoms, 900 S.W.2d 23 (Tenn. 1995)).
The proper interpretation of a statute is an issue of law that may commonly be decided on summary judgment. We review the trial court‘s interpretation of a statute de novo with no presumption of correctness. See Lind v. Beaman Dodge, Inc., 356 S.W.3d 889, 895 (Tenn. 2011); Mills v. Fulmarque, Inc., 360 S.W.3d 362, 366 (Tenn. 2012). In construing a statute, our primary purpose is to give effect to the purpose of the legislature. Lipscomb v. Doe, 32 S.W.3d 840, 844 (Tenn. 2000). The Tennessee Supreme Court has outlined the applicable principles that apply to the question of statutory interpretation:
When dealing with statutory interpretation ... our primary objective is to carry out legislative intent without broadening or restricting the statute beyond its intended scope. Houghton v. Aramark Educ. Res., Inc., 90 S.W.3d 676, 678 (Tenn. 2002). In construing legislative enactments, we presume that every word in a statute has meaning and purpose and should be given full effect if the obvious intention of the General Assembly is not violated by so doing. In re C.K.G., 173 S.W.3d 714, 722 (Tenn. 2005). When a statute is clear, we apply the plain meaning without complicating the task. Eastman Chem. Co. v. Johnson, 151 S.W.3d 503, 507 (Tenn. 2004). Our obligation is simply to enforce the written language. Abels ex rel. Hunt v. Genie Indus., Inc., 202 S.W.3d 99, 102 (Tenn. 2006).
Estate of French v. Stratford House, 333 S.W.3d 546, 554 (Tenn. 2011). With these principles in mind, we turn to the substance of the appeal.
Analysis
This case requires us to interpret certain provisions in the Business Tax Act, codified at
Business taxes are generally divided among four classifications. See generally
(2) CLASSIFICATION 2. Each person engaged in the business of making sales of the following:
(A) New or used motor vehicles, parts and accessories, tires, batteries, motor boats or other watercraft, marine supplies, outboard motors, mobile homes and campers, motorcycles and go-carts;
* * *
(F) Tangible personal property not specifically enumerated or described elsewhere in this part[.]
Instead, NAJO claims that it is entitled to an exemption provided in a different provision under a separate classification, Classification 3, also found in
(3)(C) Each person making sales of services or engaging in the business of furnishing or rendering services, except those described [below] ...:
* * *
(xiii) Lessors of the following properties: agricultural, airport, forest, mining, oil, and public utility[.]
(Emphasis added.) NAJO contends that because it leases public utility property to JNJ Express, it is a lessor of public utility property.7 Thus, NAJO argues that it is exempt from business taxes under the above provision. On the other hand, the Department asserts that this exemption only applies to those taxpayers providing “services.” Because NAJO claims that this exemption applies, NAJO bears the burden of proving that it is entitled to the exemption. See Tibbals Flooring Co. v. Huddleston, 891 S.W.2d 196, 198 (Tenn. 1994); Crown Enters., Inc. v. Woods, 557 S.W.2d 491, 493 (Tenn. 1977). The existence of any well-founded doubt of the exemption‘s application to NAJO‘s leasing of trucks and trailers is fatal to its argument. See Tibbals Flooring, 891 S.W.2d at 198. As such, we address whether NAJO carried its burden by demonstrating that its business activity fell within the exemption, or whether the exemption is indeed one for services.
Our analysis of NAJO‘s argument begins with an analysis of the exemption provision at issue, specifically
To determine if
Here, NAJO‘s business activity involves the lease of tangible personal property, which clearly constitutes a sale, rather than a service. See
In addition to the general principles surrounding statutory construction, see discussion supra, statutes that are part of a broad statutory scheme should be interpreted in pari materia, so as to make that scheme consistent in all its parts. Wells v. Tenn. Bd. of Regents, 231 S.W.3d 912, 917 (Tenn. 2007); Lyons v. Rasar, 872 S.W.2d 895, 897 (Tenn. 1994); State v. Allman, 167 Tenn. 240, 68 S.W.2d 478, 479 (Tenn. 1934). Courts are required to construe a statute, or set of statutes, “so that the component parts are consistent and reasonable.” In re Sidney J., 313 S.W.3d 772, 775 (Tenn. 2010) (quoting Cohen v. Cohen, 937 S.W.2d 823, 827 (Tenn. 1996)). We also have a duty to interpret a statute in a manner that makes no part inoperative. In re Sidney J., 313 S.W.3d at 775-76 (citing Tidwell v. Collins, 522 S.W.2d 674, 676 (Tenn. 1975)). “Statutes that relate to the same subject matter or have a common purpose must be read in pari materia so as to give the intended effect to both.” In re Kaliyah S., 455 S.W.3d 533, 547-48 (Tenn. 2015). The court‘s interpretation must not render any part of the statute “inoperative, superfluous, void or insignificant.” Nissan N. Am., Inc. v. Haislip, 155 S.W.3d 104, 106 (Tenn. Ct. App. 2004).
In addition to other legislation, a court may also look to an administrative regulation or interpretation promulgated by the state agency in determining legislative intent. Nashville Mobilphone Co. v. Atkins, 536 S.W.2d 335, 340 (Tenn. 1976). However, we recognize that administrative regulations and interpretations are not controlling. See Carr v. Chrysler Credit Corp., 541 S.W.2d 152, 156 (Tenn. 1976). Still, “a state agency‘s interpretation of a statute that the agency is charged to enforce is entitled to great weight in deter
In addition to the foregoing principles of statutory construction, this Court is further guided by the doctrine of ejusdem generis.9 This concept was discussed by our Supreme Court in Sallee v. Barrett, 171 S.W.3d 822, 828-29 (Tenn. 2005):
Under this doctrine of statutory construction, “where general words follow the enumeration of particular classes of things, the general words will be construed as applying only to things of the same general class as those enumerated.” Black‘s Law Dictionary 517 (6th ed. 1990); see also Lyons v. Rasar, 872 S.W.2d 895, 897 (Tenn. 1994) (citing Nance ex rel. Nance v. Westside Hosp., 750 S.W.2d 740, 743 (Tenn. 1988)); State v. Sims, 909 S.W.2d 46, 49 (Tenn. Crim. App. 1995). In other words, “where it clearly appears that the lawmaker was thinking of a particular class of persons or objects, his words of more general description may not have been intended to embrace any other than those within the class.” Automatic Merch. Co. v. Atkins, 205 Tenn. 547, 327 S.W.2d 328, 333 (1959) (quoting State v. Grosvenor, 149 Tenn. 158, 258 S.W. 140, 141 (1924)).
The issue in this case requires us to use the canons of statutory construction in interpreting the exemption NAJO claims in
When applying the canons of statutory construction in this case, we first turn to the relevant administrative regulations promulgated by the Department in an attempt to gauge the legislative intent. In Carr v. Chrysler Credit Corp., 541 S.W.2d 152 (Tenn. 1976), the Tennessee Supreme Court opined: “Prior administrative interpretations and rules of statutory construction are merely aids in attempting to arrive at the legislative intent, and no one of them is controlling.” Id. at 156. In that vein, we examine Tennessee Rule and Regulation 1320-4-5-.48, an administrative regulation, to aid in our interpretation of the exemption provision at issue in this case. The regulation provides:
(1) A person exempt under the provisions of
T.C.A. § 67-4-708 , classification 3, from paying the tax on receipts from services rendered is, nevertheless, liable for the tax on receipts from sales of tangible personal property.(2) A person engaged in the business of selling tangible personal property is liable for the Business Tax even though he may call his business a service.
Tenn. Comp. R. & Regs. 1320-04-05-.48 (emphasis added). This regulation, read in pari materia with the phrase “sales of services” in subsection (3)(C), tends to show that the purpose of the exemption provision is the opposite of NAJO‘s contention: that the Legislature intended only to exempt those taxpayers providing services,
Furthermore, another regulation, Tennessee Rule and Regulation 1320-04-05-.41(1) supports the Department‘s contention that the exemption does not apply to NAJO, but applies to lessors leasing real property, providing: “Persons who receive monies or other consideration for the sale or rental of real property belonging to them are not liable for the Business Tax on such sales or rentals.” NAJO posits that the exemption it claims cannot only be interpreted to exempt lessors of real property because, by virtue of Rule 1320-04-05.41(1), they are exempt from the Business Tax regardless. Thus, in NAJO‘s view, these two complimentary provisions cannot exist simultaneously because one is necessarily superfluous.
Next, we turn to the other statutory provisions surrounding the specific exemption that NAJO claims in subsection (3)(C)(xiii). The specific provision in subsection (3)(C)(xiii) provides an exemption for “[l]essors of the following properties: ... public utility.”
Finally, we address NAJO‘s contention that the exemption in
We respectfully disagree. First, NAJO‘s assumption that “[l]essor” is defined by its counterpart term “lease” creates an inconsistent construction of the statute, putting the exemption provision in direct contravention of at least two regulations. As discussed above, if the exemption for “[l]essors” applied to sales of tangible personal property as NAJO contends, that exemption would be rendered meaningless, as a separate regulation specifically mandates that those taxpayers exempt under subsection (3)(C) are still “nevertheless, liable for the tax on receipts from sales of tangible personal property.” Tenn. Comp. R. & Regs. 1320-04-05-.48. In addition, another regulation, Tennessee Rule and Regulation 1320-04-05-.41(1) specifically provides that persons receiving monies for selling or renting real property enjoy an exemption on such sales or rentals. Thus, the substance of both Rule 1320-04-05-.48 and Rule 1320-04-05-.41 support the conclusion that the General Assembly intended to exempt “lessors” of real property from business taxes, while requiring “lessors” of tangible personal property to make tax payments.
Second, we decline to define the term “[l]essor,” as contained in the pertinent exemption, as limited by the definition of the term “lease.” We note that the definition section of the Business Tax Act includes definitions for certain transactions, such as “sale” and “wholesale,” and for the person or entity concerned with the trans
Based on the foregoing, NAJO has shown, at most, that the exemption it claims is ambiguous. Through application of the canons of statutory construction, we have uncovered a well-founded doubt as to the exemption‘s application to NAJO‘s leasing of trucks and trailers to JNJ Express. See Tibbals Flooring, 891 S.W.2d at 198. We must conclude that NAJO has not met its burden in demonstrating that the exemption at issue applies to its business activities because a well-founded doubt exists in the statute‘s interpretation. The trial court, in granting summary judgment to the Department, specifically found in its written order that the provision was unambiguous. This Court may affirm a trial court‘s award of summary judgment on grounds different from those which provided the basis for the trial court‘s decision. Hill v. Lamberth, 73 S.W.3d 131, 136 (Tenn. Ct. App. 2001). Accordingly, we affirm the judgment of the trial court granting summary judgment in favor of the Department.
Conclusion
The judgment of the Shelby County Chancery Court is affirmed, and this case is remanded for further proceedings as are necessary and consistent with this Opinion. Costs of this appeal are taxed against Appellant NAJO Equipment Leasing, LLC and its surety.