Sprint Spectrum LP v. Commissioner of Revenue

issues are not treated health and addiction manner. treat- appropriate With

ment, drop. rates tend to recidivism become national leader

Minnesota has initiatives. The manda- preventative

these

tory provided minimum for in Minn.Stat. 3(b), 152.025, and Minn.Stat. directly counter to what 152.026 runs accomplish trying been

Minnesota has

in terms of rehabilitation and diversion to Sentencing

reduce recidivism. Bluhm 6 directly coun- imprisonment

months’ runs trying

ter to what Minnesota has been

accomplish.

ANDERSON, H., PAUL Justice

(concuri'ing). join

I in the concurrence of Justice Gil-

bert.

HANSON, (concurring). Justice join

I concurrence of Justice Gil-

bert. LP,

SPRINT SPECTRUM al., Relators,

et

v. REVENUE,

COMMISSIONER OF

Respondent.

No. A03-954.

Supreme Court of Minnesota.

April purchased equipment use

three entities paid and tax on in their sales business purchases.1 Relators’ network transforms form in a caller’s voice or data electronic P.A., Byron, Thomas R. & Fredrikson recipi- it to the convey order intended MN, for Re- Muck, Minneapolis, # processed sound wave and ent. The lators. various converted into forms. These General, Hatch, State of Attorney Mike signals, analog signal digital forms include Minnesota, # As- Barry R. Greller waves, forms, optical light pulses, data Paul, MN, General, Attorney St. sistant streams, par- electrical The signals. and for Respondent. to enable it ticular form is deconstructed then recon- to travel over distances and from an It is then transformed structed. repro- into an electronic format electronic input. original voice or data duction of the OPINION transfor- undergo Data streams similar GILBERT, Justice. high-speed mation for transmission called break- “packet switching,” which includes tax case that involves consoli- This is a frag- ing the streams into smaller data Reve- appeal of Commissioner dated routing ments to the receiver. To before requested refunds of sales denial of nue’s capital exemption sales tax qualify for purchases tax on paid equipment must be used to equipment, the Communica- companies: Sprint three “tangible personal property manufacture LP, LP, Company Sprint Spectrum tions * * * to See at be sold retail.” Telephone Company Minne- United 16(a) 297A.01, (2000); Minn.Stat. subd. “relators”). (collectively These com- sota 16(d)(4) 297A.01, Minn.Stat. subd. of equip- panies argue purchases their (2000). statute at issue defined The wireless, exchange, ment for their local “corporeal property” as “tangible personal qualify distance services should long any kind whatsoever personal property “capital equip- ** *_» manufacturing ment” that personal property.” “tangible sold is taxed and agreed stipulated facts. Relators’ parties

The net- access the three different seg- different retail. To operate three Relators works, pay The fees are telecommunications customers fees. business. ments of taxable per of Minnesota Telephone Company United 3(f) (2000), defining as taxable sales and operates exchange Sprint local networks. telephone various services. phone purchases of Spectrum provides wireless ser- $53,921,415 provides paid Relators’ customers have Communications Sprint vices. during period relevant All in sales taxes services. long telephone distance sup- computers, backup power and retrieval utilized includes combiners, frames, switches, radio-frequency plies, transmission distribution cables, wires, complexes” tandem power which include equipment, “switch interface switches, switches, controllers, transceivers, long core distance generators, commu- receivers, switches, system links, digital multiplex scanning antenna nications databases, assemblies, storage system data switches. purchases from the businesses use whether the tax properly applied the issue. These taxes are law stipulated to the set of facts. On an contention. appeal summary from judgment, when the dates, During September the relevant facts are stipulated, we review de novo 2000, July relators purchased large whether the lower court erred in appli- 1996— equipment amounts of for inclusion their cation of the law. Burlington N. R.R. Co. wireless, exchange, local and long distance Rev., v. Comm’r 54, 606 N.W.2d 57 telecommunications networks. Relators (Minn.2000); Corp. Amoco v. Comm’r of paid tax of approximately sales million $9 Rev., 859, (Minn.2003). 871 purchases incorporated on the interpreting When an exemption gener- equipment into them various communica- taxation, al the exemption provision is to systems. parties tions agreed strictly construed. Camping & Educ. paid subject the sales tax would be to Found, State, 245, v. 250, 282 Minn. 164 verification the Commissioner of Reve- (1969). 369, The party seek- if nue we determine that exemption ing an exemption has the burden proof applies. Relators seek a tax-refund for to establish entitlement to exemption. paid purchases. taxes on these Id. aWhen statute is ambiguous, The tax court affirmed the denial of look legislative toward intent to assist us relators’ refund claims. Relying pre- on a in our interpretation. See Minn.Stat. decision, Qwest vious tax court Corp. v. (2002). § 645.16 Before doing that Rev., Comm’r 7283-R, Nos. 7214-R and though, we will review history of this (Minn. 2, 2001), WL 355861 Apr. T.C. dispute and discuss product at issue. court, by an evenly divided affd (Minn.2002), N.W.2d 351 the tax court not- Minnesota imposes sales tax on “the ed that “the common definition of ‘corpore- gross receipts from sales at retail made al’ ‘does not include a that can any person in this state.” Minn.Stat. ” only be heard and not touched or seen.’ 297A.02, (2000). § subd. 1 Minnesota im- Sprint LP, Spectrum et al. v. Comm’r of poses use tax “[f]or the privilege of using, 7299-R, 7309-R, Nos. 7308-R and storing, distributing, or consuming (Minn. 2003 WL 21246600 at May *5 T.C. Minnesota personal property or 2003) Qwest, (quoting 2001 WL 355861 taxable purchased use, services stor- *3).2 Based on this corpo- age, distribution, or consumption in this real, the tax court held that relators’ ” * * * state unless sales tax paid equipment does not manufacture price. 297A.14, § property as defined in Minn.Stat. (2000). 297A.01, § subd. 1 However, subd. receipts therefore the from equipment is not exempt sale, from use, sales tax storage, consumption or capital equipment under Minn.Stat. “capital equipment,” as defined in Minn. 297A.25, § Sprint, subd. 42. 2003 WL 297A.01, 16(a) § Stat. (2000), subd. *5, 21246600at 6. We reverse. exempt from sales and use tax. Minn. 297A.25, (2000). Stat.

I. matter, the current no materi Minnesota Legislature en- al facts are in dispute. The sole issue is acted a 2% lower exemption sales tax 2. The tax Sprint’s position court described requesting] that we redefine the term.” essentially “disagreeing] with definition Sprint, 2003 WL 21246600 at *4. Qwest tangible personal property in (codified as amended at Minn. 1067-68 to stimulate economic 16(a) (2000)). 297A.01, subd. Be- exemption was Stat. activity Minnesota. amendment, capital equip- full fore to a expanded 12, 7, statutorily follows: 3, 1989, art. ment was defined as ch. Act of October Receipts Laws 206-07. machinery Minn. means Capital equipment use, storage, or sup- the sale of and “from and the materials and capital equipment” are ex- consumption necessary to or install plies construct * * * tax. from sales and use empt machinery Per Minn. manufac- purchaser lessee for 16(a) (2000): § subd. turing, fabricating, Stat. or mining, quarrying, a to be sold at retail machinery refining means Capital for use and must be used the establishment purchased or leased for a of an by purchaser physical expansion the of new or the state and used manufacturing, fabricating, min- manufacturing, existing for primarily lessee or facility or in the refining tangible ing, quarrying, refining or fabricating, mining, sold state. property to be personal electronically and for transmit

at retail (em- 297A.01, § subd. Minn.Stat. 16 by a customer of ting results retrieved added). phasis Following the 1993 amend- computerized on-line data retrieval an amendment, ment, prior to the 1994 * * n . system the statute read: added). “Tangible personal (emphasis machinery Capital equipment means personal “corporeal is defined as property” sup- the equipment and materials and whatsoever, any including property of kind necessary to construct or install plies * * * property which is real to become machinery the or attachment, or a result of incorporation, or manufac- by the lessee for purchaser Minn. following acquisition.” installation turing, fabricating, or mining, quarrying, (2000).3 297A.01, § 11 subd. for Stat. refining tangible property, re- electronically transmitting results 1993, the legislature amended of an com- trieved customer on-line proper- insert “tangible personal statute to system, or for puterized data retrieval 24, product.” May “a ty” place Act steam, to generation electricity 1993, 375, 9, 25, 16, § art. ch. subd. 1993 retail and must be used be sold at (codified 2728, Laws as amend- Minn. 2897 physi- of a new or the establishment 16(a) 297A.01, § subd. ed at Minn.Stat. manufactur- expansion existing cal 1994, (Supp.1993)). the statute was refining ing, quarrying, or fabricating, again language update amended facility in the state. 16(a), “tangible person- but left subdivision 16(a) 5, 1994, 297A.01, May (Supp. § Act of subd. property” al intact. added).4 1993) 2, 1043, 587, 2,§ (emphasis ch. art. 1994 Minn. Laws “prepaid telephone call- ed in define amended in 1997 to 1998 to 3. This subdivision was 18, 300, 1998, ing 2, art. card.” Act of Mar. ch. prepaid telephone cards as include 3, 344, (effective Laws 1998 Minn. 2, personal property. June ch. Act of 1997, July purchases made or after for sales or art. 7 1997 Minn. Laws 1997) (codified at Minn.Stat. sales, use, (effective storage, purchases, (2000)). 30, 1997) consumption occurring June after (codified amended Although authority to the current not direct matter, (Supp.1997)). recently The lan- be noted that it should exemption, effec- the tax guage of this subdivision was further amend- amended In Northern States Power Co. v. nications equipment would be Comm’r provided services “would consti ” (Minn.1997) (“NSP ”), ‘product.’ tute a However, Id. at *2. ques- reviewed a changing the term “product” to “tangible per- tion of whether electric transformers personal property,” tax court reasoned manufacturing formed a function that statutory amendment nar qualify would for tax exemption. uti-We rowed the definition of capital equipment legislative history interpret lized by requiring that it a product manufacture purpose amendment, of the 1993 noting: can be touched or only seen and not purpose of [the is to amendment] Further, heard. Id. at *3. clarify original confirm and intent of pointed out that a change second to the enacting the exemption capital equipment exemption added lan for capital equipment *. does [It] guage that specifically exempted “electron category not create a new of items that ically transmitting results retrieved subject tax, to sales and use nor customer of an on computerized line data does exclude from any ma- Qwest, system.” retrieval 2001 WL 355861 chinery, equipment, or other items at (quoting 297A.01, § *3 Minn.Stat. exempted were intended to be as 16(a)). language, the tax court stat capital equipment, as defined in Minne- ed, showed that the [Legislature “[i]f did Statutes, 297A.01, sota section subdivi- not intend the 1993[a]mendments to nar sion 16. scope row the capital of the equipment * n n , NSP, (brackets 571 N.W.2d at 576 and exemption this additional language ellipsis original, 924, in quoting S.F. No. superfluous would be and without mean (Minn.1993)). Leg. 78th at n 3.Since Qwest, ing.” 355861, 2001 WL Qwest, departed the tax court from (“Black’s ”) Black’s Law Dictionary defines amendment, our interpretation of the 1993 tangible property as “that which may be finding that the amendment “narrowed” touched[,] felt or and is necessarily corpo the tax exemption. 2001 355861 at real,” WL *3. (6th Black’s Law Dictionary 1456 that, It noted pre-1993 under the statutory ed.1990), the tax court found that the new equipment, telecommu version of § Minn.Stat. 297A.01 did not 1, January (3) tive for 272.02, sales on or after property described in section 297A.61, According § to 9, subd. 10 (a) (d); subdivision clauses and added): (Supp.2003) (emphasis (4) 272.03, property described in section Tangible (a) Property, "Tangible Personal 2, (5). subdivision clauses and personal property" personal proper- means 25, 2003, 127, 10, May Act of ch. art. seen, ty measured, weighed, can be 2003 Minn. Laws 740-41. felt, touched, any or that is in other Effective after the relevant dates in the perceptible "Tangible manner to the senses. matter, present further added a includes, personal property” but is not lim- specific exemption for "Telecommunications to, water, steam, electricity, gas, ited prew- equipment:” software, computer ritten prepaid call- (a) machinery Telecommunications ing cards. equipment purchased or leased for use di- (b) Tangible personal property does not in- rectly by a pro- telecommunications service clude: primarily provision vider in the of telecom- (1) large ponderous machinery equip- munications services that are ment production used in a business or ac- exempt, regardless be sold at retail are tivity which at common law would be con- owner, purchased by whether a con- sidered to be property; real tractor, or a subcontractor. (2) property subject which is ad valo- subd. 35 tax; rem equipment “equipment empt capital the ser equipment because exempt phone * * * * * * * manufacturing for any of the used did not meet they provide vices sold at to be at retail.” Id. *2 “tangible property.” product definitions of .a Qwest, (citing MinmStat. at *7. 2001 WL (1992)) added). (emphasis The tax court in Qiuest directly contradict- tax The 10 concluded that the RSA NSP, in NSP. In we noted holding ed our manufacturing product for to be used amendment purpose “ at retail. Id. *2-3. The tax court sold clarify original was to ‘confirm Qiuest rely refused to on RSA rea enacting intent of the ” nar soning 1993 amendments capital equipment.’ for exemption (by insert rowed the definition of (quoting S.F. No. any ing “tangible”) and therefore cancelled (Minn.1993)). present In the Leg. 78th telephone for the relevant matter, court did mention our the tax Qwest, at *3. equipment. 2001 WL 355861 statutory of this scheme interpretation Rather, question current it relied on its own nonbind- therefore revolves NSP. Qwest. can ing precedent Sprint, 2003 around whether relators’ See “capital per *4-6. In Minn. process, equipment” WL 21246600 at defined from requirements 297A.01 tax court narrowed Stat. pur- If required a tax on items tax. that relators exemption and exempted primarily intended to be chased was relators the statute * * * “manufacturing tangible personal equipment. as capital retail,” to be sold at property decision, In of support further 16(a) (2000), Minn.Stat. it Qwest distinguished previous tax a court classified as ex- will be decision, tax 10 Ltd. court Minnesota RSA from tax. In answer- empt sales use Rev., 6481, 1997 v. Comm’r No. P’ship of language we to the ing question, look (Minn. 1997), July WL T.C. 410997 statute, legislative history and our court, divided 581 equally aff'd guidance. precedents (Minn.1998) (“RSA ”), that 10 N.W.2d 36 prior of our deal with the telephone equipment qualify had to Two decisions found personal concept tangible property to prior based on the statute analysis. In guidance In the tax some our the 1993 amendment. RSA offer Rev., purchase Fingerhut of cellular Products Co. v. Comm’r court held (Minn.1977), 610 the reve telephone system equipment was N.W.2d 258 mail order tax. 410997 found that from and use 1997 WL nue commissioner for additional owners were liable *3. It found telecommunications business the value of merely against not commu taxes assessed equipment does deliver use business, nications, lists in their signal mailing also re but “creates various § 297A.14 For the quired voice Id. The per to transmit or data.” period, required section 297A.14 a tax further that the cellular relevant reasoned [cjellular using, storing “the privilege “manufactures tax for company [c]om- use tangible per commonly consuming that term un Minnesota munications as property.” Fingerhut, N.W.2d frequencies, derstood when uses radio sonal (machines) § 297A.14 (quoting to and electronics at 608 computers (1969)). essence, mailing if product.” lists transmit and create Id. however, court, personal property, they tangible tax the former relied on were statute, they If were classified defined ex taxable. version of the which were 645.08(1) service, they were not taxable. We held Minn.Stat. (emphasis added). addresses, itself, statute, that a in and of Relying list of on this relators property, point tangible personal dictionary but several common defini- “material,” “matter,” tions of tapes, “corporeal,” included on Cheshire the addresses “substance,” labels, “physical,” gummed “incorporeal,” and heat transfers were require none of which property. Fingerhut, physical personal seen,” substance be “touched or at 610. "While as re- consumers did themselves, quired Black’s definition typed they “corporeal” not use the lists did labels, which the tax court tapes, gummed Adopting use the Cheshire referred. transfers, regular dictionary definitions, which ar- “physi and heat were the relators n * n gue, would be cal manifestation of the consistent with Minn.Stat. 645.08(1). merely intangible information.” Id. point Relators further out that the 1999 Sort, Inc. v. Zip Comm’r edition of Black’s revised the definition of (Minn.1997), N.W.2d considered “corporeal property” “property that can envelopes

whether bar codes on could be perceived.” be Terms such as “seen” or tangible personal classified as property. “handled” were eliminated from the newer “corpo- We noted that Black’s has defined edition. change, relators argue, property” things may real as “all which should cause impulses relators’ electronic perceived by any bodily of the senses ... to be classified as corporeal and therefore although a common definition of the word exempt. merely includes that which can be touched Sort, Zip previously suggested and seen.” We have that defi (6th “corporeal nitions of (quoting Dictionary property” vary, Black’s Law can ed.1990)). noting Black’s applying Fingerhut “corporeal proper After defines test, ty” as “all things perceived we held that bar codes were by any senses,” bodily property because the bar code but then was a states that a common intangi- medium format which definition of the word presented “merely ble information was that includes that which can be essential, incidental, Sort, merely Zip touched and seen.” to the rea- 567 N.W.2d Sort, at 40 purchase. (quoting son for the Zip Dictionary Black’s Law (6th ed.1990)). at 40. Although N.W.2d we referenced SoH, the sixth edition of Zip Black’s in we that Relators assert the tax court erred Fingerhut relied on our decision to resolve in deferring to Black’s definition “corpo- of legal Sort, confronting Zip issue us. Instead, personal property.” real relators SoH, Zip N.W.2d at 40. As in we do urge rely this court to on the common not wish to be restricted here in our analy dictionary definition. Relators point first by any sis single dictionary definition. 645.08(1) provides: which especially This is true where both in phrases words and troductory construed ac- portions of Minn.Stat. cording grammar to rules of and accord- subd. 11 and dictionary that ing to their common approved us- edition start with a much broader defini age; but technical phrases words and “corporeal tion: personal property any * * acquired such others as have a spe- kind whatsoever cial meaning or are defined in this chap- added), 11 (emphasis ter, are according construed to such spe- things “all perceived by any be definition; cial meaning or their bodily of the senses Law Black’s ed.1990) (6th Light Prop. Co. v. Pers. Minn. Power & (emphasis Dictionary 343 Tax, Dist., Fraser, Taxing City Sch. added). ap common gives one Black’s 64, 75, does 289 Minn. example, but that Dist. No. a mere proach as (concluding defi necessarily other common exclude “manufactured, Qivest electricity on a marketable tax court relied is nitions. The 272.02(11)). of the sixth edition portion product” to a under Minn.Stat. resorted “corporeal property” entry on have also found electrical transformers Black’s We (now superseded) definition exempt, reasoning a be the trans utilizes at the originated could have corporeal integral part of the manu formers are dictio Empire. NSP, Roman While time of the at facturing process. 571 N.W.2d helpful are sometimes nary definitions 575. In we referenced the Minneso expand it would statutory interpretations, Department ta Revenue’s dictionary’s author for of a power “a that ends “manufacturing” process solely portion specif a of a rely product of the is completed when the state text, omitted). overemphasize (citation or to sin dictionary ic Trans achieved.” Id. examples specific within a gle words component, formers are an essential entry. dictionary process as “it is manufacturing electrical electricity prod not a ‘finished clear that is statutory Zip Sort We noted passes until it ‘completed uct’ or state’ helpful in deter- not all that language is tap, and line through step-down, load can be products certain mining whether Similarly, as men transformers.” Id. property to tangible personal classified tax court has held previously, tioned ultimately sold at retail. 567 N.W.2d aré a that cellular communications Instead, precedent looked to our to manufacture and the that: and concluded Fingerhwt from exempt from communications1are cellular in which the information the medium [I]f 10, 1997 WL and use tax. RSA rea- merely incidental to the resides is has further The tax court *3. the transferred purchase, for the son legal research computerized determined But property. intangible information Publ’g Co. v. Comm’r product. West if which the information the medium *2 108040 at No. 1990 WL necessary to the resides is essential 1990), (Minn. without July T.C. aff'd trans- purchase, then the reason for (Minn.1991). op., 464 N.W.2d 512 property. ferred information Here, Sort, at 40. Zip manner, relators’ telecom- In a similar mere paying for more than customer is a manufactures equipment munications receipt for the paying and is information and other raw by converting voice information, be it form of that particular a conveyed, that can be data into form waves, light pulses, optical, analog digital, measured, sold, by the perceived and is streams, signals or electric specific data transformed, pro- senses. The matter in of the medium Regardless facsimile. cessed, refined, amplified, “packetized,” being placed, call is elec- phone which a reconstructed, routed, regenerated, and always essential impulses have been tronic in forms digital optical into and delivered service, or and thus essential telephone waves, analog signals, order to send sound of customers’ com- necessary to the reason The form to the receiver. light pulses and purchase. and munication felt, heard, seen, and produced can be under certain human senses by received determined previously have We precisely mea- and can be product. circumstances a manufactured electricity is 664 electricity, telecommunica- fled that As with the amendment was to “confirm sured. * * personal property *, “of corporeal clarify

tions is does not [it] create a and includes all any whatsoever”5 kind category subject new items 6 may perceived by any be things which NSP, the sales and tax use senses, including, but not limit- bodily (brackets original, quot- N.W.2d at 576 in and, to, touch, in sight, hearing this ed (Minn.1993)). ing Leg. S.F. No. 78th case, measured, precisely can be directed Respondent acknowledged in oral argu- a retail and delivered use customer. legislative history ment analysis precedent Our traditional 1993 amendment does not support reveal categorize would this telecommunications for the notion that this telecommunications refining manufacturing equipment equipment was meant to ineligible ultimately at product “to be sold retail.” exemption. agree. As we noted in We NSP, See, at e.g., N.W.2d 576. As NSP, did not create a new capital equipment, with all other this items, category of such as telecommunica- equipment is consumed the manu- equipment, tions that would now be sub- fabricating facturing process. The busi- ject to the sales tax. utilizing equipment nesses al- have Color-Ad, Packaging, Inc. v. Comm’r ready generated retail sales to relators’ (Minn.1988), 428 N.W.2d 806 Jus- customers that have been taxed in the Kelley, tice dissenting opinion, his noted $54,000,000 equipment amount of and this enacted the tax exemp- generating will continue the fu- tion “to stimulate development economic ture. resulting employment” by “pro- [the] looking In addition to at the language of vid[ing] an incentive to businesses to ei- statute, legisla- we also consider the ther locate or to remain the state.” Id. “object interpre- ture’s intent. The of all at (Kelley, joined dissenting; J. tation and construction of laws is to ascer- JJ.). Yetka Popovich, past, tain and effectuate intention of the both our court and the tax court have (2002); legislature.” 645.16 applied a modern and common ap- sense Haule, see v. also Peterson 304 Minn. proach statutory classify definitions to 51, 57 legis- newer forms of technology “product.” as a lature’s intention ascertained Minn, See, e.g., Minn. Power Light, & among matters, considering, other contem- at (holding electrici- poraneous legislative history, “object ty West, a product); 1990 WL attained,” to be the “circumstances under *2 (holding computerized legal re- enacted,” which it was and “the occasion a product). search is and necessity for the law.” Minn.Stat. quoted portions 645.16. In Communication should be no legislature’s exception. regarding stated intent would have 1993 amendment of Minn.Stat. been exempt under the 1992 definition of from the senate file which speci- and, because the 1993 297A.01, (2000). § 5. See categories Minn.Stat. legislature.” added the result clarify,” would not "confirm and but 6. The "would adhere to our dissent statement reasoning rather follow tax the in NSP," in unilaterally adopt but then would a Qwest, NSP, contrary holding and to our in contrary interpretation modify diat would effectively range capital would narrow the of holding product that to mean "the must be equipment eligible exemption. for is, tangible, capable-of being that touched and seen, express unless included in the additional clarification, technological in Vast strides advances a only was amendment in telecommunications. It continues have occurred equipment telecommunications that appears that desired capital equipment under to be competitive at Minnesota remain definition. with Cf. neighboring states in these industries.7 It statutory language suggests The 576. readily the telecommunications exempt capital apparent intention legislature’s industry legislature hoped tax is one that the pursuant from sales equipment 297A.25, expand by pro- to re- to retain and in Minnesota § subd. and viding exemptions significant for major changes oc- sales and embrace the flect capital produces investment substan- curring technology. in Although tial sales at retail. modern tele- equip- capital The initial definition may products always communications very legislature is em- ment used in be “touched or seen” the traditional ma- “includes all bracing. specifically It sense, legislative encourage intent to is essential to chinery equipment and investment process.” Minn. integrated production is the same for each.8 Minnesota 16(b) (2000). 297A.01, § The subd. Stat. Accordingly, we hold that the relators included com- specifically has proof entitling have met their burden of software, and electronic or electri- puters, exemption. capital them to the tax The category. this See cal devices within equipment purchased for use relators’ d(l) (3) 297A.01, and subd. produces business in Minnesota telecom- (2000). Furthermore, type this of telecom- products tangible per- munication that are specifically equipment munications to be sold sonal for excluded retail.9 purposes. Minn. non-productive See 16(c)(2) Stat. subd. Reversed.

(2000). equip- The telecommunications BLATZ, C.J., part took no purchas- ment at issue is essential ease. consideration or decision integrated production process. ongoing er’s pur tangible personal property for the comparison purposes, as a general a 1994 7.For advisory Northwestern Steel governmental exemption. council re poses Minnesota a tax states, surrounding Illi port notes that three Dept. Ill.App.3d & Wire Co. v. Dakota, nois, impose and North Wisconsin 76 Ill.Dec. 458 N.E.2d personal property a nor tax on neither Capital manufacturing equipment. Leg Equipment Advisoiy Report Council to the product manufac- 8. The telecommunications 1994). (February Although this islature actually may per- measurable tured is advisoiy report prepared year after one senses, including variety bodily ceived amendment, general the 1993 reflects hearing, feeling through but also sound vibra- feeling the tax climate at the time towards instances, and, optical tions in some region tech and the desire in the to maintain data, seen. In the case of forms even be Dakota, nological for ex industries. North facsimiles, product may form such as the final ample, specifically exempts from taxes printed, is also and touched. “[g]ross receipts computer from sales of sold at retail to ultimate consumer. is an in telecommunications tegral part primary business of a new sector n n light Sprint’s n .” N.D. our conclusion Cent.Code 57-39.2-04.3 per- "tangible can be classified as addition, neighboring (Supp.2003). states property” under Minn.Stat. sonal phrase adopted have broad definitions of the 16(a), courts, Sprint’s address we need not property." "tangible personal Illinois regarding exemption, gaseous oxygen arguments example, other have classified 666 A., attachment,

ANDERSON, incorporation, Justice as a result of or RUSSELL following acquisition.” installation Minn. (dissenting). (2000) (current 297A.01, § Stat. subd. I disagree dissent. with I respectfully 297A.61, § version subd. majority ap- definition the broad 10(a) (2002)). concluding exemption, the tax to words within plies equipment at issue does not manufacture 16(a) (2000) 297A.01, subd. MinmStat. tangible personal property, the tax court (current at Minn.Stat. version adhered to its construction of the terms 5(a) (2002)). majority ignores The subd. tangible personal property corporeal approved language use of the common and case, Qwest in personal property an earlier applied to previously that we have Rev., 7283-R, 7214-R, v. Comm’r Nos. relevant tax statute. (Minn. 2, 2001), Apr. 2001 WL 355861 T.C. when A few rules are well established court, ajfd by evenly divided N.W.2d exemption of tax approaching questions (Minn.2002), Court, explaining: “This First, statutory taxa- interpretation. referring to 6th edition Black’s Law general exemption rule and tion is the Dictionary, found that the common defini- equal rights. in “exception derogation ‘corporeal’ prod- tion of ‘does not include a Therefore, all presumption there is a only uct that can be heard and not touched ” property consequence, is taxable. LP Sprint Spectrum seen.’ v. Comm’r proof seeking is on the one burden of 7299-R, 7308-R, 7309-R, Nos. that he is entitled exemption establish (Minn. May 2003 WL 21246600 *5 T.C. exemption.” Camping & Educ. 2003) Qwest, (quoting 355861 at WL Found, State, Minn. v. *3). majority rejects The apparently (citations omitted). tax court’s reliance on the “common defini- Second, exemption provisions are to be tion” of in corporeal as stated the 6th Fi- strictly narrowly construed. Id. Black’s, explaining edition of that it does nally, phrases words and statutes by any single not wish to be restricted generally according to be construed dictionary definition. approved usage. them common Minn. However, rejected having the definition 645.08(1) (2002). majority’s The Stat. court, employed by majority the tax analysis fail to and conclusions adhere to fails to articulate an expressly alternative principles. these meaning corporeal of either personal property. majority The ultimate- key phrase of contention ly states that: present “tangible prop- matter is erty,” qualify for the product pro- because The telecommunications equipment exemption, actually duced here is measurable and sought which the must manu- perceived by variety bodily senses, personal property including hearing, facture for sale but also feel- and, retail. ing through sound vibrations 16(a) (2000). instances, years For the tax at issue some optical forms and here, “tangible per- defined light pulses may even be seen. In the data, facsimiles, property” “corporeal personal sonal case of such as the final whatsoever, any property including product produced may kind form printed, formatted, is to property become real and touched. consequently findings regard. vacate the tax court's majority’s only clarify, change, amendment to not to represents If this statement it corporeal property, appears capital equipment. definition the definition of I can- language of the 2003 aligned join more with in approach this for several rea- that redefined legislative amendment sons. with personal property than First, majority’s rejection of the ea- applicable of the 1993 statute. language pable-of-being-touched-and-seen definition 1, 25, 2003, May ch. art. See Act of tangible/corporeal property misguid is (codi- 731, 741-42 2003 Minn. Laws majority ed. While the eschews the tax 10(a) fied at Minn.Stat. court’s reliance on the definition from the (Supp.2003)) (redefining tangible personal Black’s, 6th edition of it fails to acknowl part, “personal in relevant as: property, Sort, edge Zip the fact that Inc. v. seen, weighed, mea- property that can be Rev., (Minn. Comm’r N.W.2d 34 sured, felt, touched, in any or that is 1997), very relied on the same senses.”). perceptible to other manner corporeal property definition of as stated statutory language appli- This amended is dictionary. “corpo in that Black’s defined cable, however, only occurring to property” real as: Further, January or after 2004. Id. senses, may as and Such affects be majority extent the notes that sound handled, incorpo- seen and opposed as may be felt and data trans- vibrations property, real which cannot be seen or printed can be missions handled, only contempla- and exists touched, goes beyond product it * * * law, In tion. Roman the distinc- equipment at issue here. things corporeal tion between and incor- majority’s analysis More crucial to the touch; poreal rested on the sense of electricity,

its review of cases in which objects only were considered telephone signals computer- cellular law, corporeal. things modern all legal “prod- ized research were held to be perceived by any qualified ucts” that their for tax producers bodily corporeal, senses are al- termed exemptions conclusion that though a common tvord Sprint’s1 equipment similarly manufac- merely includes that which can be tures a “product.” touched and seen. majority “product” finds the cases (6th ed.1990) Dictionary Black’s Law prior relevant to 1993 the statute because added). Sort, (emphasis Zip defined * * * * * * narrower, adopted the “common” defini- “equipment for manufac * tion, stating question we must “[t]he turing be sold retail.” statute, therefore, consider under the Minn .Stat. printed with ink direct- added). whether bar code (emphasis Although the ly envelope on an is that which can be legislature removed the lan “product” Sort, 567 Zip touched and seen.” N.W.2d guage when amended the statute added). (emphasis approach at 40 apparently the court considers the our of inter- principles was consistent with it con prior language applying and cases according preting words used statutes trolling because we stated in Northern usage, approved to their common and States Poiver Co. v. Comm’r (Minn.1997) 645.08(1), (“NSP”), tax ex- narrowly, construed emptions intended the 1993 are collectively Sprint. referred to herein Relators 668 n n * * * * Minn, Found., manu used for & Educ. 282 Camping * * n facturing tangible personal prop

250, majority at 372. The 164 N.W.2d erty, electronically transmitting for re Sort, precedent Zip of only the abandons by sults retrieved a customer of an on these estab- so forsakes doing but system, computerized line data retrieval statutory interpretation. lished canons of generation electricity or for the Moreover, of cor- Zip the Sort definition steam, *. to be sold at retail only from poreal property is not the source 375, 24, 1993, 9, 25, May Act of ch. art. properly definition flows. which narrower (emphasis 1993 Minn. Laws reasonably fact that ignore cannot the We added) (codified as amended Minn.Stat. defined, being “tangible per- phrase the 16(a) (Supp.1993)). subd. adjective crucial property,” sonal the question “tangi- There is no that the 1993 “tangible” has a well-understood common personal property” language, ble rather being touched and meaning: “[cjapable of “product” language, applies than the 1992 (6th Dictionary seen.” Black’s Law to the refund case.3 claims this ed.1990).2 combination of two these In NSP we stated the 1993 amend- adjectives by legislature, “corpo- the used only purposes ment of clarification logically to “tangible,” real” and leads the not, ordinarily presumed, as is intend- primary criterion the conclusion change ed to the law. 571 N.W.2d at 576. legislature convey intended to was that the statement, majority In reliance can perceived manufactured concludes that because the in- by the of touch. This reinforces our sense clarify change tended to rather than to adoption Zip Sort of the narrower defi- capital equipment, the court’s is, prop- nition corporeal property, broadly “prod- previous construing cases erty that can be touched and seen. intangible uct” to include both applicable items the definition end, majority’s analysis In the falls capital equipment in this case. previous back on of the statute version in which crucial instead term was disagree I with the conclusion the ma- noted, ex- “product.” prior As jority reaches from our statement in NSP. empt capital in rel- equipment was defined we were asked trans- whether * ** part evant “equipment purchased by power company formers n n n * * * a manufactnring both before and after the 1993 amendment to be sold at retail.” Minn.Stat. exempt capital equipment. were added). (emphasis addressing pur- N.W.2d at 574. First amended the defini- language chases to which the 1992 applied, substituting tion of equipment, new we noted that we had deter- previously language “product.” electricity for the word The mined that is a manufactured product, (citing new definition of was: 571 N.W.2d at 575 Minn. Indeed, materially esp. this common definition of existent sense PALPABLE, non-legal TACTILE”). is found in dictionaries as well. touch: (3d E.g., Heritage College American Diet. 1385 ed.1997) (defining tangible as "Discernible "capital equipment,” 3. The definitions of touch; palpable”); Webster’sSeventh New "tangible property” "corporeal being Collegiate ("capable of Diet. 901 personal property” have been amended since touch”); perceived esp. the sense of Web- changes apply 1993. Those do not to the (1976) ("ca- ster's Third New Int'l Diet. 2337 at issue claims here. pable being perceived touched: able to be Tax, to look at lan- Prop. appropriate clarifying Pets. Light Co. v. Poiver & Dist., Fraser, it. guage, ignore Dist. rather than to The ma- City Sch. Taxing 64, 75, jority essentially that because Minn. concludes No. (1970)). Thus, only change the 1993 amendment did not the issue was meaning capital equipment, legisla- of the performed transformers the whether that language, function. Id. In that con- ture intended the new manufacturing text, “tangible personal property,” the issue first under the mean the analyzed prior language, “product,” to the 1993 same as the old as statutory definition in But prior and concluded that the trans- construed the cases. the in- amendment in integral part terpretation “product” “an of the man- of those cases formers were and, such, intangibles. credulity are ex- included It strains ufacturing process as suggest legislature under the 1992 to that the intended to empt capital equipment original the confirm an intent to both Id. We then addressed definition.” include intangible by language. chang- under the amended 1993 issue agreement parties ing wording limiting of all that the the more We noted the merely phrase “tangible personal property.” a clarifica- The legislation the 1993 was capital equip- explanation more is that the tion of the 1992 definition reasonable quoted legisla- language clarify new was intended to that ment. Id. at 576. We also original capital that intent: the intent was to history expressing tive limit to that which manufactures is to purpose amendment] of [the tangible personal property. original intent of clarify confirm and the exemption in legislature enacting the the Indeed, changing “prod in addition to does capital equipment [It] *. “tangible the personal property,” uct” to items category not create a new expressly 1993 amendment also added to tax, nor subject to sales and use of exempt capital the definition any ma- does it exclude from electronically transmitting used “for re or other items chinery, equipment, of an sults retrieved a customer on-line exempted which were intended to be as system, or for computerized data retrieval in Minne- capital equipment, defined electricity or steam.” If generation Statutes, sota section subdivi- property was intended to sion 16. majority’s intangibles, ap as the include No. quoting 571 N.W.2d at 576 S.F. mean, proach would would (Minn.1993) (brackets in Leg. 78th expressly no include have had reason quotation illustrates two original). data categories the additional on-line things clarifying amendment. about electricity. generation transmission First, original it addressed the intent of Indeed, likely in categories those were second, legislature, and it did not add because, language in the amended cluded categories of taxable or or delete history quoted in legislative as stated items. above, clarifying original in addition to its intent, legislature did not want narrow intended to confirm

That the any existing exempted categories. to delete necessarily intent original does mean, however, explicitly catego included two confirming It therefore it was “prod- that had been construed the courts interpretation applied ries broad majority. previous included in the definition. See uct” cases relied on Rather, Light Prop. & Co. v. question remains what was the Minn. Power Pers. Dist, Fraser, Tax, Taxing City Sch. original defining cap- intent in legislature’s 64, 75, 182 language No. 289 Minn. equipment. ital The amended Dist. intent, (holding that elec clarify intended to so is N.W.2d was product); West by providing in Minnesota ex- a manufactured tricity is Revenue, significant capital invest- emptions No. Publ. Co.v. Comm’r of (Minn. July produces ment that substantial sales T.C. 1990 WL op., Although modern telecommuni- unthout 1990), retail. aff'd (Minn.1991) (holding computerized products may always le cations product). traditional is a “touched or seen” gal research sense, legislative encourage intent to Therefore, I adhere to although would the investment in NSP amendment our statement for each. Minnesota is the same clarify rather than to intended to omitted.) (Footnotes Unfortunately, ab- change the majority opinion any ref- sent from the categories prod- the change and did not criterion, actual action or histo- legislative erence to satisfy exemption that the ucts in ry supports I conclude that that these broad conclusions majority, the unlike intent, regard legislature legislature’s the about the intent with clarifying original its tangi- must be technology clear that the and the telecommunications made ble, is, being Instead, majority only touched and capable industry. that the relies seen, express in the addi- dissenting opinion unless included on a statement from legislature. the categories added general legislature tional the intent of the about Indeed, intended to legislature had the development economic and to to stimulate telephone electronic specifically provide incentives for businesses relo- clearly expressed this it could have pulses, notably cate to or remain in the state — intention, catego- related as it did with the technology with no reference at all to systems of the computer ries of on-line Next, majority telecommunications. electricity. generation of relies on decisions from this court and the recognized tax court that “newer forms of support further majority seeks to technology,” electricity computerized exemption by reading of expansive its research, legal particular, “prod- as a intent, ultimately legislative reference to hardly uct.” But those decisions consti- that: concluding legislative tute action.4 legislature desired appears It Moreover, above, as discussed when the competitive with that Minnesota remain legislature “clarify” original chose to its in these indus- neighboring its states amendments, readily apparent the tele- intent with its 1993 rather tries. It is industry adopting expansive language that than that is one communications expand easily retain and could have made clear intent to legislature hoped to 04.3(6)(b)(l) ap (Supp.2003); majority report Wis. Stat. 4. The cites a 1994 Illinois, parently 77.54(6)(a) knowing Wisconsin and (Supp.2001). tangible when it amended the Sort, Zip 567 N.W.2d at 40. Unlike the personal property 2003.6 majority, I would conclude that the elec- Because a more narrow definition is con- pulses produced Sprint’s tronic equip- language employed by the the sistent with merely ment that inci- are medium is legislature, usage the common of the terms to purchase dental the reason corporeal, and our established telephone service. regarding construction of tax ex- principles Although majority concludes that statutes, I would affirm the tax emption Fingerhut/Zip Sort test should be con- holding pulses7 court’s that the electronic classify Sprint’s product tangi- strued to equipment are not produced Sprint’s personal property, ble that is personal property. retail, reading at of the test sold close arguendo, that assuming, Even Sort, Zip shows otherwise. In we conclud- majority’s reasoning utilize the should tangible, that because ed bar codes were pulses that are Sprint’s they intangible conclude electronic a medium were presented that was essen- tangible personal property, property information was 30, 2:001, 5, 12, majority agreement art. 5. notes its with ment. Act of June ch. The 1411, (1st Sprint "legislative history Spec.Sess.) of the 1993 Laws 2001 Minn. support does reveal for the amendment not (codified at Minn.Stat. 1698-99 equip- that notion this telecommunication (2002)). legis- Obviously, when ineligible was meant for tax ex- ment expand scope wanted to lature presumption emption." But the is that all exemption, so. I it knew how do cannot taxable, consequently property is the bur- note, help regarding expansions, but these ' taxpayer qualifica- is on the to establish den long-standing presumption our an ’ , exemption, Camping & Educ. tion for change amendment intended to the law. is Minn, Found., at 164 N.W.2d at See 571 N.W.2d 575-76. affirmatively not on the state ineligible exemption. is for the produces various 7.The issue types signals transport that are used to broadened the defi- message, including telephonic electrical cur- "tangible personal property.” nition of See rent, light pulses, D-3, and radio waves. For con- pp. legisla- D-2— infra. venience, they collectively referred to ture had the sales tax statute to amended pulses. expressly exempt equip- herein as electronic telecommunications ANDERSON, (dissenting). H. at 40. PAUL purchase. tial to However, we found that Fingerhut, join in of Justice Russell A. I the dissent merely incidental were mailing lists typed Anderson. information con- intangible to the use at 610. lists. 258 N.W.2d within tained selling- revolves around

Sprint’s business

communication, pul- electronic selling are incidental pulses The electronic ses. VLAHOS, al., Appellants, et Dean P. of the consumer purpose to the overall v. may not average consumer purchase. message how his is trans- aware of even be R&I CONSTRUCTION OF BLOOM another, and phone to from one mitted INGTON, INC., & Robert Waade f/k/a satisfied if a future likely equally

would Associates, Inc., al., Respondents, et rely developed that did method al., Defendants, Doe, et and R & I John Indeed, amply this is pulses. electronic Bloomington, Inc., Of Construction technology by evolution of illustrated Associates, Inc., Robert Waade & current, f/k/a using lines electrical from land Respon al., third-party plaintiffs, et transmission, to the now fiber optical then dents, employs telephone ubiquitous wireless pulses are not The electronic radio waves. v. purchased, medium the essential Quality Insulation, Inc., third-party incidental device deliver but rather an defendant, Respondent, Sprint’s pul- This makes communications. mailing Co., Inc., lists Insulating to the ses more similar Intex Third- the information Fingerhut. Fingerhut, Party Defendant, lists, the lists them- mailing on the Conditioning, Heating Kleve & Air selves, purchase. was essential defendant, Inc., third-party Similarly, at 610. Fingerhut, 258 N.W.2d Respondent, by Sprint’s it is the information delivered essential to the pulses electronic Co., third-party Tappe Construction consumer, themselves. pulses defendant, Respondent, Therefore, Sprint sells at product Donnelly Brothers Construction tele- retail the communication Inc., third-party Company, phonic message, pulses not the electronic defendant, Respondent, message. Accord- uses to transmit pulses are incidental ingly, because those Electrical Collins Construction sold that is defendant, Co., third-party retail, they were construed to be even if Respondent, the definition personal property, Inc., Mfg., would not satis- Third- Weather Shield Party fied. Defendant. reasons, For I see no basis to these No. C7-02-1428. majority’s interpretation broad adopt the Minnesota. Supreme Court of exemption, April exemp- narrowly and would construe tion, According- required we are to do.

ly, I affirm. would notes Without impose North a sales tax on Dakota did meaning phrase ascribed to that crucial manufacturing capital equipment as evidence years those states in the when relevant legislature to remain com intended enacted, legislation was citation to Minnesota petitive neighboring with states in the tele report nothing competi tells us about the However, industry. a 1994 communications relationship among the states in this re tive report light sheds no on the intent of the Illinois, gard. example, supreme For legislature years previous here. in the relevant legislature tangi court held that the intended Moreover, currently each of those three states "[c]apable personal property to mean ble generally exempt manufacturing equipment being touched” and therefore electrical ener only pro from their sales tax if it is used to tangible personal property. gy Par "tangible personal property.” duce 35 Ill. Hatpin, v. 10 Ill.2d rand Coal Co. 120/2-5(14) (West Comp. Supp. Stat. Ann. N.E.2d 700-01 2003); N.D. Cent.Code 57-39.2- qualify in- at retail to technologies among the must be sold newer embrace Fingerhut exemption. Products Co. exemp- for the qualify that would dustries Revenue, v. Commissioner exemp- tion, redefined the (Minn.1977), in Zip 609-10 and later phrase “tangible tion with the restrictive Sort, developed test dealt with telling, And most personal property.”5 intangible proper circumstances which included in expressly also information, ty, such as was transferred electricity computerized means of media and later sold at legislature thought If the legal research. retail. Under this test: technologies new were included such the medium in which the [I]f information “tangible personal property” def- within merely resides is incidental to the rea- inition, been no need to there would have purchase, son for the the transferred electricity and com- specifically provide for intangible property. information is But Alternatively, puterized legal research. if the medium in which the information broadly embrace new had wished necessary resides essential technology products, easily it could have for purchase, reason then the trans- it did expansive used a more definition as is tangible property. ferred information

Case Details

Case Name: Sprint Spectrum LP v. Commissioner of Revenue

Court Name: Supreme Court of Minnesota

Date Published: Apr 1, 2004

Citation: 676 N.W.2d 656

Docket Number: A03-954

Court Abbreviation: Minn.