Summary 2010 WY 122

Summary of Decision issued August 26, 2010

Summaries are prepared by Law Librarians and are not official statements of the Wyoming Supreme Court.

Case Name: Sinclair Oil Corp. v. Wyo. Dept of Revenue

Citation: 2010 WY 122

Docket Number: S-09-0231

W.R.A.P. 12.09(b) Certification from the District Court of Laramie County. The Honorable Thomas T.C. Campbell, Judge

Representing Appellant Sinclair: John A. Sundahl, Sundahl, Powers, Kapp & Martin, LLC, Cheyenne, Wyoming.

Representing Appellee Wyo. Dept of Revenue: Bruce A. Salzburg, Attorney General; Michael L. Hubbard, Deputy Attorney General; Karl D. Anderson, Senior Assistant Attorney General, Martin L. Hardsocg, Senior Assistant Attorney General.

Facts/Discussion: Effective July 1, 2004, the Wyoming Legislature provided a sales tax exemption for machinery used in manufacturing in Wyoming. It is undisputed that the tax exemption applied to two large pieces of machinery owned by Sinclair Oil Corporation. Sinclair claimed that the materials used to construct foundations for the machines also qualified for the tax exemption. Sinclair applied to the Dept. of Revenue for a refund of the sales tax it had paid on the foundation materials. The Department denied that application. Sinclair appealed to the State Board of Equalization, and the Board upheld the Department’s determination. Sinclair then appealed to the district court, which certified the case for direct review by the Court.
The task before the Court was to interpret the statute establishing the tax exemption, Wyo. Stat. Ann. § 39-15-105(a)(viii), along with related provisions, to determine whether the Board correctly applied the statute to the largely undisputed facts. Sinclair argued the reformer and hydrocracker are the basic units, but without foundations, neither piece of machinery could be operated safely and properly. The foundations fit the definition of an “adjunct or attachment necessary for the basic unit to accomplish its intended function.” The Department maintained that whether or not the foundations were attachments or adjuncts to the basic units, the foundations could not be considered “machinery” because they did not satisfy the initial phrase of the definition: “all tangible personal property.” The Court agreed with the Board that the statutes plainly provide that the tax exemption applies only to manufacturing machinery and unambiguously defined the term “machinery” to include only tangible personal property. The foundations are real property and not tangible personal property. The Board relied upon Hanover Compression where it had determined that the compressor facilities were real property because they were structures affixed to the land. In the instant case, the Board determined and the Court agreed that the concrete and related foundation materials were “articles” that had been “buried or embedded.”
Next, Sinclair asserted that if the foundations are real property, then it should not have paid sales tax on the foundation materials when it purchased them because sales tax applies only to tangible personal property and not to real property. The Court noted that personal property can be converted into real property. An article that is personal property can be converted to real property when it is buried or embedded as in the instant case.

Conclusion: The Board correctly concluded that the concrete and related materials were personal property when Sinclair purchased them. In Wyoming, sales or excise tax is levied on the retail price at the time of sale. Consequently, the concrete and related materials were subject to sales tax. Later, Sinclair buried and embedded the foundation materials, thereby converting them into real property. By the time the hydrocracker and reformer were bolted to the foundations, the foundations had become real property. They were therefore ineligible for the tax exemption for manufacturing machinery because they did not satisfy the definition of machinery which includes only tangible personal property.

Affirmed.

J. Burke delivered the decision.

C.J. Kite dissenting, joined by J. Voigt: In order to remain true to the legislative intent, the nature of the property should have been determined at the time of sale. At that time, the materials were tangible personal property and qualified for the exemption under § 39-15-105(a)(viii)(O). The Justices would have held that the Board erred by concluding that Sinclair was not entitled to an exemption from the excise tax for the foundation materials.

Link: http://tinyurl.com/2bbxutj .

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