Big Blue Express v. Nebraska Dept. of Rev. , 309 Neb. 838 ( 2021 )


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  • Nebraska Supreme Court Online Library
    www.nebraska.gov/apps-courts-epub/
    10/01/2021 08:10 AM CDT
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    Nebraska Supreme Court Advance Sheets
    309 Nebraska Reports
    BIG BLUE EXPRESS v. NEBRASKA DEPT. OF REV.
    Cite as 
    309 Neb. 838
    Big Blue Express, Inc., appellant and
    cross-appellee, v. Nebraska Department
    of Revenue et al., appellees and
    cross-appellants.
    ___ N.W.2d ___
    Filed July 30, 2021.    No. S-20-518.
    1. Administrative Law: Judgments: Appeal and Error. A judgment or
    final order rendered by a district court in a judicial review pursuant to
    the Administrative Procedure Act may be reversed, vacated, or modified
    by an appellate court for errors appearing on the record.
    2. ____: ____: ____. When reviewing an order of a district court under
    the Administrative Procedure Act for errors appearing on the record,
    the inquiry is whether the decision conforms to the law, is sup-
    ported by competent evidence, and is neither arbitrary, capricious, nor
    unreasonable.
    3. Judgments: Appeal and Error. Whether a decision conforms to law
    is by definition a question of law, in connection with which an appel-
    late court reaches a conclusion independent of that reached by the
    lower court.
    4. ____: ____. An appellate court, in reviewing a district court judgment
    for errors appearing on the record, will not substitute its factual find-
    ings for those of the district court where competent evidence supports
    those findings.
    5. Taxation: Property. Nebraska imposes a tax on each item of tangible
    personal property in this state at some point in the chain of commerce,
    unless the item is specifically excluded from taxation. If the item is pur-
    chased in Nebraska, the sales tax applies, and if the item is purchased
    outside Nebraska, the use tax applies. Nebraska’s sales and use taxes
    are interrelated, and together, they provide a uniform tax upon the sale,
    lease, rental, use, storage, distribution, or other consumption of all tan-
    gible personal property.
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    Nebraska Supreme Court Advance Sheets
    309 Nebraska Reports
    BIG BLUE EXPRESS v. NEBRASKA DEPT. OF REV.
    Cite as 
    309 Neb. 838
    6. Taxation: Words and Phrases. A “sale for resale” as that term is
    defined in 
    Neb. Rev. Stat. § 77-2701.34
     (Reissue 2018) is an exemption
    from sales and use taxes.
    7. Taxation: Proof. The burden of establishing a tax exemption is placed
    on the party claiming the exemption.
    8. Taxation: Property. When determining whether property is being
    leased in the normal course of a taxpayer’s business within the meaning
    of 
    Neb. Rev. Stat. § 77-2701.34
     (Reissue 2018), a court may consider
    factors including, but not limited to, whether the leases are entered
    into with consumers who are related to or associated with the taxpayer,
    whether the terms of the leases and the parties’ subsequent conduct
    reflect an arm’s-length business transaction, whether the leases produced
    reasonable revenue for the taxpayer’s business in relation to operating
    expenses, and whether the taxpayer held itself out to the public as being
    in the business of leasing the property.
    9. Appeal and Error. An appellate court is not obligated to engage in
    analysis that is not necessary to adjudicate the case and controversy
    before it.
    Appeal from the District Court for Lancaster County: Kevin
    R. McManaman, Judge. Affirmed.
    Matthew R. Ottemann, of McGrath, North, Mullin & Kratz,
    P.C., L.L.O., for appellant.
    Douglas J. Peterson, Attorney General, and L. Jay Bartel for
    appellees.
    Heavican, C.J., Cassel, Stacy, Funke, Papik, and
    Freudenberg, JJ.
    Stacy, J.
    A Nebraska corporation purchased an interest in an airplane
    from a Kansas seller without paying Nebraska sales or use
    taxes. The Nebraska Department of Revenue (Department)
    assessed a tax deficiency, and the corporation claimed no taxes
    were owed because the purchase was a “sale for resale.” 1 After
    a hearing, the Tax Commissioner concluded the corporation
    1
    See 
    Neb. Rev. Stat. §§ 77-2701.34
     (Reissue 2018) and 77-2703 (Cum.
    Supp. 2020).
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    Nebraska Supreme Court Advance Sheets
    309 Nebraska Reports
    BIG BLUE EXPRESS v. NEBRASKA DEPT. OF REV.
    Cite as 
    309 Neb. 838
    failed to prove the purchase was a sale for resale and affirmed
    the Department’s deficiency assessment of $161,373.31. The
    corporation appealed to the Lancaster County District Court
    pursuant to the Administrative Procedure Act (APA), 2 and
    the district court affirmed. The corporation appeals, and the
    Department, along with the Tax Commissioner and the State,
    cross-appeals. We affirm.
    I. FACTS
    1. Big Blue and Related Entities
    Big Blue Express, Inc. (Big Blue), is a Nebraska corporation
    formed in 2004. Michael Schneider is its president, treasurer,
    and director. Rick Shaneyfelt is its secretary and chief financial
    officer. Big Blue has no employees. Big Blue and its officers
    have close business relationships with several other entities,
    and because an understanding of those relationships is help-
    ful to our legal analysis later, we describe them in some detail
    when reciting the facts.
    CVE Merchant Services, Inc. (CVE), owns 100 percent of
    Big Blue, and Schneider is the president and a 100-­percent
    owner of CVE. CVE is also the only owner and the sole
    member of Cheque Point Payment Processing, LLC, which
    does business under the names “PowerPay” and “PowerPay
    Central.” Schneider is also the owner and director of Tamarack
    Aerospace Group, Inc., and the president of CR Services, Inc.
    Additionally, Schneider has business relationships with The
    First Group, Inc., and Tactical Air Support, and he is a partner
    of Schay Enterprises Limited Partnership (Schay). PowerPay,
    Schay, The First Group, and CVE all have the same mailing
    address as does Big Blue.
    2. Airplane Purchase
    On April 8, 2011, Big Blue purchased a 662⁄3 interest in a
    “2009 Embraer Phenom 100 Emb-500” airplane from a seller
    in Kansas. The total price of the airplane was $2,821,500,
    2
    See 
    Neb. Rev. Stat. § 84-917
     (Reissue 2014).
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    BIG BLUE EXPRESS v. NEBRASKA DEPT. OF REV.
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    309 Neb. 838
    and the parties agree that Big Blue paid no sales or use tax on
    the airplane in any state. Robinson’s Hangar LLC purchased
    the remaining 331⁄3 interest in the airplane. Robinson’s Hangar
    is unrelated to either Schneider or Big Blue.
    An “Aircraft Joint Ownership Agreement” and an “Aircraft
    Management Agreement” were entered into by Big Blue and
    Robinson’s Hangar approximately 1 week before the pur-
    chase of the airplane. Pursuant to these agreements, Robinson’s
    Hangar is entitled to use the airplane for 100 flight hours per
    year and may utilize up to 50 additional flight hours by paying
    Big Blue $222 per flight hour. Big Blue is entitled to use the
    airplane for 200 flight hours per year and may utilize up to 100
    additional flight hours by paying Robinson’s Hangar $111 per
    flight hour.
    These agreements anticipated that Big Blue and Robinson’s
    Hangar each would “lease the aircraft to their respective own-
    ers and such owner’s affiliates,” and the agreements authorized
    each party to keep the revenue from such leases. The agree-
    ments identified Big Blue as the manager of the airplane,
    which was hangared at an airport in Wahoo, Nebraska.
    3. Insurance on Airplane
    Big Blue purchased an aviation insurance policy on the
    airplane. The declarations page indicated the airplane
    would be used for “PLEASURE AND BUSINESS” but not
    “COMMERCIAL.” The policy defined those terms as follows:
    Commercial means used principally in the business
    of the insured, including . . . passenger or freight carry-
    ing for hire or reward, rental to others for the purpose of
    pleas­ure and business and those uses defined under pleas­
    ure and business.
    ....
    Pleasure and business means used in the business
    of the insured including personal and pleasure uses but
    excluding any operation for hire or reward.
    (Emphasis omitted.)
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    BIG BLUE EXPRESS v. NEBRASKA DEPT. OF REV.
    Cite as 
    309 Neb. 838
    4. Use Agreements
    On April 30, 2011, Big Blue (as the lessor) entered into
    written use agreements for the airplane with lessees Schneider,
    CVE, Schay, and CR Services. Schneider signed all these
    agreements for Big Blue in his capacity as president. Schneider
    also signed the agreements on behalf of lessees CR Services
    and Schay in his capacity as president for those companies.
    Shaneyfelt signed as the lessee for CVE, in his capacity as its
    secretary. The same day, a use agreement with Cheque Point
    Payment Processing, doing business as PowerPay, was signed
    by Shaneyfelt as “CFO” of PowerPay. In that agreement, the
    signature for the lessor was to be Schneider as president of Big
    Blue, but it appears Schneider never signed.
    Almost 2 years later, on July 15, 2013, Big Blue entered
    into a written use agreement for the airplane with Tamarack
    Aerospace Group. Schneider signed that agreement as the
    lessor in his capacity as president of Big Blue, and as the les-
    see in his capacity as “CEO” of Tamarack Aerospace Group.
    Schneider testified that on unspecified dates he, as presi-
    dent of Big Blue, also entered into oral use agreements with
    The First Group, Tactical Air Support, Steve Meyer, and
    Steve Buchanan.
    All of the written use agreements provided for a payment
    of $1,300 per flight hour and made the lessees responsible for
    expenses such as fuel, providing a pilot and crew, and paying
    for insurance and hangar costs. The agreements further pro-
    vided that Big Blue would send invoices for flight hours used
    and that unless invoices were paid within 15 days, interest
    would accrue at 18 percent per annum.
    5. Invoices
    Big Blue’s records show the airplane was flown 20 times
    in the 20-month period between April 2011, when it was pur-
    chased, and December 2012. Flight hour invoices prepared by
    Big Blue at the end of each calendar year documented these
    flights. Specifically, invoices dated December 31, 2011, were
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    309 Nebraska Reports
    BIG BLUE EXPRESS v. NEBRASKA DEPT. OF REV.
    Cite as 
    309 Neb. 838
    sent by Big Blue to Schneider, PowerPay, Meyer, Buchanan,
    and The First Group. These invoices all charged a rate of
    $1,100 per flight hour and related to flight dates between May
    2011 and December 2011. Three flight hour invoices dated
    December 31, 2012, were sent to Schneider; two invoices
    charged $1,300 per flight hour, and one charged $1,100.
    Big Blue’s financial records show none of the invoices
    it sent in December 2011 and December 2012 were paid
    until after Big Blue was contacted by the Department in July
    2013. Specifically, the December 31, 2011, invoices were paid
    between 495 and 570 days past their due dates; the December
    31, 2012, invoices were paid 204 days after their due dates.
    Many of the invoices issued by Big Blue between December
    2011 and December 2012 were paid from an investment account
    owned by Schneider and his wife, including the invoices issued
    by Big Blue to Meyer, Buchanan, PowerPay, and Schay.
    On July 2, 2013, the Department contacted Big Blue about
    its sales tax returns and the airplane purchase. At that time,
    Big Blue reported that it had not collected any revenue related
    to leasing the airplane. As noted, however, Big Blue subse-
    quently collected payment on the various invoices issued in
    2011 and 2012. Big Blue did not charge interest on any late
    invoice payments.
    Between July and December 2013, Big Blue issued five
    flight hour invoices to Tamarack Aerospace Group that were
    promptly paid, four flight hour invoices to Schneider that were
    promptly paid, and flight hour invoices to PowerPay and Schay
    that were promptly paid. All of these invoices appear to relate
    to flight dates in 2013 and charge $1,300 per flight hour.
    In total, Big Blue issued 20 flight hour invoices between
    December 31, 2011, and December 31, 2013, showing the air-
    plane was leased for a total of 237.69 flight hours. Six of the
    invoices billed $1,100 per flight hour, and the remaining 14
    billed $1,300 per flight hour. Of the 237.69 flight hours, 133.9,
    or 56 percent, were invoiced directly to Schneider.
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    BIG BLUE EXPRESS v. NEBRASKA DEPT. OF REV.
    Cite as 
    309 Neb. 838
    Schneider testified that Big Blue issued invoices after details
    from the airplane’s flight logbook were sent to him. Although
    he testified that he was involved in the preparation of the
    invoices, he also testified that he did not recognize any of the
    flight hour invoices offered at trial as being prepared by him.
    Schneider suggested that a person named “Brenda,” surname
    unknown to him, or perhaps Pam Schendt, had created them.
    He did not know which of his many related entities employed
    either Brenda or Schendt. Shaneyfelt testified that he super-
    vised Big Blue’s invoicing, which was performed by Schendt,
    and that he generally was guided by Schneider in doing so.
    Neither Schneider nor Shaneyfelt could explain the years-long
    delay in preparing some of the invoices.
    6. Flight Hour Rate
    and Advertising
    Schneider is a pilot with certifications to fly multiple aircraft,
    and he testified that he established the $1,300 flight hour rate
    contained in the use agreements. He also testified he thought
    the rate reflected fair market value in 2011 through 2013.
    Schneider explained that when setting the $1,300 flight hour
    rate, he reviewed industry publications that analyze the hourly
    cost involved in owning an aircraft and then added a rate of
    profit to that hourly cost. He also relied on his ­experience as a
    pilot and his previous experience in leasing airplanes.
    Big Blue also offered the testimony of Vincent Barone.
    Barone testified he graduated from high school in 2016 and
    was pursuing a bachelor’s degree in aviation while he worked
    as a commercial pilot for a company specializing in air-
    craft consulting and management. Barone generally testified
    that he reviewed industry publications and industry standards
    and thought the cost to operate the airplane was somewhere
    between $1,100 and $1,250 per flight hour, so the rate of
    $1,300 per flight hour for the airplane was “about fair mar-
    ket value” in 2011 through 2013. Barone testified on cross-­
    examination that Big Blue would have to lease the airplane
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    BIG BLUE EXPRESS v. NEBRASKA DEPT. OF REV.
    Cite as 
    309 Neb. 838
    at least 200 flight hours per year to break even with a flight
    hour rate of $1,300.
    Schneider testified that he was busy with other endeavors
    and thus made no attempt to market or advertise the airplane
    as available for lease; he merely talked to individuals he “knew
    who needed aircraft.” When asked by the Department who
    he had talked to in this regard, Schneider could recall only
    one person.
    7. Big Blue’s Finances
    Rental revenue from the airplane is Big Blue’s sole source
    of ordinary income. At $1,300 per flight hour, the 237.69 flight
    hours during the 32-month period from May 2011 to December
    2013 generated an average monthly revenue of approximately
    $9,600 for Big Blue. Big Blue’s financial records show that
    during the same period, its operating expenses were approxi-
    mately $20,000 per month. The records also show that in 2011,
    Big Blue received paid in capital of $277,000 and $166,000
    from CVE. In 2012, Big Blue received paid in capital of
    $304,296 from CVE. And in 2013, Big Blue received paid in
    capital from CVE of $154,000.
    Big Blue’s profit-and-loss statements show it had net income
    of approximately $95,000 in 2011 and net losses in 2012 and
    2013 of approximately $186,000 and $2,614, respectively.
    8. Department Assessment and
    Tax Commissioner Order
    On April 28, 2014, the Department issued a notice of defi-
    ciency determination to Big Blue for the period of April 1
    through 30, 2011, in the total amount of $161,373.31. This
    included a use tax in the amount of $131,670, a penalty of
    $13,167, and interest calculated through June 27, 2014, in the
    amount of $16,536.31. The deficiency was calculated using a
    tax rate of 7 percent on two-thirds of the total purchase price
    of the airplane.
    Big Blue timely protested the notice and assessment, and
    the parties attempted to resolve the issue on their own. When
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    BIG BLUE EXPRESS v. NEBRASKA DEPT. OF REV.
    Cite as 
    309 Neb. 838
    they were unsuccessful, an administrative hearing was held
    before the Tax Commissioner in December 2018.
    At that hearing, Big Blue generally claimed the airplane
    purchase was not subject to Nebraska sales and use taxes under
    § 77-2703(2) because it was a sale for resale, 3 purchased for
    the purpose of leasing to others and leased at fair market value.
    Big Blue also argued that if the Tax Commissioner found the
    airplane purchase was not a sale for resale, then Big Blue
    should get a credit for sales tax paid by the lessees on some
    of the airplane leases pursuant to 
    Neb. Rev. Stat. §§ 77-2709
    and 77-2704.28 (Reissue 2018). The Department argued that
    Big Blue’s purchase and use of the airplane did not qualify as
    a sale for resale, and it further argued that Big Blue’s lease of
    the airplane to its sister company subjected it to sales and use
    taxes under § 77-2704.28. The Department generally denied
    that Big Blue was entitled to any credit or setoff for sales tax
    paid by lessees.
    After the hearing, the Tax Commissioner found Big Blue was
    liable for use tax under both § 77-2704.28 and § 77-2703(2)
    and affirmed the Department’s deficiency assessment. The Tax
    Commissioner denied Big Blue any credit or setoff for sales
    tax paid by any lessee.
    9. District Court Order
    Big Blue appealed to the Lancaster County District Court
    pursuant to the APA. In an order entered July 1, 2020, the dis-
    trict court affirmed the Tax Commissioner’s order. The court
    disagreed with the Tax Commissioner as to the applicability of
    § 77-2704.28 and found that statute did not subject Big Blue’s
    airplane purchase to Nebraska sales or use tax. But it agreed
    Big Blue failed to prove the purchase and use of the airplane
    was a “sale for resale,” and thus, it affirmed the tax deficiency
    assessment under § 77-2703(2).
    The district court focused on the requirement that a sale for
    resale must be a sale in the normal course of the taxpayer’s
    3
    See § 77-2701.34 (defining sale for resale).
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    business, 4 and it particularly emphasized the statutory defini-
    tion of “business” as an “activity engaged in . . . with the
    object of gain, benefit, or advantage, either direct or indirect.” 5
    Relying in part on case law from Michigan and Ohio 6 that
    interpreted similar statutory language in similar circumstances,
    the district court reasoned Big Blue had not shown the airplane
    was purchased to be resold in the normal course of its busi-
    ness because the evidence showed Big Blue made little or no
    attempt to use the airplane for the object of its gain, benefit,
    or advantage.
    In this respect, the district court found that although Barone
    testified Big Blue needed to lease the airplane 200 hours per
    year to break even, it came nowhere close to doing so. Instead,
    the undisputed evidence was that Big Blue had leased the air-
    plane for a total of 237.69 hours from May 2011 to December
    2013, well below the annual threshold necessary to recoup the
    costs associated with owning the airplane and turning a profit.
    The district court characterized Big Blue’s billing and collec-
    tion practices with respect to the airplane leases as “disinter-
    ested,” noting it often waited a substantial amount of time to
    send and collect on invoices and it never collected interest on
    late payments, even though it had the contractual authority to
    do so. The court also emphasized that Big Blue received sub-
    stantial cash infusions from its parent company CVE, despite
    the fact that CVE never used the airplane. It reasoned that
    these factors suggested Big Blue’s purpose in buying the air-
    plane was not to engage in business, because business involved
    operation for a gain or benefit.
    The district court recognized that a business need not be
    profitable, but reasoned that § 77-2701.07 required an entity
    purporting to be engaged in a business to “at least try.” Noting
    4
    See § 77-2701.34.
    5
    See 
    Neb. Rev. Stat. § 77-2701.07
     (Reissue 2018).
    6
    See, Pi In The Sky, L.L.C. v. Testa, 
    2018 Ohio 4812
    , 
    56 Ohio St. 3d 113
    ,
    
    119 N.E.3d 417
     (2018); Devonair Enter. v. Dep’t of Treasury, 
    297 Mich. App. 90
    , 
    823 N.W.2d 328
     (2012).
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    that Big Blue admittedly made no effort to market the airplane
    beyond Schneider’s “word-of-mouth advertising,” the court
    reasoned “[t]he fact that Big Blue’s marketing was dictated by
    Schneider’s other business pursuits also suggests that Big Blue
    bought the airplane not to realize some benefit for itself, but
    rather to accommodate Schneider.” It concluded:
    In sum, the Court finds that Big Blue did not purchase
    the airplane with the object of gain, benefit, or advan-
    tage under § 77-2701.07. Nor, under § 77-2701.34, was
    renting the airplane to others at market rates the “sole
    purpose” of buying it. The predominant purpose appears
    to have been to convenience Schneider (who personally
    accounted for more than half the flight hours) and his
    other business pursuits.
    The district court further rejected Big Blue’s argument that
    it was entitled to a credit for certain sales tax paid on the
    leases under the doctrine of equitable recoupment. In doing
    so, it noted that the Tax Commissioner had rejected Big Blue’s
    similar argument based on § 77-2709, and Big Blue had not
    appealed on that issue. The district court questioned whether it
    could address the new equitable recoupment argument, ­noting
    the general rule that a court reviewing an agency decision
    under the APA cannot consider an issue not presented to the
    agency. 7 It also questioned whether the argument for equitable
    recoupment could ever be valid, as it was unclear whether the
    Department was authorized to issue equitable credit. The court
    ultimately concluded that Big Blue’s equitable recoupment
    argument was meritless in any event, because it would not be
    Big Blue that was entitled to seek a credit for sales taxes paid,
    but, rather, the lessees who actually paid those taxes. 8
    Big Blue filed this timely appeal, and the Department
    cross-appealed. We moved the appeals to our docket on our
    own motion.
    7
    See § 84-917(5).
    8
    See, generally, 
    Neb. Rev. Stat. § 77-2703
     (Reissue 2018).
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    309 Neb. 838
    II. ASSIGNMENTS OF ERROR
    Big Blue assigns, restated and summarized, that the district
    court erred in concluding Big Blue did not prove its purchase
    and subsequent use of the airplane was a nontaxable sale for
    resale. Alternatively, Big Blue argues that if there was no sale
    for resale, then it is entitled to a credit for Nebraska sales tax
    paid by certain lessees of the airplane under the doctrine of
    equitable recoupment.
    On cross-appeal, the Department assigns the district court
    erred in failing to find that Big Blue was required to pay
    use tax on the purchase of the airplane under § 77-2704.28,
    because Big Blue leased the airplane to a related entity and that
    entity did not qualify for any sales and use tax exemptions on
    the leased property.
    III. STANDARD OF REVIEW
    [1,2] A judgment or final order rendered by a district court
    in a judicial review pursuant to the APA may be reversed,
    vacated, or modified by an appellate court for errors appear-
    ing on the record. 9 When reviewing an order of a district court
    under the APA for errors appearing on the record, the inquiry
    is whether the decision conforms to the law, is supported by
    competent evidence, and is neither arbitrary, capricious, nor
    unreasonable. 10
    [3] Whether a decision conforms to law is by definition
    a question of law, in connection with which an appellate
    court reaches a conclusion independent of that reached by the
    lower court. 11
    [4] An appellate court, in reviewing a district court judg-
    ment for errors appearing on the record, will not substitute its
    factual findings for those of the district court where competent
    evidence supports those findings. 12
    9
    Prokop v. Lower Loup NRD, 
    302 Neb. 10
    , 
    921 N.W.2d 375
     (2019).
    10
    
    Id.
    11
    
    Id.
    12
    
    Id.
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    IV. ANALYSIS
    1. Relevant Statutes
    [5] Generally speaking, and as discussed in greater detail
    below, Nebraska imposes a tax on each item of tangible
    personal property in this state at some point in the chain of
    commerce, unless the item is specifically excluded from taxa-
    tion. 13 If the item is purchased in Nebraska, the sales tax
    applies. 14 If the item is purchased outside Nebraska, the use tax
    applies. 15 Nebraska’s sales and use taxes are thus interrelated,
    and together, they provide a uniform tax upon the sale, lease,
    rental, use, storage, distribution, or other consumption of all
    tangible personal property. 16
    (a) Sales Tax
    Sales and use taxes are both imposed by § 77-2703. Section
    77-2703(1) imposes a sales tax “upon the gross receipts from
    all sales of tangible personal property sold at retail in this
    state.” “Gross receipts” is defined as the “total amount of the
    sale or lease or rental price, as the case may be, of the retail
    sales of retailers.” 17 “[S]ale at retail” is defined as “any sale,
    lease, or rental for any purpose other than for resale, sublease,
    or subrent.” 18
    “Sale for resale” is defined as a “sale of property . . . to any
    purchaser who is purchasing such property . . . for the purpose
    of reselling it in the normal course of his or her business.” 19
    It includes a “sale of property to a purchaser for the sole
    13
    See Intralot, Inc. v. Nebraska Dept. of Rev., 
    276 Neb. 708
    , 
    757 N.W.2d 182
     (2008). See, also, 
    Neb. Rev. Stat. § 77-2701
     et seq. (Reissue 2018 &
    Cum. Supp. 2020).
    14
    
    Id.
    15
    
    Id.
    16
    
    Id.
    17
    § 77-2701.16.
    18
    § 77-2701.31.
    19
    § 77-2701.34.
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    purpose of that purchaser renting or leasing such property to
    another person, with rent or lease payments set at a fair market
    value.” 20 “Lease or rental” is defined as “any transfer of pos-
    session or control of tangible personal property for a fixed or
    indeterminate term for consideration.” 21 And “[b]usiness” is
    defined as “any activity engaged in by any person or caused to
    be engaged in by him or her with the object of gain, benefit, or
    advantage, either direct or indirect.” 22
    (b) Use Tax
    Section 77-2703(2) imposes a use tax on the “storage, use,
    or other consumption in this state of property purchased . . .
    from any retailer and on any transaction the gross receipts of
    which are subject to tax under subsection (1).” “Retailer” is
    defined as “any seller,” 23 and “[s]eller” includes “every person
    engaged in the business of selling, leasing, or renting property
    of a kind the gross receipts from the retail sale, lease, or rental
    of which are required to be included in the measure of the sales
    tax.” 24 Essentially, § 77-2703(2) provides that use tax is owed
    if the purchase, had it occurred in Nebraska, would have been
    subject to sales tax under § 77-2703(1). 25
    (c) Exemptions
    The sales and use tax statutes also contain a number of
    statutory exemptions, codified primarily at §§ 77-2704.02 to
    77-2704.30. One such exemption is § 77-2704.28, which relates
    to leases between related companies, and provides:
    A lease of property from a subsidiary to the parent
    company, from a parent company to a subsidiary, from
    20
    Id.
    21
    § 77-2701.18.
    22
    § 77-2701.07.
    23
    § 77-2701.32(1).
    24
    § 77-2701.36.
    25
    See Lackawanna Leather Co. v. Nebraska Dept. of Rev., 
    259 Neb. 100
    ,
    
    608 N.W.2d 177
     (2000).
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    one subsidiary to another subsidiary of the same par-
    ent company, or between brother-sister companies shall
    not be subject to the sales and use tax imposed by the
    Nebraska Revenue Act of 1967 if such property was either
    originally acquired prior to June 1, 1967, or if acquired
    thereafter, the seller or transferor directly or indirectly
    has previously paid a sales or use tax thereon. Such lessor
    company shall have the same sales and use tax liability on
    the purchase of property to be leased to the lessee com-
    pany as the lessee company would have paid if the lessee
    company had purchased the property directly.
    [6] We have also described a “sale for resale,” as that term
    is defined in § 77-2701.34, as an exemption from sales and
    use taxes. 26 Big Blue’s primary argument on appeal is that its
    purchase and use of the airplane meets the definition of a sale
    for resale, and thus was nontaxable.
    We note the parties’ briefing debates whether the sale for
    resale provisions in the Nebraska Revenue Act of 1967 are
    properly characterized as an exception in a statute imposing
    a tax or as an exemption from taxation. Generally speak-
    ing, statutes imposing a tax are strictly construed against
    the government and in favor of the taxpayer, 27 while exemp-
    tions from taxation are to be strictly construed in favor of
    the government and not extended by judicial construction. 28
    Arguably, there is some tension in our case law as to whether
    a sale for resale is properly considered an exception or an
    26
    See, generally, Intralot, 
    supra note 13
    ; May Broadcasting Co. v. Boehm,
    
    241 Neb. 660
    , 
    490 N.W.2d 203
     (1992); Interstate Printing Co. v.
    Department of Revenue, 
    236 Neb. 110
    , 
    459 N.W.2d 519
     (1990); Nucor
    Steel v. Leuenberger, 
    233 Neb. 863
    , 
    448 N.W.2d 909
     (1989).
    27
    See New York Ins. Co. v. Edwards, 
    271 U.S. 109
    , 
    46 S. Ct. 436
    , 
    70 L. Ed. 859
     (1926). See, generally, 71 Am. Jur. 2d State and Local Taxation § 7
    (2012).
    28
    See, Ash Grove Cement Co. v. Nebraska Dept. of Rev., 
    306 Neb. 947
    , 
    947 N.W.2d 731
     (2020); Woodmen of the World v. Nebraska Dept. of Rev., 
    299 Neb. 43
    , 
    907 N.W.2d 1
     (2018).
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    exemption, 29 but we see no need to resolve that tension in
    this case.
    [7] Under Nebraska law, it is presumed that the airplane
    purchase was subject to use tax, and Big Blue had the burden
    of proving to the contrary. 30 As such, it was Big Blue’s burden
    to prove that its purchase and use of the airplane was a non-
    taxable sale for resale. 31 And as we explain next, regardless of
    whether the relevant statutes are construed broadly or strictly,
    Big Blue failed to meet its burden on this key issue.
    2. Not Sale for Resale
    Big Blue argues that to prove the purchase and use of the
    airplane was a sale for resale, it was required to prove (1) it
    purchased the airplane to lease it; (2) it leased the airplane
    to another; (3) the lease payments were set at fair market
    value; and (4) the leasing was done in the normal course of its
    business. 32 The Department does not vigorously contest this
    framework, but argues that Big Blue failed to prove the lease
    payments were set at fair market value and further failed
    to show the leasing was done in the normal course of Big
    Blue’s business.
    (a) Cases From Other Jurisdictions
    The parties direct us to no Nebraska case in which we have
    addressed a sale for resale involving leased property. But at
    29
    Compare Intralot, 
    supra note 13
     (referring to sale for resale as both
    exemption from taxation and as not subject to sales and use taxes); May
    Broadcasting Co., supra note 26 (referring to sale for resale as exemption);
    Interstate Printing Co., supra note 26 (same); Nucor Steel, 
    supra note 26
    (same).
    30
    See § 77-2703(2)(e) (“it shall be presumed that property sold, leased, or
    rented by any person for delivery in this state is sold, leased, or rented for
    storage, use, or consumption in this state until the contrary is established.
    The burden of proving the contrary is upon the person who purchases,
    leases, or rents the property”).
    31
    See Intralot, 
    supra note 13
     (burden of establishing that purchase was sale
    for resale is on party claiming exemption).
    32
    See § 77-2701.34.
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    least two other jurisdictions have applied similar statutory
    language to facts which are much the same as those pre-
    sented here.
    In Devonair Enter., L.L.C. v. Dep’t of Treasury, 33 a Michigan
    taxpayer appealed from an order of the tax tribunal affirming
    the assessment of a use tax on its purchase of an airplane.
    The relevant statutes and regulations provided that a “person
    engaged in the business of renting or leasing tangible personal
    property to others” 34 could either pay tax at the time the prop-
    erty was purchased or pay tax on rental receipts. “Business”
    was defined as “activities engaged in by a person or caused to
    be engaged in by a person with the object of gain, benefit, or
    advantage, either direct or indirect.” 35
    The evidence showed the taxpayer, a corporation, purchased
    the airplane in 2007 for approximately $3.6 million and entered
    into two lease agreements the same day. One was with the sole
    member of the taxpayer corporation, and the other was also
    with a related entity. The lease agreements were for $200 per
    flight hour and $680 per flight hour, respectively. In 2007, the
    airplane had 74.4 flight hours; in 2008, it had 179 flight hours;
    and in 2009, it had 136.5 flight hours. An aviation expert testi-
    fied that a charter service would generally charge about $1,300
    per flight hour for a similar airplane and that 479 flight hours
    per year is a typical usage. The expert further testified that
    the costs of owning the airplane were about $1,580 per flight
    hour. Evidence showed the taxpayer did not advertise itself as
    a lessor with the public and pursued no lease agreements with
    unrelated entities.
    The tax tribunal and the district court in Devonair Enter.
    both found the evidence was insufficient to show the taxpayer
    corporation was engaged in the business of leasing the air-
    plane to others. In doing so, they generally reasoned: (1) The
    33
    Devonair Enter., supra note 6.
    34
    Mich. Admin. Code § 205.132 (1979).
    35
    
    Mich. Comp. Laws § 205.92
    (h) (2021).
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    hourly rate charged was not sufficient to cover the costs of
    leasing the airplane; (2) the taxpayer did not advertise itself
    to the public as a lessor and pursued no leasing agreements
    with unrelated companies; and (3) the taxpayer’s very limited
    rental receipts resulted in it paying minimal use tax, compared
    to the substantial sales tax that would have been paid at the
    time of purchase. The tax tribunal and the district court found
    this evidence showed the taxpayer was not engaged in business
    because it had no reasonable expectation of gain, benefit, or
    advantage to itself.
    A similar situation was addressed by the Ohio Supreme Court
    in Pi In The Sky, L.L.C. v. Testa. 36 There, a single-member, lim-
    ited liability company purchased an airplane without paying
    sales or use tax on it and then leased it to its sole corporate
    member. The applicable law provided that a “‘[r]etail sale’”
    did not occur and thus no sales and use taxes were owed when
    “the purpose of the consumer is to resell the thing transferred
    . . . by a person engaging in business, in the form in which the
    same is, or is to be, received by the person.” 37 “‘Business’”
    was defined as engagement in an activity “with the object of
    gain, benefit, or advantage, either direct or indirect.” 38
    The Ohio Supreme Court focused its analysis on whether
    the taxpayer’s use of the airplane constituted “engaging in
    business” so that it could meet the sale for resale exception. In
    doing so, it found the taxpayer leased the airplane exclusively
    to its only member for $80 per flight hour. It also found the
    taxpayer had no business location aside from the residence of
    its sole member, that the airplane was never used by a third-
    party lessee, and that there was no evidence the taxpayer ever
    marketed the airplane for lease. Based on this evidence, it
    found significant support for the tax tribunal’s conclusion that
    the airplane was not purchased for the purpose of leasing it to
    others as part of a business enterprise.
    36
    Pi In The Sky, L.L.C., supra note 6.
    37
    See Ohio Rev. Code Annot. § 5739.01(E) (West 2020).
    38
    See § 5739.01(F).
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    We agree with the Department that the statutory language
    analyzed by the courts in Devonair Enter. and Pi In The Sky,
    L.L.C., is similar to the relevant language of our statutes gov-
    erning leases in the normal course of business. Because of this
    similarity, we find those cases instructive and we consider the
    factors discussed by those courts to be appropriate when ana-
    lyzing whether Big Blue has shown the airplane was leased in
    the normal course of its business.
    [8] As such, when determining whether property is being
    leased in the normal course of a taxpayer’s business within the
    meaning of § 77-2701.34, a court may consider factors includ-
    ing, but not limited to, whether the leases are entered into with
    consumers who are related to or associated with the taxpayer,
    whether the terms of the leases and the parties’ subsequent con-
    duct reflect an arm’s-length business transaction, whether the
    leases produced reasonable revenue for the taxpayer’s business
    in relation to operating expenses, and whether the taxpayer
    held itself out to the public as being in the business of leasing
    the property. 39 Applying those factors here, we agree that Big
    Blue has not met its burden of proving that the purchase and
    use of the airplane was a sale for resale.
    (b) No Business Activity With Object
    of Gain, Benefit, or Advantage
    Pursuant to § 77-2701.07, Big Blue had to show it purchased
    the airplane to lease it in the normal course of its business.
    “Business” in this respect is an “activity engaged in by any
    person or caused to be engaged in by him or her with the object
    of gain, benefit, or advantage, either direct or indirect.” 40
    We find substantial support in the record for the district
    court’s factual findings and conclusion that Big Blue’s pur-
    chase and leasing of the airplane was not pursued with the
    “object of [its] gain, benefit, or advantage.” 41 In this respect,
    39
    See, Pi In The Sky, L.L.C., supra note 6; Devonair Enter., supra note 6.
    40
    § 77-2701.07.
    41
    See id.
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    the vast majority of the leases entered into by Big Blue
    were either with Schneider personally or with related entities.
    Although several leases were with nonrelated entities, includ-
    ing those with Meyer and Buchanan, the record shows that
    Schneider personally paid invoices related to those leases. And
    over half of the airplane’s flight hours were invoiced directly
    to Schneider.
    The terms of the leases and the parties’ subsequent conduct
    with respect to invoices also demonstrate that Big Blue was
    not engaged in business activity with the object of Big Blue’s
    gain, benefit, or advantage. Approximately 20 percent of the
    leases were for an hourly rate under what Big Blue considered
    to be fair market value. The use agreements required the les-
    sees to pay for pilot services, and while the flight logs show
    Schneider was often the pilot, he testified that no lessee had
    ever paid him for his pilot services. Big Blue issued invoices
    for flight hours for the years 2011 and 2012, but those invoices
    remained outstanding and Big Blue made no effort to collect
    on them prior to the time it was contacted by the Department
    about the airplane in July 2013. This delay resulted in some of
    the invoices being paid as late as 500 days after issuance, and
    even then, Big Blue charged no interest, despite the terms of
    the lease agreement. After being contacted by the Department,
    Big Blue generally increased its leasing of the airplane and
    began promptly collecting on invoices.
    While not dispositive on its own, it is plainly evident from
    the record that the revenue Big Blue generated from leasing
    the airplane was substantially less than the costs it incurred
    in owning the airplane. It is undisputed that Big Blue’s only
    source of ordinary income was revenue from leasing the air-
    plane. It only leased the airplane for a total of 237.69 hours
    from May 2011 to December 2013, and as such, it generated an
    average of approximately $9,000 in revenue each month, while
    its operating expenses averaged approximately $20,000 per
    month. Big Blue argues its profit-and-loss statements show a
    small net profit in 2012 and 2013, but the evidence is that this
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    was largely the result of substantial capital infusions made by
    CVE to Big Blue, even though CVE never leased the airplane.
    Indeed, the record suggests the cash infusions were needed to
    keep Big Blue afloat precisely because it was not leasing the
    airplane for its gain, benefit, or advantage.
    And, finally, the record shows Big Blue made almost no
    effort to hold itself out to consumers or the public as the lessor
    of the airplane, the very business activity in which it claims to
    have been engaged. Schneider admitted that other than talk-
    ing to one person, he made no effort to market the airplane to
    potential lessees other than those with whom he was affiliated
    or personally acquainted. And it is telling that when insuring
    the airplane, Big Blue purchased coverage for “PLEASURE
    AND BUSINESS” use, which expressly excluded “any opera-
    tion for hire or reward.”
    On this record, there is substantial, competent evidence to
    support the district court’s conclusion that Big Blue failed
    to meet its burden of showing that it purchased the airplane
    to lease it in the normal course of engaging in an activity
    designed to result in “gain, benefit, or advantage” to Big Blue.
    We therefore agree that the airplane purchase was not a nontax-
    able sale for resale, and we affirm the district court’s finding
    that the Department’s tax deficiency assessment of $161,373.31
    was proper.
    3. § 77-2704.28 and Leases
    With Sister Company
    As noted, the Tax Commissioner affirmed the Department’s
    deficiency assessment on two bases. It found the assessment
    was proper because the airplane purchase was not a sale for
    resale, and it also found the assessment was proper, pursu-
    ant to § 77-2704.28, because Big Blue leased the airplane to
    its sister company, PowerPay, on at least one occasion. The
    district court disagreed that § 77-2704.28 applied, but agreed
    that use tax was owed because Big Blue had not proved the
    sale for resale exemption applied. In its cross-appeal, the
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    Department contends the district court erred in its analysis of
    § 77-2704.28.
    [9] We do not reach the merits of the cross-appeal; having
    determined the airplane purchase was not a nontaxable sale for
    resale and having affirmed the tax deficiency assessment of
    $161,373.31 on that basis, it is unnecessary to address whether
    an alternative statutory basis also exists for affirming the defi-
    ciency. An appellate court is not obligated to engage in analysis
    that is not necessary to adjudicate the case and controversy
    before it. 42 Nevertheless, so that the Legislature is generally
    apprised of the perceived tension in the statutory language,
    we expound on the competing constructions of § 77-2704.28
    advanced by the parties in this case.
    Section 77-2704.28 is codified in that portion of Nebraska’s
    sales and use tax statutes that set out specific exemptions
    to the sales and use taxes imposed by § 77-2703. 43 Section
    77-2704.28 is entitled “Leases between related companies;
    exemption,” and it provides:
    A lease of property from a subsidiary to the parent
    company, from a parent company to a subsidiary, from
    one subsidiary to another subsidiary of the same par-
    ent company, or between brother-sister companies shall
    not be subject to the sales and use tax imposed by the
    Nebraska Revenue Act of 1967 if . . . the seller or trans-
    feror directly or indirectly has previously paid a sales or
    use tax thereon. Such lessor company shall have the same
    sales and use tax liability on the purchase of property to
    be leased to the lessee company as the lessee company
    would have paid if the lessee company had purchased the
    property directly.
    Generally stated, the Department contends the first sen-
    tence of § 77-2704.28 exempts a lessee company from paying
    42
    See, George Clift Enters. v. Oshkosh Feedyard Corp., 
    306 Neb. 775
    , 
    947 N.W.2d 510
     (2020); Woodmen of the World, 
    supra note 28
    .
    43
    See §§ 77-2704.02 to 77-2704.30.
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    sales tax when it leases property from a related company and
    the lessor company has previously paid sales or use tax on the
    property. And the Department contends the second sentence
    of § 77-2704.28 imposes sales or use tax on a lessor company
    when that company purchases property to be leased and subse-
    quently leases that property to a sufficiently related company.
    According to the Department, when such a lease occurs, the
    lessor company’s sales and use tax liability on the purchase is
    calculated based on the sales and use tax liability the related
    lessee company would have incurred if it had purchased the
    property directly. Moreover, the Department contends the sec-
    ond sentence of § 77-2704.28 imposes this tax on the lessor
    even if the purchase would otherwise qualify as a sale for
    resale. In other words, the Department interprets the first sen-
    tence of § 77-2704.28 to exempt certain lessees from sales tax
    when the lease is between related companies and interprets the
    second sentence of § 77-2704.28 to impose use tax on certain
    lessors when the lease is between related companies.
    Big Blue characterizes the Department’s interpretation of the
    second sentence of § 77-2704.28 as “nonsensical.” 44 It argues
    the Department’s interpretation exposes a lessor to a use tax if
    its purchase of property to be leased otherwise qualified as a
    sale for resale, but it leases the property to a sufficiently related
    entity just one time, perhaps even years after the original pur-
    chase. Big Blue contends such a construction is improper, par-
    ticularly when § 77-2704.28 is codified as an exemption and
    does not purport to impose a new tax.
    Big Blue suggests a completely different interpretation of
    § 77-2704.28, under which the first sentence of § 77-2704.28
    gives a lessor wanting to lease property to a related company
    two options. First, it can choose, at the time of the lease, to
    pay sales and use taxes on the purchase of the property; if it
    does, then the lessee is exempt from paying sales tax on the
    lease. Second, it can choose, again at the time of the lease, to
    44
    Brief for cross-appellees on cross-appeal at 1.
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    not pay sales and use taxes on the purchase of the property, but
    instead to have the lessee pay sales tax on the lease. Big Blue
    does not explain how this construction of § 77-2704.28 can
    be reconciled with the “previously paid” language of the first
    sentence. As to the second sentence of the statute, Big Blue
    contends “[s]uch lessor” necessarily refers to a company which
    has elected the first option, and describes how that lessor’s
    sales and use taxes are to be assessed.
    In its order, the district court recognized that neither party’s
    interpretation of § 77-2704.28 was “without its complications,”
    in that neither construction perfectly accounts for or reconciles
    all of the statutory language. We agree the statutory language is
    vexing, and we are not persuaded that either party’s proposed
    interpretation is consistent with settled principles of statu-
    tory construction.
    The correct interpretation and application of § 77-2704.28
    will need to wait for a case where it is dispositive. In the mean-
    time, we leave to the Legislature consideration of whether its
    intended policy is adequately set forth in the statutory language
    of § 77-2704.28.
    4. Equitable Recoupment
    Big Blue makes another argument related to § 77-2704.28.
    It argues that because some of the airplane lessees—specifi-
    cally CVE, PowerPay, and CR Services—are its subsidiaries
    or brother-sister companies, then under its interpretation of the
    first sentence of § 77-2704.28, those entities did not have to
    pay sales tax on the leases if Big Blue had to pay tax on the
    airplane purchase. 45 Big Blue contends the tax amount it owes
    on the deficiency assessment should thus be offset by the sales
    tax payments made by these three related entities under the
    doctrine of equitable recoupment.
    45
    See 316 Neb. Admin Code, ch. 1, § 018.08A (2017) (recognizing
    exemption in § 77-2704.28 applies to corporations that have at least 50
    percent common ownership and other entities that would be considered
    parent, subsidiary, or brother-sister if they were corporations).
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    As it has been described by another court:
    The ancient doctrine of equitable recoupment, which
    developed concurrently at common law and in equity,
    was judicially created to preclude unjust enrichment of
    a party to a lawsuit and to avoid wasteful multiplicity of
    litigation. . . . The doctrine has been applied in Federal
    tax matters since the Supreme Court’s decision in Bull
    v. United States, 
    295 U.S. 247
     (1935), to allow the bar
    of the expired statutory limitation period to be overcome
    in limited circumstances in order to prevent inequitable
    windfalls to either taxpayers or the Government that
    would otherwise result from inconsistent tax treatment
    of a single transaction, item, or event affecting the same
    taxpayer or a sufficiently related taxpayer. . . . The doc-
    trine of equitable recoupment may be applied to relieve
    inequities caused when a transaction is treated inconsist­
    ently under different taxes, such as the income tax and
    the estate tax. . . . However, the party asserting equitable
    recoupment may not affirmatively collect the time-barred
    underpayment or overpayment of tax. Equitable recoup-
    ment “operates only to reduce a taxpayer’s timely claim
    for a refund or to reduce the government’s timely claim
    of deficiency.” 46
    As a general matter, to establish equitable recoupment, a party
    must prove:
    (1) The overpayment or deficiency for which recoupment
    is sought by way of offset is barred by an expired period
    of limitation; (2) the time-barred overpayment or defi-
    ciency arose out of the same transaction, item, or taxable
    event as the overpayment or deficiency before the Court;
    (3) the transaction, item, or taxable event has been incon-
    sistently subjected to two taxes; and (4) if the transaction,
    item, or taxable event involves two or more taxpayers,
    46
    Estate of Mueller v. C.I.R., 
    101 T.C. 551
    , 551 (1993), disapproved on
    other grounds 
    153 F.3d 302
     (6th Cir. 1998), superseded by statute, Estate
    of Jorgensen v. C.I.R., 
    97 T.C.M. (CCH) 1328
     (2009).
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    there is sufficient identity of interest between the taxpay-
    ers subject to the two taxes that the taxpayers should be
    treated as one. 47
    Some states have declined to adopt the doctrine of equitable
    recoupment, reasoning their statutory tax scheme is the sole
    means of recovering any overpayment. 48 Similarly, Nebraska
    has a statute, § 77-2709, that specifically addresses how credits
    against tax deficiencies are to be determined.
    Section 77-2709(1) provides in pertinent part that in mak-
    ing a deficiency determination for sales and use taxes, the
    “Tax Commissioner may offset overpayments for a period or
    periods, together with interest on the overpayments, against
    underpayments for other period or periods, against penalties,
    and against the interest on the underpayments.”
    Here, Big Blue argued to the Tax Commissioner that it was
    entitled to credit under § 77-2709. In doing so, it made sub-
    stantially the same argument it now attempts to make under the
    theory of equitable recoupment. Specifically, Big Blue argued
    to the Tax Commissioner that it should be given a setoff or
    credit under § 77-2709 because, under § 77-2704.28, if it has
    to pay use tax on the airplane purchase, then its related les-
    sees—CVE, PowerPay, and CR Services—should have been
    exempt from paying sales tax on their airplane leases. Big Blue
    makes this argument despite the fact that our record shows
    that CVE and CR Services never used the airplane after enter-
    ing into the lease agreement. Regardless of the evidentiary
    weakness in Big Blue’s claim, the Tax Commissioner denied
    credit under § 77-2709 because it expressly rejected Big Blue’s
    interpretation of § 77-2704.28. Instead, the Tax Commissioner
    found that § 77-2704.28 exempted the related company lessees
    47
    Menard, Inc. v. C.I.R., 
    130 T.C. 54
    , 62-63 (2008).
    48
    See, Gen. Motors Corp. v. Limbach, 
    67 Ohio St. 3d 90
    , 
    616 N.E.2d 204
    (1993); Anderson v. Dept. of Rev., 
    313 Or. 1
    , 
    828 P.2d 1001
     (1992) (rea­
    soning tax statute waives sovereign immunity and thus sovereign immu­
    nity still applies to equitable claims); Dairyland Harvestore v. Wisconsin
    Dept. of Revenue, 
    151 Wis. 2d 799
    , 
    447 N.W.2d 56
     (Wis. App. 1989).
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    309 Neb. 838
    from paying sales tax on the leases only if Big Blue had “pre-
    viously paid” tax on the airplane purchase, which it had not
    done at the time the lessees paid the sales tax.
    In its APA proceeding before the district court, Big Blue did
    not challenge the Tax Commissioner’s refusal to issue a credit
    under § 77-2709 or its related interpretation of § 77-2704.28.
    Instead, before the district court, and now before this court,
    Big Blue relies on an interpretation of § 77-2704.28 that was
    rejected by the Tax Commissioner, as support for its argument
    that it is entitled to credit based on the theory of equitable
    recoupment. Because the Tax Commissioner explicitly rejected
    the legal argument Big Blue now attempts to assert via an equi-
    table doctrine, and because Big Blue did not appeal that issue
    to the district court, we find the argument has not been pre-
    served for appellate review, 49 and we decline to address it.
    V. CONCLUSION
    The district court’s finding that Big Blue’s purchase of the
    airplane did not qualify as a nontaxable sale for resale is sup-
    ported by sufficient competent evidence and is not contrary to
    law, and we affirm the deficiency assessment under § 77-2703.
    We do not reach the merits of Big Blue’s assignment of error
    related to equitable recoupment because it has not been pre-
    served for appellate review. And we decline to reach the
    Department’s cross-appeal, as it is not necessary to resolve the
    appeal. The judgment of the district court is therefore affirmed.
    Affirmed.
    Miller-Lerman, J., participating on briefs.
    49
    See Orchard Hill Neighborhood v. Orchard Hill Mercantile, 
    274 Neb. 154
    ,
    
    738 N.W.2d 820
     (2007) (in APA appeal, district court cannot commit error
    in resolving issue never presented to it).