Georgia Dept. of Revenue v. Owens Corning , 283 Ga. 489 ( 2008 )

Melton, Justice.

We granted certiorari in this case to determine whether the Court of Appeals erred by holding that the 1997 version of OCGA § 48-8-3 (34) (A) clearly and unambiguously creates an exemption from taxation for machinery repair parts. See Owens Corning v. Ga. Dept. of Revenue, 285 Ga. App. 158 (645 SE2d 644) (2007). Based on the applicable standards of review, the legislative history of the statute, and the Legislature’s expressed intent that machinery repair parts not be extended a sales tax exemption prior to 2000, we find that no clear, unambiguous exemption for machinery repair parts existed in 1997. Therefore, we must reverse.

Based on its contention that the 1997 version of OCGA § 48-8-3 (34) (A) provided a sales tax exemption for machinery repair parts for machinery it used directly for the manufacture in Georgia of tangible personal property for sale, Owens Corning filed a claim with the Georgia Department of Revenue seeking a refund for sales taxes it paid on such parts between July 1,1997 and December 31,1999. The Department failed to rule on this claim, and, as a result, Owens Corning brought an action seeking a refund pursuant to OCGA § 48-2-35. Thereafter, Owens Corning and the Department filed cross-motions for summary judgment, and the trial court granted the Department’s motion and denied Owens Coming’s motion.¹ On appeal, the Court of Appeals reversed,² and we granted certiorari.

The standards for reviewing taxation statutes are well-settled.

Taxation is the rule, and exemption from taxation [is] the exception. And exemptions are made, not to favor the individual owners of property, but in the advancement of the interests of the whole people. Exemption, being the exception to the general rule, is not favored; but every exemption, to be valid, must be expressed in clear and unambiguous terms, and, when found to exist, the enactment by which it is given will not be enlarged by construction, but, on the contrary, will be strictly construed.

(Citations and punctuation omitted.) Collins v. City of Dalton, 261 Ga. 584, 585-586 (4) (a) (408 SE2d 106) (1991). Moreover, the interpretation of a statute by an administrative agency which has the duty of enforcing or administering it is to be given great weight and deference. See, e.g., Kelly v. Lloyd’s of London, 255 Ga. 291, 293 (336 SE2d 772) (1985).

At its inception in 1951 as part of the Retailers’ and Consumers’ Sales and Use Tax Act and for more than 40 years thereafter, machinery repair parts have been explicitly subjected to sales tax. At the outset, therefore, we begin with a clear and unambiguous legislative intent that machinery repair parts are not exempt from sales tax. This clear intent to tax machinery repair parts must necessarily inform our consideration of future changes in the statute.

In 1994, OCGA § 48-8-3 (34) (A) provided a sales tax exemption for “[machinery . . . used directly in the manufacture of tangible personal property when the machinery is bought to replace or upgrade machinery in a manufacturing plant presently existing in this state.” There was no reference to machinery repair parts in this statute, and it is undisputed that no exemption existed under this language. Therefore, the historical taxation of machinery repair parts continued as of 1994.

Likewise, no exemption was created under the revision of OCGA § 48-8-3 (34) (A) in 1997. The 1997 statute provides for a sales tax exemption for “[machinery, including components thereof, which is used directly in the manufacture of tangible personal property when the machinery is bought to replace or upgrade machinery in a manufacturing plant presently existing in this state.” (Emphasis supplied.) Nothing in this language creates an explicit exemption from sales tax for machinery repair parts. At best, this language may create some ambiguity that “replacement components” could possibly include repair parts. However, in cases of ambiguity, the statute must be interpreted in favor of the tax, not the exemption. Collins, supra. Moreover, in light of the Legislature’s explicit past declarations that machinery repair parts should be subject to tax, it stands to reason that, if the Legislature wished to reverse this historical trend in the 1997 amendment, it would have done so explicitly.

The Legislature did not take that action, however, until 2000. That year, OCGA § 48-8-3 was revised once more. The phrase “including components thereof” was deleted from subsection (34) (A). In addition, a new subsection was added which, for the first time, explicitly provides a phased-in exemption applicable to machinery repair parts. Until this point in time, every explicit mention by the Legislature of repair parts was made to show that these items were not allowed an exemption. The 2000 amendment is the first time the Legislature altered this rule.

The Legislature’s intent that the exemption for machinery repair parts not take effect until 2000 is made evident from the stated purpose for the 2000 statutory revision, namely “to amend Code Section 48-8-3 ..., relating to exemption from sales and use taxes, so as to clarify that the exemption regarding certain components of machinery used directly in the manufacture of tangible personal property extends only to machinery components purchased to upgrade such machinery.” (Emphasis supplied.) The Legislature then goes on to create a prospective phased-in exemption for machinery repair parts. This language shows that the Legislature wished to eradicate any ambiguity caused by the 1997 statute and make it clear that the 1997 statute did not extend the sales tax exemption to machinery repair parts.

Rather than narrowly construing the 1997 amendment, the dissent construes the statute in order to expand the scope of the sales tax exemption to cover machinery repair parts, despite the facts that the statute makes no mention of repair parts and these parts had been explicitly excepted from the exemption for decades, evidence of clear legislative intent that the dissent goes so far as to call “irrelevant.” In essence, the dissent turns the appropriate standard of review on its head, construing the statute in favor of the exemption, not the tax. If one interprets the stated purpose of the Legislature in the appropriate manner, however, namely in favor of the tax, the more reasonable conclusion is that the 2000 amendment was necessary to clarify that the 1997 exemption applied to only those components which upgraded machinery, because the former version of the statute was ambiguous and unclear in scope. By its express terms, the Legislature was not limiting an already existing exemption. In finding otherwise, the dissent distorts the standard that “subsequent legislation declaring the intent of the legislature in enacting an earlier statute is entitled to great weight. [Cits.]” Fleming v. State, 271 Ga. 587, 589 (523 SE2d 315) (1999). Ultimately, the dissent converts language designed to clarify that no exemption previously existed into a legislative acknowledgment of an exemption that needed to be limited.

At best, the 1997 amendment created an ambiguity as to whether the sales tax exemption applied to machine repair parts, and the law demands that, in such a case, we find that no exemption existed in fact.

Judgment reversed.

All the Justices concur, except Carley, Thompson, and Hines, JJ., who dissent.

1 In part, the trial court relied on Inland Paperboard & Packaging v. Ga. Dept. of Revenue, 274 Ga. App. 101 (616 SE2d 873) (2005) for the proposition that repair and replacement parts did not become exempt from sales tax until 2000.

2 The Court of Appeals concluded that Inland Paperboard, supra, was not controlling because it compared the 1994 version of the statute with the 2000 version of the statute without considering the 1997 version.