Citation Partners, LLC v. Wisconsin Department of Revenue ( 2023 )

2023 WI 16SUPREME COURT OF WISCONSIN
CASE NO.: 2020AP1683
COMPLETE TITLE: Citation Partners, LLC,
Petitioner-Respondent-Petitioner,
v.
Wisconsin Department of Revenue,
Respondent-Appellant.
REVIEW OF DECISION OF THE COURT OF APPEALS
Reported at 400 Wis. 2d 260, 968 N.W.2d 734PDC No: 2021 WI App 86 - Published
OPINION FILED: March 1, 2023
SUBMITTED ON BRIEFS:
ORAL ARGUMENT: October 17, 2022
SOURCE OF APPEAL:
COURT: Circuit
COUNTY: Dodge
JUDGE: Martin J. De Vries
JUSTICES:
DALLET, J., delivered the majority opinion of the Court, in
which ANN WALSH BRADLEY, HAGEDORN, and KAROFSKY, JJ., joined.
ROGGENSACK, J., filed a dissenting opinion, in which ZIEGLER,
C.J., and REBECCA GRASSL BRADLEY, J., joined.
NOT PARTICIPATING:
ATTORNEYS:
For the petitioner-respondent-petitioner, there were briefs
filed by Frederic J. Brounder, J. Wesley Webendorfer, and DeWitt
LLP, Madison. There was an oral argument by J. Wesley
Webendorfer.
For the respondent-appellant, there was a brief filed by
Anthony D. Russomanno, assistant attorney general, with whom on
the brief was Joshua L. Kaul, attorney general. There was an
oral argument by Anthony D. Russomanno, assistant attorney
general.
2
2023 WI 16NOTICE
This opinion is subject to further
editing and modification. The final
version will appear in the bound
volume of the official reports.
No. 2020AP1683
(L.C. No. 2019CV612)
STATE OF WISCONSIN : IN SUPREME COURT
Citation Partners, LLC,
Petitioner-Respondent-Petitioner,
FILED
v. MAR 1, 2023
Wisconsin Department of Revenue, Sheila T. Reiff
Clerk of Supreme Court
Respondent-Appellant.
DALLET, J., delivered the majority opinion of the Court, in
which ANN WALSH BRADLEY, HAGEDORN, and KAROFSKY, JJ., joined.
ROGGENSACK, J., filed a dissenting opinion, in which ZIEGLER,
C.J., and REBECCA GRASSL BRADLEY, J., joined.
REVIEW of a decision of the Court of Appeals. Affirmed.
¶1 REBECCA FRANK DALLET, J. Wisconsin imposes a five
percent tax on the sale or lease of tangible personal property,
including aircraft, as well as on select services. The tax
applies to the "sales price"——that is, "the total amount of
consideration" paid for a sale, lease, or service, with no
deductions for the seller's or lessor's costs. See Wis. Stat.
No. 2020AP1683
§§ 77.52(1)(a), 77.51(15b)(a) (2013-14).1 The sale of aircraft
parts and maintenance, however, are exempt from sales tax. See
Wis. Stat. §§ 77.52(2)(a)10., 77.54(5)(a)3.
¶2 Citation Partners, LLC owns an aircraft which it
leases to third parties, the Lessees. As part of the total
amount the Lessees pay to lease the aircraft, Citation Partners
charges per-flight-hour rates for aircraft repairs and engine
maintenance. Those rates correspond to the amount Citation
Partners spends on aircraft repairs and engine maintenance.
Citation Partners argues that this portion of the lease payment
is tax exempt because it is a sale of aircraft parts or
maintenance. We disagree. The per-flight-hour charges for
aircraft repairs and engine maintenance are taxable because they
are part of the total amount of consideration the Lessees pay to
lease Citation Partners' aircraft. We therefore affirm the
court of appeals' decision.
I
¶3 Citation Partners owns an aircraft that it leases to
the Lessees. The Lessees signed a contract called the Aircraft
Dry Lease, defining the responsibilities they and Citation
Partners have with regard to the lease of the aircraft. The Dry
Lease requires the Lessees to notify Citation Partners if the
aircraft needs repairs or maintenance. If so, Citation Partners
is responsible for scheduling and paying for all repairs or
All subsequent references to the Wisconsin Statutes are to
1
the 2013-14 version.
2
No. 2020AP1683
maintenance.2 It does not perform any of the repairs or
maintenance itself.
¶4 In addition to the Dry Lease, the Lessees entered into
a Side Agreement with Citation Partners that sets forth the
financial terms for the lease of the aircraft. The Side
Agreement includes costs-per-flight-hour that Citation Partners
charges the Lessees for aircraft repairs and engine maintenance.
Those charges are substantially similar to the amount Citation
Partners spends when it purchases aircraft repairs and engine
maintenance directly from vendors.
¶5 In 2013, the Legislature passed Wisconsin Act 185,
which expanded an existing sales tax exemption to include the
sale of aircraft parts or maintenance. See 2013 Wis. Act 185.
After the Act took effect, Citation Partners stopped collecting
sales tax on the amounts it charged Lessees for aircraft repairs
and engine maintenance. In 2017, the Wisconsin Department of
Revenue notified Citation Partners that unpaid sales taxes were
due on those amounts.
¶6 Citation Partners appealed, claiming that the Act 185
sales tax exemption applied to the Lessees' payments for
aircraft repairs and engine maintenance because they were a
dollar-for-dollar "reimbursement" to Citation Partners for those
costs. The Tax Appeals Commission disagreed, concluding that
2 The Lessees have limited authority to incur up to $5,000
of necessary maintenance and repair work for the aircraft
without the prior written approval from Citation Partners. The
Lessees will be reimbursed by Citation Partners upon receipt of
proof of payment.
3
No. 2020AP1683
the payments were not reimbursements and that Act 185 did not
apply to any portion of the payments Citation Partners received
from the Lessees. The circuit court3 reversed the Commission's
decision on the grounds that an agency relationship existed
between Citation Partners and the Lessees. According to the
circuit court, this relationship meant that the payments for
aircraft repairs and engine maintenance were tax exempt, since
those payments would be tax-free if they were made directly by
the Lessees to the vendors.
¶7 The court of appeals reversed. Citation Partners, LLC
v. DOR, 2021 WI App 86, ¶35, 400 Wis. 2d 260, 968 N.W.2d 734.
In its view, the existence of an agency relationship was
irrelevant. Id., ¶32. Instead, it held that the payments were
not exempt from sales tax under the plain language of the
statutes, which apply sales tax to "the total amount paid on an
aircraft lease," without "any deduction for the portions of a
lease attributed to aircraft maintenance or engine maintenance,
which are the costs and expenses of running an aircraft leasing
business." Id., ¶24.
II
¶8 We review the Commission's decision rather than the
circuit court's. See Friendly Vill. Nursing & Rehab, LLC v.
DWD, 2022 WI 4, ¶13, 400 Wis. 2d 277, 969 N.W.2d 245. In doing
so, we defer to the Commission's findings of fact so long as
The Honorable Martin
3 J. De Vries of the Dodge County
Circuit Court presided.
4
No. 2020AP1683
they are supported by substantial evidence, but we review its
legal conclusions de novo. Id.III
¶9 In order to determine whether the Lessees' cost-per-
flight-hour payments to Citation Partners for aircraft repairs
and engine maintenance are taxable, we analyze the tax statutes.
"When interpreting statutes, we start with the text, and if its
meaning is plain on its face, we stop there." Clean Wis., Inc.
v. DNR, 2021 WI 72, ¶10, 398 Wis. 2d 433, 961 N.W.2d 611. In
assessing the plain meaning of the text, "[w]e also consider the
broader statutory context, interpreting language consistently
with how it is used in closely related statutes." Duncan v.
Asset Recovery Specialists, Inc., 2022 WI 1, ¶9, 400 Wis. 2d 1,
968 N.W.2d 661. After analyzing the relevant statutes, we then
consider what effect, if any, Citation Partners' arguments about
the law of agency has on our interpretation.
A
¶10 Wisconsin imposes a five percent tax on the "sales
price" for tangible personal property like aircraft that is sold
or leased. § 77.52(1)(a). "[S]ales price" is defined broadly
as "the total amount of consideration, . . . for which tangible
personal property . . . [is] sold, licensed, [or] leased."
§ 77.51(15b)(a). The "total amount of consideration," and
therefore the "sales price," is calculated "without any
deduction for" "[t]he seller's cost of the property or items,
5
No. 2020AP1683
property, or goods . . . sold," or "[t]he cost of materials
used, labor or service cost, . . . and any other expense of the
seller." Id. (a)1.-2. Thus, §§ 77.52(1)(a) and § 77.51(15b)(a)
together state that the total amount of consideration paid for a
lease——the "sales price"——is taxable, with no deduction for the
lessor's costs. See § 77.51(15b)(a)1.-2.
¶11 To calculate the total "sales price" that the Lessees
pay Citation Partners to lease the Aircraft, we simply multiply
the number of flight hours by the total of all the costs-per-
flight-hour.4 The Side Agreement breaks the total costs-per-
flight-hour down into different hourly rates, including a base
rate ($724.50/hour), Airplane Repairs ($488/hour), and Engine
TAP Costs ($292.26/hour).5 The Lessees have to pay all of these
costs in order to lease the aircraft. The sum of those costs——
including for aircraft repair and engine maintenance——is thus
"the total amount of consideration . . . for which [the aircraft
is] . . . leased" and is therefore taxable. See
§ 77.51(15b)(a). If there were any doubt remaining as to
whether Citation Partners' costs for aircraft repairs and engine
maintenance can be deducted from the sales price,
§ 77.51(15b)(a) confirms that the "total amount of
consideration" must be calculated "without any deduction" for
Citation Partners' costs. Id. (emphasis added).
4In addition, the Lessees also pay $1.00 per rental period
to lease the aircraft.
5These hourly rates reflect those in the Side Agreement as
of January 1, 2015.
6
No. 2020AP1683
¶12 Citation Partners argues that the payments are not
taxable because they are not consideration at all. That is
because, in its view, Citation Partners simply hands the money
the Lessees pay for repairs and maintenance over to the vendors
that provide those services. But consideration is "any act of
the plaintiff from which the defendant . . . derives a benefit
or advantage." Consideration, Black's Law Dictionary (11th ed.
2019); see also DOR v. River City Refuse Removal, Inc., 2007 WI
27, ¶50, 299 Wis. 2d 561, 729 N.W.2d 396 (explaining that
consideration "may arise when there is a benefit to the promisor
or a detriment to the promisee"). And Citation Partners clearly
benefits from these payments by passing along to its Lessees the
costs of maintaining its aircraft. For that reason, these
payments are——by definition——consideration. See River City, 299
Wis. 2d 561, ¶50 (consideration includes "a change in financial
position"). Additionally, accepting Citation Partners' argument
that it receives no consideration from the Lessees' payments for
aircraft repairs and engine maintenance simply because that
payment corresponds to anticipated repair costs would render
part of § 77.51(15b)(a) meaningless. See State ex rel. Kalal v.
Cir. Ct. for Dane Cnty., 2004 WI 58, ¶46, 271 Wis. 2d 633, 681
N.W.2d 110 ("Statutory language is read where possible to give
reasonable effect to every word, in order to avoid
surplusage."). After all, if Citation Partners is right, it is
not clear what § 77.51(15b)(a) means when it says that the
"sales price"——the "total amount of consideration"——is
7
No. 2020AP1683
calculated "without any deduction" for Citation Partners' costs.
§ 77.51(15b)(a) (emphasis added).
¶13 Citation Partners claims that the costs-per-flight-
hour that it receives for aircraft parts and engine maintenance
are nevertheless tax exempt. It points to two statutory
exemptions related to aircraft: Wis. Stat. § 77.54(5)(a)3.,
which exempts the sale of "parts used to modify or repair
aircraft," and Wis. Stat. § 77.52(2)(a)10., which exempts the
sale of "repair, service, . . . and maintenance of any aircraft
or aircraft parts." Citation Partners argues that since the
plain language of both exemptions covers the costs of aircraft
repairs and engine maintenance, then "the reimbursement payments
that Citation Partners receives from the Lessees are exempt from
sales tax."
¶14 We disagree because neither of these statutory
exemptions applies to the payments Citation Partners receives
from the Lessees. Simply put, Citation Partners does not sell
its Lessees "parts used to modify or repair aircraft," or
"repair, service, . . . and maintenance of any aircraft." See
§§ 77.54(5)(a)3., 77.52(2)(a)10. It leases its aircraft to the
Lessees. And as explained previously, the statutes already make
clear that the total amount of consideration paid on an aircraft
lease is taxable without any deduction for the Lessor's costs.
See §§ 77.51(15b)(a), 77.52(1)(a). When Citation Partners (or
the Lessees for that matter) buy aircraft repairs or engine
maintenance directly, those transactions are tax-exempt. But
when Citation Partners passes those costs along to its customers
8
No. 2020AP1683
as part of the total amount of consideration in a lease, that
transaction is taxable.
¶15 For example, if the plane's landing gear breaks and
Citation Partners purchases parts from a business in Wisconsin,
that transaction is exempt under § 77.54(5)(a)3. That is
because the business sold Citation Partners "parts used to
modify or repair [the] aircraft." See id. Thus, the seller
would not have to charge the usual five percent sales tax.
Likewise, when Citation Partners pays a maintenance company to
service the aircraft's engine, that transaction is exempt from
the sales tax under § 77.52(2)(a)10. That is because the
maintenance company sold Citation Partners "repair,
service, . . . and maintenance of . . . an[] aircraft part[]."
See id.
¶16 Under Act 185 then, sales of aircraft repairs or
engine maintenance are tax-exempt. But when Citation Partners
turns around and leases its aircraft, it is not selling aircraft
repairs or engine maintenance. It is leasing an aircraft.6
Thus, because Citation Partners' activities fall outside the
text of the exemptions, the total lease price is taxable.
For this reason, the general rule in § 77.51(15b)(a) and
6
the specific exemptions in §§ 77.54(5)(a)3. and 77.52(2)(a)10.
relate to different subject matters and are not in conflict. These
statutes simply apply to different types of transactions. And
because there is no conflict, the general-specific canon is
inapposite. See Kramer v. City of Hayward, 57 Wis. 2d 302, 310-
11, 203 N.W.2d 871 (1973); see also Townsend v. ChartSwap, LLC,
2021 WI 86, ¶39, 399 Wis. 2d 599, 967 N.W.2d 21 (Dallet, J.,
concurring) ("The general-specific canon applies only to
statutes that both address the same subject matter and conflict
with one another such that harmonizing them is impossible.").
9
No. 2020AP1683
B
¶17 Citation Partners tries to circumvent the plain
language of the statutes by arguing that it is the Lessees'
agent when it purchases aircraft repairs and engine maintenance.
And for that reason, the per-flight-hour reimbursements for
aircraft repairs and engine maintenance are akin to the Lessees
purchasing those repairs and maintenance directly.
¶18 An agency relationship is a "fiduciary relation which
results from the manifestation of consent by one person to
another that the other shall act on his behalf and subject to
his control." James W. Thomas Constr. Co. v. City of Madison,
79 Wis. 2d 345, 352, 255 N.W.2d 551 (1977). Thus, in order for
an agency relationship to exist, Citation Partners must
demonstrate that (1) the Lessees manifested consent to have
Citation Partners act on their behalf with respect to aircraft
repairs and engine maintenance and (2) the Lessees had the right
to control Citation Partners' conduct in that regard. See id.¶19 Citation Partners relies on the lease documents as
"provid[ing] the framework for the agency relationship." It
points out that the Dry Lease makes the Lessees responsible for
"inspect[ing] the Aircraft" and notifying Citation Partners if
"any repair or maintenance should be completed." Additionally,
the Dry Lease contains an indemnification provision under which
the Lessees are "ultimately responsible for all obligations,
expenses and disbursements asserted against Citation Partners
arising out of the operation of the Aircraft."
10
No. 2020AP1683
¶20 Rather than prove an agency relationship exists, the
lease documents reveal the opposite. The Dry Lease states that
Citation Partners——not the Lessees——"shall schedule and pay for
all repairs and maintenance." And that decision is not
"directed" by the Lessees just because they must notify Citation
Partners of necessary maintenance upon inspection of the
aircraft. Rather, the Lessees' inspection obligation is limited
to confirming that the aircraft is flightworthy before using it.
Likewise, under the Dry Lease, the Lessees have only limited
authority to purchase repairs and maintenance up to $5,000, and
are reimbursed by Citation Partners if they do so.
Additionally, although the parties entered into a new Side
Agreement in 2015 which states that the Lessees are "responsible
for fixed and indirect operating expenses and charges
attributable to the operation and maintenance of the Aircraft,"
including "[s]cheduled and unscheduled maintenance," nothing in
that Agreement or the Dry Lease suggests that the Lessees
control Citation Partners' aircraft-maintenance activities.
¶21 The indemnification provision does not demonstrate
otherwise. In that provision, the Lessees agree to indemnify
Citation Partners "from and against any and all claims,
liabilities, demands, obligations, losses, damages, . . . which
may be imposed on, incurred by or asserted against [Citation
Partners], in any way relating to or arising out of this Lease,
and/or the operation of the Aircraft, . . . ." But standing
alone, standard indemnification language like this does not
create an agency relationship. To reiterate, an agency
11
No. 2020AP1683
relationship requires that one party have the right to control
the other's conduct. See James W. Thomas Constr. Co., 79 Wis.
2d 345, at 352. And nothing in this indemnification provision
grants the Lessees the right to control Citation Partners.
Instead, the Dry Lease and the Side Agreement demonstrate that
Citation Partners, the owner of the aircraft, is the one in
charge of repairs and engine maintenance, and that the Lessees
do not control how Citation Partners fulfills that
responsibility.
IV
¶22 Wisconsin imposes a five percent sales tax on the sale
or lease of tangible personal property like Citation Partners'
aircraft. The tax applies to the total "sales price" of the
lease unless there is an applicable exemption. Two such
exemptions exist for the sale of aircraft parts and maintenance,
but neither apply to the Lessees' payments to Citation Partners
for aircraft repairs and engine maintenance. Accordingly, we
hold that the total amount of consideration the Lessees pay to
lease Citation Partners' aircraft is taxable, and affirm the
court of appeals' decision.
By the Court.—The decision of the court of appeals is
affirmed.
12
No. 2020AP1683.pdr
¶23 PATIENCE DRAKE ROGGENSACK, J. (dissenting). In 2013
Wis. Act 185, the legislature enacted Wis. Stat.
§ 77.52(2)(a)10. to exempt the "repair, service,
alteration . . . of any aircraft or aircraft parts" and Wis.
Stat. § 77.54(5)(a)3. to exempt the "[p]arts used to modify or
repair aircraft" from state sales taxes. This case involves a
claimed exemption from state sales taxes for aircraft
maintenance services and aircraft parts. The majority opinion
never interprets §§ 77.52(2)(a)10. or 77.54(5)(a)3, which
address aircraft repairs and aircraft parts. It skips over the
plain meaning of those two statutes, and instead, it interprets
Wis. Stat. §§ 77.51(15b)(a) and 77.52(1)(a), neither of which
contains the word, "aircraft," nor does either statute mention
aircraft parts or aircraft maintenance.
¶24 I interpret Wis. Stat. §§ 77.52(2)(a)10. and
77.54(5)(a)3., the statutes relevant to Citation Partners, LLC's
claim. The plain meaning of those statutes grants Citation
Partners the sales tax exemption it seeks. Because the majority
opinion chooses to follow the error-strewn path of the Tax
Appeals Commission (TAC), which contravenes the clear statutory
direction to exempt the sales price of aircraft parts and
aircraft maintenance from state sales taxes, I respectfully
dissent.
I. BACKGROUND
¶25 Citation Partners, LLC owns a Cessna Citation C12
aircraft that it leases to parties related to the limited
1
No. 2020AP1683.pdr
liability company and to one unrelated party. The parties
operate under two documents: the Aircraft Dry Lease and
individual Side Agreements that each lessee signs.
¶26 Section One of the Dry Lease describes the structure
of a "Rental Period" for the aircraft's use and return to
Citation Partners. It sets one dollar "and other good and
valuable consideration" as a lessee's initial payment to
Citation Partners. Section Two provides that the lease term is
one year, unless terminated earlier by either party with ten
days notice. Section Four talks about scheduling use of the
aircraft and what is required to do so. Section Five requires
Citation Partners to insure the aircraft.
¶27 Section Six places certain geographic and other
restrictions on aircraft use and creates obligations for the
lessees. Section Nine requires lessees to inspect the aircraft
and maintenance records prior to each rental period and to
notify Citation Partners and not to operate the aircraft until
all repairs and maintenance are completed. Citation Partners
schedules and initially pays vendors for repairs and
maintenance. Section Nineteen requires that the lease be
interpreted in accordance with the laws of the State of
Wisconsin.
¶28 The Side Agreements are individual memoranda
concerning the financial commitments of lessees to Citation
Partners. Each Side Agreement states the hourly charge for
flight time, the lessee's obligation to pay a stated amount for
aircraft repairs and for engine maintenance and a listing of
2
No. 2020AP1683.pdr
expenses specific to flights that are allocated only to the
lessee who was using the aircraft when the charges were
incurred. Accordingly, Citation Partners charges each lessee
its proportionate share of aircraft repairs and engine
maintenance that Citation Partners initially pays to vendors.
However, the Side Agreements contain more components than those
two charges.
¶29 Prior to 2015, Citation Partners charged state sales
taxes on all components of the Dry Lease and Side Agreements and
remitted the collections to Department of Revenue (DOR).
Because the effective date of 2013 Wis. Act 185 was July 2014,
Citation Partners filed for a refund of taxes collected for
periods of time after the effective date of Act 185. DOR
granted the refund. Subsequently, however, DOR demanded
repayment.
¶30 Citation Partners appealed DOR's decision to the TAC,
which agreed with DOR. Citation Partners then sought review in
circuit court, which reversed the TAC. The TAC sought review in
the court of appeals, which reversed the circuit court.
Citation Partners petitioned for review here, which petition we
granted.
II. DISCUSSION
A. Standard of Review
¶31 We review the TAC's decision, not that of the circuit
court or the court of appeals. MercyCare Ins. Co. v. Wis.
Comm'r of Ins., 2010 WI 87, ¶25, 328 Wis. 2d 110, 786 N.W.2d
785.
3
No. 2020AP1683.pdr
¶32 This dispute requires us to interpret and apply
statutes. The interpretation and application of statutes
present questions of law requiring our independent review.
Milwaukee Police Ass'n v. City of Milwaukee, 2018 WI 86, ¶17,
383 Wis. 2d 247, 914 N.W.2d 597; Solowicz v. Forward Geneva
Nat'l, LLC, 2010 WI 20, ¶13, 323 Wis. 2d 556, 780 N.W.2d 111.
However, as we do so, we benefit from the discussions of the
circuit court and court of appeals. Id. We owe no deference to
TAC on questions of law. Tetra Tech EC, Inc. v. DOR, 2018 WI
75, ¶84, 382 Wis. 2d 496, 914 N.W.2d 21; see also Patience Drake
Roggensack, Elected to Decide: Is the Decision-Avoidance
Doctrine of Great Weight Deference Appropriate in This Court of
Last Resort?, 89 Marq. L. Rev. 541 (2006).
B. Statutory Interpretation
1. Principles of Statutory Interpretation
¶33 We begin statutory interpretation with examination of
the words the legislature chose to use in statutory enactments
that are under review here. When we do so, "statutory language
is interpreted in the context in which it is used; not in
isolation but as part of a whole; in relation to the language of
surrounding or closely-related statutes; and reasonably, to
avoid absurd or unreasonable results." Teigen v. Wis. Elections
Comm'n, 2022 WI 64, ¶50, 403 Wis. 2d 607, 976 N.W.2d 519(quoting State ex rel. Kalal v. Cir. Ct. for Dane Cnty., 2004 WI
58, ¶46, 271 Wis. 2d 633, 681 N.W.2d 110); Antonin Scalia &
Bryan A. Garner, Reading Law: The Interpretation of Legal
Texts, 180, 183 (2012) (explaining that the general-specific
4
No. 2020AP1683.pdr
canon applies to statutory construction "when conflicting
provisions simply cannot be reconciled").
¶34 Statutory history is central to a plain meaning
analysis. As we have explained, a "review of statutory history
is part of a plain meaning analysis" because it is part of the
context in which we interpret statutory terms. Richards v.
Badger Mut. Ins. Co., 2008 WI 52, ¶22, 309 Wis. 2d 541, 749
N.W.2d 581; see also Kalal, 271 Wis. 2d 633, ¶52 n.9 (citing
Cass R. Sunstein, Interpreting Statutes in the Regulatory State,
103 Harv. L. Rev. 405, 430 (1989)).
2. Wisconsin Stat. §§ 77.52(2)(a)10. and 77.54(5)(a)3.
¶35 2013 Wis. Act 185 enacted two statutes that are
relevant here: Wis. Stat. §§ 77.52(2)(a)10. and 77.54(5)(a)3.
As enacted, § 77.52(2)(a)10. provides in relevant part:
For the privilege of selling, licensing, performing or
furnishing the services described under par.
(a) . . . .
(a) The tax imposed herein applies to the
following types of services:
. . . .
10. Except for the repair, service, alteration,
fitting, cleaning, painting, coating, towing,
inspection, and maintenance of any aircraft or
aircraft parts;
Section 77.52(2)(a)10. is broadly stated. The statute applies
to "any aircraft or aircraft parts." (Emphasis added.) There
is no statutory limitation on the statute's use that refers to
whether the "selling, licensing, performing or furnishing" of
aircraft parts or services are set out in a written agreement or
performed without a written agreement. There is no limitation
5
No. 2020AP1683.pdr
on whether the person responsible for that financial obligation
pays the vendor directly or pays another who has paid the vendor
on that person's behalf.
¶36 Wisconsin Stat. § 77.54 is not a newcomer to Wisconsin
statutes. It sets out "General exemptions" from state sales
tax. Section 77.54's exemptions are many and diverse, ranging
from tractors and machines, § 77.54(3)(a), to the sales price
for tickets to elementary and secondary school activities,
§ 77.54(9), to the sales price of ballet and tap shoes,
§ 77.54(67)(a)12.a.
¶37 2013 Wis. Act 185 added a relevant exemption to the
many-faceted exemptions of Wis. Stat. § 77.54 with the enactment
of § 77.54(5)(a)3. The amended statute provides a new
exemption:
The sales price from the sale of and the storage, use
or other consumption of;
. . . .
3. Parts used to modify or repair aircraft.
It exempts the "sales price" of aircraft parts from sales taxes,
just as § 77.54(67)(a)12.a. exempts the sales price of ballet
and tap shoes from sales taxes. Nothing in § 77.54(5)(a)3.
limits its exemption when the obligation to pay for aircraft
parts is set out in written agreements. Once again, just as the
legislature has done for the myriad of exemptions contained
within § 77.54, the legislature granted a broad exemption for
the sales price of aircraft parts.
¶38 In the dispute before us, the plain meaning of the
words the legislature chose when it enacted Wis. Stat.
6
No. 2020AP1683.pdr
§§ 77.52(2)(a)10. and 77.54(5)(a)3. describe both specific
exemptions from sales taxes for the repair and maintenance of
aircraft and general exemptions from sales tax for the "sales
price" of aircraft parts used to modify or repair an aircraft.
¶39 Prior to the above-described statutory changes,
aircraft parts and maintenance were not exempt from state sales
tax, unless the aircraft was used by "certified or licensed
carriers of persons or property in interstate or foreign
commerce," Wis. Stat. § 77.54(5)(a)1., or the aircraft and
attachments to aircraft were "sold to persons who are not
residents of this state and who will not use such aircraft in
this state," § 77.54(5)(a)2.1 Clearly, the legislature knew how
to limit exemptions from sales tax for aircraft if it chose to
do so. However, in the enactment of Wis. Stat.
§§ 77.52(2)(a)10. and 77.54(5)(a)3., the legislature chose to
provide the exemption for the "sales price" of "any aircraft or
aircraft parts." (Emphasis added.) Accordingly, applying the
plain meaning of the words the legislature chose, I conclude
§§ 77.52(2)(a)10. and 77.54(5)(a)3. grant exemptions that
Citation Partners seeks.
1 2013 Wis. Act 185 repealed Wis. Stat. § 77.54(5)(a) and
renumbered the statute as Wis. Stat. §§ 77.54(5)(a)1. and
77.54(5)(a)2. Act 185 did not change the quoted language.
7
No. 2020AP1683.pdr
3. TAC Decision
¶40 As required, I review the TAC decision, beginning with
its factual statements. In reviewing TAC findings of fact, we
apply the "'substantial evidence' standard." Hilton ex rel.
Pages Homeowners' Ass'n v. DNR, 2006 WI 84, ¶16, 293 Wis. 2d 1,
717 N.W.2d 166 (citations omitted). Wisconsin Stat. § 227.57(6)
requires us to set aside or remand an agency action "if the
agency's decision depends on any finding of fact not supported
by substantial evidence in the record."2 Id.
¶41 The test is based on the evidence of record, and
whether reasonable minds would conclude that there are material
factual findings that underlie TAC's erroneous legal
conclusions. Id. In this matter, we are concerned about how
TAC's factual findings affected its decision not to apply Wis.
Stat. §§ 77.52(2)(a)10. and 77.54(5)(a)3. to the transaction
under review here. As explained below, I conclude that the
TAC's material factual findings that underlie its legal
conclusion are not supported by substantial evidence, and
therefore, TAC's decision must be set aside.
2 Wisconsin Stat. § 227.57(6) provides: "The court shall,
however, set aside agency action or remand the case to the
agency if it finds that the agency's action depends on any
finding of fact that is not supported by substantial evidence in
the record."
Wisconsin Stat. § 73.015(2) provides that "[a]ny adverse
determination of the tax appeals commission is subject to review
in the manner provided in [Wis. Stat.] ch. 227."
8
No. 2020AP1683.pdr
a. Factual Errors
¶42 TAC appears to misread the relevant Side Agreements
that are in the record. In one of TAC's errors, it says:
Below the hourly fee descriptions, the Side
Agreement clarifies the parties' responsibilities for
expenses. The Lessor's list includes scheduled and
unscheduled maintenance. The Lessee's list does not
include any maintenance related expenses.[3]
This TAC statement is completely incorrect.
¶43 The relevant Side Agreement, dated January 1, 2015,
says the opposite of what TAC finds. The Side Agreement
actually provides:
Lessee will be responsible for fixed and indirect
operating expenses and charges attributable to the
operation and maintenance of the Aircraft. These
expenses and costs include, but are not limited
to: . . . Scheduled and unscheduled maintenance.[4]
¶44 The TAC's factual inaccuracy leads it to incorrect
legal conclusions. TAC errs when it ignores the plain
statements in the Side Agreement and says:
The Dry Lease, with its Side Agreement, does not
confer a responsibility for maintenance on the Lessee.
To the contrary, it is the Lessor who is expressly
responsible for the repairs and maintenance. Because
the Lessees are not obligated to maintain the
aircraft, they are not reimbursing the Lessor for
something paid on their behalf.[5]
As the quote above from Record 6-35 shows, under the Side
Agreement, the lessees are obligated to pay for repairs and
3 TAC decision, R. 22-13 (emphasis added).
4 R. 6-35 (P. App 0053) (emphasis added).
5 R. 22-15.
9
No. 2020AP1683.pdr
maintenance of the aircraft. Therefore, Citation Partners is
being reimbursed under the Side Agreement for obligations of the
lessees that it paid on their behalves.
¶45 In addition to its misreading of record exhibits, the
TAC ignores the Stipulation of Facts that the parties jointly
submitted.6 That stipulation in paragraph 3 states, "the Side
Agreements and invoices to lessees expressly provided for dollar
for dollar reimbursement by each of the lessees of the Aircraft
of both engine maintenance cost and Aircraft maintenance cost."7
Notwithstanding that factual stipulation the TAC says,
That starting point, reimbursement, presupposes
that each Lessee was obligated to pay for repair and
maintenance such that the Lessor, in effect, paid the
expenses on behalf of the Lessees. That is not what
happens under these Agreements.[8]
However, reimbursement from the lessees for expenses that
Citation Partners paid for the lessees is exactly what the
parties represented in the Factual Stipulation that they
provided to TAC, as well as under other record exhibits.
¶46 Accordingly, TAC's material factual findings are not
supported by substantial evidence, and they must be set aside
based on documents in the record and the Stipulation of Facts
6 The majority opinion also ignores the parties' Stipulation
of Facts that was submitted to and accepted by TAC and is part
of the record before us. That Stipulation is critical to
understanding the facts that drive the matter that is now before
the court.
7 R. 9-4 (P. App 0061).
8 R. 22-14.
10
No. 2020AP1683.pdr
that the parties provided to the TAC. Pages Homeowners' Ass'n,
293 Wis. 2d 1, ¶16.
b. Legal Conclusions
¶47 TAC's legal conclusions are grounded in its erroneous
factual findings. As with the majority opinion, the TAC does
not interpret the statutes that are at issue here. Instead, it
interprets Wis. Stat. § 77.51(15b)(a), which does not mention
aircraft maintenance, aircraft parts or aircraft in any regard.9
Nevertheless, TAC concludes that "expenditures for those repairs
and maintenance parts and services are not separately exempt
when incorporated into the lease payments of a subsequent lease
of the entire Aircraft."10
¶48 Rather, it is Wis. Stat. § 77.54(5)(a)3. that creates
an "exemption" for the "sales price" of "[p]arts used to modify
or repair aircraft," and Wis. Stat. § 77.52(2)(a)10. that sets
sales of "repair, service, alteration, fitting, cleaning,
painting, coating, towing, inspection and maintenance of any
aircraft or aircraft parts" outside the scope of state sales
taxes. Nothing in either statute changes those exemptions when
an aircraft is leased. Stated otherwise, there is nothing in
either statute that limits its use when obligations to pay for
aircraft maintenance and parts are incurred pursuant to written
documents rather than directly to the vendors.
9 The word "aircraft" also does not appear in Wis. Stat.
§ 77.52(1)(a), which is relied on by the majority opinion.
Majority op., ¶10.
10 TAC decision, R. 22-16 (P. App 0038).
11
No. 2020AP1683.pdr
¶49 In addition, a plain reading of Wis. Stat.
§§ 77.52(2)(a)10. and 77.54(5)(a)3. cannot be reconciled with
the TAC's use of Wis. Stat. § 77.51(15b)(a). Sections
77.52(2)(a)10. and 77.54(5)(a)3. are more specific to the
dispute before the court than are § 77.51(15b)(a)'s general
terms. Therefore, §§ 77.54(5)(a)3. and 77.52(2)(a)10., which
are more specific in addressing sales taxes on the sales price
of aircraft services and aircraft parts, control the outcome of
Citation Partners' claim for state sales tax exemption. RadLAX
Gateway Hotel, LLC v. Amalgamated Bank, 566 U.S. 639, 645 (2012)
(explaining "it is a commonplace of statutory construction that
the specific governs the general."). Furthermore, this canon is
most frequently applied to statutes in which a general
prohibition is contradicted by a specific permission, just as we
have here. Id.; see also Scalia, Reading Law, at 183. TAC's
legal conclusion is based on its interpretation of a broad sales
tax statute and is contrary to the plain meaning of Act 185's
amendments to sales taxes owed on the sales price for any
aircraft parts and services that were granted by Act 185.
Accordingly, TAC's decision must be set aside.11
¶50 Furthermore, although the plain meaning of the words
chosen by the legislature for Act 185's enactments clearly grant
the exemption Citation Partners seeks, I note that the
Legislative Council Act Memo describes comprehensive use of Act
185's provisions:
The majority opinion does not review TAC's decision,
11
either as to the facts TAC found or the reasoning underlying
TAC's legal conclusion.
12
No. 2020AP1683.pdr
2013 Wisconsin Act 185 adds a comprehensive exemption
for aircraft parts to the list of aviation-related
sales and use tax exemptions under existing law,
described above. Under the Act, sales of aircraft
parts are exempt from sales and use tax regardless of
how the aircraft is used. The Act also creates a
sales and use tax exemption for the repair and
maintenance of any aircraft and aircraft parts.
Although legislative history is not part of a plain meaning
statutory analysis, we have used it to confirm a plain meaning
interpretation, as I do here. Kalal, 271 Wis. 2d 633, ¶51.
III. CONCLUSION
¶51 I interpret Wis. Stat. §§ 77.52(2)(a)10. and
77.54(5)(a)3., the statutes relevant to Citation Partners'
claim. The plain meaning of those statutes grants Citation
Partners the sales tax exemption it seeks. Because the majority
opinion chooses to follow the error-strewn path of the TAC,
which contravenes clear statutory direction to exempt the sales
price of aircraft parts and aircraft maintenance from state
sales taxes, I respectfully dissent.
¶52 I am authorized to state that Chief Justice ANNETTE
KINGSLAND ZIEGLER and Justice REBECCA GRASSL BRADLEY join this
dissent.
13
No. 2020AP1683.pdr
1