Harrah's v. State, Dep't of Taxation

130 Nev., Advance Opinion 15
IN THE SUPREME COURT OF THE STATE OF NEVADA
HARRAH'S OPERATING COMPANY, No. 61521
INC.,
Appellant,
vs.
FILED
THE STATE OF NEVADA MAR 20 2014
DEPARTMENT OF TAXATION, TRADE K. LINDEMAN
Respondent. CLE OF \ CUP ME R
BY
0
CHIEF DEP IT LERK
I
Appeal from a district court order denying a petition for
judicial review in a tax matter. Eighth Judicial District Court, Clark
County; Kenneth C. Cory, Judge.
Affirmed in part, reversed in part, and remanded.
John S. Bartlett, Carson City,
for Appellant.
Catherine Cortez Masto, Attorney General, and David J. Pope, Senior
Deputy Attorney General, Carson City,
for Respondent.
BEFORE HARDESTY, PARRAGUIRRE and CHERRY, JJ.
OPINION
By the Court, CHERRY, J.:
In this case, we consider the application of Nevada's use tax to
four aircraft purchased out of state and used to transport Harrah's
executives and customers to and from its establishments worldwide. In
particular, under NRS 372.258, goods purchased outside of Nevada are
presumed not to be purchased for use in Nevada, and thus not taxable
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outside Nevada and (2) the goods are continuously used in interstate
commerce for 12 months In this case, we construe the first use
requirement to apply to an aircraft's first flight that both originates and
terminates outside of Nevada. Additionally, the parties stipulated to the
fact that the aircraft at issue were continuously used in interstate
commerce. Because two of Harrah's aircraft engaged the presumption of
NRS 372.258 and the record does not rebut the presumption, we conclude
that the Department of Taxation erred in its interpretation of NRS
Chapter 372 and those aircraft are not subject to Nevada's use tax.
FACTS AND PROCEDURAL HISTORY
The parties stipulated to the following relevant facts.
Appellant Harrah's Operating Company, Inc., is a Delaware corporation
registered to do business in Nevada. Harrah's purchased four aircraft for
the purpose of transporting Harrah's employees and guests to and from its
establishments worldwide. Two of the aircraft, N88HE and N168CE, were
purchased and delivered to Harrah's in Little Rock, Arkansas. According
to their flight logs, those two planes flew to Las Vegas on their first flight.
The other two aircraft, N89HE and N89CE, were purchased and delivered
to Harrah's in Portland, Oregon, and their first flights thereafter went to
Arkansas and California, respectively. The flight logs reveal that
passengers were aboard each plane on its first flight and that the planes
carried passengers on the majority of all flights. Each of the aircraft
consistently flew to and from Nevada while in service. The parties
stipulated that the planes have been continuously used ever since in the
manner of their initial uses, i.e. , in interstate commerce.
Harrah's paid Nevada use tax on each of the aircraft and then
requested refunds for the taxes paid, claiming that the aircraft were not
purchased for use in Nevada within the meaning of NRS Chapter 372, No
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sales or use taxes were paid to any other state. Respondent Nevada
Department of Taxation denied the refund requests.
After the Department denied Harrah's refund claims, the
matter was referred to the Department's administrative law judge (AU).
The AM affirmed the Department's refund denials. Harrah's appealed to
the Nevada Tax Commission, which upheld the AL's decision. Harrah's
then filed a petition for judicial review, which was denied by the district
court. Harrah's appealed.
DISCUSSION
The dispositive issue in this case is whether, by purchasing
the aircraft out of state and later bringing them to Nevada, Harrah's
became subject to the use tax imposed by NRS 372.185. 1 Harrah's argues
that, because its aircraft purchases fell under a statutory presumption
that they were not taxable and because the Department failed to overcome
that presumption, taxes were wrongfully imposed and upheld as a matter
of law.
Like the district court, we review de novo the legal conclusions
of an administrative agency. State, Dep't of Taxation v. Masco Builder
Cabinet Grp., 127 Nev. „ 265 P.3d 666, 669 (2011). "Questions of
law, including the administrative construction of statutes, are subject to
independent appellate review." Nev. Tax Comm'n v. Nev. Cement Co., 117
Nev. 960, 964, 36 P.3d 418, 420 (2001). Although we normally defer to "an
agency's conclusions of law [that] are closely related to its view of the
facts," Fathers & Sons & A Daughter Too v. Transp. Servs. Auth. of Nev.,
1 NRS Chapter 374 contains identical provisions relating to use taxes
levied to support local schools. See NRS 374.190; NRS 374.263. Reference
herein to NRS Chapter 372 applies equally to the analogous provision in
NRS Chapter 374.
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124 Nev. 254, 259, 182 P.3d 100, 104 (2008), "[b]ecause this case concerns
the construction of a statute, . . . independent review is necessary."
Langman v. Nev. Adm'rs, Inc., 114 Nev. 203, 207, 955 P.2d 188, 190
(1998). In addition, tax statutes are to be construed in favor of the
taxpayer. State, Dep't of Taxation v. Visual Commc'ns, Inc., 108 Nev. 721,
725, 836 P.2d 1245, 1247 (1992).
Nevada use tax and the NRS 372.258 presumption
The Nevada use tax is complementary to the sales tax imposed
on retail purchases made in this state. State, Dep't of Taxation v. Kelly-
Ryan, Inc., 110 Nev. 276, 280, 871 P.2d 331, 334 (1994). The use tax can
be imposed here if Harrah's planes, although delivered out of state and
therefore not subject to Nevada's sales tax, were purchased for storage,
use, or consumption, and were actually stored, used, or consumed in
Nevada. See id.; NRS 372.185; cf. Great Am. Airways v. Nev. State Tax
Comm'n, 101 Nev. 422, 428, 705 P.2d 654, 658 (1985) (upholding
constitutionality of Nevada's use tax imposed on the purchase of an
airplane used in interstate commerce but kept in Reno).
The Legislature has provided several rebuttable presumptions
to assist the fact-finder in determining whether property was purchased
for use in Nevada. The presumption at issue in this case is NRS 372.258.
NRS 372.258(1) states that property delivered outside of this state for use
in interstate commerce is presumed not purchased for storage, use, or
consumption in this state if certain requirements are met:
It is presumed that tangible personal property
delivered outside this State to a purchaser was not
purchased from a retailer for storage, use or other
consumption in this State if the property;
(a) Was first used in interstate or foreign
commerce outside this State; and
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(b) Is used continuously in interstate or
foreign commerce, but not exclusively in this
State, for at least 12 months after the date that
the property was first used pursuant to paragraph
(a).
The AU I found that Harrah's failed to meet the "first used" and "used
continuously" requirements of NRS 372.258(1)(a) and (b).
First use
In order for the presumption in NRS 372.258 to apply, the
purchased property must be "first used in interstate or foreign commerce
outside this State." NRS 372.258(1)(a). The statute does not define
"used," although courts generally define the term broadly for tax purposes.
See USAir, Inc. v. Ind. Dep't of State Revenue, 623 N.E.2d 466, 469 (Ind.
T.C. 1993). The statute does, however, define "[iinterstate . commerce."
NRS 372.258(2)(a). "Interstate. . commerce" requires the transportation
of passengers or property between two or more states and is defined as
the transportation of passengers or property
between:
(1) A point in one state and a point in:
(I) Another state;
(II) A possession or territory of the
United States; or
(III) A foreign country; or
(2) Points in the same state when such
transportation consists of one or more segments of
transportation that immediately follow movement
of the property into the state from a point beyond
its borders or immediately precede movement of
the property from within the state to a point
outside its borders.
Id.
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Here, the AU J decided that the presumption applied only if
Harrah's first interstate commerce use of each aircraft occurred
completely outside Nevada, including both the origin and destination of
each aircraft's first flight. Furthermore, the AU J apparently concluded
that the first use meant first day of use, because he ruled that one of the
planes purchased in Portland, N89CE, which did not fly to Nevada on its
first flight but did so later that same day, did not meet the first-use-
outside-of-Nevada requirement.
"[When possible, we construe statutes such that no part of the
statute is rendered nugatory or turned to mere surplusage." Albios v.
Horizon Communities, Inc., 122 Nev. 409, 418, 132 P.3d 1022, 1028 (2006).
The presumption's definition of interstate commerce already contemplates
the crossing of state lines. See NRS 372.258(2)(a)(1). Yet the presumption
states "first used in interstate or foreign commerce outside this State."
NRS 372.258(1)(a) (emphasis added). Using the statute's definition of
interstate commerce, the "first used" provision requires the crossing of
state lines outside of Nevada. The Legislature's addition of the word
"outside" adds a requirement of exclusivity, meaning that the first use in
interstate commerce must occur entirely outside the State of Nevada.
Because the statute's definition of interstate commerce in subsection 2
allows one point to be within the state, the word "outside" in the
subsection 1 requirement becomes surplusage if we do not read it to mean
entirely outside Nevada.
We limit, however, the definition of "first used" to the first
flight and thereby repudiate the AL's temporal requirement. The "use[
of an aircraft is commonly associated with the flight of an aircraft. Cf.
Irwin Indus. Tool Co. v. Ill. Dep't of Revenue, 938 N.E.2d 459, 467 (Ill.
2010) (interpreting Director of Revenue v. Superior Aircraft Leasing Co.,
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734 S.W.2d 504 (Mo. 1987), to stand for the proposition that an aircraft's
flights are more significant to the "purpose, function, and use" of aircraft,
as relevant to use tax statutes, than the time that an aircraft spends on
the ground). Nowhere in the statute does it state that the flights or
"use[ ]" must be considered on a daily basis, with flights within a single
day considered as mere segments of a larger use. "'We will not extend a
tax statute by implication," Visual Commc'ns, Inc., 108 Nev. at 725, 836
P.2d at 1247 (quoting Cashman Photo Concessions & Labs, Inc. v. Nev.
Gaming Comm'n, 91 Nev. 424, 428, 538 P.2d 158, 160 (1975)), and here we
will not impose a temporal requirement not contained within the statute.
Having thusly interpreted the statute, we conclude that the
aircraft purchased in Little Rock, N88HE and N168CE, were not "first
used" in interstate commerce outside Nevada because their first flights
terminated in Las Vegas. Accordingly, the presumption of nontaxability
does not apply to those two planes. Because property purchased out of
state and then brought into Nevada is generally presumed to have been
purchased for use in this state, NRS 372.250, and the stipulated facts do
not demonstrate otherwise, Harrah's refund of the use taxes paid on the
purchases of these planes was properly denied.
Conversely, Harrah's first use in interstate commerce of the
aircraft purchased in Portland, N89HE and N89CE, occurred wholly
outside the State of Nevada, because one was flown to Little Rock and the
other to California. Therefore, the AU J erred in deciding that N89HE and
N89CE were not "first used" in interstate commerce outside Nevada under
NRS 372.258(1)(a).
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Continuous use
Having found that the planes purchased in Portland, N89HE
and N89CE, were first used in interstate commerce outside of Nevada, we
now consider whether their use in interstate commerce was "continuous[ I"
for one year, as required by NRS 372.258(1)(b) to trigger the presumption
of nontaxability. Our consideration is made easy by the parties'
stipulation that the aircraft have been "continuously so used" in
accordance with their initial uses. Thus, having already determined that
the first use of both N89HE and N89CE was in interstate commerce, we
also conclude that, in accordance with the parties' stipulation, the aircraft
have been continuously so used ever since. This continuous use satisfies
NRS 372.258(1)(b).
Rebutting the NRS 372.258 presumption of nontaxability
Because the aircraft purchased in Portland, N89HE and
N89CE, were first used in interstate commerce outside of Nevada and
were used continuously in interstate commerce for over 12 months
thereafter, we hold that the MA erred by not applying the presumption in
NRS 372.258. We must now consider whether the Department has
successfully rebutted the presumption by presenting other evidence.
We first note that remand to the AM is not appropriate here
because the parties stipulated to all of the relevant facts, giving this court
the power to examine the record itself and make the necessary inferences.
See Sparks Nugget, Inc. v. State, Dep't of Taxation, 124 Nev. 159, 163, 179
P.3d 570, 573 (2008) ("Because the parties have stipulated to the operative
facts ... the only issue before us involves the interpretation and
application of Nevada [law]."). "We are impressed that in our review, we
are as well situated as was the district court to make this
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determination. . . ." Commercial Warehouse Co. v. Hyder Bros., Inc., 411
P.2d 978, 983 (N.M. 1966) (on second rehearing).
The stipulated facts do not rebut the presumption that
Harrah's aircraft were not purchased for use in Nevada. Only the flight
logs cast any doubt on the presumed fact, because they show many flights
to and from Las Vegas. However, NRS 372.185 does not say that the tax
is applied in relation to the amount of time spent in Nevada. Cf. Great
Am. Airways v. Nev. State Tax Comm'n, 101 Nev. 422, 427, 705 P.2d 654,
657 (1985) (rejecting appellant's "argument that Nevada should apportion
its use tax based upon the amount of miles flown in Nevada or hours spent
in Nevada"). Rather, the distinction created by the statutory scheme is
between goods purchased "for. . . use" in Nevada, NRS 372.185(1), and
those purchased for use in interstate commerce, even if such use might
occur in Nevada, see NRS 372.258(2). We are not concerned here with the
soundness of this distinction—we merely apply it. 2
Harrah's use of the aircraft in Nevada was use in interstate
commerce—a flight departing from Nevada nearly always terminated in a
flight arriving in another state or country. In addition, the statute
contemplates that some interstate commerce can occur wholly within the
2We are aware that, as a result of our interpretation, Harrah's will
not have paid any sales or use tax on two of their aircraft. Nevertheless,
this court must apply the statutes as written. "[D]espite the fundamental
changes in federal Commerce Clause jurisprudence," Word of Life
Christian Ctr. v. West, 936 So. 2d 1226, 1241 (La. 2006), NRS 372.185 only
imposes a use tax on goods purchased for storage, use, or consumption in
Nevada, not those purchased for use in interstate commerce. Any
expansion of Nevada's use tax must come from the Legislature, not this
court.
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state. See NRS 372.258(2)(0(2). Therefore, we determine that the
stipulated facts do not rebut the presumption in NRS 372.258.
We conclude that the district court erred in affirming the
AL's interpretation of NRS 372.258. The Department must refund the
use taxes remitted for aircraft N89HE and N89CE. We accordingly affirm
in part, reverse in part, and remand for further proceedings with respect
to the requested refund.
, J.
We concur:
de4-
Hardesty
inimsratrev ,11 .
Parraguirre
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