John Keener d/b/a Mountaineer Inspection Services, LLC v. Matthew Irby, State Tax Commissioner of West Virginia

IN THE SUPREME COURT OF APPEALS OF WEST VIRGINIA
September 2021 Term FILED
November 8, 2021
released at 3:00 p.m.
EDYTHE NASH GAISER, CLERK
SUPREME COURT OF APPEALS
No. 20-0488 OF WEST VIRGINIA
JOHN KEENER D/B/A
MOUNTAINEER INSPECTION SERVICES, LLC,
Petitioner
V.
MATTHEW IRBY,
STATE TAX COMMISSIONER OF WEST VIRGINIA,
Respondent
_________________________________________________________
Appeal from the Circuit Court of Taylor County
The Honorable Shawn D. Nines, Judge
Civil Action No. 18-P-57
AFFIRMED, IN PART; REVERSED, IN PART
_________________________________________________________
Submitted: September 15, 2021
Filed: November 8, 2021
Ronald G. Kramer Patrick Morrisey
Kramer Legal Group, PLLC Attorney General
Bridgeport, West Virginia William C. Ballard
Allison S. McClure Assistant Attorney General
McClure Law PLLC Andrew L. Ellis
Clarksburg, West Virginia Assistant Attorney General
Attorneys for Petitioner Charleston, West Virginia
Attorneys for Respondent
Henry R. Glass, III
Glass Law Offices
South Charleston, West Virginia
Attorney for Amicus Curiae,
West Virginia Association of Home
Inspectors
CHIEF JUSTICE JENKINS delivered the Opinion of the Court.
JUSTICE HUTCHISON and JUSTICE WOOTON concur, in part, and dissent, in
part, and reserve the right to file separate opinions.
SYLLABUS BY THE COURT
1. “Interpreting a statute or an administrative rule or regulation presents
a purely legal question subject to de novo review.” Syllabus point 1, Appalachian Power
Co. v. State Tax Department of West Virginia, 195 W. Va. 573, 466 S.E.2d 424 (1995).
2. “Interpretations of statutes by bodies charged with their
administration are given great weight unless clearly erroneous.” Syllabus point 4, Security
National Bank & Trust Co. v. First West Virginia Bancorp, Inc., 166 W. Va. 775, 277
S.E.2d 613 (1981).
3. “The primary object in construing a statute is to ascertain and give
effect to the intent of the Legislature.” Syllabus point 1, Smith v. State Workmen’s
Compensation Commissioner, 159 W. Va. 108, 219 S.E.2d 361 (1975).
4. “When a statute is clear and unambiguous and the legislative intent is
plain, the statute should not be interpreted by the courts, and in such case it is the duty of
the courts not to construe but to apply the statute.” Syllabus point 5, State v. General
Daniel Morgan Post No. 548, Veterans of Foreign Wars, 144 W. Va. 137, 107 S.E.2d 353(1959).
i
5. “A statute that is ambiguous must be construed before it can be
applied.” Syllabus point 1, Farley v. Buckalew, 186 W. Va. 693, 414 S.E.2d 454 (1992).
6. “Where a person claims an exemption from a law imposing a license
or tax, such law is strictly construed against the person claiming the exemption.” Syllabus
point 2, State ex rel. Lambert v. Carman, State Tax Commissioner, 145 W. Va. 635, 116
S.E.2d 265 (1960).
7. “A valid legislative rule is entitled to substantial deference by the
reviewing court. As a properly promulgated legislative rule, the rule can be ignored only
if the agency has exceeded its constitutional or statutory authority or is arbitrary or
capricious. W. Va. Code, 29A-4-2 (1982).” Syllabus point 4, in part, Appalachian Power
Co. v. State Tax Department of West Virginia., 195 W. Va. 573, 466 S.E.2d 424 (1995).
8. “A regulation that is proposed by an agency and approved by the
Legislature is a ‘legislative rule’ as defined by the State Administrative Procedures
Act, W. Va. Code, 29A-1-2(d) [1982], and such a legislative rule has the force and effect
of law.” Syllabus point 5, Smith v. West Virginia Human Rights Commission, 216 W. Va.
2, 602 S.E.2d 445 (2004).
ii
Jenkins, Chief Justice:
Petitioner John Keener d/b/a Mountaineer Inspection Services, LLC (“Mr.
Keener”) appeals from an order entered June 4, 2020, by the Circuit Court of Taylor
County. In that order, the circuit court determined that home inspectors do not meet the
professional services tax exemption in West Virginia Code section 11-15-8 (eff. 2008) and
that home inspection services are not professional services pursuant to West Virginia Code
of State Rules section 110-15-8.1.1.1 (eff. 1993) (sometimes referred to as “Section 110-
15-8.1.1.1”). The circuit court also concluded that the four-part test set forth in Section
110-15-8.1.1.1 creates a mandatory four-part test, and not a balancing test as determined
by the Office of Tax Appeals (“OTA”) and as argued by Mr. Keener.
On appeal, Mr. Keener urges this Court (1) to recognize the services rendered
by home inspectors as professional services for purposes of the tax exemption in West
Virginia Code section 11-15-8, (2) to conclude that the language of Section 110-15-8.1.1.1
creates a balancing test, not a mandatory, four-part test, and (3) to find that a four-year
degree is not required to be deemed a professional. Having considered the briefs submitted
on appeal, the appendix record, the parties’ oral arguments, and the applicable legal
authority, we agree with the circuit court’s ruling that home inspection services do not
qualify as professional services under West Virginia law. We also agree with the circuit
court’s ruling regarding the four-year degree requirement. However, we find that the
circuit court erred in concluding that each part of the four-part test must be met to be
1
classified as a professional. Accordingly, for the reasons set forth below, we affirm, in
part, and reverse, in part, the rulings made by the circuit court. 1
I.
FACTUAL AND PROCEDURAL HISTORY
Mountaineer Inspection Services, LLC (“Mountaineer”) is a single-member
limited liability company with its principal place of business located in Taylor County,
West Virginia. Mr. Keener, Mountaineer’s sole member, is certified by the West Virginia
State Fire Marshal to perform home inspection services. To obtain this certification, he
passed a National Home Inspector Examination, completes at least eighty hours of
instruction, completed high school, presented proof of general liability insurance, provided
fingerprints, presented proof of a valid West Virginia business license, and completes
sixteen hours of continuing education each year. See generally W. Va. C.S.R. § 87-5-4
(eff. 2006) and W. Va. C.S.R. § 106-6-4 (eff. 2021).
Between January 1, 2011, and September 30, 2015, Mountaineer, by and
through Mr. Keener, failed to collect and remit consumers sales and service taxes to the
1
We wish to acknowledge the appearance of Amicus Curiae for the West
Virginia Association of Home Inspectors, and to express our appreciation for its brief in
support of the position espoused by Mr. Keener herein. We have considered its arguments
and brief in our decision of this case.
2
West Virginia Tax Department (“Tax Department”). 2 In December of 2015, the Tax
Department issued Mr. Keener a notice of assessment stating that he owed $31,137.96 in
taxes and $5,048.24 in interest, for a total of $36,186.20. After receiving this notice, Mr.
Keener filed a petition for reassessment with the OTA on February 5, 2016. Both parties
agreed to waive an evidentiary hearing, and instead, they submitted the case to the OTA
by filing briefs. Throughout the proceedings below, Mr. Keener maintained that he was
exempt from collecting consumers sales and service tax because he and his home
inspection company provided professional services—an exemption detailed in West
Virginia Code section 11-15-8. 3
On October 4, 2018, the OTA issued its Final Decision and affirmed the Tax
Department’s assessment, concluding that home inspection services are not professional
services for purposes of West Virginia Code section 11-15-8. However, the OTA rejected
the notion that West Virginia Code of State Rules section 110-15-8.1.1.1 requires a four-
year degree for an activity to be considered professional, and further concluded that Section
110-15-8.1.1.1 cannot be characterized as a mandatory four-part test.
2
Since the filing of this case, the Tax Commissioner has changed, and the
Commissioner is now Matthew Irby. Accordingly, the Court has made the necessary
substitution of parties pursuant to Rule 41(c) of the West Virginia Rules of Appellate
Procedure.
3
The text of West Virginia Code section 11-15-8 is quoted in Part III, Section
A of this opinion, infra.
3
Both Mr. Keener and the Tax Department appealed the OTA’s Final
Decision. 4 Upon consideration of the briefs submitted by the parties, the circuit court
entered a final order on June 4, 2020, affirming in part and reversing in part the decision
of the OTA. The circuit court concluded that home inspection services do not qualify as
professional services for purposes of the tax exemption in West Virginia Code section 11-
15-8; that the OTA erroneously ruled that a four-year college degree is not a requirement
for an activity to be classified as a professional service; and that the OTA erred by ruling
that Section 110-15-8.1.1.1 sets forth a balancing test as opposed to a true four-part test.
Mr. Keener now appeals the June 4, 2020 decision of the circuit court.
II.
STANDARD OF REVIEW
This case is before this Court on appeal from the circuit court’s order
affirming in part, and reversing in part, a decision of the West Virginia Office of Tax
Appeals.
In an administrative appeal from the decision of the
West Virginia Office of Tax Appeals, this Court will review
the final order of the circuit court pursuant to the standards of
review in the State Administrative Procedures Act set forth in
W. Va. Code § 29A-5-4(g) [1988]. Findings of fact of the
administrative law judge will not be set aside or vacated unless
clearly wrong, and, although administrative interpretation of
4
Mr. Keener appealed the OTA’s decision to the Circuit Court of Taylor
County, and the Tax Department appealed the decision to the Circuit Court of Kanawha
County. The Tax Department’s case was transferred to the Circuit Court of Taylor County
and consolidated with Mr. Keener’s case.
4
State tax provisions will be afforded sound consideration, this
Court will review questions of law de novo.
Syl. pt. 1, Griffith v. ConAgra Brands, Inc., 229 W. Va. 190, 728 S.E.2d 74 (2012). Accord
Syl. pt. 1, Ashland Specialty Co. v. Steager, 241 W. Va. 1, 818 S.E.2d 827 (2018).
West Virginia Code section 29A-5-4 (eff. 1998) provides:
The court may affirm the order or decision of the agency
or remand the case for further proceedings. It shall reverse,
vacate or modify the order or decision of the agency if the
substantial rights of the petitioner or petitioners have been
prejudiced because the administrative findings, inferences,
conclusions, decision or order are:
(1) In violation of constitutional or statutory provisions;
or
(2) In excess of the statutory authority or jurisdiction of
the agency; or
(3) Made upon unlawful procedures; or
(4) Affected by other error of law; or
(5) Clearly wrong in view of the reliable, probative and
substantial evidence on the whole record; or
(6) Arbitrary or capricious or characterized by abuse of
discretion or clearly unwarranted exercise of
discretion.
Therefore, findings of fact from the OTA will not be set aside or vacated unless clearly
wrong, and, although administrative interpretation of State tax provisions will be afforded
sound consideration, this Court will review questions of law de novo.
Additionally, throughout this opinion, we are tasked with interpreting certain
statutes and rules applicable to the issues sub judice. “Interpreting a statute or an
administrative rule or regulation presents a purely legal question subject to de novo
5
review.” Syl. pt. 1, Appalachian Power Co. v. State Tax Dep’t of W. Va., 195 W. Va. 573,
466 S.E.2d 424 (1995). Accord Syl. pt. 1, In re Tax Assessment Against Am. Bituminous
Power Partners, L.P., 208 W. Va. 250, 539 S.E.2d 757 (2000). “Interpretations of statutes
by bodies charged with their administration are given great weight unless clearly
erroneous.” Syl. pt. 4, Security Nat’l Bank & Trust Co. v. First W. Va. Bancorp, Inc., 166
W. Va. 775, 277 S.E.2d 613 (1981). Mindful of these principles, we now consider the
parties’ arguments.
III.
DISCUSSION
The issue presented in this matter is whether the services provided by home
inspectors are professional services. In the case sub judice, Mr. Keener asserts that the
circuit court erred by determining that, as a home inspector, he does not provide
professional services for purposes of a tax exemption espoused in West Virginia Code
section 11-15-8. In particular, he contends that the circuit court erred in concluding
(1) that Section 110-15-8.1.1.1 sets forth a mandatory four-part test for determining
whether an occupation is professional, and (2) that a four-year college degree is required
for an activity to be considered to provide professional services.
In response, the Tax Department contends that its interpretation of Section
110-15-8.1.1.1 as a mandatory, four-part test that requires a four-year degree is
permissible and is the correct and controlling interpretation of the legislative rule at issue,
6
and therefore this Court should affirm the decision of the circuit court determining that
home inspection services are not exempt from the consumers sales and service tax.
Because this case requires us to examine the statute governing consumers
sales and service tax, we are mindful that “[t]he primary object in construing a statute is to
ascertain and give effect to the intent of the Legislature.” Syl. pt. 1, Smith v. State
Workmen’s Comp. Comm’r, 159 W. Va. 108, 219 S.E.2d 361 (1975). Therefore, where
the legislative intent is plainly expressed, we are required to apply rather than interpret the
statute at issue. “When a statute is clear and unambiguous and the legislative intent is
plain, the statute should not be interpreted by the courts, and in such case it is the duty of
the courts not to construe but to apply the statute.” Syl. pt. 5, State v. Gen. Daniel Morgan
Post No. 548, Veterans of Foreign Wars, 144 W. Va. 137, 107 S.E.2d 353 (1959).
Conversely, “[a] statute that is ambiguous must be construed before it can be applied.” Syl.
pt. 1, Farley v. Buckalew, 186 W. Va. 693, 414 S.E.2d 454 (1992). With these standards
in mind, we now proceed to consider the arguments of the parties.
A. Professional Services
West Virginia imposes a general consumers sales and service tax “for the
privilege of selling tangible personal property or custom software and for the privilege of
furnishing certain selected services.” W. Va. Code § 11-15-3(a) (eff. 2003). If a vendor
fails to collect and remit the consumers sales tax, the vendor is personally liable for the tax.
7
See W. Va. Code § 11-15-4a (eff. 2003). In order to prevent evasion, all sales are presumed
to be taxable until proven otherwise. See W. Va. Code § 11-15-6(b) (eff. 2009).
However, the statute does provide some exemptions; in particular, West
Virginia Code section 11-15-8 provides, in relevant part:
The provisions of this article apply not only to selling
tangible personal property and custom software, but also to the
furnishing of all services, except professional and personal
services, and except those services furnished by businesses
subject to the control of the public service commission when
the service or the manner in which it is delivered is subject to
regulation by the public service commission.
(Emphasis added).
Because West Virginia Code sections 11-15-1 to -34, which comprise the
relevant portion of the West Virginia tax code, do not define the term professional
services, we must turn to the duly promulgated legislative regulations pertaining to
consumers sales and service tax. West Virginia Code of State Rule section 110-15-8.1.1.1
states:
Professional services, as defined in Section 2 of these
regulations, are rendered by physicians, dentists, lawyers,
certified public accountants, public accountants, optometrists,
architects, professional engineers, registered professional
nurses, veterinarians, licensed physical therapists,
ophthalmologists, chiropractors, podiatrists, embalmers,
osteopathic physicians and surgeons, registered sanitarians,
pharmacists, psychiatrists, psychoanalysts, psychologists,
landscape architects, registered professional court reporters,
licensed social workers, enrolled agents, professional foresters,
8
licensed real estate appraisers and certified real estate
appraisers licensed in accordance with W. Va. Code [§] 37-14-
1 et seq., nursing home administrators, licensed professional
counselors and licensed real estate brokers.
Section 110-15-8.1.1.1 continues, and also lists services that are classified as nonprofessional
services:
Persons who provide services classified as nonprofessional for
consumers sales and service tax purposes include interior
decorators, private detectives/investigators, security guards,
bookkeepers, forestors [sic], truck driving schools, hearing aid
dealers/fitters, contractors, electricians, musicians, and
hospital administrators; the foregoing listing is not all-
inclusive but intended as containing examples of trades and
occupations.
Lastly, Section 110-15-8.1.1.1 grants limited discretion to the Tax Department and concludes by
providing a standard for the Tax Department to use when classifying non-listed services as either
professional or nonprofessional:
The determination as to whether other activities are
“professional” in nature will be determined by the State Tax
Division on a case-by-case basis unless the Legislature amends
W. Va. Code [§] 11-15-1 et seq. to provide that a specified
activity is “professional.” When making a determination as to
whether other activities fall within the “professional”
classification, the Tax Department will consider such things as
the level of education required for the activity, the nature and
extent of nationally recognized standards for performance,
licensing requirements on the State and national level, and the
extent of continuing education requirements.
Now that we have established the underlying principles that will guide our
resolution of the issues presented in this case, we consider whether home inspection
9
services are professional services for purposes of the consumers sales tax exemption in
West Virginia Code section 11-15-8.
B. Determination of Whether Home Inspection
Services are Professional Services
Mr. Keener first contends that the circuit court erred when it held that the
standard set forth at the end of Section 110-15-8.1.1.1 constitutes a mandatory, four-part
test where all four factors must be met for an occupation to be considered professional. See
W. Va. C.S.R. § 110-15-8.1.1.1 (“[T]he Tax Department will consider such things as the
level of education required for the activity, the nature and extent of nationally recognized
standards for performance, licensing requirements on the State and national level, and the
extent of continuing education requirements.”). Rather, Mr. Keener contends that the
standard is a balancing test and that home inspectors should be classified as professionals
because of the stringent requirements imposed upon them. According to Mr. Keener, the
work of home inspectors is akin to that of lawyers and other professions listed as
professional services in Section 110-15-8.1.1.1. He argues, that in both those professions
and in home inspections, clients rely on the individuals’ education, experience, and
professional judgment in making major life decisions. More specifically, Mr. Keener
argues that although home inspectors are not explicitly identified in Section 110-15-8.1.1.1
as an occupation providing professional services, home inspectors should be classified as
such because they meet the rigorous considerations set forth in the four-part test of Section
110-15-8.1.1.1.
10
When claiming an exemption from the consumers sales and service tax,
taxpayers are under a heavy burden to prove that their services qualify as “professional.”
This Court has held that “[w]here a person claims an exemption from a law imposing a
license or tax, such law is strictly construed against the person claiming the exemption.”
Syl. pt. 2, State ex rel. Lambert v. Carman, State Tax Comm’n, 145 W. Va. 635, 116 S.E.2d
265 (1960). In the case of Wooddell v. Dailey, 160 W. Va. 65, 230 S.E.2d 466 (1976),
this Court addressed a similar query regarding whether the services of an interior designer
could be classified as professional services under West Virginia Code section 11-15-8. 5 In
Wooddell, we ruled that “any such other profession must be clearly established as
professional by the one who asserts that the services rendered by him in connection
therewith are ‘exempt’ or ‘excepted’ and hence not taxable.” 160 W. Va. at 70, 230 S.E.2d
at 470. Therefore, because home inspectors are not explicitly listed as providing
professional services, Mr. Keener—and other similarly situated individuals—are required
to meet a high bar to prove that their services qualify under the professional services tax
exemption.
According to Mr. Keener’s brief, to become a certified home inspector in
West Virginia, individuals
must (1) pass the National Home Inspector Examination
offered by the Examination Board of Professional Home
5
Wooddell v. Dailey was decided in 1977 under the statutory framework in
existence at that time. The corresponding legislative rule was promulgated in 1993. Once
promulgated, the legislative rule explicitly identified the services of interior designers as
“nonprofessional.” See W. Va. C.S.R. § 110-15-8.1.1.1.
11
Inspectors or other comparable examination, as determined by
the State Fire Marshal; (2) present proof of having conducted
business as a home inspector for three (3) years prior to the
effective date of the rule or proof of satisfactory completion of
at least eighty (80) hours of instruction directly relating to the
performance of home inspections; (3) have a high school
degree or its equivalent; (4) present proof of and maintain
general liability insurance of at least $250,000; and, (5) provide
fingerprints for examination by the West Virginia State Police
and Federal Bureau of Investigation. W. Va. Code St. R. § 87-
5-4.
Pet. Br. at 2.
Because home inspectors are required to meet such stringent requirements,
Mr. Keener argues that the circuit court should have balanced the considerations in Section
110-15-8.1.1, rather than require a fulfillment of each factor. Since this was not done, Mr.
Keener contends that the circuit court erred when it ruled that the language of West Virginia
Code of State Rules section 110-15-8.1.1.1 is a mandatory, four-part test. The legislative
rule provides that
[w]hen making a determination as to whether other activities
fall within the “professional” classification, the Tax
Department will consider such things as the level of education
required for the activity, the nature and extent of nationally
recognized standards for performance, licensing requirements
on the State and national level, and the extent of continuing
education requirements.
W. Va. C.S.R. § 110-15-8.1.1.1. Mr. Keener argues that because the rule does not contain
the word shall, that it is not a mandatory four-part test, but rather a list of considerations
that should be balanced. Therefore, he asks this Court to reverse the circuit court’s decision
12
concluding that the rule is a mandatory, four-part test, where all four factors must be
satisfied.
In reading the language of the legislative rule, we find that the circuit court
erred in finding that Section 110-15-8.1.1.1 provides a mandatory, four-part test, where
each criterion must be satisfied. However, that is not to say that this Court finds Section
110-15-8.1.1.1 to be a mere balancing test. The language of the rule directs that the Tax
Department “will consider such things as” the required level of education, the nature and
extent of national standards, licensing requirements, and continuing education
requirements when analyzing whether an occupation provides professional services. See
W. Va. C.S.R. § 110-15-8.1.1.1.
The phrase “will consider” indicates a mandatory obligation on the part of
the Tax Department to consider the four listed factors, and the phrase “such things as”
indicates that the analysis is not limited to the four listed factors. The word will creates an
obligation to perform. See Bryan A. Garner, A Dictionary of Modern Legal Usage 941-
942 (2d ed., Oxford U. Press 1995). Yet, a mandatory obligation to consider is not
equivalent to a mandatory “all or nothing” test where all factors must be satisfied. Rather,
this Court concludes that the plain language of the rule requires the Tax Department to
mandatorily consider the listed criteria at a minimum, and not to the exclusion of other
factors.
13
Based on these determinations, an individual seeking to be classified as a
professional—for purposes of the tax exemption in West Virginia Code section 11-15-8—
must not satisfy all four factors set forth in Section 110-15-8.1.1.1, but the Tax Department
must consider the listed criteria at a minimum, and not to the exclusion of additional factors
that may arise over time. Therefore, we conclude that the circuit court erred in determining
Section 110-15-8.1.1 to be a mandatory, four-part test where all factors must be satisfied.
Mr. Keener next contends that the four-year college degree requirement
imposed by the Tax Department and accepted by the circuit court is contrary to the plain
language of Section 110-15-8.1.1.1. Mr. Keener asserts that the Legislature has
unambiguously announced that the Tax Department must consider the level of education
required for an activity before determining whether that activity provides professional
services. Absent from this rule, however, is the four-year college degree requirement
propounded by the Tax Department. Mr. Keener alleges that even if the rule was
ambiguous, the four-year degree requirement is an impermissible exercise of the Tax
Department’s gap-filling authority because the requirement is arbitrary and directly
contrary to the language of the rule. Therefore, Mr. Keener contends that the circuit court
erred in finding that a four-year college degree is required before an occupation can be
considered a professional service. In support of his argument, Mr. Keener asserts that
Section 110-15-8.1.1.1 is unambiguous. We disagree. Pursuant to these provisions, if the
services provided by home inspectors are professional services then they are exempted
from the general requirement of the collection of consumers sales and service tax; however,
14
West Virginia Code sections 11-15-1 to -34 do not define the term professional services.
The absence of such a definition makes it unfeasible for this Court to say that this statute
is clear and unambiguous because further statutory construction is required to resolve this
obvious ambiguity.
If a statute is silent or ambiguous on a specific issue, and the administrative
agency is authorized to promulgate legislative rules—in this case the Tax Department—
then the administrative agency has discretion to interpret the statute. See, e.g., Syl. pt. 4,
in part, Appalachian Power Co., 195 W. Va. 573, 466 S.E.2d 424 (1995) (“If legislative
intent is not clear, a reviewing court may not simply impose its own construction of the
statute in reviewing a legislative rule. Rather, if the statute is silent or ambiguous with
respect to the specific issue, the question for the court is whether the agency’s answer is
based on a permissible construction of the statute.”); Syl. pt. 7, in part, Lincoln County Bd.
of Educ. v. Adkins, 188 W. Va. 430, 424 S.E.2d 775 (1992) (“Interpretations of statutes by
bodies charged with their administration are given great weight unless clearly erroneous.”).
Under West Virginia law, “[a] regulation that is proposed by an agency and
approved by the Legislature is a ‘legislative rule’ as defined by the State Administrative
Procedures Act, W. Va. Code, 29A-1-2(d) [1982], and such a legislative rule has the force
and effect of law.” Syl. pt. 5, Smith v. W. Va. Human Rights Comm’n, 216 W. Va. 2, 602
S.E.2d 445 (2004). The State Administrative Procedures Act, West Virginia Code section
29A-1-2(d) (eff. 2015), defines a “legislative rule” in the following manner:
15
“Legislative rule” means every rule . . . proposed or
promulgated by an agency pursuant to this chapter. Legislative
rule includes every rule which, when promulgated after or
pursuant to authorization of the legislature, has (1) the force of
law, or (2) supplies a basis for the imposition of civil or
criminal liability, or (3) grants or denies a specific benefit.
Every rule which, when effective, is determinative on any issue
affecting private rights, privileges or interests is a legislative
rule.
This Court has held that in reviewing an agency’s construction of a statute,
we consider two separate questions: whether the Legislature’s intent is clear and whether
the agency’s construction of the statute is permissible. Appalachian Power, 195 W. Va. at
583, 466 S.E.2d at 434 (quoting Sniffin v. Cline, 193 W. Va. 370, 373-74, 456 S.E.2d 451,
454-55 (1995)). If the Legislature has spoken directly to the precise issue in question, the
review ends. Appalachian Power, 195 W. Va. at 583, 466 S.E.2d at 434. If the
Legislature’s intent is unclear, then the court moves to considering whether the
construction is permissible. Id. Courts should “presume that a legislature says in a statute
what it means and means in a statute what it says.” Id. (quoting Martin v. Randolph County
Bd. of Educ., 195 W. Va. 297, 312, 465 S.E.2d 399,414 (1995)). If there is a gap in the
Legislature’s enactments on a particular issue, then an agency, within their rule-making
authority, may fill the gap, but the agency’s gap-filling rulemaking should not stand if it is
arbitrary, capricious, or manifestly contrary to the statute. Appalachian Power, 195 W. Va.
at 589, 466 S.E.2d at 440.
16
As stated above, West Virginia Code sections 11-15-1 to -34 do not define
the term professional services. Therefore, we must turn to West Virginia Code of State
Rules section 110-15-8.1.1.1. Here, the legislative rule at issue expressly designates thirty-
seven services as professional services, which are, thus, exempted from the consumers
sales and service tax. Home inspection services are not enumerated in the list of
professional services. Likewise, home inspection services also are not listed in the
specified nonprofessional services. It would be inconceivable, and even absurd, to expect
the Legislature to classify every single occupation as either professional or
nonprofessional. Therefore, while the Legislature is free to designate any service as
professional or nonprofessional regardless of the educational requirement, the Tax
Department does not have the same unfettered discretion. Rather, the Legislature delegates
limited authority 6 to the Tax Department to classify additional professional services on a
“case-by-case basis” in accordance with the criteria expressly authorized by the Legislature
in Section 110-15-8.1.1.1. When classifying non-listed services as either professional or
nonprofessional, the four-part test detailed in Section 110-15-8.1.1.1 is used: the level of
education, the nature and extent of nationally recognized standards, the licensing
requirements, and the continuing education requirements. See W. Va. C.S.R. § 110-15-
8.1.1.1.
6
We recognize that an agency’s authority to fill “gaps” in legislative
enactments is subject to the provisions of W. Va. Code § 29A-3-2 (eff. 1982).
17
The four-year degree rule contested by Mr. Keener is not a new or random
requirement. Although the legislative rule is silent as to the level of education required,
the Tax Department has long taken the position that a high school diploma or a GED is not
sufficient to fulfill the educational requirements under Section 110-15-8.1.1.1, and that a
relevant four-year degree from an accredited college or university is required. See, e.g.,
W. Va. Tax Dec. 2006-340C, 2007 WL 9617856, *1 (W. Va. Off. Tax App. Mar. 27, 2007)
(concluding that having a four-year degree is a requirement and that a degree germane to
the activity at issue is one that tends to divide professions from trade or skilled
occupations).
It has been argued that because some of the professional services listed in
Section 110-15-8.1.1.1 do not require any more education than a high school diploma, that
a four-year degree cannot be deemed a necessary requirement to qualify for the
professional services tax exemption. For example, real estate brokers (W. Va. Code § 30-
40-14 (eff. 2002)), real estate appraisers (W. Va. C.S.R. §190-2-1 (eff. 2020)), and
embalmers (W. Va. C.S.R. § 6-1-3.1.2.a (eff. 2021)) are all listed in Section 110-15-8.1.1.1
as providing professional services; however, those occupations do not require a college
degree. We are not persuaded by this argument.
Here, Section 110-15-8.1.1.1 gives the Tax Department the authority to
determine whether additional non-specified occupations fall within the scope of
professional services. Of particular importance here is the level of education required for
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an occupation to be considered “professional.” As evident from the language of the rule,
it is clear that the Legislature did not specify how much education is required—this
question was left open.
Although this Court has not addressed this issue before, the OTA has spoken
on this issue in previous tax appeals. More specifically, the OTA has stated:
The requirement that in order to qualify as a profession
an occupation must satisfy the educational requirement of a
four-year college degree is one that was established by the
State Tax Commissioner’s Office of Hearings and Appeals.[7]
This tribunal, the West Virginia Office of Tax Appeals, is
independent of the State Tax Commissioner. Decisions issued
by the Tax Commissioner’s Office of Hearings and Appeals
are not precedents that are binding on this Office. However,
this Office has chosen to continue to adhere to this educational
requirement because it is one that is reasonable in light of the
purposes and goals that the Legislature attempted to achieve in
enacting the statute and approving the legislative rule. A
minimum requirement of a four-year degree that is germane to
the activity (plus the other requirements of the legislative rule)
is one that tends to divide professions from mere trades or
skilled occupations.
This Office recognizes that this requirement of a four-
year college degree is, in a very technical sense, “arbitrary.” As
the Circuit Court of Kanawha County held in Wideman &
Associates, Inc. v. Paige, Civil Action No. 93-C-5726 (Cir. Ct.
Kan. Co. 06/27/95), the legislative rule, on its face, is devoid
of any fixed number of respectively weighted standards that
7
“[L]egislative changes resulted in the creation of a successor tribunal to the
Tax Commissioner’s Office of Hearings and Appeals: the Office of Tax Appeals.”
Concept Min., Inc. v. Helton, 217 W. Va. 298, 300, 617 S.E.2d 845, 847 (2005). The Office
of Tax Appeals began operations on January 1, 2003.
19
can be used for guidance by taxpayers, the Tax Commissioner,
the courts and, logically, this Office as the specialized state tax
tribunal. In light of the lack of guidance provided by the
legislative rule, any standard applied will, of necessity, be
arbitrary, whether it be a rule applied to all occupations, as this
Office is doing, or whether it establishes some rule respecting
the education required (or one of the other standards) for an
occupation on a case-by-case basis. The only thing that this
Office, a specialized state tax tribunal, and the courts can hope
to do when creating some necessarily arbitrary rule is to avoid
being capricious at the same time. This Office’s goal in
establishing the requirement that an occupation must require a
four-year college degree in order to be considered a profession
is to establish a clear, bright line rule that can readily be
understood and applied, in advance, by all taxpayers, the State
Tax Commissioner and this Office.
W. Va. Tax Dec. 2006-340C, 2007 WL 9617856, at *12 (W. Va. Off. Tax App. Mar. 27,
2007) (footnote added).
We are guided and persuaded by the sound reasoning of the OTA as set forth
in the preceding excerpt. In the case sub judice, a gap existed in the education requirement
for determining whether a particular occupation provides a professional service, and the
Tax Department properly used its discretion to clarify the ambiguity. Based upon
established precedent, the Tax Department interpreted the education requirement in the
rule as requiring a four-year college degree for a service to be classified as a professional
service. In doing so, the Tax Department did not act randomly or beyond its authority.
Rather, the Tax Department used the four-year degree to provide a bright line rule that can
be easily followed and applied in future cases. Accordingly, we conclude that the Tax
Department acted within the discretion afforded to it by the Legislature, and the circuit
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court did not err when finding that the four-year degree requirement was a permissible
exercise of the Tax Department’s rule-making authority.
While this Court has never directly addressed whether home inspectors
provide professional services, this issue has been previously answered by the Tax
Department in its administrative decisions. See, e.g., W. Va. Tax Dec. 2003-418C & 2003-
487RC, 2004 WL 1416147, at *5 (W. Va. Off. Tax App. Mar. 29, 2004) (“The
‘professional services’ exception from services in general subject to the consumers’ sales
and service tax, see W. Va. Code §§ 11-15-8 [1955] and 11-15-2(s) [1994, 1998, 2001],
does not apply to the services of a home inspector, where, as here, such an inspector fails
to prove that his or her services comport with the mandatory four-part test of the legislative
regulation set forth in 110 C.S.R. 15, § 8.1.1.1 (effective on or after May 1, 1992), and in
fact fails to prove that home inspection services satisfy any of the four requirements.”);
W. Va. Tax Dec. 96-098CS, 1998 WL 1048430, at *3 (W. Va. Off. Hrg. App. Sept. 21,
1998) (“Based upon the review of the criteria, the Petitioner has failed to meet the burden
of proof required to clearly establish that home inspection service is a professional service.
Thus, the Petitioner’s services rendered in his capacity as a home inspector are not exempt
from consumers sales and service tax as professional service.”).
While it should be noted that these decisions were issued prior to the
certification requirements set forth by the State Fire Marshal in West Virginia Code of
State Rules section 87-5-4, it remains that the since-promulgated requirements only impose
21
minimal educational requirements. See W. Va. C.S.R. § 87-5-4.2. Under the State Fire
Marshal’s promulgated rule, a home inspector must have “[s]successfully completed high
school or its equivalent.” Id. As noted by the circuit court in its order, when asked “to
classify a service that is not specifically designated as a professional service in the
legislative rule, the Tax Department has long taken the position that a high school diploma
or a GED is not enough to qualify as providing a professional service.” The circuit court
further stated that “[t]o be classified as providing a professional service, the minimum
education required to provide that service must be a four-year college degree or its
equivalent.”
After careful review of the pertinent law, we conclude that the circuit court
did not err in finding that home inspectors are not professionals under West Virginia Code
of State Rules section 110-15-8.1.1.1, and also did not err in upholding the four-year degree
requirement, as we find it was a permissible exercise of the Tax Department’s rule-making
authority. Accordingly, we conclude that home inspectors do not provide professional
services for purposes of the professional services tax exemption in West Virginia Code
section 11-15-8. However, we find that the circuit court did err in finding that Section 110-
15-8.1.1.1 created a mandatory four-part test where each factor must be satisfied.
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IV.
CONCLUSION
For the reasons set forth above, we affirm, in part, and reverse, in part, the
circuit court’s order.
Affirmed, in part; Reversed, in part.
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