COLORADO COURT OF APPEALS 2017COA118
Court of Appeals No. 16CA1355
Jefferson County District Court No. 15CV31189
Honorable Christopher C. Zenisek, Judge
Sodexo America, LLC,
Plaintiff-Appellant,
v.
City of Golden, Colorado; and Jeff Hansen, in his official capacity as Finance
Director of the City of Golden, Colorado,
Defendants-Appellees.
JUDGMENT REVERSED AND CASE
REMANDED WITH DIRECTIONS
Division IV
Opinion by JUDGE J. JONES
Graham and Welling, JJ., concur
Announced September 7, 2017
Silverstein & Pomerantz LLP, Neil I. Pomerantz, Mark E. Medina, Michelle
Bush, Denver, Colorado, for Plaintiff-Appellant
Williamson and Hayashi, LLC, David S. Williamson, Mathew M. Munch,
Boulder, Colorado, for Defendants-Appellees
Cynthia H. Coffman, Attorney General, Stephanie Scoville, Assistant Attorney
General, Jeremy Hueth, Special Assistant Attorney General, Denver, Colorado,
for Amici Curiae Colorado Higher Education Institutions
¶1 Sodexo America, LLC (Sodexo) provides food services and food
to the Colorado School of Mines (Mines) pursuant to a contract with
Mines. Mines, in turn, contracts with its students to provide them
food (the food obtained, prepared, and served by Sodexo) through
different types of meal plans. The City of Golden (the City) taxes
Sodexo for students’ use of the meal plans. This, Sodexo
maintains, violates the Colorado Constitution and the Golden
Municipal Code (2015) (Code or GMC).1
¶2 The district court disagreed with Sodexo and granted
summary judgment for the City on Sodexo’s challenges to the City’s
assessment and denial of refunds, leading to this appeal. Departing
from the decision of another division of this court in City of Golden
v. Aramark Educational Services, LLC, 2013 COA 45, involving a
similar arrangement, we hold that, under the relevant contract and
pursuant to the plain language of the Code, no sales occur between
Sodexo and Mines’ students with meal plans. Instead, Sodexo sells
meal plan meals to Mines at wholesale. And since the Code
expressly exempts wholesale sales from taxation, the City’s
assessment is invalid. We therefore reverse the district court’s
1 We apply the 2015 version of the Code throughout.
1
summary judgment and remand the case for entry of judgment in
Sodexo’s favor.
I. Background
¶3 The contract between Sodexo and Mines requires Sodexo to
“provide food services for [Mines] students, faculty, staff, employees
and invited guests.” It defines food services as “[t]he preparation,
service and sale of food, beverages, and select goods, merchandise
and other items to be agreed upon by [Mines] and Sodexo . . . ,
including catering, concessions, retail and meal plans.” But the
contract also says that the food and other tangible items Sodexo
provides are deemed Mines’ property alone; Sodexo is essentially
Mines’ go-between for that food.
¶4 Sodexo provides food services by operating and staffing all of
the dining facilities on Mines’ campus, both traditional residential
dining facilities and “branded” dining facilities, including the Slate
Cafe, Diggers’ Den Food Court, Subway, and Einstein Bros. Bagels.
A student buying a meal plan from Mines (pursuant to a contract
with Mines, as explained below) can redeem her meal plan meals at
any of these facilities. The facilities aren’t advertised to the public
and are used primarily by Mines’ students and staff. On rare
2
occasion, members of the public buy food from the facilities using
cash or a credit card.
¶5 Sodexo’s contract with Mines sets the prices Mines pays
Sodexo for each meal that a student redeems pursuant to a meal
plan the student has purchased from Mines. It also stipulates that
any increase or decrease in these prices requires Mines’ prior
approval.
¶6 Mines requires every student living in a residence hall to select
a meal plan from among several options; students living off-campus
may purchase meal plans. Each meal plan includes a certain
number of weekly meals and a sum of “Munch Money,” a declining
balance of points/dollars that can be used at any retail food
location on campus. At the end of each semester, students lose any
unused balance of meals and Munch Money. These terms are
memorialized in contracts that Mines enters into with its students;
Sodexo doesn’t enter into any food purchase contracts with Mines’
students.
¶7 The students’ contracts describe the available meal plan
options and how much they cost. Mines alone determines prices
and terms, without Sodexo’s approval, and charges the cost of the
3
meal plans to the students’ Mines accounts. Only Mines can
charge and collect amounts owed for meal plans.
¶8 Students redeem meal plan meals and Munch Money using
“BlasterCards” provided by Mines. Mines electronically syncs each
student’s BlasterCard with the meal plan the student has
purchased from Mines. So each time a student “swipes” her
BlasterCard on a card reader at a dining facility, Mines’ software
automatically deducts a meal (or Munch Money) from the student’s
account.
¶9 Periodically, Mines reports the number of meals used under
each of its meal plans to Sodexo.2 Sodexo then invoices Mines
based on the report. The per meal prices Mines pays Sodexo per
their contract are significantly less than the prices Mines charges
students under the meal plans.
¶ 10 The Code says the City may levy a three percent sales tax on
the “purchase price” of “all sales of tangible personal property and
services,” including food, unless expressly exempted. GMC
§ 3.03.010. Sodexo collects and remits sales tax on campus food
2 The contract contemplates monthly reports, but it appears from
the record that Mines may provide weekly reports.
4
purchases made with cash, check, or credit card.3 But the City has
also assessed Sodexo sales tax on transactions whereby students
swipe their BlasterCards in exchange for meal plan meals in the
dining facilities. (Paradoxically, however, the City assesses the tax
based on the prices Mines pays Sodexo, not on the prices students
pay Mines.4) As noted, Sodexo’s challenges to this assessment have
thus far failed.
II. Discussion
¶ 11 Sodexo contends that the City can’t tax it for meals purchased
by Mines’ students under the students’ contracts with Mines
because (1) doing so interferes with Mines’ constitutional authority
to exercise “exclusive control and direction” of its funds and
appropriations; (2) doing so unconstitutionally taxes Mines’
students’ acquisition of education furnished by the State; (3)
Sodexo’s sales of food to Mines under their contract are excluded
3 Sodexo concedes that these sales are subject to the sales tax, and
therefore they are not at issue.
4 According to the Code, the purchase price is “the price to the
consumer.” GMC § 3.02.10. The sales tax rate is “three percent of
the purchase price.” Id. at § 3.03.10(a). The City claims that the
student is the consumer, but the City doesn’t assess Sodexo based
on the price to that consumer. Rather, it assesses three percent on
the lower price Mines pays Sodexo.
5
from taxation under the Code as direct sales to Mines in its
governmental capacity only; and (4) Sodexo does not sell food to
students at retail, but instead sells food to Mines at wholesale, and
the Code expressly exempts wholesale sales from taxation. Because
we conclude that Sodexo doesn’t sell food to students at retail, and
that the Code’s wholesale exemption applies to the sales Sodexo
makes to Mines, we don’t address Sodexo’s first three contentions.5
A. Standard of Review and Applicable Law
¶ 12 We review an order granting summary judgment de novo.
Hamon Contractors, Inc. v. Carter & Burgess, Inc., 229 P.3d 282, 290
(Colo. App. 2009). We similarly review the interpretation of a
municipal ordinance. See Friends of Denver Parks, Inc. v. City &
Cty. of Denver, 2013 COA 177, ¶ 45; Leggett & Platt, Inc. v. Ostrom,
251 P.3d 1135, 1140 (Colo. App. 2010) (construing tax ordinances,
including a tax exemption provision).
5 Sodexo urges us to decide this case on constitutional grounds, as
do the other public institutions of higher education that have filed a
brief as amici curiae. But we avoid constitutional analysis if we can
resolve a case on statutory grounds. City of Florence v. Pepper, 145
P.3d 654, 660 (Colo. 2006); see also Taxpayers for Pub. Educ. v.
Douglas Cty. Sch. Dist., 2015 CO 50, ¶ 11, cert. granted, judgment
vacated, and case remanded, 582 U.S. ___ (2017).
6
¶ 13 We construe such ordinances the same way we construe
statutes, and so our ultimate goal is to determine and give effect to
the municipality’s intent. Leggett & Platt, 251 P.3d at 1141; Waste
Mgmt. of Colo., Inc. v. City of Commerce City, 250 P.3d 722, 725
(Colo. App. 2010). To do this, we look first at the ordinance’s plain
language. But we don’t look at the language in isolation: we must
consider the language in context, looking to related provisions and
construing them in a way that gives effect to all, in a harmonious
way, if possible. Leggett & Platt, 251 P.3d at 1141; Waste Mgmt.,
250 P.3d at 725.
¶ 14 If, after doing all this, we conclude that the ordinance’s
meaning is clear, we won’t apply other rules of statutory
interpretation. But if we conclude to the contrary — that is, that
the relevant language is ambiguous — those other rules come into
play. Leggett & Platt, 251 P.3d at 1141; Waste Mgmt., 250 P.3d at
725.
¶ 15 A couple of special rules guide our interpretation of tax
provisions.
¶ 16 First, as a general matter, we construe provisions purporting
to impose a tax narrowly in the taxpayer’s favor. Associated Dry
7
Goods Corp. v. City of Arvada, 197 Colo. 491, 496, 593 P.2d 1375,
1378 (1979) (“[T]axing powers and taxing acts will not be extended
beyond the clear import of the language used . . . .”); Coors Brewing
Co. v. City of Golden, 2013 COA 92, ¶ 18; Noble Energy, Inc. v. Colo.
Dep’t of Revenue, 232 P.3d 293, 296 (Colo. App. 2010). This first
rule requires us to resolve all doubts regarding imposition of a tax
against the taxing authority. Associated Dry Goods, 197 Colo. at
496, 593 P.2d at 1378; Noble Energy, 232 P.3d at 296.
¶ 17 Second, we construe tax exemptions narrowly in the taxing
authority’s favor. Catholic Health Initiatives Colo. v. City of Pueblo,
207 P.3d 812, 817-18 (Colo. 2009); Coors, ¶ 18. This second rule
requires us to resolve all reasonable doubts about whether an
exemption applies against the taxpayer. Catholic Health Initiatives,
207 P.3d at 818; Coors, ¶ 18; Noble Energy, 232 P.3d at 296. And
the taxpayer has the burden of clearly establishing that the
exemption applies. Catholic Health Initiatives, 207 P.3d at 817.
B. Analysis
¶ 18 Section 3.03.010(a) of the Code provides that a three percent
sales tax “is levied . . . upon all sales of tangible personal property
and services specified in subsection 3.03.030(a).” As relevant for
8
our purposes, “sales of food, prepared food, or food for immediate
consumption” are taxable sales. GMC § 3.03.030(a)(4).
¶ 19 Under the Code, “sale means the acquisition for any
consideration by any person of tangible personal property or taxable
services that are purchased.” GMC § 3.02.010. And the Code
defines “gross sales” as “the total amount received in money, credit,
property or other consideration valued in money for all sales, leases,
or rentals of tangible personal property or services.” GMC
§ 3.02.010 (emphasis added). The plain language of the Code
therefore limits taxable sales to exchanges where the one providing
the tangible item receives consideration for the exchange.
¶ 20 In concluding that Sodexo makes meal plan sales directly to
students, the district court erroneously determined that a sale
occurs when a student swipes her BlasterCard. No sale by Sodexo
occurs in that circumstance because, under the Code, a sale
requires the receipt of consideration for the exchange, see GMC
§ 3.02.010, and a student doesn’t give consideration to Sodexo (or,
arguably, to anyone else) when she swipes a BlasterCard to obtain a
meal under the meal plan or with Munch Money.
9
¶ 21 The relevant contracts and undisputed facts show that
consideration is exchanged for food on two occasions: once when a
student pays Mines for a meal plan or Munch Money, and again
when Mines pays Sodexo periodically based on the number and
types of meals provided to students pursuant to the students’
agreements with Mines. As noted, the meal plans and Munch
Money are “use it or lose it” propositions. The student can’t get a
refund from Mines if she uses less than what she has already paid
for. So the student isn’t truly paying anything when swiping a
BlasterCard; she is merely reducing the number of meals she can
obtain in the future under her meal plan. Certainly she is paying
nothing to Sodexo. Simply put, when a student uses a BlasterCard,
she and Sodexo aren’t engaging in a buyer-seller transaction.
¶ 22 As no sale by Sodexo occurs under the Code (as construed
narrowly in favor of the taxpayer) when a student swipes a
BlasterCard, Sodexo can’t be responsible for sales tax for any such
transaction. See GMC § 3.03.010.
10
¶ 23 To be sure, sales occur under the Code when Mines pays
Sodexo for meals.6 But what kind of sales are they? If they are
wholesale sales, as Sodexo contends, they are exempt from taxation
under subsection 3.03.040(a)(13) of the Code, which says that “[t]he
sales tax . . . shall not apply to . . . [a]ll wholesale sales.” We agree
with Sodexo that this exemption clearly applies to its sales to
Mines.
¶ 24 We begin, as we must, with the Code’s definition of wholesale
sales. Such sales are “sales to licensed retailers, jobbers, dealers or
wholesalers for resale.” GMC § 3.02.010.7 Sodexo sells meals to
Mines, a licensed retailer. And Mines resells them to students at
prices significantly higher than Sodexo charges it under its contract
6Given that the City has thus far only sought to tax the
BlasterCard swipe transactions, we arguably don’t need to
determine whether the parties’ contractual relationships give rise to
any other taxable sales. But we do so out of an abundance of
caution, and because the City’s assessment is based on the prices
Mines pays Sodexo.
7 The Code also distinguishes wholesale sales from “retail sales”
(defined as “all sales except wholesale sales”) in the way it defines
“retailer”: “any person selling . . . tangible personal property . . . at
retail.” GMC § 3.02.010. As discussed, Sodexo doesn’t sell to
students at all, and it doesn’t sell to Mines at retail. Mines, on the
other hand, sells to students at retail.
11
with Sodexo. So Sodexo’s sales to Mines meet the Code’s definition
of wholesale sales. See also P.H. Collin, Dictionary of Business 474
(3d ed. 2001) (a wholesaler “buys goods in bulk at a wholesale
discount”).
¶ 25 The City’s reliance on Sodexo’s delivery of the meals to
students misses the mark. Though Sodexo also provides the service
of delivering the meals to the students, it does so in Mines’ stead.
The meals, under the express terms of the contract, are Mines’
property. And that is no less so just because Mines itself doesn’t
physically receive the meals.8
¶ 26 Even less appealing is the City’s argument that because Mines
is not the “ultimate consumer” of the meals, Sodexo can’t be a
wholesaler. By definition, sales to end users are not wholesale
sales. See GMC § 3.02.010 (“Sales by wholesalers to consumers are
not wholesale sales.”); see also Black’s Law Dictionary 1832 (10th
ed. 2014) (defining “wholesale” as “[t]he sale of goods or
commodities usu[ally] to a retailer for resale, and not to the
ultimate consumer”); Encyclopedia of Small Business 1323 (Virgil L.
8The City fails to cite any authority for the proposition that a sale
can’t qualify as wholesale unless the purchaser takes physical
possession of the goods.
12
Burton III ed., 2011) (defining “wholesaling” as “the selling of
merchandise to anyone . . . other that the end consumer of that
merchandise”). So the fact Mines isn’t the ultimate consumer of the
meals it buys from Sodexo actually supports Sodexo’s position.9
¶ 27 In sum, we conclude that Sodexo’s sales to Mines are
wholesale sales under the plain language of the Code’s exemption.
Of this we have no reasonable doubt.
¶ 28 Though we rely on the plain language of the exemption as
applied to the undisputed facts, we might be remiss if we failed to
examine the issue using a test formulated by the supreme court to
determine whether a sale is a wholesale sale.
¶ 29 In A.B. Hirschfeld Press, Inc. v. City & County of Denver, 806
P.2d 917 (Colo. 1991), the court, interpreting tax provisions of the
Denver Municipal Code that are substantially similar to those at
issue in this case, held that a wholesale purchase occurs if “the
primary purpose of the transaction is the acquisition of the item for
resale in an unaltered condition and basically unused by the
9That the contract between Sodexo and Mines doesn’t use the word
“wholesale” is, contrary to the City’s argument, immaterial. The
substance of the transaction is what matters, and nothing in the
Code requires the taxpayer to formally label its transactions
wholesale.
13
purchaser.” Id. at 921; see also Coors, ¶ 21 (applying this test to
the GMC’s wholesale exemption). Mines doesn’t alter or use the
meals provided to students, and the economic reality of the parties’
relationships is that Mines acquires the meals to resell to its
students at a higher price. It follows that Sodexo’s sales to Mines
are wholesale sales under the primary purpose test.10
¶ 30 Decisions from other jurisdictions also support our conclusion
that Sodexo makes wholesale sales. In Slater Corp. v. South
Carolina Tax Commission, 242 S.E.2d 439 (S.C. 1978), for example,
the South Carolina Supreme Court interpreted an almost identical
statute under practically identical facts. In that case,
[t]he students contracted with and paid the
colleges, not [the food service supplier], for the
meals. The colleges, in turn, contracted with
and paid [the food service supplier]. The
colleges, not [the food service supplier],
determined who should be entitled to purchase
meals at the dining hall, and if a refund was
given, it came from the college, not from [the
food service supplier].
10The court in A.B. Hirschfeld Press, Inc. v. City & County of Denver
identified a number of factors a court may consider in this context.
806 P.2d 917, 921 (Colo. 1991). They don’t support the City’s
position in this case, and indeed the City doesn’t make any
argument along those lines.
14
Id. at 440.11 Therefore, the court concluded, “[t]he meals in
question were clearly purchased for resale with the students buying
their food from the colleges rather than from [the food service
supplier].” Id.
¶ 31 In so holding, the Slater court drew from a Fifth Circuit case,
Hodgson v. Crotty Brothers Dallas, Inc., 450 F.2d 1268, 1281 (5th
Cir. 1971), holding that a food service supplier on school premises
qualified as a “retail establishment” pursuant to the Fair Labor
Standards Act (FLSA). The Fifth Circuit’s holding in Crotty Brothers
rested on the FLSA’s definition of “retail or service establishments,”
which expressly included catering services. Id. at 1280. But in its
analysis of the question, the court recognized the wholesale-like
nature of the types of transactions in that case, this case, and
Slater, noting, “even though no completed meals ever passed from
[the caterer] to the school, it would seem more reasonable to
characterize the transactions involving [the caterer], the school, and
11 Mines gives no refunds.
15
the students as sales for resale than as sales directly from [the
caterer] to the students.” Id.12
¶ 32 Hodgson v. Prophet Co., 472 F.2d 196 (10th Cir. 1973), on
which the City relies, is distinguishable. In that case, the court,
like the court in Crotty Brothers, held that a food service supplier
that contracted with a college to serve students qualified as a “retail
and service establishment” under the FLSA. Our case is not, of
course, an FLSA case; we construe materially different tax
provisions. And, in any event, the Tenth Circuit relied on aspects of
12 Our determination also adheres to the more general principle we
follow when interpreting tax provisions, as articulated by the
Supreme Court in Frank Lyon Co. v. United States:
Where, as here, there is a genuine multiple-
party transaction with economic substance
that is compelled or encouraged by business or
regulatory realities, that is imbued with tax-
independent considerations, and that is not
shaped solely by tax-avoidance features to
which meaningless labels are attached, the
Government should honor the allocation of
rights and duties effectuated by the parties
. . . . [T]he form of the transaction adopted by
the parties governs for tax purposes.
435 U.S. 561, 562 (1978). The City doesn’t even allege that the
transactions at issue are structured solely (or at all) as a tax-
avoidance scheme.
16
the contract before it that differ in important respects from the one
before us. As the court explained,
All the college did . . . was to collect from each
boarding student . . . the amounts the contract
stipulated [the food service supplier] was
entitled to receive . . . and remit the same to
[the food service supplier]. In other words, all
the college did was to act in the role of a
collection agent, rather than a purchaser.
Id. at 204. The contract in that case “provided that [the food service
supplier] should charge boarding plan students . . . $1.68 each per
day . . . and that the college should remit the aggregate of such
charges collected by it from boarding plan students monthly to [the
food service supplier].” Id. at 199-200 (emphasis added).
¶ 33 In contrast to the terms of that contract, the contract between
Sodexo and Mines stipulates that Mines will purchase from Sodexo
all of the meals it requires to fulfill its contractual obligations to its
students, after Mines alone determines the prices and terms of
those plans. And Sodexo doesn’t charge students. Further, the
food service supplier in Prophet Co. contracted to “operate on its
own credit and at its own risk of loss,” id. at 206, whereas, in this
case, only Mines, not Sodexo, bears the risk of loss if a student fails
to pay for her meal plan.
17
¶ 34 Lastly, we acknowledge that our holding conflicts with the
division’s holding in City of Golden v. Aramark Educational Services,
LLC, 2013 COA 45. But with all due respect to the division, we
disagree with its analysis. In Aramark, the division held that
although “both parties have presented several tenable arguments,”
“Golden’s arguments are sufficiently tenable as to create reasonable
doubts that [the food service supplier] is entitled to the wholesale
sales exemption.” Id. at ¶¶ 32, 36. The division stopped there,
declining to determine which of the parties’ “tenable” arguments
was correct.
¶ 35 A “tenable” argument — that is, a merely nonfrivolous or
defensible argument — isn’t necessarily a correct one. Though
we’re required to construe tax exemptions narrowly, resolving all
reasonable doubts against the taxpayer, we don’t think that means
that a taxing entity’s assertion of a nonfrivolous argument for
refusing to apply an exemption can, entirely on the basis of having
been articulated, carry the day. Rather, we must resolve the
meaning of the provision to ensure that a taxpayer isn’t subjected to
18
a tax that, under the correct interpretation, it has no legal
obligation to pay.13
¶ 36 The City’s argument in this case is “tenable” but incorrect.
Under the plain language of the Code, Sodexo makes wholesale
sales to Mines; Sodexo doesn’t make direct sales to students who
use BlasterCards. Therefore, under the Code, the City can’t assess
sales tax against Sodexo.
III. Conclusion
¶ 37 The judgment is reversed, and the case is remanded for entry
of judgment for Sodexo and for any other proceedings consistent
with this opinion.
JUDGE GRAHAM and JUDGE WELLING concur.
13 We also observe that no other Colorado appellate case has taken
this “tenable argument” approach, which treats the mere assertion
of a nonfrivolous argument as dispositive. In fact, in Coors Brewing
Co. v. City of Golden, 2013 COA 92, the division subsequently
construed the same wholesale exemption without using that
approach.
19