Scott Paper Co. v. State Tax Assessor

GLASSMAN,

Justice with whom ROBERTS, Justice, joins, dissenting.

Because I believe that the Tax Assessor’s interpretation of 36 M.R.S.A. § 1760(31) (1990) is not contrary to its expressed legislative purpose and thus is entitled to great deference by this court, I respectfully dissent. We have previously stated that “in construing a tax exemption statute, the underlying deep-seated policy of this Court is that taxation is the rule and tax exemption is the exception” and that “all doubt and meaning of the statute and legislative intendment must be weighed against exemption.” Silverman v. Town of Alton, 451 A.2d 103, 105 (Me.1982). A party claiming a tax exemption has the burden of establishing that the claimed exemption is clearly within the provisions of the statute. Id. It is well established Maine law that “an exemption from taxation, while entitled to reasonable interpretation in accordance with its purpose, is not to be extended by application to situations not clearly coming within the scope of the exemption provisions.” Harold MacQuinn, Inc. v. Halperin, 415 A.2d 818, 820 (Me.1980).

In the instant case, Scott’s position, with which the court agrees, is that because it did not purchase the machinery and equipment for the purpose of selling it to GECC and has made actual use of it in its production processes it is entitled to the tax exemption provided in 36 M.R.S.A. § 1760(31). Technically speaking, Scott seeks an extension of the meaning of the words “use by the purchaser ... in the production” to include use by the initial purchaser after that purchaser has sold the machinery and equipment to another. The Tax Assessor’s position is that the purpose of the purchase is neither addressed in the statute nor a determinative factor; rather, it is the use of the machinery and equipment by the purchaser that determines its tax status, and a purchaser that sells the machinery or equipment before using it in the production of tangible personal property is not entitled to the tax exemption provided in section 1760(31). In determining the applicability of the exemption provided in 36 M.R.S.A. § 1760(31) to the situation presented by Scott, the statute must be read in light of sections 1861,2 1752(15) and 1752(21), defining terms used in the legislation governing sales and use taxes:

Section 1861 provides: A tax is imposed on the storage, use or other consumption in this State of tangible personal property, purchased at retail sale, at the rate of 5% of the sale price.
Section 1752(15) provides: “Storage” includes any keeping or retention in this State for any purpose, except subsequent use outside of this State, of tangible personal property purchased at retail sale.
Section 1752(21) provides: “Use” includes the exercise in this State of any right or power over tangible personal property incident to its ownership when purchased by the user at retail sale....

(emphasis added).

It is undisputed that during the period of Scott’s ownership of the machinery and equipment the only use made of it was to install it in a facility. Thereafter, Scott sold the machinery and equipment, together with the facility in which it was located (stored), to GECC. Implicit in ownership of any property is the right of possession and the right to completely control its use. At the moment of this sale, Scott not only relinquished these inherent rights of ownership but became the seller of the machinery and equipment. The possession and use of the machinery and equipment there*279after was solely within the control of GECC. Scott’s use of the machinery and equipment in the production of tangible personal property was not in its capacity as purchaser but as the seller who had a contractual relationship with the purchaser that allowed such use pursuant to the terms of the leaseback agreement between the parties.

We have frequently stated that:

[T]he construction of a statute utilized by those whose duty it is to make the statute operative is entitled to great deference by a court when called upon to construe the statute. [If] there is nothing in the language of th[e] enactment which makes the interpretation given by the State Tax Assessor contrary to expressed legislative purpose, it is entirely appropriate to look to its contemporaneous construction by the [Tax Assessor] as a guide.

Kelley v. Halperin, 390 A.2d 1078, 1080 (Me.1978) (quoted with approval by Georgia-Pacific Corp. v. State Tax Assessor, 562 A.2d 672, 674 (Me.1989); see also Imagineering, Inc. v. Sup’t of Insurance, 593 A.2d 1050, 1053 (Me.1991) (“[o]n questions involving the interpretation and application of technical statutes or regulations, this court gives deference to the administrative agency unless the statutes or regulations plainly compel a contrary result”). I agree with the Tax Assessor that Scott’s use of the machinery and equipment for production of tangible personal property was not “ ‘use by the purchaser’ within the scope of an exemption that the legislature has left carefully circumscribed despite efforts to broaden it.” Harold MacQuinn, Inc. v. Halperin, 415 A.2d at 822. I also agree with the Tax Assessor that as the purchaser of new machinery and equipment Scott did nothing but store it within the clear meaning of section 1752(15), and the Tax Assessor properly imposed a tax on that storage as provided by section 1861. Accordingly, I would vacate the judgment of the Superior Court and affirm the decision of the Tax Assessor.

. Since the dates at issue here, this statute has been amended by P.L.1985, ch. 783, § 7 and P.L.1987, ch. 497, § 41.