Hercules Inc. v. Utah State Tax Commission

*234THORNE, Judge

(dissenting):

116 I respectfully dissent from my colleagues' decision, reversing the Tax Commission's (Commission) ruling imposing a sales and use tax upon Hereules' purchase of nitrogen gas for use in its manufacturing process. I dissent for the following reasons: (1) the Commission levied a sales and use tax upon Hercules purchase of nitrogen gas under Utah Code Ann. $ 59-182-108(1)(a) and not section 59-12-108(1)(c); and (2) Hereules' argument that the term "gas" in section 59-12-108(1)(c) includes nitrogen gas contravenes the rules of statutory interpretation.

117 First, a review of the Commission's Findings of Fact, Conclusions of Law, and Final Decision clearly shows that the Commission levied the sales and use tax upon Hercules pursuant to Utah Code Ann. § 59-12-108(1)(a). The Commission's Conclusions of Law expressly state: "[Hercules'] purchases of the nitrogen gas for use it is [sic] graphite manufacturing process are subject to sales tax pursuant to Utah Code Ann. § 59-12-108(1)(a) as they are retail sales of tangible personal property." - (Emphasis added.). Hercules does not dispute the Commission's ruling under section 59-12-108(1)(a). Accordingly, I would avoid being drawn into Hercules' convoluted and periph-cral argument, which fails to address the Commission's actual ruling.

118 Section 59-12-108(1)(a) (1995) states "Itlhere is levied a tax on the purchaser for the amount paid or charged for the following: (a) retail sales of tangible personal property made within the state." Id. Utah Code Ann. § 59-12-102(18)(a)(i) (1995) defines tangible personal property as "all tangible or corporeal things and substances which are dealt in or capable of being possessed or exchanged." Id. (emphasis added). Hercules fails to adequately explain why it is exempt from this taxation statute. Indeed, my review of the exemptions to section 59-12-1083, contained in section 59-12-104, indicates that there may be no exemptions applicable to the present situation. - Accordingly, the majority opinion need not have reached the merits of Hercules' peripheral argument that the term "gas" in section 59-12-108(1)(c) includes nitrogen gas. Based upon Hereules' failure to directly address the Commission's ruling, I would affirm.

119 Second, Herceules' argument that the term "gas" in section 59-12-108(1)(c) includes nitrogen gas fails because it completely disregards the rules of statutory construction. To support its claim, Hercules argues that section 59-12-1083 is a taxation statute that must be construed favorably to the taxpayer. See SF Phosphates Ltd. v. Auditing Div. of Utah State Tax Comm'n, 972 P.2d 384, 386 (Utah 1998); Parson Asphalt Prods., Inc. v. Utah State Tax Comm'n, 617 P.2d 397, 398 (Utah 1980). The fundamental flaw in Hercules' argument is the notion that including nitrogen gas within the term "gas" is a favorable result to a taxpayer. In reality, Hercules' interpretation is not construed in favor of taxpayers, generally, because it increases the scope of items subject to taxation under this section.

120 Hercules then proceeds to argue that it is exempt from paying sales and use tax on its purchase of nitrogen gas under seetion 59-12-103(1)(c), as the use was for "noncommercial" purposes. Utah Code of Administrative - Procedure _ R865-19-858 (1995), exempts sales and use tax upon "Gas, Electricity, Heat, Coal, Fuel Oils or Other Fuels" for "noncommercial purposes." Id. Unquestionably, Rule 865-19-858 is a tax exemption provision. See SF Phosphates, 972 P.2d at 386 ("[the sales tax exemption for fuels [contained in Rule 865-19-358] must be narrowly construed" (emphasis added)). Exemption provisions must be construed in favor of the Commission. "Statutes which provide for exemptions should be strictly construed and one who so claims has the burden of showing his entitlement to the exemption." Parson, 617 P.2d at 398 (footnotes omitted).

121 Hercules argument that "gas" under section 59-12-108(1)(c) includes nitrogen gas is an expansive, rather than a restrictive, reading of the provision and is in direct conflict with the rules of construction for exemption provisions. Instead, Hereules' argument, seeking such an expansive reading, must yield to the application of the rules of construction governing such provisions. Accordingly, Hercules does not meet its burden *235to clearly demonstrate an entitlement to the exemption.

122 Finally, other rules of statutory construction require us to look "first to the plain language of the statute ... and [to] assume[ ] that each term was used advisedly by the [Llegislature." - Biddle v. Washington Terrace City, 1999 UT 110, ¶14, 993 P.2d 875. Further, we interpret the " 'terms of a statute ... as a comprehensive whole and not in piecemeal fashion'" Business Aviation of S. Dakota, Inc. v. Medivest, Inc., 882 P.2d 662, 665 (Utah 1994) (quoting Morton Int'l, Inc. v. Auditing Div. of Utah State Tax Comm'n, 814 P.2d 581, 591 (Utah 1991).

123 A plain language reading of section 59-12-103(1)(c) reveals a list of fuels. As further support for such a conclusion, the Legislature chose to include the term "other fuels" in the list to ensure that other prod-nets in the same category are not omitted. The common characteristics of the list are that each item is capable of producing heat 'or energy, characteristics commonly used to define fuels. Seq, eg., Utah Code Admin.P. R365-19-358 (1995) (defining "other fuels" as "products which burn independently to produce heat or energy"). A plain language reading of section 59-12-108(1)(c) is more logical than the interpretation argued by Hercules, wherein terms in the same list are read in isolation and categorized by physical descriptors such as liquids, gases, or solids.

1 24 We must assume that the Legislature uses terms advisedly, see Biddle, 993 P.2d 875, 1999 UT 110 at ¶ 14, and the terms of statutes should be read as a whole. See Business Aviation, 882 P.2d at 665. In light of the various rules of construction-plain language, statutory terms used advisedly, statutes being read as a whole-and in addition to the special rules used for interpreting taxation statutes and exemption provisions, I conclude that the sale of nitrogen gas for noncommercial or industrial purposes is taxable.

I 25 I believe that it was the intent of the Legislature to exempt from taxation fuels, which produce heat or energy, used in the industrial process as a means of encouraging economic development. Nitrogen gas is not such a fuel. Accordingly, I would affirm the Commission's decision imposing sales and use tax on Hercules' purchase of nitrogen gas pursuant to section 59-12-108(1)(a), both upon the general application of section 59-12-103(1)(a) and the inapplicability of section 59-12-103(1)(c) and its exemption, Rule 865-19-358.