Sanfelippo v. Wisconsin Department of Revenue

GARTZKE, P.J. Joseph Sanfelippo owns two taxicabs. He leases his cabs to the drivers. The issue is whether the drivers' lease payments to him are gross receipts from sales at retail and, therefore, subject to the retail sales tax under sec. 77.52(1), Stats.1 The Wisconsin Department of Revenue believes that the sales tax applies and assessed a sales tax against Sanfelippo. The Wisconsin Tax Appeals Commission agreed with the department. The circuit court accepted Sanfelippo's claim that the sales tax does not apply and reversed the commission's decision. The department appeals. We conclude that the lease payments are sales at retail and are therefore subject- to sales tax. For that reason, we reverse the order of the circuit court. During the years at issue, 1981-84, Sanfelippo orally leased his cabs to drivers for $100 to $125 per week. He exercised no control over the drivers and took no share of their fares. They paid for the gas and some maintenance. Because the facts are undisputed, and this case presents only questions of law, we are not bound by the — 385 — commission's or trial court's conclusions. Anderson v. DOR, 169 Wis. 2d 255, 262, 484 N.W.2d 914, 916 (1992). However, the commission has decided one case similar to the one before us. For that reason, its decision, being "very nearly" one of first impression, is entitled to "due weight." Jicha v. DILHR, 169 Wis. 2d 284, 291, 485 N.W.2d 256, 259 (1992). A sales tax is imposed upon the sale, lease or rental of tangible personal property "at retail." Section 77.52(1), Stats. A "sale at retail” includes the transfer of the ownership of, title to, possession of, or enjoyment of tangible personal property or services for use or consumption but not for resale as tangible personal property or services and includes: (j) The granting of possession of tangible personal property by a lessor to a lessee, or to another person at the direction of the lessee. Such a transaction is deemed a continuing sale in this state by the lessor for the duration of the lease as respects any period of time the leased property is situated in this state, irrespective of the time or place of delivery of the property to the lessee or such other person. Section 77.51(14), Stats, (emphasis added). Sanfelippo argues that his leases to cab drivers are not taxable because each transfer is for the purpose of "resale" under sec. 77.52(1), Stats., since the drivers use the cabs to serve the passenger public. For that reason, he contends that his lease receipts are not subject to sales tax. He relies on DOR v. Milwaukee Refining Corp., 80 Wis. 2d 44, 257 N.W.2d 855 (1977). In Milwaukee Refining, the taxpayer sold gold to dentists who used it for their patients' inlays, bridges and partial plates. The department assessed sales taxes — 386 — against the taxpayer on grounds that its sales of gold to dentists were made at retail. Rejecting the department's theory, the Milwaukee Refining court concluded that the taxpayer sold the gold to the dentists for resale to their patients. Consequently, the sales were not made at retail. Id. at 51, 53, 257 N.W.2d at 859, 860. The court reasoned that the transfer of property for "use or consumption but not for resale as tangible personal property or services" can be understood only as meaning the final and ultimate employment of the property which results in its withdrawal from the marketplace of goods and services. In the case of dental alloys the final and ultimate employment occurs when the dentist installs the gold in the mouth of the patient. Id. at 51, 257 N.W.2d at 859. Sanfelippo's reliance on Milwaukee Refining is misplaced. Sanfelippo's drivers do not resell, re-lease or sublease his cabs. His drivers do not transfer ownership of, title to or possession of the cabs. At all times during the driver-passenger relationship, each driver retains control of the cab.2 Sanfelippo argues that when he leases a cab to a driver, that is not the "final and ultimate employment" of the cab, citing Milwaukee Refining, 80 Wis. 2d at 51, — 387 — 257 N.W.2d at 859. The "final and ultimate employment" occurs, he asserts, when a driver transports a passenger in exchange for a fare. We disagree. The driver employs the cab, not the passenger. The driver employs the cab to provide a service, transportation. The passenger receives nothing more than that service. The "final and ultimate employment" of the cab is by the driver. Again relying on Milwaukee Refining, Sanfelippo argues that the cab is withdrawn from the marketplace of goods and services when the passenger pays the fare. Id. Not so. The cab leaves the marketplace when a driver leases it from Sanfelippo. The cab itself never re-enters the marketplace. The cab is not for sale or leased to others. The driver's services are for sale. Those services are withdrawn from the marketplace when the passenger pays or agrees to pay the fare, but Sanfelippo is not the service provider. Sanfelippo argues that the applicability of the sales tax statute to the undisputed facts is ambiguous. He cites the familiar rule that a "tax can only be imposed by clear and express language, and all ambiguities as to the applicability of the tax must be resolved in favor of the person upon whom the tax is sought to be imposed." Kollasch v. Adamany, 104 Wis. 2d 552, 561, 313 N.W.2d 47, 51 (1981). A statute is ambiguous when it can be construed in two different ways by reasonably well-informed persons. Id. at 561, 313 N.W.2d at 51-52. Sanfelippo points out that the department reached one result, the commissioner affirmed with one commissioner dissenting, and that the circuit court agreed with the dissenting commissioner. Ambiguity, however, is not necessarily present when courts disagree regarding a statute's meaning. — 388 — Such a test is "unworkable," since it would mean that "a trial court's finding of ambiguity is final, because a contrary conclusion by an appellate court would itself evidence ambiguity. That is, the appellate court's conclusion that the statute is unambiguous would create an ambiguity." State v. Moore, 167 Wis. 2d 491, 497 n.6, 481 N.W.2d 633, 636 n.6 (1992). Sanfelippo contends that the statute is ambiguous because it fails to provide guidance to the taxpayer as to whether a sale is "at retail." He acknowledges that sec. 77.51 (14)(a)-(m), Stats., lists several sales made at retail, but argues that neither the leasing of taxicabs "or any business transaction related to the leasing of taxicabs is included in the list." We disagree. Section 77.51(14)(j), Stats., provides that a sale at retail includes the "granting of possession of tangible personal property by a lessor to a lessee . . .. Such a transaction is deemed a continuing sale____" Sanfelippo, as lessor, grants possession of the cabs to the drivers, as lessees. It is immaterial that subsection (j) does not specifically apply to taxicabs. It applies to tangible personal property, and that includes cabs. That is unambiguous.3 Sanfelippo implies that because a reasonable person could believe that his cab leases were for resale, the statute is ambiguous. But it is plain that his drivers do not "resell" the leased cabs to their passengers. Moreover, subsection (j) bolsters the conclusion that Sanfelippo's leases to the drivers were sales made at retail and not for resale. Finally, Sanfelippo asserts that the department had once taken the position that cab owners who had an — 389 — employer-employee relationship with their drivers could not be subject to the sales tax. In 1974, the Wisconsin Department of Industry, Labor and Human Relations ruled that Sanfelippo was in such a relationship.4 Sanfelippo argues that these two positions, taken together, render the statute ambiguous as applied to him. We disagree. The commission did not find that the department took such a position. The department denies that it did. The record fails to disclose what the fact is.5 By the Court. — Order reversed. Footnotes [1] Section 77.52(1), Stats., provides: For the privilege of selling, leasing or renting tangible personal property, including accessories, components, attachments, parts, supplies and materials, at retail a tax is imposed upon all retailers at the rate of 5% of the gross receipts from the sale, lease or rental of tangible personal property, including accessories, components, attachments, parts, supplies and materials, sold, leased or rented at retail in this state. [2] Nor does the driver transfer the "enjoyment" of the cab to the passenger, sec. 77.51(14), Stats., because to "have the 'enjoyment' of tangible personal property, one must not only derive an economic or social benefit, but must also derive some use of the property beyond achieving the end result of completing a contract and must have the benefit of applying the tangible property to its normal use." DOR v. Horne Directory, Inc., 105 Wis. 2d 52, 60, 312 N.W.2d 820, 825 (1981). A cab patron does not derive use of the cab beyond achieving the end result of being driven to a chosen destination in exchange for a fare. [3] We also note that the list of sales contained in sec. 77.51(14)(a)-(m), Stats., is illustrative, not exhaustive. [4] DILHR's ruling was for unemployment compensation purposes and a circuit comí; upheld that ruling. A ruling by DILHR under a statute governing employment compensation contributions does not render the sales tax statute ambiguous. [5] Sanfelippo argued to the commission and the circuit court that because of DILHR's rulings, the department is estopped from imposing the sales tax at issue. At oral argument, Sanfelippo's counsel said that the estoppel issue was not before us because the circuit court did not reach the issue.