BEFORE THE STATE BOARD OF EQUALIZATION

FOR THE STATE OF WYOMING

IN THE MATTER OF THE APPEAL OF             )

BUEHNER BLOCK COMPANY, INC.           )         Docket No. 2003-161

FROM A SALES AND USE TAX AUDIT           )

ASSESSMENT BY THE EXCISE DIVISION      )

OF THE DEPARTMENT OF REVENUE            )

(Audit Period 7/1/99 - 12/31/02)                        )

___________________________________________________________________________________________________________________________

FINDINGS OF FACT, CONCLUSIONS OF LAW, DECISION AND ORDER

___________________________________________________________________________________________________________________________

APPEARANCES

John A. Coppede of Rothgerber Johnson & Lyons, LLP, for Buehner Block Company, Inc. (Buehner Block or Petitioner).

Ryan T. Schelhaas, Assistant Attorney General, for the Wyoming Department of Revenue, (Department).

JURISDICTION

The Board shall review final decisions of the Department on application of any interested person adversely affected. Wyo. Stat. Ann. §39-11-102.1(c). The taxpayer’s appeal must be filed with the Board within thirty days of the Department’s final decision. Rules, Wyoming State Board of Equalization, Chapter 2, §5(a). Buehner Block timely appealed the final decision of the Department, and the Board has jurisdiction to decide this matter.

The Board, Alan B. Minier, Chairman, Thomas R. Satterfield, Vice Chairman, and Thomas D. Roberts, Board Member, held a hearing on December 13 and 14, 2004.

STATEMENT OF THE CASE

Petitioner, a licensed out-of-state vendor of masonry products, collected sales tax on some of its sales to Wyoming customers. On audit, numerous other Wyoming sales came to light. In its appeal of the Department’s deficiency assessment following the audit, Petitioner claimed it was entitled to a statutory exemption for sales the State is prohibited from taxing under the United States Constitution, citing Quill Corporation v. North Dakota, 504 U.S. 298, 309, 112 S.Ct. 1904 (1992).

We affirm the decision of the Department.

CONTENTIONS AND ISSUES

In its final prehearing pleading, Buehner Block identified five contested issues of fact:

1. Whether the Wyoming Department of Audit ignored the exemption certificate of Tensar Corporation.

2. Whether the Wyoming Department of Audit tried to collect sales/use tax on jobs that were tax-exempt because they were for the Wyoming Department of Transportation and/or other tax-exempt jobs.

3. Whether the Wyoming Department of Audit has identified vendors and collected sales/use tax on the same projects it is trying to collect from Buehner Block.

4. Whether the Wyoming Department of Audit has failed to recognize a credit memo issued to Tensar Corporation in determining the sales/use tax.

5. Whether the sales at issue were exempt from the sales tax because they are sales which the State of Wyoming is prohibited from taxing under the Commerce Clause of the United States Constitution.

Buehner Block identified three contested issues of law:

1. Whether the State of Wyoming is prohibited from taxing the sales at issue under the Commerce Clause of the United States Constitution.

2. Whether the tax assessment at issue contravenes the Commerce Clause of the United States Constitution and is therefore void and of no effect.

3. Whether title to the goods at issue passed in Utah.

The Department identified four mixed questions of law and fact:

1. Whether Petitioner is a Wyoming vendor obligated to collect and remit sales/use tax on sales it made to customers in Wyoming.

2. Whether title and possession to the masonry materials and supplies passed from Petitioner to its customers in Wyoming.

3. Whether Petitioner’s sales of masonry materials and supplies to customers in Wyoming were taxable.

4. Whether Petitioners collected and remitted all sales/use tax for the masonry materials and supplies that it sold to customers in Wyoming.

The Department identified two issues of law:

1. Whether Petitioner’s sales to customers working on government projects in Wyoming were exempt from taxation.

2. Whether the Department’s audit assessment was consistent with law.

We will broadly group these issues into whether the exemption on constitutional grounds applies, and whether there are other grounds for determining that the assessment was improper.

FINDINGS OF FACT

1.        Buehner Block is a Utah corporation that manufactures and sells concrete block and related masonry supply materials. [Trans. Vol. I, pp. 19-21]. Its customers are primarily masonry contractors. [Trans. Vol. I, p. 22].

2.        Buehner Block’s production and sales facilities have been located at the same address in Salt Lake City, Utah, since 1950. [Trans. Vol. I, p. 22]. It has no facilities outside Utah. [Trans. Vol. I, p. 21]. It has no employees in Wyoming, and does not advertise in Wyoming. [Trans. Vol. I, p. 24].

3.        On May 27, 1983, Buehner Block applied to the Wyoming Department of Revenue and Taxation for a Wyoming Sales and Use Tax license. [Exhibit 532; Trans. Vol. II, pp. 305-306]. The application recited that its “salesmen only travel in Wyoming occasionally.” [Exhibit 532; Trans. Vol. II, pp. 305-306]. The Department granted the application and assigned Buehner Block vendor license number 24 0-07033. [Trans. Vol. II, p. 306]. From 1983 until 2004, Buehner Block filed sales and use tax returns with the Department. [Trans. Vol. II, p. 310]. For the years at issue, those returns showed that Buehner Block collected and paid sales tax to the Department as follows:

[Exhibit 520, pp. 51-54; Trans. Vol. II, pp. 307-308, Vol. I, p. 48]. When Buehner Block paid Wyoming sales tax, it was because product was shipped to Wyoming. [Trans. Vol. I, p. 85].

4.        Buehner Block also holds sales/use tax licenses in Utah, Idaho, and Nevada. [Trans. Vol. I, pp. 99-100]. As a foreign corporation, it has collected and remitted taxes to Idaho and Nevada. [Trans. Vol. I, p. 100].

5.        On October 24, 2004, shortly before the hearing of this case, Buehner Block filed a Wyoming Vendor Sales/Use Tax Return stating that its business had permanently closed, effective October 1, 2004, or twenty-one months after the close of the audit. [Exhibit 520, p. 54-J; Trans. Vol. II, pp. 303-304, Vol. I, p. 48]. At the time of the hearing, the Department was in the process of cancelling Buehner Block’s license, pending the receipt of a final quarterly report and other record-keeping issues. [Trans. Vol. II, pp. 303-304].

6.        The Wyoming Department of Audit (Audit) engaged an audit of Buehner Block by letter of October 11, 2002. [Exhibit 501; Trans. Vol. I, p. 181]. Audit’s standard form of engagement letter requested access to an extensive list of documents, including, inter alia, sales invoices, exemption certificates, and shipping documents. [Exhibit 501; Trans. Vol. I, p. 182]. The stated audit period was from July 1, 1999, through June 30, 2002, a period later extended to the end of 2002. [Exhibit 501; Trans. Vol. I, p. 182].

7.        On November 4, 2002, T. R. Lindsay of Audit held an opening conference with Bruce Hiller of Buehner Block. [Exhibit 502; Trans. Vol. I, p. 183]. Hiller has been the controller of Buehner Block since 1997. [Trans. Vol. I, p. 18]. He oversees financial statements, human resources, the general ledger, and credit functions, among other responsibilities. [Trans. Vol. I, p. 19]. Hiller advised Lindsay that Buehner Block had no Wyoming assets and no Wyoming employees. [Exhibit 502; Trans. Vol. I, p. 183]. Hiller also advised Lindsay that Buehner Block’s Wyoming sales were designated by a ship-to/delivery location address. [Exhibit 502; Trans. Vol. I, p. 184].

8.        Hiller conceded that he did not know whether Buehner Block sales personnel traveled in Wyoming during the audit period, and that he does not track sales personnel. [Trans. Vol. I, p. 104].

9.        Lindsay reviewed over 80,000 sales invoices. [Trans. Vol. II, p. 210]. He focused on sales invoices which reflected a Wyoming destination, and found a mixture of invoices where a Wyoming sales tax was charged [e.g., Exhibit 521, p. 56]; where no sales tax was charged [e.g., Exhibit 521, p. 61]; and where the tax was collected for another state [e.g., Exhibit 521, p. 55]. [Trans. Vol. II, p. 204]. Hiller was able to provide Lindsay an accounting report showing every invoice charged to a particular customer during the audit period [Exhibit 503; Trans. Vol. II, p. 209], that assisted Lindsay in assuring that he reviewed all pertinent invoices. [Trans. Vol. II, p. 209]. Lindsay prepared a sales tax exception worksheet [Exhibit 503, pp. 21-26; Trans. Vol. II, p. 208] which was later formalized when the Department of Revenue issued its assessment. [Exhibit 516; Trans. Vol. II, p. 296]. Lindsay found 318 invoiced deliveries, to six Wyoming counties, which reflected that Buehner Block did not collect Wyoming sales tax. [Exhibit 519].

10.      When determining the taxable amount of each sale, the auditor considered only the price of the product, and did not include delivery charges. [Trans. Vol. II, pp. 211-213].

11.      During the audit, Hiller confirmed to Lindsay that the ship-to location shown on an invoice reliably indicated the destination of a shipment. [Trans. Vol. II, p. 216].

12.      At the hearing of this matter, Hiller explained pertinent aspects of Buehner Block’s shipping and billing procedures, supported by extensive documentation not made available to the Department until the Friday before the hearing. [Trans. Vol. I, pp. 27-28; Exhibits 120BH to EW, 120EX to IJ, 120IK to KO]. Generally, Buehner Block’s sales manager provides the service of arranging for shipment of products to the customer’s destination. [Trans. Vol. I, pp. 31, 119, 132, 145]. Buehner Block shipped to Wyoming customers by common carrier. [Trans. Vol. I, p. 23]. The carrier picks up the product at Buehner Block’s facilities, provides a bill of lading, bills Buehner Block for shipping, and delivers the product. [Trans. Vol. I, p. 27]. A memorandum of the bill of lading and a copy of the invoice go into a customer file. [Trans. Vol. I, p. 31].

13.      When Buehner Block shipped by common carrier, it included the carrier’s delivery charge on its sales invoice. [E.g., Exhibit 521, pp. 55-60]. When Buehner Block collected a sales tax, the tax was calculated on the total of product and delivery charges. [E.g., Exhibit 521, pp. 55-60; Trans. Vol. I, p. 119]. Sometimes Buehner Block quoted a single price which included the delivery charge. [Trans. Vol. I, p. 143]. Buehner Block’s computer system assigned the appropriate sales tax based on county of destination. [Trans. Vol. I, p. 124].

14.      Buehner Block’s standard invoice includes the following language on its reverse side:

It is the responsibility of the purchaser to examine and inspect these materials at the point of delivery. If there are any problems Buehner Block Co. must be notified immediately.

* * *

Sellers liability is limited to replacement of the merchandise at no more than the value of the material proven to be defective.

* * *

Our drivers will make reasonable effort to place materials where customer designates, however, in so doing we assume no responsibility for damages inside of curb or property lines.

* * *

Purchaser assumes full responsibility for keeping lime, cement, and related products dry, after he receives possession of these products, i.e. - delivery on job site constitutes possession.

[Exhibit 521, p. 65]. Hiller’s testimony was consistent with these terms. [Trans. Vol. I, pp. 72-73, 80].

15.      On occasions when product suffered damage en route, the freight company paid Buehner Block, not the purchaser, for such damages. [Trans. Vol. I, pp. 80-81, 133].

16.      While performing the audit, Lindsay passed questions concerning taxability on to his supervisors and the Department. [Trans. Vol. II, pp. 255, 265-268, 272-275]. He was directed to handle the transactions at issue in this case as Wyoming sales. [Trans. Vol. II, p. 275].

17.      Lindsay provided Hiller a closing conference checklist on December 6, 2002. [Exhibit 504].

18.      Audit transmitted its preliminary audit findings to Buehner Block on January 16, 2003. [Exhibits 505, 506, 507, 508]. The transmittal was signed by Michael Robb, Administrator of the Excise Tax Division of the Department of Audit. [Exhibit 505].

19.      On March 20, 2003, Randy Sellers, a CPA acting on behalf of Buehner Block, wrote to Robb, claiming that Buehner Block owed no tax because: (1) it was not a vendor as defined by Wyoming statute; (2) the sales were made to vendors that were not Wyoming based, and Buehner Block was unable to precisely calculate the tax; (3) Buehner Block used a common carrier to deliver the goods, and therefore did not deliver the goods; (4) Buehner Block otherwise lacked the appropriate nexus with Wyoming. As we have already seen, several of these points are either incorrect or completely groundless. For example, Buehner Block was plainly able to calculate the tax. Supra, ¶3. Since Sellers was replaced by counsel on or about October 19, 2004 [Board Record, Motion to Continue], we will not address the defects in Sellers’ position in detail.

20.      On the request of Hiller, Audit granted Buehner Block an extension to April 23, 2003, to respond to the preliminary findings. [Exhibits 509, 510].

21.      On May 13, 2003, the Department responded to the letter of Randy Sellers. [Exhibit 121]. The Department explained why it disagreed with each of the points in Sellers’ analysis, consistently stressing Buehner Block’s status as a licensed vendor. [Exhibit 121]. In particular, the Department explained how status as a licensed vendor affected the constitutional claims of Buehner Block:

The 1992 Supreme Court case, Quill Corp. v. North Dakota, 504 U.S. 298, only protected companies whose only connection with a state was by common carrier from being required to obtain a sales tax license. As a licensed vendor, Buehner Block cannot avail itself of this protection; the use of a common carrier to deliver the goods is immaterial. It is not different from a licensed local company using a common carrier to deliver its goods to another point within Wyoming.

[Exhibit 121]. At the hearing, Dan Noble, the Administrator of the Department of Revenue’s Excise Tax Division [Trans. Vol. II, p. 294] confirmed the Department’s view that Quill does not apply because Buehner Block had a sales tax license. [Trans. Vol. II, p. 329].

22.      A second request for an extension of time to prepare a response was again granted, until July 31, 2003. [Exhibits 511, 512].

23.      On July 18, 2003, Randy Sellers wrote to Michael Robb, soliciting the Department of Audit’s response to documents purporting to be (1) an exemption certificate from Tensar Earth Tech; (2) certification from Pete Mickelsen & Sons Masonry showing that tax on sales to that firm had already been paid; and (3) certification from McQueen Masonry showing that tax on sales to that firm had already been paid. [Exhibit 118]. Based on these documents, Sellers asserted that Buehner Block had no tax liability.

24.      The Department of Audit transmitted its Final Findings on November 12, 2003. [Exhibits 513, 514]. Audit found that $35,773.60 of sales tax had not been paid. [Exhibits 513, 514]. Interest calculations attached to the Final Findings were later amended to the amount of $12,730.04; interest continues to accrue. [Exhibit 514, p. 39-2; Trans. Vol. II, p. 298]. No penalty was assessed. [Exhibit 516].

25.      The Department issued the assessment which is the subject of this appeal on December 6, 2003. [Exhibits 516, 517, 518, 519]. This assessment recites that it is “based on the audit as clarified on the enclosed Department of Audit’s final findings letter.” [Exhibit 516]. (Since Petitioner’s statement of contested issues of fact reflects a misunderstanding about the responsibility of the Department of Revenue, not Audit, for the final assessment, we have treated the Petitioner’s statement of issues as if they pertained to the Department of Revenue.)

26.      Dan Noble testified to the factors that influenced the Department’s position regarding its authority to assess the sales tax in dispute. Noble explained that by statute, a sale is a transfer of title or possession for consideration. [Trans. Vol. II, p. 294]. The Department viewed Buehner Block’s sales as destination sales that accordingly occurred in Wyoming. [Trans. Vol. II, p. 300]. He noted the standard invoice provisions providing for inspection rights, and providing that title passes once the block enters the job site. [Trans. Vol. II, pp. 300-301]. Noble said his view of title to the goods was reinforced by the fact that any claim for damages in transit was made by Buehner Block against the carrier, implying that the title remained in Buehner Block. [Trans. Vol. II, p. 300]. His view was further reinforced by the fact that Buehner Block indeed collected sales tax on some Wyoming transactions. [Trans. Vol. II, p. 301]. The reference on the invoice to “our drivers” is not definitive, but was part of the consideration. [Trans. Vol. II, pp. 324-325].

27.      The Department’s assessment rested principally on sales to four contractors: McQueen Masonry, Tensar, Pete Mickelsen & Sons, and M-L Masonry. [Trans. Vol. I, pp. 25-26; Exhibit 519]. Following the issuance of the preliminary audit findings, Buehner Block began to produce documents related to these four contractors. [Exhibits 108, 109, 110, 111, 112, 113, 114, 115, 116]. However, Buehner Block did not call any witnesses from any of the four contractors to testify at the hearing of this matter.

28.      All of the documents produced after the audit relate to claims that Buehner Block did not have to pay taxes on transactions involving the four contractors. Generally speaking, the principal auditor testified that if he had seen these documents during the audit, he would have conducted further investigation before drawing any conclusions. [Trans. Vol. II, pp. 226-229, 282-286].

29.      Exhibit 108 is a telefax of an incomplete Wyoming Sales Tax Exemption Certificate. [Exhibit 108]. It purports to be issued by Tensar Earth Tech, address not disclosed, although invoices to Tensar show an address in Atlanta, Georgia, with a delivery address in Alpine, Wyoming. [Exhibits 108, 120BH, 120BJ, 120BL]. The only date on the Certificate is the telefax transmission date of July 18, 2003. [Exhibits 108, 120BH, 120BJ, 120BL]. The box checked as the stated reason for the exemption is “Purchases made for resale or taxable services for resale.” [Exhibits 108, 120BH, 120BJ, 120BL]. From the face of the Certificate, that exemption applies only to licensed vendors, but there is no indication on the Certificate that Tensar is a licensed vendor. [Exhibits 108, 120BH, 120BJ, 120BL]. Buehner Block has not attempted to demonstrate that Tensar is a licensed vendor.

30.      Under the plain terms of Exhibit 108, the issuer of an Exemption Certificate agrees that it “will pay sales or use tax on all tangible personal property used or consumed in a taxable manner.” [Exhibit 108]. There is no evidence in the record that Tensar paid a sales or use tax.

31.      Hiller explained that Tensar is a Georgia corporation involved in a job at Alpine Junction for the Wyoming Department of Transportation. [Trans. Vol. I, p. 121]. Buehner Block manufactured block for Tensar. [Trans. Vol. I, p. 122]. The contractor on the job was Beco Corporation of Boise, Idaho. [Trans. Vol. I, p. 122]. Hiller stated that Buehner Block at one time believed sales to private contractors working on government jobs were exempt, but does not believe that any more. [Trans. Vol. I, pp. 66-67]. See Wyo. Stat. Ann. §39-15-105(a)(iv). Dan Noble confirmed that a vendor must collect and remit sales tax where a subcontractor is working on a government job. [Trans. Vol. II, p. 309]. See Wyo. Stat. Ann. §39-15-303. The dating and slapdash preparation of Exhibit 108 both suggest that some representative of Buehner Block solicited the Exemption Certificate from Tensar while Buehner Block was still laboring under its mis-impression concerning private contractors on government jobs.

32.      We find that Exhibit 108 is not credible evidence that an exemption existed for Buehner Block’s sales to Tensar.

33.      Exhibit 109 is a document on Department letterhead, entitled “Delinquent Affidavit of Completion - Demand,” dated April 24, 2002. It is signed by a representative of Pete Mickelsen & Sons; so is a cover memorandum to HHI Corporation dated April 23 2002, and demand for retainage to HHI Corporation dated April 19, 2002. [Exhibits 109, 110, 111]. Exhibit 109 refers to a Wyoming State Hospital Adult Care Facility project in Evanston, Wyoming, for work completed on October 17, 2001, and identifies HHI Corporation as the General Contractor. All of the invoices at issue in this case pertaining to Pete Mickelsen & Sons reflect delivery to Uinta County. [Exhibit 519].

34.      Exhibit 109 shows Wyoming sales tax remittances in two amounts, $4,844.58 and $11,440.99, and a tax payment to Utah in the amount of $1,755.00. Hiller testified that Buehner Block assumes that if Pete Mickelsen & Sons paid tax on materials on the Evanston job, that payment included tax on Buehner Block materials. [Trans. Vol. I, p. 171].

35.      The Department put on evidence of its records of tax payment history by Pete Mickelsen & Sons. [Trans. Vol. II, pp. 311-315; Exhibit 524, pp. 73-76]. That account history shows only payments related to Teton and Fremont Counties – nothing related to Uinta County, the site of Evanston project. [Exhibit 524, pp. 75, 76]. Further, the amounts on the Pete Mickelsen & Sons payment records do not correspond to the amounts on Exhibit 109. [Exhibit 524, pp. 73-76].

36.      We find that Buehner Block has not carried its burdens of proof or persuasion to demonstrate that any payments made by Pete Mickelsen & Sons related to Exhibit 109 also relate to the sales at issue in this case.

37.      Exhibits 113 and 114 pertain to a job performed by McQueen Masonry. Exhibit 113 is an incomplete Affidavit of Completion, being unsworn, regarding “Sublette County Govt Facilities Renovations” on which the general contractor was Hogan & Associates Construction. It is dated February 18, 2003, signed March 14, 2003, and purports to show that sales tax of $4,553.80 was paid to Utah on materials in the amount of $68,997.21. [Exhibit 113]. Exhibit 114 is an unsigned Wyoming Contractor Use Tax Return of McQueen Masonry, Inc., dated March 14, 2003, showing $2,759.89 Wyoming use tax due on $68,997.21 of materials used in Sublette County, but offset entirely by a credit in the amount of $4,553.80 tax paid to Utah. While all of the invoices at issue show that Buehner Block delivered materials to McQueen Masonry at Pinedale (Sublette County), Wyoming, we do not know if the McQueen documents pertain to the same job as the Buehner Block invoices identified on audit. [Exhibit 519].

38.      Neither Exhibit 113 nor Exhibit 114 is properly executed; both are dated after the close of the audit period; no authorized representative of McQueen appeared; no evidence was introduced to show that the tax was actually paid in Utah; and even if paid, questions remain about whether the tax was properly paid in Utah. Buehner Block concedes that it has not, itself, consistently directed tax payments to the proper authority. [Trans. Vol. I, p. 101]. The questions raised by Exhibits 113 and 114 were matters that could have been investigated during the audit if they had been timely raised, but they were not. During this hearing, it was incumbent on Buehner Block to demonstrate that tax had been paid by McQueen in a manner that relieved Buehner Block of the obligation to pay sales tax. We find that Buehner Block has failed to carry its burdens of proof and persuasion.

39.      Exhibit 115 is an invoice reflecting a credit of $122,621.12 to Tensar because the block provided by Petitioner failed to meet specifications. [Exhibit 115; Trans. Vol. I, pp. 152-153]. Tensar had previously made partial payments on the job when Buehner Block originally issued invoices in 1999. [Trans. Vol. I, p. 160].

40.      Although the invoice is dated June 1, 2001, Bruce Hiller testified that the date was entered manually, and “it was done after the audit period because we hadn’t settled everything up.” [Trans. Vol. I, p. 166]. On its face, the invoice has a telefax date of March 12, 2003. [Exhibit 115]. Hiller conceded the credit was granted no earlier than late 2002, and may have been in 2003. [Trans. Vol. I, p. 166]. The invoice was not given to the auditor [Trans. Vol. I, p. 159], from which we infer that it was not available.

41.      Dan Noble explained that in the instance of a rescinded sale, the vendor can either request a refund or take a credit on a subsequent sales tax return. [Trans. Vol. II, p. 330]. Either way, the change in the transaction is not reflected until it actually occurs. [Trans. Vol. II, p. 331].

42.      We find that Buehner Block did not carry its burden of persuasion to demonstrate that the Tensar credit was issued during the audit period. Our finding in no way precludes Buehner Block from pursuing a refund request as authorized by statute; we only find that the credit did not affect the audit assessment.

43.      Any portion of the Conclusions of Law - Principles of Law or the Conclusions of Law - Application of Principles of Law set forth below which includes a finding of fact, may also be considered a Finding of Fact and, therefore, is incorporated herein by reference.

CONCLUSIONS OF LAW: PRINCIPLES OF LAW

44.      “The burden of proof is on the party asserting an improper valuation.” Amoco Production Company v. Wyoming State Board of Equalization, 899 P. 2d 855, 858 (Wyo. 1995); Teton Valley Ranch v. State Board of Equalization, 735 P. 2d 107, 113 (Wyo. 1987). The Board’s Rules provide that:

[T]he petitioner shall have the burden of going forward and the ultimate burden of persuasion, which burden shall be met by a preponderance of the evidence. If petitioner provides sufficient evidence to suggest the Department determination is incorrect, the burden shifts to the Department to defend its action....

Rules, Wyoming State Board of Equalization, Chapter 2, §20.

45.      “Taxable event. The following shall apply:

(i) Except as provided by W. S. 39-15-105, there is levied an excise tax upon:

(A) The sales price of every retail sale of tangible personal property within the state...”

Wyo. Stat. Ann. §39-15-103(a)(i)(A).

46.      “As used in this [State Sales Tax] article:

(vi) ‘Retail sale’ means the sale of tangible personal property to a person for use and not for subsequent resale;

(vii) ‘Sale’ means any transfer of title or possession in this state for a consideration....

* * *

(ix) ‘Tangible personal property’ means any property not real or intangible....

* * *

(xv) ‘Vendor’ means any person engaged in the business of selling at retail or wholesale tangible personal property, admissions or services which are subject to taxation under this article....”

Wyo. Stat. Ann. §39-15-101(a)(vi),(vii)(ix).

47.      Effective July 1, 2002, the definition of “Retail sale” changed to “any sale, lease or rental for any purpose other than for resale, sublease or subrent.” Wyo. Stat. Ann. §39-15-101(a)(vi) (2002).

48.      “Unless otherwise explicitly agreed title passes to the buyer at the time and place at which the seller completes his performance with reference to the physical delivery of the goods, despite any reservation of a security interest even though a document of title is to be delivered at a different time or place; and in particular and despite any reservation of a security interest by the bill of lading:

(B) If the contract requires delivery at destination, title passes on tender there.”

Wyo. Stat. Ann. §34.1-2-401(a)(ii); Utah Code Annotated, §70A-2-401.

49.      The Department’s Rules addressed interstate sales originating in Wyoming, but did not address interstate sales originating outside Wyoming. Rules, Department of Revenue, Chapter 2, §14(p) [now §14(q)].

50.      “Every vendor shall obtain from the department a sales tax license to conduct business in the state. Any out-of-state vendor not otherwise subject to this article may voluntarily apply for a license from the department and if licensed, shall collect and remit the state sales tax imposed by W. S. 39-15-103....” Wyo. Stat. Ann. §39-15-106(a).

51.      “Taxpayer. The following shall apply:

(i) Except as otherwise provided every vendor shall collect the tax imposed by this article and is liable for the entire amount of the taxes imposed...”

Wyo. Stat. Ann. §39-13-103(c)(i).

52.      “Any person discontinuing business shall notify the department, return his license for cancellation and preserve all business records in the state until the department issues a receipt showing that all taxes have been paid.” Wyo. Stat. Ann. §39-15-106(f). “Vendors shall request cancellation of their sales/use tax license when no longer engaged in business activities which require the license. The vendor shall provide the Department with a written cancellation request and shall be in good standing with all sales/use tax requirements before the license may be cancelled. All canceled licenses shall be surrendered to the Department upon request for cancellation.” Rules, Department of Revenue, Chapter 2, §5(h).

53.      “The following sales or leases are exempt from the excise tax imposed by this article:

(i) For the purpose of exempting sales of services and tangible personal property protected by federal law, the following are exempt:

(A) Sales which the state of Wyoming is prohibited from taxing under the laws or constitutions of the United States or Wyoming....”

Wyo. Stat. Ann. §39-15-105(a)(i).

54.      The Commerce Clause of the United States Constitution, Article I, §8, cl. 3, prohibits certain state actions that interfere with interstate commerce. Quill Corporation v. North Dakota, 504 U.S. 298, 309, 112 S.Ct. 1904 (1992). A tax will be sustained against a Commerce Clause challenge so long as it meets a four part test; the first part is whether the tax is applied to an activity with a substantial nexus to the taxing state. Quill Corporation, at 311. A vendor whose only contacts with the taxing State are by mail or common carrier lacks the “substantial nexus” required by the Commerce Clause. Quill Corporation, at 311. Such vendors are free from state-imposed duties to collect sales and use taxes. Quill Corporation, at 315.

55.      The State of Texas could not impose a franchise tax on a foreign corporation that held a Texas certificate of authority to do business in Texas, where the foreign corporation transacted its business (involving certain patents and licenses) solely through interstate commerce; the foreign corporation’s activity did not constitute a substantial nexus which would permit Texas to assess franchise taxes consistent with the Commerce Clause. Rylander v. Bandag Licensing Corporation, 18 S.W.2d 296 (Ct. Appeals Texas 2000).

CONCLUSIONS OF LAW: APPLICATION OF PRINCIPLES

56.      The Board has jurisdiction to hear and decide this matter.

57.      On the facts in the record, the Department properly concluded that the transactions in question met the Wyoming statutory standards for imposition of sales tax. The tax is imposed in retail sales, and a sale occurs when there is transfer of title or possession in Wyoming for consideration. Since Buehner Block’s business involved destination sales, the transfer of title and possession occurred in Wyoming even though Buehner Block customarily employed common carriers for delivery.

58.      In its defense, Buehner Block relies on the statutory exemption for sales which the state of Wyoming is prohibited from taxing under the laws or constitutions of the United States or Wyoming. Wyo. Stat. Ann. §39-15-105(a)(i); [Buehner Block Company, Inc.’s Submission of Proposed Findings of Fact and Conclusions of Law (Petitioner’s Proposed Conclusions of Law), ¶¶4-10]. Buehner Block argues that the exemption applies because it does not have the substantial nexus required under Quill Corporation. [Petitioner’s Proposed Conclusions of Law, ¶¶6-14]. Buehner Block stresses its lack of physical presence in Wyoming, a subject which we have addressed at length in our Findings of Fact. The only evidence of physical presence, other than the destination sales, is the representation in the 1983 licence application that Buehner Block’s sales personnel occasionally travel in Wyoming; Buehner Block’s sole company witness was not competent to say whether this was still true, or not. Buehner Block did not carry its burden of demonstrating that its salesmen no longer travel in the state.

59.      The principal flaw in Buehner Block’s argument lies in the fact that at all pertinent times, it voluntarily held a Wyoming sales tax license. Generally speaking, a license is a revocable permission to commit some act that would otherwise be unlawful. Black’s Law Dictionary, 7^th Edition, p. 931 (1999); 51 Am. Jur. 2d Licenses and Permits §1; 53 C.J.S. Licenses §2a; see Sammons v. American Automobile Association, 912 P.2d 1103, 1105 (Wyo. 1996). In this case, Buehner Block was authorized by the Department to collect taxes on behalf of the state of Wyoming. Buehner Block undeniably collected and remitted sales tax during the years at issue, as it was authorized to do pursuant to the license, and as it was obliged to do in its capacity as a holder of the license. The facts do not support Buehner Block’s claim that it merely possessed the license. [Petitioner’s Proposed Conclusions of Law, ¶14].

60.      We read Quill Corporation as extending the Commerce Clause prohibitions principally to those instances in which a state seeks to impose a duty on a foreign vendor to collect sales or use taxes, or make the vendor secure a license as a condition of carrying on interstate commerce. Quill Corporation, at 315. Where the vendor proactively seeks a sales tax license, it cannot claim that it has been obliged to assume an unwanted duty. When Buehner Block voluntarily applied for the license, Buehner Block also voluntarily subjected itself to the requirements of the Wyoming sales tax statutes. See Arrington v. Louisiana State Racing Commission, 482 So.2d 200, 202 (La. 1986). Where the vendor collects sales tax pursuant to that same license, adherence to the requirements of the state’s licensing scheme is merely an adherence to valid conditions and regulations that follow from the voluntary acquisition of the license. See 53 C.J.S. Licenses §46. Buehner Block was required as well as authorized to collect taxes on behalf of the State of Wyoming. Wyo. Stat. Ann. §39-15-106(a).

61.      Further, by voluntarily applying for a sales tax license and collecting sales tax, a vendor establishes substantial nexus with the state. At the very least, such a vendor holds permission to act – to collect taxes – that can only be granted by the State.

62.      Buehner Block’s position amounts to a claim that when an out of state vendor voluntarily secures a Wyoming sales tax license, it remains free to collect and remit taxes only when it sees fit to do so. Aside from being contrary to Wyoming statute, such a principle would give rise to a great risk of tax evasion and even fraud: with respect to Wyoming’s administration of its sales and use tax statutes, with respect to sister states that allow credits for taxes already paid elsewhere, and with respect to customers who understand that a vendor with a Wyoming license will properly collect and remit taxes. Wyoming has a strong interest in assuring that the holders of its sales and use tax licenses conform to the terms of the permission that the State has granted. We reject any argument that the Commerce Clause restricts a state from vindicating this interest because it unduly burdens interstate commerce.

63.      For essentially the same reasons, we conclude that Rylander may be readily distinguished. A foreign corporation that secures a certificate of authority to do business in a state does not assume, and is not granted, the authority to collect sales or use taxes on behalf of that state.

64.      We otherwise conclude that Buehner Block failed to provide sufficient evidence to support its claim that other taxpayers have paid sales or use taxes on the sales in question.

65.      We also conclude that Buehner Block failed to provide sufficient evidence to support its claim that the Tensar credit of $122,621.12 applied to the audit period in question.

ORDER

           IT IS THEREFORE ORDERED that the assessment of the Excise Tax Division of the Department of Revenue from a sales and use tax audit for the period July 1, 1999, to December 31, 2002, is affirmed.

Pursuant to Wyo. Stat. Ann. §16-3-114 and Rule 12, Wyoming Rules of Appellate Procedure, any person aggrieved or adversely affected in fact by this decision may seek judicial review in the appropriate district court by filing a petition for review within 30 days of the date of this decision.

           Dated this _______ day of April, 2005.

                                                                             STATE BOARD OF EQUALIZATION

    ________________________________

                                                                            Alan B. Minier, Chairman

                                                                            ________________________________

                                                                            Thomas R. Satterfield, Vice-Chairman

                                                                            ________________________________

                                                                            Thomas D. Roberts, Board Member

ATTEST:

_________________________________

Wendy J. Soto, Executive Secretary