FARMERS COOPERATIVE, A COOPERATIVE CORPORATION ORGANIZED UNDER THE LAWS OF THE STATE OF NEBRASKA, APPELLANT,
STATE OF NEBRASKA ET AL., APPELLEES. FRONTIER COOPERATIVE COMPANY, A COOPERATIVE CORPORATION ORGANIZED UNDER THE LAWS OF THE STATE OF NEBRASKA, APPELLANT,
STATE OF NEBRASKA ET AL., APPELLEES.
Administrative Law: Judgments: Appeal and
Error. A judgment or final order rendered by a
district court in a judicial review pursuant to the
Administrative Procedure Act may be reversed, vacated, or
modified by an appellate court for errors appearing on the
__:__: __ . When reviewing an order of a district court under
the Administrative Procedure Act for errors appearing on the
record, the inquiry is whether the decision conforms to the
law, is supported by competent evidence, and is neither
arbitrary, capricious, nor unreasonable.
Administrative Law: Statutes: Appeal and
Error. To the extent that the meaning and
interpretation of statutes and regulations are involved,
questions of law are presented, in connection with which an
appellate court has an obligation to reach an independent
conclusion irrespective of the decision made by the court
Statutes: Appeal and Error. Statutory
language is to be given its plain and ordinary meaning, and
an appellate court will not resort to interpretation to
ascertain the meaning of statutory words which are plain,
direct, and unambiguous.
Statutes: Legislature: Intent. In discerning
the meaning of a statute, a court determines and gives effect
to the purpose and intent of the Legislature as ascertained
from the entire language of the statute considered in its
plain, ordinary, and popular sense.
Neb. 348] 6. Statutes. A
statute is ambiguous when the language used cannot be
adequately understood from the plain meaning of the statute
or when considered in pari materia with any related statutes.
Statutes: Legislature. When the Legislature
provides a specific definition for purposes of a section of
an act, that definition is controlling.
Taxation: Agriculture: Words and Phrases.
The phrase "depreciable repairs or parts" in Neb.
Rev. Stat. § 77-2708.01 (Cum. Supp. 2016) is ambiguous.
Statutes: Legislature: Intent. An appellate
court can examine an act's legislative history if a
statute is ambiguous or requires interpretation.
Statutes: Intent. In construing a statute, a
court looks to the statutory objective to be accomplished,
the evils and mischiefs sought to be remedied, and the
purpose to be served.
Statutes: Taxation. Tax exemption provisions
are strictly construed, and their operation will not be
extended by construction.
Statutes: Legislature: Intent. The
fundamental objective of statutory interpretation is to
ascertain and carry out the Legislature's intent. An
interpretation that is contrary to a clear legislative intent
will be rejected.
Taxation: Agriculture. Under Neb. Rev. Stat.
§ 77-2708.01 (Cum. Supp. 2016), the refund for
depreciable repairs or parts is to prevent double taxation
and to ensure that all depreciable repairs and parts are
subject to personal property tax.
Taxation: Agriculture: Words and Phrases. In
Neb. Rev. Stat. § 77-2708.01 (Cum. Supp. 2016), the
phrase "depreciable repairs or parts" means repairs
or parts that appreciably prolong the life of the property,
arrest its deterioration, or increase its value or
usefulness, and are ordinarily capital expenditures for which
a deduction is allowed only through the depreciation recovery
Taxation: Proof. The party claiming an
exemption from taxation must establish entitlement to the
exemption. A tax exemption is analogous to a tax refund.
from the District Court for Lancaster County: Andrew R.
Jacobsen, Judge. Affirmed.
E. Jeffers and Andrew C. Pease, of Crosby, Guenzel, L.L.P.,
Douglas J. Peterson, Attorney General, and L. Jay Bartel for
Heavican, C.J., Wright, Miller-Lerman, Cassel, Kelch, and
Neb. 349] FUNKE, J.
NATURE OF CASE
Cooperative (Farmers) and Frontier Cooperative Company
(Frontier) (collectively the Cooperatives) appeal from orders
by the district court for Lancaster County affirming the
decisions of the Nebraska Department of Revenue (Department)
and the acting Tax Commissioner of the State of Nebraska
which denied, in part, their requested refunds of sales and
use taxes paid on the purchase of repairs and parts for
agricultural machinery and equipment, under Neb. Rev. Stat.
§ 77-2708.01 (Cum. Supp. 2016). The district court
consolidated the cases for oral arguments. Likewise, this
court has consolidated the appeals for oral arguments and
sole issue presented in each case is how the phrase
"depreciable repairs or parts, " within §
77-2708.01, should be interpreted. The district court did not
err in affirming the partial denial of the Cooperatives'
requested refunds based upon its interpretation of §
77-2708.01. We affirm.
Department's Interpretation of § 77-2708.01
1993, the Nebraska Legislature passed 1993 Neb. Laws, L.B.
345, which amended § 77-2708.01 to include the refund of
sales and use taxes for depreciable repairs or parts. The
relevant version of § 77-2708.01(1) states:
Any purchaser of depreciable repairs or parts for
agricultural machinery or equipment used in commercial
agriculture may apply for a refund of all of the Nebraska
sales or use taxes and all of the local option sales or use
taxes paid prior to October 1, 2014, on the repairs or parts.
September 2014 "Nebraska Agricultural Machinery and
Equipment Sales Tax Exemption Information Guide"
(Information Guide), the Department interpreted the phrase
"depreciable repairs or parts." The Information
Guide defined [296 Neb. 350] repairs and parts as
depreciable, "if they will appreciably prolong the life
of the property, arrest its deterioration, or increase its
value or usefulness, and are ordinary capital expenditures
for which a deduction is allowed only through the
depreciation/ cost recovery allowance." Conversely,
according to the Tax Commissioner, the Information Guide
explained that nondepreciable repair and replacement parts
are those that "keep the property in an ordinary or
usable condition, do not increase the value of the
agricultural machinery and equipment repaired, or lengthen
Information Guide informed purchasers of depreciable repairs
or parts that they may receive a refund of the sales and use
taxes paid thereon by filing a "Nebraska Sales and Use
Tax Refund Claim for Agricultural Machinery and Equipment
Purchases or Leases, Form 7AG-1" (Form 7AG-1).
Cooperatives are buyers and sellers of agricultural products
and inputs, including purchasing, selling, and storing grain.
Both also provide on-farm services and products.
September 2014, the Cooperatives submitted to the Department
several Form 7AG-l's seeking refunds of sales and use
taxes. Accompanying the forms were spreadsheets listing the
transactions forming the basis of the claims and invoices
related to those transactions. Neither of the Cooperatives
submitted its personal property tax return or depreciation
schedule to verify it had also paid personal property taxes
on the agricultural machinery and equipment repairs or parts.
Farmers' Refund Claim
submitted a single Form 7AG-1 for a refund of the sales and
use taxes paid on repairs or parts for $1, 582.48.
response, the Department sent an email to Farmers notifying
it that some invoices were determined to be for repair,
replacement, or maintenance parts. The Department stated that
it could refund the taxes paid thereon only if Farmers had
paid personal property taxes on the items and requested
Farmers [296 Neb. 351] submit a copy of its personal property
tax return or depreciation schedule to verify that it had. In
October 2014, the Department sent another email to Farmers,
asking if Farmers had placed any of the claimed purchases on
its personal property tax return. The record does not show
that Farmers responded to either email.
March 2015, the Department notified Farmers that it had
completed processing the refund claim and that it had denied
a portion of the requested refund, because the taxes were on
purchases of nondepreciable repairs or parts. The items
disallowed by the Department included, but were not limited
to, alternators, bolts, gaskets, sensors, and an air
conditioner for "Terragators/Floaters" owned and
operated by Farmers. Counsel for Farmers responded in an