2009 WI App 69
court of appeals of
published opinion
Case No.: |
2008AP1684 |
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Complete Title of Case: |
†Petition for Review filed. |
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Milwaukee Symphony Orchestra, Inc., Petitioner-Appellant-Cross-Respondent,† v. Wisconsin Department of Revenue, Respondent-Respondent-Cross-Appellant. |
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Opinion Filed: |
April 16, 2009 |
Submitted on Briefs: |
February 10, 2009 |
Oral Argument: |
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JUDGES: |
Dykman, Vergeront and Bridge, JJ. |
Concurred: |
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Dissented: |
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Appellant |
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ATTORNEYS: |
On behalf of the petitioner-appellant-cross-respondent,
the cause was submitted on the briefs of Robert A. Schnur, Timothy G.
Schally and Sarah L. Fowles of
Michael Best & Friedrich LLP, |
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Respondent |
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ATTORNEYS: |
On behalf of the respondent-respondent-cross-appellant, the cause was submitted on the briefs of F. Thomas Creeron III, asst. attorney general, and J.B. Van Hollen, attorney general. |
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2009 WI App 69
COURT OF APPEALS DECISION DATED AND FILED April 16, 2009 David
R. Schanker Clerk of Court of Appeals |
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NOTICE |
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This opinion is subject to further editing. If published, the official version will appear in the bound volume of the Official Reports. A party may file with the Supreme Court a petition to review an adverse decision by the Court of Appeals. See Wis. Stat. § 808.10 and Rule 809.62. |
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Appeal No. |
2008AP1684 |
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STATE OF |
IN COURT OF APPEALS |
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Milwaukee Symphony Orchestra, Inc., Petitioner-Appellant-Cross-Respondent, v. Wisconsin Department of Revenue,
Respondent-Respondent-Cross-Appellant. |
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APPEAL
and CROSS-APPEAL from a judgment of the circuit court for
Before Dykman, Vergeront and Bridge, JJ.
¶1 VERGERONT, J. The Tax Appeals Commission determined that the concert performances of the Milwaukee Symphony Orchestra, Inc., were properly characterized as entertainment events under Wis. Stat. § 77.52(2)(a)2. (2007-08),[1] which imposes a sales tax on “the sale of admissions to … entertainment … events….” The issue on this appeal and cross-appeal is whether the commission’s decision is correct. We conclude the commission’s decision is entitled to due weight deference, and, applying that standard, we conclude the commission properly interpreted and applied the statute. Accordingly, we reverse the circuit court’s decision ordering a remand to the commission and direct the circuit court to enter an order affirming the commission’s decision.
BACKGROUND
¶2 Milwaukee Symphony Orchestra, Inc. (MSO), is incorporated as a not-for-profit corporation under Wis. Stat. ch. 181. It is a professional, full-time orchestra and employs approximately ninety musicians. MSO presents approximately 100-150 concerts per year.
¶3 In July 1997, MSO filed amended sales tax returns for September 1, 1992, through August 31, 1996, claiming a refund of $719,456.69 in sales tax that it had previously paid on its sales, including all of its ticket sales. The sales at issue are ticket sales that MSO made directly to its patrons and indirectly through Ticketmaster. MSO’s stated reason for the refund, as relevant to this appeal, is that the symphony concerts are primarily educational or charitable and are therefore not taxable under Wis. Stat. § 77.52(2)(a)2. This statute imposes a 5% sales tax on the gross receipts from “the sale of admissions to amusement, athletic, entertainment or recreational events or places.…”[2]
¶4 The Department of Revenue denied all but $585.36 of the claim, taking the position that MSO’s concerts were amusement, entertainment, and/or recreational events under Wis. Stat. § 77.52(2)(a)2.[3] After the Department denied MSO’s petition for redetermination, MSO filed a petition for review by the Tax Appeals Commission.
¶5 Before the commission, MSO and the Department agreed that under Wis. Stat. § 77.52(2)(a)2. the event must be primarily “amusement, athletic, entertainment or recreational,” agreed that “primarily” means more than 50%, and agreed that reliance on dictionary definitions was appropriate. After making detailed findings of fact, the commission concluded that MSO’s concerts were properly characterized as entertainment events for purposes of imposing sales tax under § 77.52(2)(a)2.
¶6 In construing the statute, the commission looked to the dictionary definitions of “entertainment” that it had applied in two prior cases: “something diverting or engaging: as a public performance,” Milwaukee Repertory Theater v. DOR (Milwaukee Rep), Wis. Tax Rptr. (CCH) 400-515 (WTAC 2000), and “relat[ing] to the passing of time in a pleasant and agreeable manner,” Historic Sites Foundation v. DOR, Wis. Tax Rptr. (CCH) 202-662 (WTAC 1986). The commission noted that the parties relied on the definition from Milwaukee Rep and additional dictionary definitions that, in it’s view, were “in a similar vein.” The commission concluded that under both definitions from its prior cases MSO’s concerts constituted entertainment.
¶7 The commission rejected MSO’s argument that the concerts were not primarily entertainment because they were primarily educational or, in the alternative, primarily charitable. The commission also rejected MSO’s arguments that it should either distinguish or overrule Milwaukee Rep, in which the commission decided that the sales of tickets to performances of the Milwaukee Repertory Theater were taxable under Wis. Stat. § 77.52(2)(a)2. because the events were amusement or entertainment events. The commission reaffirmed Milwaukee Rep and concluded it was controlling in this case.
¶8 The commission also addressed MSO’s argument that the commission should disregard the Department’s rule, Wis. Admin. Code § Tax 11.65 (Sept. 2006),[4] on which the Department had relied in addition to the statute.[5] The commission concluded that the rule was not inconsistent with Wis. Stat. § 77.52(2)(a)2. and the Department had not in the past applied it in an inconsistent or arbitrary manner. However, the commission stated, even if it did not consider the rule, under the statute itself the ticket sales were taxable.
¶9 MSO sought judicial review of the commission’s decision. The circuit court, giving due weight deference to the decision, concluded that the commission erred in basing its decision on a distinction between education and entertainment, because Wis. Stat. § 77.52(2)(a)2. does not use the terms “educational” or “non-educational.” The court remanded the matter to the commission to allow it to develop a standard for determining whether an event is “entertainment” within the meaning of § 77.52(2)(a)2. and to apply it to the evidence.
DISCUSSION
¶10 MSO appeals the circuit court’s decision, contending that a remand is unnecessary. Its primary contention is that Wis. Stat. § 77.52(2)(a)2. is unambiguous and plainly does not apply to MSO’s ticket sales because the concerts are primarily educational or charitable. In the alternative, MSO asserts, if the statute is ambiguous then it must be construed in favor of MSO, the taxpayer. The Department cross-appeals, also challenging the court’s remand order. The Department’s position is that the statute is not ambiguous as applied to symphony concerts, which are plainly taxable as entertainment under the common meaning applied by the commission. Although the parties also dispute the commission’s interpretation and application of the rule, we find it unnecessary to address that issue for reasons we explain in paragraph 30, infra.
¶11 We review the commission’s decision, not that of the circuit
court. See DOR v. Menasha Corp., 2008 WI 88, ¶46, 311
¶12 MSO is not challenging the commission’s findings of fact, and there appears to be no dispute over the facts. Rather, the dispute is over the interpretation and application of Wis. Stat. § 77.52(2)(a)2. to an undisputed set of facts. More specifically, as we explain below, the crux of the dispute is the proper application of the statutory language to the facts, rather than the meaning given to that language.
¶13 The interpretation of a statute and its application to a given
set of facts presents a question of law, which we generally review de
novo. Menasha Corp., 311
¶14 We give great weight deference when the following conditions
are met: (1) the agency was charged
by the legislature with the duty of administering the statute; (2) the
interpretation of the agency is one of long standing; (3) the agency
employed its expertise or specialized knowledge in forming the interpretation;
and (4) the agency’s interpretation will provide uniformity and
consistency in the application of the statute.
¶15 We give due weight deference when the agency has some
experience in an area, but has not developed the expertise that necessarily
places it in a better position to make judgments regarding the interpretation or
application of the statute than a court.
¶16 De novo review, that is, giving no deference to the agency’s
legal conclusion, is appropriate in any of the following circumstances: (1) the issue before the agency is
clearly one of first impression; (2) a legal question is presented and
there is no evidence of any special agency expertise or experience; or (3) the
agency’s position on an issue has been so inconsistent that it provides no real
guidance.
¶17 The Department contends that the criteria for great weight deference are met, while MSO asserts we should apply a de novo standard because, according to MSO, the commission’s expertise in interpreting and applying Wis. Stat. § 77.52(2)(a)2. is limited to three prior inconsistent decisions: Historic Sites Foundation, Experimental Aircraft Ass’n v. DOR, Wis. Tax. Rptr. (CCH) ¶ 202-672 (WTAC 1986), aff’d in part, rev’d in part, Wis. Tax Rptr. (CCH) ¶ 202-802 (Dane County Cir. Ct. 1986), and Milwaukee Rep.
¶18 We conclude that due weight deference is appropriate in this case. The legislature has designated the commission as the final authority, subject to judicial review, on all questions of law and fact arising from a decision of the Department. Wis. Stat. § 73.01(4). In addition, the commission has considered the application of Wis. Stat. § 77.52(2)(a)2. in the three prior cases cited by MSO, one of which, Milwaukee Rep, is factually similar to this case and was relied on by the commission in deciding this case. While these three prior cases may not provide the type of long-standing interpretation and application of the statute that would support great weight deference, we do not view them as so inconsistent as to warrant de novo review. Experimental Aircraft, in which the commission concluded that admission fees to public areas of the association’s annual “fly-in” were not taxable, contained a number of specific factual findings but no memorandum opinion; it therefore does not easily lend itself to application in another case unless the facts are similar.[6] However, Historic Sites Foundation and Milwaukee Rep do provide some guidance for this case and the apparent inconsistencies are reconcilable when considered in the context of the arguments raised in each case.
¶19 In Historic Sites Foundation, the Department argued that the sale of admissions to
the
¶20 In Milwaukee
Rep, the taxpayer relied on evidence of the producer’s objective in arguing that the primary objective of the
theater performances was educational.
¶21 In this case MSO argued to the commission that in Milwaukee
Rep the commission deviated from Historic Sites Foundation and Experimental Aircraft because
it did not consider the sponsor’s objective in Milwaukee Rep while that
was the only factor considered in the other two cases. In its decision, the commission explained why
this was not a correct reading of the three prior cases. The sponsor’s objective was not irrelevant in
Milwaukee
Rep, the commission stated.
Rather, it was one factor to consider along with the nature of the event
itself and the audience’s motivation, and the evidence on the latter two
factors was more persuasive. The
commission also explained that the sponsor’s objective was not the only factor
considered in Experimental Aircraft and
Historic Sites Foundation,
pointing to the factual findings in the former and the findings and discussion
in the latter that addressed the nature of the event itself. This is a reasonable and coherent reading of
the three prior decisions.
¶22 Applying
due weight deference to the commission’s decision that MSO’s symphony
performances are entertainment within the meaning of Wis. Stat. § 77.52(2)(a)2., we conclude it is
reasonable, not contrary to the plain meaning of the statute, and that another
conclusion is not more reasonable.
¶23 We address first the commission’s interpretation of the statutory language “entertainment events.” Consistent with the parties’ agreement, the commission interpreted “entertainment” to mean “something diverting or engaging” or “relat[ing] to the passing of time in an agreeable and pleasant manner” and interpreted an “entertainment event” to be an event that is primarily, that is, more than 50%, entertainment. We do not understand MSO to challenge this interpretation of the phrase but, for purposes of clarity, we confirm that it is a reasonable interpretation of the phrase, it is not contrary to the plain meaning of the statute, and there is not another meaning that is more reasonable. Courts typically use a dictionary to establish the common meaning of a word and neither party suggests there is a more reasonable common meaning of “entertainment.”[7]
¶24 As for the “primarily” or over 50% requirement, Wis. Stat. § 77.52(2)(a)2. does not specify the degree to which an event must be “entertainment” in order to be taxable. (The same is true for “amusement,” “athletic,” and “recreational” events.) Assuming without deciding that it is reasonable to read the statute to tax events that have any component of entertainment (or the other three categories), it is more reasonable to read the statute as describing the primary characteristic of the event to be taxed. This is the reading more favorable to the taxpayer.[8] See DOR v. River City Refuse Removal, 2007 WI 27, ¶31, 299 Wis. 2d 561, 729 N.W.2d. 396 (ambiguities in a tax imposition statute are resolved in favor of the taxpayer). The further refinement that “primarily” means “over 50%” reasonably clarifies “primarily” and we see no other numerical equivalent to “primarily” that is more reasonable.
¶25 We next consider the commission’s application of the statutory language, thus interpreted, to the facts in this case. The commission considered extensive evidence, including: MSO’s prior and current mission statements, its federal and state income tax status,[9] its financial operations and business plan, the number and types of concerts performed each year, the audiences who attended the various types of concerts, advertising and marketing, formal surveys of concertgoers elsewhere and informal surveys and comments of MSO concert attendees. The commission’s conclusion that the concert performances were primarily entertainment is a reasonable one based on the record. The commission recognized that learning and an aesthetic experience was a component of attending the concerts for many, that the music was artistically excellent, and that MSO’s current mission statement and certain activities were directed at educating the public on the music so as to develop greater appreciation of it. However, there was also much evidence that MSO and the attendees viewed the concerts as a form of entertainment and the commission was reasonably persuaded that this was the primary characteristic of the event—from the audiences’ standpoint, from the marketing and advertising of MSO, and from the nature of the concerts themselves.
¶26 MSO points to evidence that, it contends, establishes that the concerts are primarily educational and, thus, not primarily entertainment.[10] The commission carefully considered this evidence—primarily the testimony of MSO’s expert witness. The commission correctly observed that it was not obligated to accept this expert’s opinion on the ultimate legal conclusion before it. The commission concluded that, while the expert’s testimony on certain of the music performed indeed pertained to education, without evidence that this information was presented at the concerts, his analysis of the music did not make the concerts educational. The commission also considered the evidence of the optional pre-concert and post-concert lectures for some concerts and the written materials offered to concertgoers regarding the music performed at some concerts. It concluded that these ways of providing information about the music did not transform the concerts into primarily educational events. We are satisfied that these conclusions are reasonable because they are based on the evidence and focus on the concerts themselves, which are the events for which the tickets are sold. We are also satisfied that it is not more reasonable to conclude that an expert’s analysis of the music, taken together with the educational materials regarding the music made available to the concertgoers, make the concerts themselves primarily educational events.
¶27 MSO also contends that its concerts are primarily charitable
events because they “advance[e] public welfare or lessen … the burdens of
government,” and therefore they are not primarily entertainment.[11] The commission concluded the concerts were
not charitable events in this sense because they were not something that would
ordinarily be provided by government, and that, even if the purpose of an event
were charitable, this in itself did not preclude the event from coming within
one of the categories of events taxable under Wis. Stat. § 77.52(2)(a)2. The commission also rejected MSO’s argument
based on a
¶28 On appeal MSO challenges the commission’s conclusion that its concerts are not primarily charitable by referring to a report recognizing the arts as a community responsibility.[12] The Department responds that the report was not presented to the commission, and MSO does not dispute this in its reply brief. MSO also refers to the government support given non-profit performing arts organizations through the tax-deductible nature of contributions and through direct government grants. These arguments are summarily presented and do not explain what is unreasonable about the commission’s decision or what is more reasonable about MSO’s position. MSO does not tie its assertions about the charitable nature of the concerts to the evidence presented to the commission and, more importantly, does not develop an argument that explains why the charitable purpose of the organization or the organization’s tax status under other statutes precludes taxing the receipts from concert admissions under Wis. Stat. § 77.52(2)(a)2.
¶29 Based on the evidence presented to the commission and the limited nature of MSO’s arguments, we conclude as follows. The commission reasonably decided that MSO’s concerts are not charitable under the definition MSO provided, notwithstanding the importance of the performing arts to communities. The commission also reasonably decided that neither the charitable purpose of a concert nor the fact that an organization is considered “charitable” for other tax purposes precludes a concert from being considered primarily an entertainment event and therefore taxable under Wis. Stat. § 77.52(2)(a)2. Finally, the contrary positions MSO advocates are not more reasonable.
¶30 In summary, the commission’s decision that MSO’s concerts are
primarily entertainment events under Wis. Stat. § 77.52(2)(a)2. is
a reasonable one and the contrary conclusion advocated by MSO is not more
reasonable. Because the commission
concluded that the statute provided a basis for its decision independent from Wis. Admin. Code § Tax 11.65, we
need not address the parties’ dispute regarding the rule in order to affirm the
commission’s decision under the statute.
Cf. Menasha Corp., 311
CONCLUSION
¶31 Applying due weight deference to the commission’s decision, we conclude it properly interpreted and applied Wis. Stat. § 77.52(2)(a)2. in deciding that MSO’s concerts are primarily entertainment events. Accordingly, we reverse the circuit court’s decision ordering a remand to the commission and direct the circuit court to enter an order affirming the commission’s decision.
By the Court.—Judgment reversed and cause remanded with directions.
[1] All references to the Wisconsin Statutes are to the 2007-08 version unless otherwise noted.
[2]
(2) For the privilege of selling, performing or furnishing the services described under par. (a) at retail in this state to consumers or users, a tax is imposed upon all persons selling, performing or furnishing the services at the rate of 5% of the gross receipts from the sale, performance or furnishing of the services.
(a) The tax imposed herein applies to the following types of services:
….
2. a. Except as provided in subd. 2. b., the sale of admissions to amusement, athletic, entertainment or recreational events or places except county fairs, the sale, rental or use of regular bingo cards, extra regular cards, special bingo cards and the sale of bingo supplies to players and the furnishing, for dues, fees or other considerations, the privilege of access to clubs or the privilege of having access to or the use of amusement, entertainment, athletic or recreational devices or facilities, including the sale or furnishing of use of recreational facilities on a periodic basis or other recreational rights, including but not limited to membership rights, vacation services and club memberships.
b. Taxable sales do not include the sale of admissions by a gun club, including the sale of a gun club membership, if the gun club is a nonprofit organization and if the gun club provides safety classes to at least 25 individuals in the calendar year.
[3] The Department also made an additional assessment totaling $39,397.87 in tax and interest as of December 2, 1997, which is not at issue.
[4] All references to the Wisconsin Administrative Code are to the September 2006 version unless otherwise noted.
[5]
(1) TAXABLE SALES. (a) The sale of admissions to amusement, athletic, entertainment or recreational events or places…. This includes admissions to movies, ballets, musical and dance performances, ball games, campgrounds, circuses, carnivals, plays, hockey games, ice shows, fairs, snowmobile and automobile races, and pleasure tours or cruises.
….
(2) NONTAXABLE SALES. The following are nontaxable admissions:
….
(b) Admissions to museums of history, art or science, and to auto or trade shows, if professional entertainment is not provided at the show. Also, all admission fees to any museum operated by a nonprofit corporation under a lease agreement with the state historical society, such as the circus world museum.
[6] The
public area in Experimental Aircraft Ass’n v. DOR, Wis. Tax Rptr. (CCH) 202-672
(WTAC 1986), aff’d in part, rev’d in part,
Wis. Tax Rptr. (CCH) 202-802 (Dane County Cir. Ct. 1986), included activities
such as films, exhibitions, workshops, and a “mini-museum” on various aspects
of aviation.
[7] Use of a dictionary to establish the common meaning
of a word does not mean the statute is ambiguous. State v. Sample, 215
[8] This
interpretation of the statute is also consistent with the commission’s
rejection of the Department’s position in Historic Sites Foundation v. DOR,
Wis. Tax Rptr. (CCH) 202-662 (WTAC 1986), that the museum admissions were
taxable if the museum had as an
objective the supplying of amusement or entertainment, even if it was not the primary objective. And it is consistent with the analysis in Milwaukee
Repertory Theater v. DOR (Milwaukee Rep), which recognized
that, although there might be evidence that the producer’s primary objective
was educational, the “overriding thrust of its advertising and promotion of the
shows, as well as the obvious objective of the public who responded by buying
tickets, was ‘entertainment,’ ‘amusement,’ and/or ‘recreation’ as those terms
are commonly understood and defined.”
[9] The
commission found that MSO is an organization exempt from federal income tax
under 26 U.S.C. § 501(c)(3) (2006), with the IRS approval of its
application stating that “it is shown that you are organized and operated
exclusively for educational purposes.”
The commission also found that, because MSO is not organized or
conducted as a corporation for pecuniary profit, pursuant to Wis. Stat. § 71.26(1)(a) it is not
subject to
[10] As we read the commission’s decision, it did not define “entertainment,” or any other statutory phrase, with reference to “educational or “non-educational.” Rather, the commission expressly recognized that the statute did not create an exception for entertainment events that are primarily educational but understood that MSO’s position was that, if an event was primarily (more than 50%) educational, it could not be primarily entertainment. We therefore do not agree with the circuit court that the commission improperly imported a distinction between education and entertainment into the statute. Simply put, if an event is primarily educational, it is not primarily entertainment (or amusement or athletic or recreational) within the meaning of Wis. Stat. § 77.52(2)(a)2.
[11] As the source for this definition of “charitable,” MSO cites 26 C.F.R. § 1.501(c)(3)-1(d)(2) (2008), which defines “charitable” for purposes of federal income tax exemptions for organizations under 26 U.S.C. § 501(c)(3). The regulation provides in relevant part:
Such term includes: relief of the poor and distressed or of the underprivileged; advancement of religion; advancement of education or science; erection or maintenance of public buildings, monuments, or works; lessening of the burdens of Government; and promotion of social welfare by organizations designed to accomplish any of the above purposes….
(Emphasis added.)
Before the
commission, MSO apparently did not cite this regulation as the source for its
definition of “charitable,” but, instead, cited Kickers of Wisconsin, Inc. v.
City of Milwaukee, 197
[12] MSO’s citation to the report is: Rockefeller Panel Report, McGraw-Hill Book Company (1965).