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Sinclair Oil Corp. v. Wyoming Dep't of Revenue

August 26, 2010


W.R.A.P. 12.09(b) Certification from the District Court of Laramie County The Honorable Thomas T.C. Campbell, Judge.

The opinion of the court was delivered by: Burke, Justice.

Before KITE, C.J., and GOLDEN, HILL, VOIGT*fn1, and BURKE, JJ.

BURKE, J., delivers the opinion of the Court; KITE, C.J., files a dissenting opinion, in which VOIGT, J., joins.

[¶1] Effective July 1, 2004, the Wyoming Legislature provided a sales tax exemption for machinery used in manufacturing in Wyoming. It is undisputed that this tax exemption applies to two large pieces of machinery owned by Sinclair Oil Corporation. Sinclair further claims, however, that the materials used to construct foundations for these machines also qualify for the tax exemption. Sinclair applied to the Wyoming Department of Revenue for a refund of the sales tax it had paid on the foundation materials. The Department denied that application. Sinclair appealed to the Wyoming State Board of Equalization, and the Board upheld the Department‟s determination. Sinclair then appealed to the district court, which certified the case for direct review by this Court. We will affirm the Board‟s decision.


[¶2] Sinclair presents two issues:

1. Because the parties have stipulated that the Hydrocracker and Number Two Reformer at Sinclair‟s Wyoming refineries are "machinery" entitled to the manufacturing exemption found in Wyo. Stat. Ann. § 39-15-105(a)(viii)(O), are the concrete related materials also considered exempt machinery because they were purchased by Sinclair and subsequently incorporated into the foundation[s] of the exempt machinery?

2. Assuming arguendo that the concrete related materials were not tangible personal property at the moment of "sale" as defined in Wyo. Stat. Ann. § 39-15-101(a)(vii), but instead were "real property" as defined in Wyo. Stat. Ann. § 39-15-101(a)(v), should Sinclair be entitled to a refund because real property is not subject to excise tax?

The Department synthesizes the dispute into a single issue:

Did the State Board of Equalization correctly conclude that the manufacturing machinery tax exemption established pursuant to Wyo. Stat. Ann. § 39-15-105(a)(viii)(O) does not apply to materials purchased and used to construct embedded concrete foundations for machinery used to manufacture?


[¶3] In 2005,*fn2 Sinclair installed a new hydrocracker at its petroleum refinery in Sinclair, Wyoming. The hydrocracker is a large piece of equipment that "cracks" crude oil components into different saleable products such as diesel fuel, gasoline, and heavier products. The hydrocracker was designed to be installed on a large foundation. To construct the foundation, Sinclair purchased concrete, rebar, grout, and related components and materials. Sinclair paid a total of $19,118.05 in sales or excise tax when it purchased these materials. Sinclair excavated the site, drilled holes down to and into the bedrock, and placed fabricated concrete piers into the holes. A concrete cap and pedestal were poured on top. The hydrocracker was attached to the foundation with anchor bolts.

[¶4] In 2006, Sinclair installed a reformer at its refinery in Casper, Wyoming. A reformer is used to process long petroleum molecules into shorter molecules with higher octane levels. Like the hydrocracker, the reformer was designed to be installed on a large concrete foundation. Sinclair purchased the concrete, rebar, grout, and related materials to construct the foundation, and paid a total of $6,388.68 in sales or excise tax on these materials. This foundation was of a somewhat different design than the one for the hydrocracker, but the construction process was similar. After the foundation was completed, the reformer was bolted into place.

[¶5] The Department conducted tax audits of Sinclair in 2006. Sinclair and the Department were in agreement that the hydrocracker and reformer qualified for the sales tax exemption. During the audit process, however, Sinclair also claimed that the tax exemption applied to the materials it had purchased to construct the foundations for the hydrocracker and reformer. The Department disagreed. Sinclair appealed to the Board, which held an evidentiary hearing on September 9 and 10, 2008. The Board issued its decision on June 30, 2009, affirming the Department‟s determination. Sinclair appealed the Board‟s decision.


[¶6] We review an administrative agency‟s decision following the provisions of the Wyoming Administrative Procedure Act, which provides, in pertinent part, that the reviewing court shall:

(ii) Hold unlawful and set aside agency action, findings and conclusions found to be:

(A) Arbitrary, capricious, an abuse of discretion or otherwise not in ...

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