W.R.A.P.
12.09(b) Certification from the District Court of Laramie
County The Honorable Thomas T.C. Campbell, Judge
Representing Appellant:
Paul
J. Hickey, Hickey & Evans, LLP, Cheyenne, Wyoming;
Richard G. Smith, Hawley, Troxell, Ennis & Hawley, LLP,
Boise, Idaho. Argument by Mr. Smith.
Representing Appellee:
Peter
K. Michael, Attorney General; Karl D. Anderson, Senior
Assistant Attorney General; Ryan T. Schelhaas, Senior
Assistant Attorney General; Lisa M. Spillman, Senior
Assistant Attorney General. Argument by Ms. Spillman.
Before
BURKE, C.J., and HILL, DAVIS, FOX, and KAUTZ, JJ.
BURKE,
Chief Justice.
[¶1]
PacifiCorp, Inc. operates coal-fired electrical generation
facilities in Wyoming. In 2012, PacifiCorp sought a ruling
from the Wyoming Department of Revenue that its purchases of
certain chemicals used in the process of generating
electricity qualified for either the manufacturers' sales
tax exemption or the wholesalers' sales tax exemption.
The Department ruled against PacifiCorp, and the Board of
Equalization affirmed the Department's ruling. PacifiCorp
appealed to the district court, and we accepted certification
of the appeal from the district court. We affirm the Board of
Equalization's decision.
ISSUES
[¶2]
PacifiCorp presents three issues for our review:
1.
Whether the Board committed legal error, or made a decision
not supported by substantial evidence, when it determined
that PacifiCorp did not engage in "manufacturing"
or "processing" as required to qualify for a sales
tax exemption under Wyo. Stat. Ann. §
39-15-105(a)(iii)(A).
2.
Whether the Board committed legal error, or made a decision
not supported by substantial evidence, when it held that
certain chemicals necessary to treat water and sulfur dioxide
emissions during the coal combustion processes that generate
electricity are not "used directly" to generate
electricity, and are therefore not exempt from sales tax
under Wyo. Stat. Ann. § 39-15-105(a)(iii)(A).
3.
Whether the Board committed legal error, or made a decision
not supported by substantial evidence, when it held that
PacifiCorp's purchases of certain chemicals and catalysts
do not constitute wholesale purchases exempt from taxation
under Wyo. Stat. Ann. § 39-15-105(a)(iii)(F).
FACTS
[¶3]
PacifiCorp operates four coal-fired electrical generation
facilities in Wyoming: the Jim Bridger, Dave Johnston,
Naughton, and Wyodak power plants. To generate electricity at
these facilities, PacifiCorp first feeds coal into a
pulverizer where it is ground to a powder. The coal powder is
then blown into a boiler where it is ignited. The walls of
the boiler are lined with tubes filled with water. The
burning coal heats the water inside the tubes and converts it
to steam. The steam's pressure is directed into a
turbine, causing the rotors in the turbine to rotate. The
turbine is connected to a generator, a large two-pole magnet
that rotates inside a coil of wires, which generates electric
energy that is transmitted and sold to customers.
[¶4]
There are two separate water cycles involved in the
generation process: boiling and cooling. As mentioned above,
the water inside the boiler tubes is converted to steam to
turn the turbines and generate electricity. In the cooling
cycle, water is used to condense the steam back into liquid
water.[1] The water in the boiling cycle must be
"ultrapure, " meaning exceptionally free of
dissolved minerals, and neither acidic nor alkaline, in order
to prevent mineral build-up inside the boiler that would
eventually cause failure. To create "ultrapure"
water, river water is run through a softening system, a
reverse-osmosis unit, and a demineralizing process. It is
then further treated with chemicals for additional
purification. The cooling water must also be "ultrapure,
" and it is treated in similar fashion. The chemicals
used by PacifiCorp to make the water "ultrapure"
are one subject of this appeal.
[¶5]
When the coal is burned in the boiler, it generates a gas
stream containing various air pollutants. To meet state and
federal air quality requirements, PacifiCorp sends the gas
stream through an electrostatic precipitator to remove fly
ash, and through a scrubber to remove sulfur dioxide. In the
scrubber, a chemical reagent[2] is used to remove the sulfur
dioxide from the gas stream and convert it to solid sodium
sulfate. These chemical reagents are the other subject of
this appeal.
[¶6]
On March 27, 2012, PacifiCorp sought a ruling from the
Wyoming Department of Revenue that its purchase of the
chemicals used in the boiling and cooling cycles and the
chemical reagents used to remove air pollutants from the gas
stream should be exempt from sales tax. PacifiCorp asserted
that it manufactures electricity, making it eligible for the
statutory sales tax exemption for manufacturers. It also
claimed that it purchases these chemicals as a wholesaler,
making it eligible for the sales tax exemption for wholesale
purchasers. The Department ruled against PacifiCorp on May 9,
2012. PacifiCorp appealed to the Wyoming State Board of
Equalization.
[¶7]
On October 1, 2012, PacifiCorp filed a sales tax refund claim
with the Department, indicating that the "substantive
issue" in this claim was the same as that being reviewed
by the Board in PacifiCorp's appeal from the
Department's ruling that it was not eligible for the
manufacturers' or wholesalers' sales tax exemptions.
The Department denied the refund request. PacifiCorp appealed
to the Board of Equalization. The Board consolidated the two
appeals, and held a contested case hearing on January 28 and
29, 2013.
[¶8]
On January 8, 2016, the Board issued its Findings of Fact,
Conclusions of Law and Order affirming the Department's
determination that PacifiCorp was not eligible for the sales
tax exemption for manufacturers or wholesale purchasers, and
denying PacifiCorp's sales tax refund request. PacifiCorp
filed its petition for review in the district court. Soon
thereafter it filed an Unopposed Motion for Certification
asking the district court to certify its petition for review
to this Court pursuant to W.R.A.P. 12.09. The district court
granted the motion to certify, and we accepted the
certification.
STANDARD
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