N.C. Dep’t of Revenue v. First Petroleum Servs., Inc., 2018 NCBC 19.
STATE OF NORTH CAROLINA IN THE GENERAL COURT OF JUSTICE SUPERIOR COURT DIVISION WAKE COUNTY 17 CVS 1663
N.C. DEPARTMENT OF REVENUE,
Petitioner,
v. ORDER AND OPINION ON FIRST PETROLEUM SERVICES, PETITION FOR JUDICIAL REVIEW INC.,
Respondent.
1. This matter is an appeal in a contested tax case. The issue is whether
Respondent First Petroleum Services, Inc. (“First Petroleum”) must pay a use tax on
materials it purchased and used in fulfilling contracts to construct and install fuel
storage tanks and related equipment. The Office of Administrative Hearings held
that the relevant contracts were not subject to the use tax and granted summary
judgment in favor of First Petroleum. The North Carolina Department of Revenue
(“Department”) petitions for judicial review of that administrative final decision.
2. For the reasons given below, the Court REVERSES the decision of the
Office of Administrative Hearings and REMANDS with instructions to grant
summary judgment in favor of the Department.
North Carolina Department of Justice, by Assistant Attorney General Andrew O. Furuseth, for Petitioner North Carolina Department of Revenue.
Stevens Martin Vaughn & Tadych, by Michael J. Tadych, for Respondent First Petroleum Services, Inc.
Conrad, Judge. I. BACKGROUND
3. Both parties moved for summary judgment before the Office of
Administrative Hearings. The material facts are undisputed.*
4. First Petroleum sells and installs petroleum fueling equipment. (See R.24;
R.263.) About half of First Petroleum’s business involves retail sales to customers
(such as sales of replacement parts). (See R.264–65.) The other half of its business
consists of contracts for construction and installation of fuel tanks, fueling islands,
and similar fuel storage and delivery systems. (See R.265–67.) The tax assessment
in this case concerns the latter.
5. The Department conducted a sales and use tax audit of First Petroleum for
the period April 1, 2009 to March 31, 2012. (See R.48.) Its review centered on eleven
contracts (“FPS Contracts”), each of which is similar in relevant respects. (See R.295
(describing contracts as “representative examples”); see also Pet. for Judicial Review
2 n.1, ECF No. 1.) The subject matter of each contract is the installation of a fuel
storage and delivery system on property owned by a governmental entity, such as a
municipality or federal agency. (See, e.g., R.334, 338, 361, 388–89, 406–07, 419.)
First Petroleum agreed to furnish the necessary labor, materials, and equipment to
perform its services, including supervision of the work and related site-management
services. (See, e.g., R.472, 519, 520, 646, 731–33, 906–07, 1228, 1244, 1249, 1277–78,
1518, 1522–23; see also R.314, 334–35; R.683.) It performed these activities subject
* The appeal record appears at ECF Nos. 21 through 31. to compliance with detailed specifications provided by the primary contractor or the
property owner. (See, e.g., R.470–71, 473–98, 519, 521, 527–42, 840–41, 1239–54; see
also R.589–96.) The FPS Contracts also generally task First Petroleum with
responsibility for permits, fees, and taxes, as well as any liability for injuries or loss
on the job site. (See, e.g., R.472, 646, 737–38, 896–920, 1277, 1519–20, 1530; see also
R.335, 685.)
6. A representative contract concerns the construction and installation of a
gasoline storage and dispensing system at Fort Bragg, North Carolina. (See R.519.)
Serving as a subcontractor, First Petroleum agreed “to furnish all necessary labor
and material, tools, [and] equipment,” to “furnish and erect scaffolding,” and to
handle “all power transportation, hauling, loading and unloading, demolition, floor
cutting & patching and all other incidentals necessary for the compete installation”
of the system. (R.519; see also R.329.) The contract sets forth detailed instructions
regarding various system components, including materials to be used, drawings and
specifications, and procedures for requesting to deviate from the approved
specifications. (See R.473, 526, 547, 1528.) First Petroleum remained responsible for
all state taxes and any and all loss due to theft or other misappropriation. (See R.331–
32, 1530.)
7. As a result of the audit, the Department found that First Petroleum failed
to pay a use tax for the building materials that it purchased and then used to perform
the FPS Contracts. (See R.48.) The Department issued a proposed assessment of use
tax, penalties, and interest. (See R.49.) 8. In response, First Petroleum did not argue that it had, in fact, paid sales or
use tax on the materials used to perform the FPS Contracts. Rather, it argued that
it was not required to do so. First Petroleum opposed the use tax assessment on the
ground that the FPS Contracts were better characterized as retail sales of equipment,
not taxable uses of building materials. (See, e.g., R.24.) And it denied incurring any
sales tax liability because its customers (government entities) were exempt. (See,
e.g., R.24.)
9. The Department disagreed with both arguments. In its Notice of Final
Determination, the Department concluded that First Petroleum’s transactions were
not exempt from tax. In certain circumstances, items purchased by government
entities are exempt, but these exemptions “do not apply if the items were used by [a]
contractor in the performance of a contract.” (R.50 (citing 17 N.C. Admin. Code
07B.1701(a), (c) & 07B.4203).)
10. The Department further “determined that the [FPS Contracts] contained
the elements of a performance contract rather than a sales transaction.” (R.50.) In
reaching that conclusion, the Department relied on the use tax statute and its
regulations interpreting the statute. (See R.49 (citing N.C. Gen. Stat. § 105-
164.6(a)(1) & 17 N.C. Admin. Code 07B.2602(a)).) Having concluded that First
Petroleum was the consumer of the materials used to perform the FPS Contracts, the
Department upheld the proposed assessment for unpaid use tax. 11. First Petroleum timely filed a Petition for Contested Hearing in the Office
of Administrative Hearings. (See R.23.) The parties cross-moved for partial summary
judgment.
12. After a hearing, the Administrative Law Judge (“ALJ”) issued a Final
Decision granting First Petroleum’s motion and denying the Department’s. (See
R.19.) The ALJ based that decision on language in Sales and Use Tax Technical
Bulletin 31-1 (“Bulletin 31-1”), a publication provided by the Department pursuant
to its statutory authority to interpret the sales and use tax statutes. The ALJ
construed Bulletin 31-1 to mean that “the critical issue here involves the level of
control by parties to a construction contract.” (R.17 ¶ 84.) After reviewing the FPS
Contracts, the ALJ concluded that “the method, manner and means of completing”
the contracts “are within the control of the owner,” not First Petroleum. (R.14.) On
that basis, the ALJ concluded that “the ‘overall tenor’ of” the contracts “does not allow
[First Petroleum] to simply supply a finished product” and, therefore, that “the
subject contracts are not performance contracts” but are instead retail sales contracts
“as a matter of law.” (R.14.)
13. The ALJ also rejected the Department’s alternative request to change the
basis for its assessment to the sales tax in the event the materials used in performing
the FPS Contracts were determined not to be subject to the use tax. The ALJ
concluded that “the statute of limitations for making a separate assessment based on
the sales tax has long since passed.” (R.16 ¶ 77.) Accordingly, the ALJ held that no additional tax was due for material purchased in connection with the FPS Contracts.
(See R.19.)
14. The Department filed its Petition for Judicial Review on February 9, 2017
and its opening brief on April 24, 2017. First Petroleum and the Department filed
their response and reply briefs, respectively, on June 29 and July 12, 2017. The Court
held a hearing on August 24, 2017, at which all parties were represented by counsel.
In response to a request from the Court at the hearing, the parties prepared an
electronic version of the record, which First Petroleum filed on October 12, 2017. This
matter is ripe for determination.
II. STANDARD OF REVIEW
15. When a “trial court exercises judicial review of an agency’s final decision, it
acts in the capacity of an appellate court.” N.C. Dep’t of Env’t & Natural Res. v.
Carroll, 358 N.C. 649, 662, 599 S.E.2d 888, 896 (2004). “The nature of the error
asserted by the party seeking review dictates the appropriate manner of review.”
Dillingham v. N.C. Dep’t of Human Res., 132 N.C. App. 704, 708, 513 S.E.2d 823, 826
(1999); see also N.C. Gen. Stat. § 150B-51(c).
16. Here, the Department appeals the order of the Office of Administrative
Hearings granting summary judgment in favor of First Petroleum. “Appeals arising
from summary judgment orders are decided using a de novo standard of review.”
Midrex Techs. v. N.C. Dep’t of Revenue, 369 N.C. 250, 257, 794 S.E.2d 785, 791 (2016).
“De novo review requires a court to consider a question anew,” Smith v. Richmond
Cty. Bd. of Educ., 150 N.C. App. 291, 295, 563 S.E.2d 258, 263 (2002), and to “freely substitute[] its own judgment for” that of the Administrative Law Judge, Carroll, 358
N.C. at 660, 599 S.E.2d at 895. “In reviewing a final decision allowing . . . summary
judgment, the court may enter any order allowed by . . . Rule 56.” N.C. Gen. Stat.
§ 150B-51(d).
17. It bears noting that the Final Decision includes a section labeled “Finding
of Facts.” (R.7–12.) Although neither party takes issue with this aspect of the Final
Decision, our courts “have on numerous occasions held that it is not proper to include
findings of fact in an order granting summary judgment.” Winston v. Livingstone
College, Inc., 210 N.C. App. 486, 487, 707 S.E.2d 768, 769 (2011). The ALJ’s
purported findings are therefore not binding in this appeal, and the Court does not
review them deferentially.
18. Rather, the Court must determine de novo whether “the pleadings,
depositions, answers to interrogatories, and admissions on file, together with the
affidavits, if any, show that there is no genuine issue as to any material fact and that
any party is entitled to a judgment as a matter of law.” N.C. R. Civ. P. 56(c).
Summary judgment is appropriate if “the facts are not disputed and only a question
of law remains.” Wal-Mart Stores East v. Hinton, 197 N.C. App. 30, 37, 676 S.E.2d
634, 641 (2009) (quoting Carter v. West Am. Ins. Co., 190 N.C. App. 532, 536, 661
S.E.2d 264, 268 (2008)). In this appeal, because the material facts are undisputed, “a
summary disposition of the claims is proper and appropriate.” Technocom Bus. Sys.
v. N.C. Dep’t of Revenue, 2011 NCBC LEXIS 1, at *12 (N.C. Super. Ct. Jan. 4, 2011). III. ANALYSIS
19. The Department contends that the ALJ’s decision “allows the property at
issue to be untaxed,” contrary to the purpose of the sales and use tax statutes. (Pet’r’s
Br. 2 [“Dept. Br.”].) In its view, the materials used to perform the FPS Contracts
were subject to the use tax under the plain language of the governing statute and the
regulations interpreting the statute. (See Dept. Br. 12–18.) In the alternative, the
Department contends that, assuming the FPS Contracts were retail sales, the ALJ
should have permitted it to change the basis for its assessment from the use tax to
the sales tax. (See Dept. Br. 19–23.)
20. First Petroleum responds that the ALJ was correct on both counts. It
contends that the “sole issue” is whether the FPS Contracts “were ‘performance
contracts’ under” Bulletin 31-1 and that the ALJ correctly concluded they were not.
(Resp’t’s Br. 2, 6–21 [“Opp’n”].) First Petroleum also argues that the Department
based its assessment solely on the use tax, never changed the basis to the sales tax,
and cannot change the basis for the assessment now. (See Opp’n 21–25.)
21. For the reasons discussed below, the Court agrees with the Department that
First Petroleum incurred liability for use tax on materials it purchased and then used
to fulfill its contracts for the construction and installation of fuel storage and delivery
systems within North Carolina. As a result, the Court need not and does not decide
whether the Department has statutory authority to change the basis for its
assessment from the use tax to the sales tax. A. The Department’s Assessment Was Correct.
22. The Sales and Use Tax Act imposes complementary sales and use taxes,
which “often bring about the same result” but “‘are assessments upon different
transactions and are bottomed on distinguishable taxable events.’” In re Assessment
of Taxes Against Village Publishing Corp., 312 N.C. 211, 214, 322 S.E.2d 155, 158
(1984) (quoting Atwater-Waynick Hosiery Mills, Inc. v. Clayton, 268 N.C. 673, 675,
151 S.E.2d 574, 576 (1966)). “A sales tax is assessed on the purchase price of property
and is imposed at the time of sale.” Colonial Pipeline Co. v. Clayton, 275 N.C. 215,
223, 166 S.E.2d 671, 677 (1969). It is “designed to be passed on to the consumer.”
Village Publishing Corp., 312 N.C. at 214, 322 S.E.2d at 158.
23. On the other hand, the “use tax is assessed on the storage, use or
consumption of property and takes effect only after such use begins.” Colonial
Pipeline, 275 N.C. at 223, 166 S.E.2d at 677. Its “purpose” is “to impose a use tax,
credited with any sales tax previously paid, upon the user of any tangible personal
property in this state.” Oscar Miller Contractor, Inc. v. N.C. Tax Review Bd., 61 N.C.
App. 725, 729, 301 S.E.2d 511, 513 (1983).
24. The texts of the sales and use tax statutes reflect these complementary
goals. In general, the State’s sales tax applies to a “retailer’s net taxable sales or
gross receipts.” N.C. Gen. Stat. § 105-164.4. A “sale” broadly includes the “transfer”
of tangible personal property “for consideration.” Id. § 105-164.3(36).
25. By contrast, the use tax applies to “[t]angible personal property . . .
purchased inside or outside this State for storage, use, or consumption in this State.” Id. § 105-164.6. This “includes property that becomes part of a building or another
structure.” Id. The term “use” is broadly defined to “include[] withdrawal from
storage, distribution, installation, affixation to real or personal property, and
exhaustion or consumption of the property or service by the owner or purchaser.” Id.
§ 105-164.3(49).
26. The interpretive difficulty here arises from the fact that First Petroleum
uses construction materials by incorporating them into large-scale improvements on
real property but also transfers title to the completed job to the property owner. First
Petroleum views these transactions for consideration as retail sales. The
Department, on the other hand, contends that the use of construction materials in
the performance of contractual obligations makes First Petroleum a consumer of
those materials, not a retailer.
27. Precedent in this area, although not abundant, is instructive. Our courts
have traditionally treated contractors as the user of building materials when
constructing structures and other improvements on real property. Thus, the North
Carolina Supreme Court rejected the “ingenious” argument that “heating and
plumbing contractors who buy materials and supplies for use in fulfilling lump-sum
contracts” were engaged in the resale of those supplies. Atlas Supply Co. v. Maxwell,
212 N.C. 624, 626–27, 194 S.E. 117, 117–18 (1937). Rather, “[t]hey purchase the
materials and supplies, not for resale as tangible personal property, but for use in
producing the turn-key job”—that is, incorporating the materials into a functioning
heating or plumbing system. Id. at 627, 194 S.E. at 118 (emphasis added); compare In re Rock-Ola Café, 111 N.C. App. 683, 685, 433 S.E.2d 236, 237 (1993) (holding that
bar snacks and matches offered by a restaurant to its customers “are not subject to a
use tax because the items were purchased [by the restaurant] for resale”).
28. Similarly, the North Carolina Court of Appeals held that lumber and related
materials used to construct warehouses and other buildings on farms were subject to
the use tax. See Morton Bldgs., Inc. v. Tolson, 172 N.C. App. 119, 120, 615 S.E.2d
906, 908 (2005). The case addressed an earlier, though similar, version of section
105-164.6, which imposed a use tax “on the purchase price of tangible personal
property purchased inside or outside the State that becomes a part of a building or
other structure in the State.” N.C. Gen. Stat. § 105-164.6(b) (2003). The Court of
Appeals reasoned that the plain language of the use tax statute applied to the
building materials at issue “because the materials, which are tangible personal
property, became ‘part of a building or other structure in the State.’” Morton Bldgs.,
172 N.C. App. at 123, 615 S.E.2d at 910. Furthermore, “[b]y incorporating the lumber
and other materials petitioner purchased into the buildings petitioner constructed in
North Carolina, petitioner exercised a right, power, and dominion over, and therefore
used the . . . materials.” Id. at 124, 615 S.E.2d at 910 (emphasis in original).
29. What flows from these cases is a reasonably defined standard for
distinguishing between a use and a sale, at least as those terms apply to the activities
of contractors. There is a clear difference, for example, between the transfer of
property for the purpose of eventual resale and the use of property to perform a turn-
key job. The former typically falls in the category of a retail sale, and the latter is deemed a use. The distinction is especially clear when a contractor purchases
construction materials and then incorporates them into a building or other structure
in the course of performing the contract. Our courts have treated such activities as
the performance of a job (subject to the use tax) rather than the sale of the specific
materials at issue (subject to the sales tax).
30. This understanding of section 105-164.6 is further supported by the
Department’s interpretation of the statute, as stated in the North Carolina
Administrative Code and in published bulletins. “The interpretation of a revenue law
adopted by the agency charged with its enforcement is a significant aid to judicial
interpretation of the same provision.” Jefferson-Pilot Ins. Co., 161 N.C. App. 558,
560–61, 589 S.E.2d 179, 181 (2003). “An interpretation by the Secretary is prima
facie correct,” N.C. Gen. Stat. § 105-264(a), as well as “strongly persuasive” and
“entitled to due consideration,” Midrex Techs., 369 N.C. at 260, 794 S.E.2d at 793
(citation and quotation marks omitted).
31. During the relevant period, the Department consistently advised that
“[c]ontractors are considered the consumers of tangible personal property they use in
fulfilling contracts and are liable for payment of applicable statutory State and local
sales or use taxes on the property.” 17 N.C. Admin. Code 07B.2602(a) (2012)
(emphasis added); see also 17 N.C. Admin. Code 07B.2607. In Sales and Use Tax
Bulletin 31-1, which specifically addresses “Contractors and Building Materials,” the
Department repeated this guidance, advising that it deems contractors “to be consumers of tangible personal property which they use in fulfilling performance
contracts.” N.C. Sales & Use Tax Bulletin § 31-1 [“Bulletin”] (emphasis added).
32. Bulletin 31-1 goes on to explain the factors that are relevant to determining
whether a transaction is a performance contract as opposed to a retail sale:
“In order to establish if a transaction constitutes a performance contract, the tenor of the agreement is for the contractor to perform a job, retaining the right to control the means, the method, and the manner of accomplishing the desired result. A performance contract does not provide for a sale of specific items; rather, the contractor agrees to furnish the necessary materials, labor, and expertise to accomplish the job. With a performance contract, responsibility for the job and title to the materials purchased by the contractor remain with the contractor until the job is completed and accepted by the purchaser/owner. The contractor is liable for accidents or injury at the job site and loss or damage due to vandalism, neglect, theft, and fire.”
See Bulletin § 31-1.
33. Thus, under the interpretation adopted by the Department, the general rule
is that contractors using tangible personal property to fulfill their contracts are the
users or consumers of that property. A “sale of specific items” is treated as a retail
sale. By contrast, the use of materials in the course of fulfilling an agreement “to
perform a job”—in which “the contractor agrees to furnish the necessary materials,
labor, and expertise to accomplish the job”—is a statutory use, subject to the use tax.
Put another way, the distinction drawn by the Department is the same distinction
drawn by Atlas Supply and Morton Buildings.
34. Here, under both the plain language of the statute and the governing
regulations, the undisputed evidence shows that First Petroleum’s activities fall on
the use side of the line. The FPS Contracts do not identify specific items for sale.
Rather, they define a scope of work—a job to be performed. First Petroleum agreed to construct large-scale improvements to real property. To perform its obligations,
First Petroleum purchased necessary materials, incorporated those materials into
fuel storage and dispensing systems, and transferred to each property owner a
completed, functioning system. In doing so, First Petroleum “exercised a right,
power, and dominion over, and therefore used the . . . materials.” Morton Bldgs., 172
N.C. App. at 124, 615 S.E.2d at 910 (emphasis in original); see also id. at 123, 615
S.E.2d at 910 (“materials . . . became ‘part of a building or other structure in the
State’”); N.C. Gen. Stat. § 105-164.6(a)(1) (imposing use tax on tangible personal
property that becomes “part of a building or other structure” in North Carolina).
35. As a result, the Department’s assessment of use tax was correct. Summary
judgment in favor of the Department is appropriate.
B. The Final Decision’s Application of Bulletin 31-1 Was Erroneous.
36. The ALJ’s Final Decision reached a different conclusion solely on the basis
of language in Bulletin 31-1. This decision was erroneous for three reasons.
37. First, this dispute ultimately concerns a question of statutory
interpretation, for which the starting point must be the statute’s text and relevant
precedent. The Final Decision neglects both. It is noteworthy that First Petroleum,
in defending the Final Decision, does not address or distinguish Atlas Supply or
Morton Buildings. Nor does it cite any contrary case law treating the use of building
materials to perform a construction contract as a retail sale. In short, First Petroleum
provides no basis to conclude that the Final Decision’s reasoning is consistent with
precedent or the traditional application of sales tax and use tax in this context. 38. While briefly addressing the statute in its opposition brief, First Petroleum
insists “that often it is not clear whether a transaction at issue is a use or a sale” and
that “not every affixation of tangible personal property to real property is a taxable
use.” (Opp’n 5 n.2.) But to resolve this dispute, the Court need not decide whether
every affixation of tangible personal property results in a taxable use. (This case is
not about, for example, the sale of carpeting or a home appliance with ancillary
installation services, for which tax treatment may be different.) The issue is much
narrower: whether First Petroleum’s use of construction materials in erecting and
installing fuel structures on real property is a taxable use. The plain language of the
statute and the holdings of Atlas Supply and Morton Buildings confirm that it is, and
the Department’s administrative guidance is consistent with both.
39. Second, the ALJ failed to read Bulletin 31-1 as a whole. According to the
ALJ, Bulletin 31-1 “draws a distinction between those construction contracts in which
the contractor determines the method, manner and means of completing the final
project and those in which the owner determines the method, manner and means of
completing the final project.” (R.15 ¶ 69.) The ALJ treated this distinction as the
“critical issue,” (R.17 ¶ 84), and First Petroleum doubles down on the point, referring
to it as the “gravamen” or “ultimate test” for distinguishing between taxable sales
and taxable uses, (Opp’n 8).
40. This cramped interpretation is not supported by the language of Bulletin
31-1. Fairly construed, the Bulletin frames the inquiry as whether “the tenor of the
agreement is for the contractor to perform a job, retaining the right to control the means, the method, and the manner of accomplishing the desired result.” (R.97
(emphasis added).) Bulletin 31-1 describes several factors to consider in making that
determination, including whether the contractor (i) “agrees to furnish the necessary
materials, labor, and expertise to accomplish the job”; (ii) retains “responsibility for
the job and title to the materials . . . until the job is completed and accepted”; and
(iii) “is liable for injury at the job site and loss or damage.”
41. It is undisputed these factors are met here. (See Opp’n 18–19 & n.11.) First
Petroleum agreed to furnish the necessary materials, labor, and expertise; title
remained with First Petroleum until the job was done; and First Petroleum was liable
for accidents, injuries, or loss. Furthermore, as discussed, there is no way to read the
contracts as a “sale of specific items” rather than a contract “to perform a job.” Taken
together, the factors deemed relevant by the Department in Bulletin 31-1 strongly
support its conclusion that First Petroleum agreed to perform a job, retaining the
right to control the means, method, and manner of performance.
42. Yet the ALJ held these factors were entitled to no weight on the ground that
the same “is true of virtually all construction contracts because the whole purpose of
the contract is for the contractor to build something for the owner.” (R.15 ¶ 68.) By
doing so, the ALJ read the relevant factors out of the Bulletin altogether, divorcing
the pertinent inquiry from the criteria that go into it. In the absence of a conflict with
the governing statute, however, the ALJ and this Court must apply the regulation as
written by the Department. No such conflict exists. The fact that certain factors
apply to “virtually all construction contracts” is not a stain on the Department’s interpretation. It is consistent with longstanding precedent that treats the use of
materials in the performance of a construction contract as subject to the use tax. The
Department’s interpretation therefore deserves due consideration.
43. Third, even putting aside the factors identified in the Bulletin, the Court
agrees with the Department that First Petroleum retained control over the means,
manner, and method of carrying out its contracts. To be sure, First Petroleum was
required to comply with extensive “plans and specifications prepared by the owner’s
engineers and architects,” among other restrictions. (Opp’n 9.) But the question is
not whether the property owners exercised oversight as to the scope of work to be
performed. (See R.272.) It is instead whether First Petroleum took responsibility for
supplying the appropriate materials and expertise, supervising its workers, and
carrying out the job. The undisputed evidence shows that it did. (See, e.g., R.329,
519; see also R.1530 (“It is agreed that the Subcontractor is an independent
contractor.”).)
44. First Petroleum nevertheless argues that Bulletin 31-1 should be construed
in its favor because it is “poorly crafted” and “virtually impossible for taxpayers to
apply.” (Opp’n 20.) Not so. For the reasons discussed above, Bulletin 31-1 is
consistent with section 105-164.6 and appellate precedents applying the sales and
use tax laws. Read as a whole, and in light of existing precedent, Bulletin 31-1 is
neither ambiguous nor incapable of reasoned application. See Carolina Photography,
Inc. v. Hinton, 196 N.C. App. 337, 341, 674 S.E.2d 724, 727 (2009) (applying Sales
and Use Tax Technical Bulletin where consistent with precedent). C. The Department’s Alternative Arguments Are Moot.
45. The Department also contends that the ALJ erred for two additional
reasons. It argues, first, that the ALJ improperly prohibited the Department from
changing the basis of its proposed assessment from the use tax to the sales tax.
Second, the Department contends that the ALJ awarded relief to First Petroleum
beyond what was requested in its petition for administrative review. Having
concluded that the ALJ erred in granting summary judgment in favor of First
Petroleum and in denying the Department’s motion for summary judgment, the Court
need not address these alternative arguments.
IV. CONCLUSION
46. For these reasons, the Court REVERSES the Final Decision and
REMANDS with instructions to enter partial summary judgment in favor of the
Department. On remand, the Office of Administrative Hearings shall determine the
amount of tax due.
This the 23rd day of February, 2018.
Adam M. Conrad Adam M. Conrad Special Superior Court Judge for Complex Business Cases