David K. Higgins, Esq.
Darrell
V. McGraw, Jr.
Paul G. Papadopoulos, Esq.
Attorney
General
Robinson & McElwee, PLLC
Joy
M. Bolling
Charleston, West Virginia
Assistant
Attorney General
Attorneys for Appellant
Charleston,
West Virginia
Attorneys
for Appellee
JUSTICE STARCHER delivered the Opinion of the Court.
2. “Any
rules or regulations drafted by an agency must faithfully reflect the intention
of the Legislature, as expressed in the controlling legislation. Where a statute
contains clear and unambiguous language, an agency's rules or regulations must
give that language the same clear and unambiguous force and effect that the
language commands in the statute.” Syllabus Point 4, Maikotter v. University
of W.Va. Bd. of Trustees, 206 W.Va. 691, 527 S.E.2d 802 (1999).
3. “It
is fundamental law that the Legislature may delegate to an administrative agency
the power to make rules and regulations to implement the statute under which
the agency functions. In exercising that power, however, an administrative agency
may not issue a regulation which is inconsistent with, or which alters or limits
its statutory authority.” Syllabus Point 3, Rowe v. W.Va. Dept. of Corrections,
170 W.Va. 230, 292 S.E.2d 650 (1982).
4. “A
statute, or an administrative rule, may not, under the guise of 'interpretation,'
be modified, revised, amended or rewritten.” Syllabus Point 1, Consumer
Advocate Div'n v. Public Service Comm'n, 182 W.Va. 152, 386 S.E.2d 650 (1989).
5. The
judiciary is the final authority on issues of statutory construction, and we
are obliged to reject administrative constructions that are contrary to the
clear language of a statute.
6. “In
the absence of any definition of the intended meaning of words or terms used
in a legislative enactment, they will, in the interpretation of the act, be
given their common, ordinary and accepted meaning in the connection in which
they are used.” Syllabus Point 1, Miners in General Group v. Hix,
123 W.Va. 637, 17 S.E.2d 810 (1941), overruled on other grounds by Lee-Norse
Co. v. Rutledge, 170 W.Va. 162, 291 S.E.2d 477 (1982).
7. Any
sales of property or services directly used or consumed in the business of transmitting
natural gas by pipeline, whether the natural gas being transmitted in the pipeline
is owned by the business owner or not, are exempt from the consumer sales tax
under W.Va. Code, 11-15-9(7) [1985] and W.Va. Code, 11-15-9(g)
[1987].
Starcher, Justice:
In this appeal from the Circuit Court of Harrison County, appellant CNG Transmission Corporation (“CNG”) challenges the circuit court's ruling upholding assessments against CNG for consumer sales taxes imposed by the Tax Commissioner of the State of West Virginia (“Tax Commissioner”). The taxes were assessed upon CNG's purchase of goods and services that were used in the transmission of natural gas owned by CNG.
After careful consideration,
we reverse the circuit court's ruling, and find that the statutes in effect
at the time of CNG's purchases exempted the purchase of goods and services
used in the transmission of natural gas from the consumer sales tax, whether
or not CNG owned the natural gas that was being transmitted.
The
instant case involves the interpretation of several tax statutes
(See footnote 1) that exempt
companies in the business of the “transmission” of natural gas through
a pipeline from paying consumer sales tax on the purchase of goods and services
that are used to conduct that business. The Tax Commissioner
disputes CNG's claim to have the status of a company in the business of transmission.
Between January 1986 and September
1993, CNG was engaged in the business of transporting natural gas through
its pipeline system, both within and without the State of West Virginia. CNG
was also in the business of making wholesale sales of “company- owned”
natural gas that CNG bought from other suppliers.
(See footnote 2) To sell this company-owned natural gas, CNG would
transport the natural gas to a subsequent purchaser through its pipeline system.
The Tax Commissioner, in an
audit of CNG's records, found that between January 1, 1986 and September 30,
1993, from 5% to 13% of the natural gas flowing through CNG's pipelines was
company-owned; the remaining 87% to 95% of the natural gas belonged to other
companies. (See footnote
3) The Tax Commissioner took the position that the transportation
of company-owned natural gas for sale to others by CNG could not to
be included in the statutorily tax-exempt activity of “transmission.”
The Tax Commissioner concluded that, between 1986 and 1993, CNG should have
paid sales tax on 5% to 13% of
all
goods and services purchased and used to transport natural gas through CNG's
pipelines. (See footnote
4) With the addition of interest, on February 25, 1998, CNG was
assessed with a total sales tax liability of $266,601.94.
After receiving notification
of the tax assessment, CNG paid the tax liability and timely filed a petition
for reassessment. By a decision dated February 22, 2000, an Administrative
Law Judge (“ALJ”) found that CNG was liable to the State of West
Virginia for taxes related to the purchase of goods and services used in connection
with its transportation of company-owned natural gas between January 1, 1986,
and September 30, 1993. CNG subsequently sought judicial review of the decision
in the Circuit Court of Harrison County. In an order dated January 22, 2001,
the circuit court affirmed the ALJ's ruling.
CNG now appeals the circuit
court's order.
At
issue in the instant case is the Tax Commissioner's interpretation of several
statutes, in effect between January 1986 and September 1993, that exempted
from the consumer sales tax goods and services that were purchased and directly
used or consumed in the business of the “transmission” of natural
gas.
The first statute, W.Va.
Code, 11-15-9(7) [1985]
(See footnote 5) , was effective between January 1, 1986, and June
30, 1987, and provided the following exemption from the consumer sales tax:
Sales of property or services
to persons engaged in this state in the business of . . . transmission . .
. Provided, That the exemption herein granted shall apply only to services,
machinery, supplies and materials directly used or consumed in the businesses
or organizations named above, and shall not apply to purchases of gasoline
or special fuel[.] This
statute did not specifically define the term “transmission,” nor
did the regulations enacted by the Tax Commissioner define or limit the term
“transmission.” Furthermore, no language was contained in either
the statute or the Tax Commissioner's regulations regarding the transportation
of company-owned natural gas by the owner of the transmission business.
Effective July 1, 1987, the
Legislature substantially altered the relevant tax statutes, and enacted changes
that remained in effect through 1993. The statute above was changed to W.Va.
Code, 11-15-9(g) [1987],
(See footnote 6) and was amended to read as follows:
The following sales and services
shall be exempt [from the consumer sales tax]: . . .
(g) Sales of property or services
to persons engaged in this state in the business of . . . transmission . .
. Provided . . . the exemption provided in this subsection shall apply only
to services, machinery, supplies and materials directly used or consumed in
the activities of . . . transmission . . . in the businesses or organizations
named above and shall not apply to purchases of gasoline or special fuel[.]
Additionally, the Legislature, in W.Va. Code, 11-15-2(r) [1987],
(See footnote 7) defined
the term “transmission” as follows: “Transmission”
shall mean the act or process of causing . . . natural gas . . . to pass or
be conveyed from one place or geographical location to another place or geographical
location through a pipeline or other medium for commercial purposes.
The language contained in these two statutes was in effect through the remainder
of the relevant time period in this case.
Pursuant to these statutes,
the Tax Commissioner enacted various regulations that were in effect between
July 1, 1987 and April 30, 1992. Those regulations essentially restated the
statutory definition of “transmission” as the “act or process
of causing . . . natural gas . . . to pass or be conveyed from one place .
. . to another place . . . through a pipeline[.]”
(See footnote 8)
The regulations, like the statute,
were again silent concerning the transportation of company- owned natural
gas by the owner of the transmission business.
Regulations that were legislatively
approved and which became effective on May 1, 1992, addressed this issue for
the first time, and specifically provided that the tax- exempt business of
“transmission” did not include the transport of company-owned natural
gas. Specifically, 110 C.S.R. 15, §123.4.4 [1992] was amended to read
as follows, in part and with emphasis on the amendments:
Transmission. -- The
activity of transmission means the act or process of causing . . . natural
gas . . . to pass or be conveyed for others for consideration from
one place or geographical location through a pipeline or other medium for
commercial purposes but does not include the passage or conveyance of .
. . natural gas . . . by the owner thereof.
The Tax Commissioner contends
that the statutory and regulatory definitions of “transmission”
have remained materially the same over the January 1986 to September 1993
assessment period, and contends that in none of the definitions is there any
indication that CNG is entitled to an exemption for conveying company-owned
natural gas.
The Tax Commissioner argues
that the tax exemption contained in W.Va. Code, 11-15-9(7) [1985] and
W.Va. Code, 11-15-9(g) [1987] applies only to companies in the “business”
of transmission, with the “transmission” done for “commercial
purposes.” When a company transports natural gas owned by another, and
charges a fee for the transportation service, the company is engaged
in the business of transmission for a commercial purpose. However, the Tax
Commissioner argues that when a company transports company-owned natural gas
through a pipeline, the transportation service is merely incidental to the
subsequent sale of the gas to a purchaser -- the commercial purpose of the
transaction is to sell natural gas for a profit, not to transport natural
gas. Accordingly, the Tax Commissioner argues that the “transmission”
of company-owned natural gas is not done for a commercial purpose, and is
therefore not a tax-exempt activity.
Appellant CNG, however, argues
that the Tax Commissioner has -- particularly through the regulations adopted
in 1992 -- ignored the statutory definition of “transmission.” CNG
takes the position that “transmission” means any act of conveying
natural gas through a pipeline for a commercial purpose, and argues that when
CNG conveys natural gas along its pipeline to a customer -- whether the gas
is company-owned or owned by another person -- CNG charges the customer for
the transportation costs incurred. Accordingly, CNG posits that its purchases
of pipe, valves, gauges and other goods and services directly used or consumed
in the operation of its interstate pipeline are used in its “transmission”
business, and that those purchases are exempt from sales taxes. We agree with
CNG's position.
The essence of CNG's argument
is that the meaning of the word “transmission” in the statutes is
clear and unambiguous, but that the Tax Commissioner has altered that definition
through regulations and interpretation. “Where the language of a statute
is clear and without ambiguity the plain meaning is to be accepted without
resorting to the rules of interpretation.” Syllabus
Point 2, State v. Elder, 152 W.Va. 571, 165 S.E.2d 108 (1968). In
accord, Syllabus Point 1, Peyton v. City Council of Lewisburg,
182 W.Va. 297, 387 S.E.2d 532 (1989); Syllabus Point 2, Mallamo v. Town
of Rivesville, 197 W.Va. 616, 477 S.E.2d 525 (1996).
As a rule of statutory construction,
we have repeatedly held that:
Any rules or regulations
drafted by an agency must faithfully reflect the intention of the Legislature,
as expressed in the controlling legislation. Where a statute contains clear
and unambiguous language, an agency's rules or regulations must give that
language the same clear and unambiguous force and effect that the language
commands in the statute.
Syllabus Point 4, Maikotter v. University of W.Va. Bd. of Trustees,
206 W.Va. 691, 527 S.E.2d 802 (1999). We held similarly in Syllabus Point
3 of Rowe v. W.Va. Dept. of Corrections, 170 W.Va. 230, 292 S.E.2d
650 (1982) that:
It is fundamental law that
the Legislature may delegate to an administrative agency the power to make
rules and regulations to implement the statute under which the agency functions.
In exercising that power, however, an administrative agency may not issue
a regulation which is inconsistent with, or which alters or limits its statutory
authority.
See also, Anderson & Anderson Contractors, Inc. v. Latimer,
162 W.Va. 803, 807-08, 257 S.E.2d 878, 881 (1979) (“Although an agency
may have power to promulgate rules and regulations, the rules and regulations
must be reasonable and conform to the laws enacted by the Legislature.”).
In sum, “[a] statute, or an administrative rule, may not, under the guise
of 'interpretation,' be modified, revised, amended or rewritten.” Syllabus
Point 1,
Consumer Advocate Div'n v. Public Service
Comm'n, 182 W.Va. 152, 386 S.E.2d 650 (1989). The judiciary is the final
authority on issues of statutory construction, and we are obliged to reject
administrative constructions that are contrary to the clear language of a
statute. See Appalachian Power Co. v. State Tax Dept. of W.Va.,
195 W.Va. 573, 589 n. 19, 466 S.E.2d 424, 440 n. 19 (1995) (quoting
INS v. Cardoza-Fonseca, 480 U.S. 421, 447-48, 107 S.Ct. 1207, 1221,
94 L.Ed.2d 434, 457-58 (1987), quoting Chevron U.S.A., Inc. v. Natural
Resources Defense Council, Inc., 467 U.S. 837, 843 n. 9, 104 S.Ct. 2778,
2781 n. 9, 81 L.Ed.2d 694, 703 n. 9 (1984)).
In the instant case, the statutory
provisions are clear. W.Va. Code, 11-15-9(7) [1985] plainly exempted
purchases directly used to support the act of “transmission” from
sales taxes. While “transmission” was not defined, we have long
held that:
In the absence of any definition
of the intended meaning of words or terms used in a legislative enactment,
they will, in the interpretation of the act, be given their common, ordinary
and accepted meaning in the connection in which they are used.
Syllabus Point 1, Miners in General Group v. Hix, 123 W.Va. 637, 17
S.E.2d 810 (1941), overruled on other grounds by Lee-Norse Co. v.
Rutledge, 170 W.Va. 162, 291 S.E.2d 477 (1982). The common, ordinary meaning
of “transmit” is “to send or transfer from one person or place
to another . . .”, Black's Law Dictionary 1344 (5th Ed. 1979),
and “to send from one person, thing or place to another; convey . . .”,
The American Heritage Dictionary (Second College Ed.) 1288 (1982).
We therefore conclude that, in enacting the 1985 version of the statute, the
Legislature intended to exempt from the consumer sales tax any purchase of goods or services made to support
the act of sending or transferring natural gas from one place to another --
regardless of who owned the natural gas.
Similarly, in 1987 the Legislature
specifically adopted a definition of “transmission” which mirrored
that found in dictionaries. W.Va. Code, 11-15-2(r) [1987] defined “transmission”
as passing or conveying natural gas “from one place or geographical location
to another place or geographical location through a pipeline” for commercial
purposes. We find no limitation in this statutory exemption that prohibits
its application to the conveyance of natural gas that is owned by the pipeline
owner. So long as the conveying of natural gas is being done for some commercial
purpose, any purchases of goods and services directly used to support the
conveyance are exempt from taxation.
Accordingly, we conclude that
any sales of property or services directly used or consumed in the business
of transmitting natural gas by pipeline, whether the natural gas being transmitted
in the pipeline is owned by the business owner or not, are exempt from the
consumer sales tax under W.Va. Code, 11-15-9(7) [1985] and W.Va.
Code, 11-15-9(g) [1987].
The Tax Commissioner's regulations,
enacted in 1987, 1988, and 1989, were consistent with the definition of “transmission”
contained in W.Va. Code, 11-15-2(r) [1987]. However, the 1992 regulations,
specifically 110 C.S.R. 15, §123.4.4 [1992], substantially modified the
statutory definition of “transmission” to limit the application
of the exemption to only those instances where natural gas was being “conveyed
for others” -- and conversely, specifically excluded from the
exemption purchases used in “the passage or conveyance of . . . natural
gas . . . by the owner thereof.”
In view of the Legislature's
plainly expressed intent that any purchase used in the business of the transmission
of natural gas -- regardless of who owns the natural gas being transmitted
-- be exempt from the consumer sales tax, we conclude that the Tax Commissioner's
1992 regulation is contrary to legislative command. The regulation is therefore
unenforceable against CNG, and all purchases of goods and services used in
CNG's transmission of company-owned natural gas between January 1, 1986, and
September 30, 1993 were exempt from taxation.
Reversed and Remanded.