AI Generated Opinion Summaries

This summary was computer-generated without any editorial revision. It is not official, has not been checked for accuracy, and is NOT citable.

Facts

• The Taxpayer, Peabody Coalsales Company, sold coal to an Arizona power plant and consistently paid gross receipts taxes on these sales. In 2015, the Taxpayer filed for a refund of the gross receipts taxes paid from December 2011 through December 2012, amounting to $6,407,751.74, arguing that the coal sold, which was used by the power plant to produce electricity through an exothermic chemical reaction, should be considered a "chemical" under Section 7-9-65 of the Gross Receipts and Compensating Tax Act and thus deductible from gross receipts (paras 2-3).

Procedural History

• Administrative Hearings Office: The administrative hearing officer denied the Taxpayer's request for a tax refund, concluding that the sale of coal does not qualify for a deduction under Section 7-9-65 of the Gross Receipts and Compensating Tax Act (para 1).

Parties' Submissions

• Taxpayer: Argued that coal qualifies as a "chemical" under Section 7-9-65 because it is used in the power plant to produce an exothermic chemical reaction, thereby making it eligible for deduction from gross receipts under the Act (para 3).
• Department: Contended that coal does not fall within the definition of a "chemical" for the purposes of Section 7-9-65 and, therefore, receipts from its sale are not deductible from gross receipts (para 4).

Legal Issues

• Whether the sale of coal to a power plant for the purpose of electricity generation qualifies as the sale of a "chemical" under Section 7-9-65 of the Gross Receipts and Compensating Tax Act, thereby making it deductible from gross receipts (para 9).

Disposition

• The Court of Appeals affirmed the decision of the administrative hearing officer, holding that receipts from the sale of coal are not deductible under Section 7-9-65 of the Gross Receipts and Compensating Tax Act (para 19).

Reasons

• Per B. Zamora, J. (Linda M. Vanzi, J., and Julie J. Vargas, J., concurring): The court concluded that the language of Section 7-9-65, which allows for the deduction of "receipts from selling chemicals and reagents in lots in excess of eighteen tons" from gross receipts, does not apply to the sale of coal. The court reasoned that the statute and its corresponding regulations do not explicitly mention coal or fuels, and the Legislature's intent, as derived from the statute's language, history, and background, does not support the Taxpayer's interpretation. The court further noted that tax deductions must be strictly construed in favor of the taxing authority and that the right to a deduction must be clearly and unambiguously expressed in the statute. The court found the term "chemical" in Section 7-9-65 to be ambiguous and, after considering the legislative intent and the statute's history, concluded that the Legislature did not intend for the deduction to apply to receipts from coal sales. The court also referenced the Legislature's actions in enacting and later repealing a separate deduction for coal sales, as well as recent amendments to Section 7-9-65, to support its conclusion (paras 7-18).