Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Pratt & Whitney Engine Services v. Steager

Supreme Court of West Virginia

November 1, 2017

PRATT & WHITNEY ENGINE SERVICES, Petitioner
v.
DALE W. STEAGER, State Tax Commissioner of West Virginia, Respondent

          Submitted: October 18, 2017

         Appeal from the Circuit Court of Harrison County The Honorable John Lewis Marks, Jr., Judge Civil Action No. 15-P-68-1

          Herschel H. Rose, III, Esq. Rose Law Office Charleston, West Virginia Counsel for the Petitioner

          Patrick Morrisey, Esq. Attorney General Sean Whelan, Esq. Assistant Attorney General L. Wayne Williams, Esq. Assistant Attorney General Charleston, West Virginia Counsel for the Respondent

         SYLLABUS BY THE COURT

         1. "In cases where a taxpayer challenges an ad valorem tax assessment, a circuit court's conclusions of law are reviewed by this Court de novo." Syllabus Point 3, Pope Properties/Charleston Ltd. Liability Co. v. Robinson, 230 W.Va. 382, 738 S.E.2d 546 (2013).

          OPINION

          KETCHUM JUSTICE

         In this case we consider whether a large inventory of jet engine repair parts are exempt from ad valorem property taxation. The county assessor, state tax commissioner, and circuit court all considered this question and concluded that the repair parts are not exempt from ad valorem property taxation. After review, we agree with the circuit court's conclusion and, accordingly, affirm its order.

         I. FACTUAL AND PROCEDURAL BACKGROUND

         Petitioner Pratt & Whitney Engine Services ("Pratt") repairs jet engines at its facility in Bridgeport, West Virginia. It maintains a vast inventory of jet engine repair parts at its West Virginia facility-the parts at issue are listed on a 39-page single-spaced document and are valued at $7, 438, 639.52.

         In January 2015, Pratt requested that the Harrison County Assessor conduct a review of whether the majority of its repair parts were exempt from ad valorem taxation.[1] Pratt argued that the repair parts were exempt from ad valorem taxation[2] pursuant to the Freeport Amendment contained in the West Virginia Constitution. The Freeport Amendment exempts certain personal property of inventory and warehouse goods from ad valorem taxation. It provides:

Notwithstanding any other provisions of this Constitution, tangible personal property which is moving in interstate commerce through or over the territory of the State of West Virginia, or which was consigned from a point of origin outside the State to a warehouse, public or private, within the State for storage in transit to a final destination outside the State, whether specified when transportation begins or afterward, but in any case specified timely for exempt status determination purposes, shall not be deemed to have acquired a tax situs in West Virginia for purposes of ad valorem taxation and shall be exempt from such taxation, except as otherwise provided in this section. Such property shall not be deprived of such exemption because while in the warehouse the personal property is assembled, bound, joined, processed, disassembled, divided, cut, broken in bulk, relabeled, or repackaged for delivery out of state, unless such activity results in a new or different product, article, substance or commodity, or one of different utility.

W.Va. Const. art. X, § 1c [1986] (emphasis added).

         After conducting its review, the county assessor determined that the repair parts were not exempt from ad valorem taxation. The assessor explained its finding as follows:

[O]ur review indicates that the parts in inventory are used in a manufacturing process that renders them an integral part of a jet engine. Clearly, the parts in a functioning jet engine have a different utility than the parts that are stocked on shelves and used in the repairs process. Given our review, we are of the opinion that the parts inventory located in Bridgeport and used by [Pratt] in its jet engine repairs process are not eligible for the Freeport exemption . . . as the use of such parts by [Pratt] . . . results in a product of different utility.

         At Pratt's request, the county assessor certified Pratt's question to the Respondent State Tax Commissioner ("tax commissioner") for "review and issuance of a taxability ruling." The tax commissioner issued a detailed, seven-page decision which concluded that Pratt's repair parts were not exempt from ad valorem taxation. Pratt appealed the tax commissioner's administrative decision to the circuit court.

         The circuit court held a bench trial on April 29, 2016.[3] The sole witness at the bench trial was Pratt's manager of supply chain logistics, Timothy H. Tucker. Mr. Tucker testified that Pratt buys the repair parts from its parent company, Pratt Whitney Canada. He stated that Pratt uses the repair parts when manufacturing, overhauling, and repairing jet engines. All of the repair parts are shipped to the Bridgeport facility from locations outside of West Virginia. The majority of the repair parts stay in the Bridgeport facility from "zero to three months." Mr. Tucker testified that the repair parts that are used retain their characteristics and identity during their installation into a jet engine. For example, Mr. Tucker was asked about one particular repair part, a counterweight, and had the following exchange with counsel for Pratt:

Q. So from the inception of manufacture, to the time it takes off and flying people hither and yon, it is a counterweight coming in, it's a counterweight going out?
A. That's correct.

         During cross-examination, Mr. Tucker discussed the purpose and utility of a jet engine, and the purpose and utility of the individual repair parts:

Q. What's the purpose of a jet engine?
A. It is to provide thrust.
Q. To fly an airplane?
A. To fly an airplane, a helicopter, anything that you want to put it on, whether it's a jet engine, in general, would have many uses.
Q. And then you install all of these parts as needed in the repair of jet engines?
A. That's correct.
Q. Could you tell me what is the - is a grommet vein retaining[4] the same product as a jet engine?
A. It is a component of a jet engine.
Q. But the jet engine, is that the same as a grommet?
A. It would not be the same, as far as a part number goes, no.
Q. But it's a different product?
A. It is - it's a piece of that product, yes. It's used in building that product. You can't have the jet engine without it.
Q. Does the jet engine have the same utility as a grommet?
A. The jet engine itself would not have the same utility as the grommet, but the jet engine wouldn't exist without what the ...

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.