Submitted: October 18, 2017
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
BY THE COURT
"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).
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.
FACTUAL AND PROCEDURAL BACKGROUND
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.
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. Pratt argued that the repair parts
were exempt from ad valorem taxation 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
W.Va. Const. art. X, § 1c  (emphasis added).
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.
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
circuit court held a bench trial on April 29,
2016. 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.
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 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,
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 ...