CHEVRON U.S.A. INC., a Pennsylvania corporation, Plaintiff/Appellant,
ARIZONA DEPARTMENT OF REVENUE, an agency of the State of Arizona, Defendant/Appellee.
Appeal from Arizona Tax Court No. TX2011-001038 The Honorable Dean M. Fink, Judge The Honorable Christopher T. Whitten, Judge
Gallagher & Kennedy, PA, Phoenix By Mark A. Fuller Co-Counsel for Plaintiff/Appellant
Cavanagh Law Firm, Phoenix By James G. Busby, Jr. Co-Counsel for Plaintiff/Appellant
Arizona Attorney General's Office, Phoenix By Jerry A. Fries Counsel for Defendant/Appellee
Snell & Wilmer, LLP, Phoenix By Craig R. McPike and Robert I. Schwimmer Co-Counsel for Amicus Curiae Arizona Tax Research Association, Arizona Chamber of Commerce and Industry, Arizona Manufacturers Council and Arizona Mining Association
Fennemore Craig, PC, Phoenix By Patrick Irvine Co-Counsel for Amicus Curiae Arizona Tax Research Association, Arizona Chamber of Commerce and Industry, Arizona Manufacturers Council, and Arizona Mining Association
Presiding Judge Donn Kessler delivered the opinion of the Court, in which Chief Judge Michael J. Brown and Judge Andrew W. Gould joined.
¶1 Chevron U.S.A., Inc. appeals from the tax court's entry of summary judgment in favor of the Arizona Department of Revenue. We hold that the industrial oils and greases used in mining and metallurgical operations involved in this case are exempt from the transaction privilege tax. Accordingly, we reverse the decision of the tax court and remand for entry of summary judgment in favor of Chevron.
FACTUAL AND PROCEDURAL HISTORY
¶2 This case involves the application of Arizona's transaction privilege tax to Chevron's sale of oils and greases to Freeport-McMoRan, Inc. for use in its mining and metallurgical operations. Freeport uses the oils and greases in conjunction with its machinery and equipment.
¶3 Chevron filed a refund claim for $324, 233.79 in taxes paid between July 2002 and March 2006 on products sold to Freeport. Chevron asserted that the sales of oils and greases are exempt from the transaction privilege tax under Arizona Revised Statutes ("A.R.S.") sections 42- 5061(B)(1), (2), (18) (Supp. 2015),  which exempt machinery and equipment used in mining or metallurgical operations and for machinery and equipment used to prevent or reduce pollution arising from such operations.
¶4 In response, the Department granted Chevron a refund of $8, 357.26 for taxes paid on the sale of hydraulic oils and transmission fluids only. The Department denied the remainder of Chevron's refund claim pertaining to engine oil, gear oil, grease, and open gear lube.
¶5 After exhausting its administrative remedies, Chevron filed a complaint in tax court pursuant to A.R.S. § 42-1254(C) (2013). The parties filed cross-motions for summary judgment, and the court granted summary judgment in favor of the Department. Chevron timely appealed, and we have ...