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Chevron U.S.A. Inc. v. Ariz. Dep't of Revenue

Court of Appeals of Arizona, First Division

December 3, 2015

CHEVRON U.S.A. INC., a Pennsylvania corporation, Plaintiff/Appellant,
v.
ARIZONA DEPARTMENT OF REVENUE, an agency of the State of Arizona, Defendant/Appellee

Editorial Note:

Counsel is cautioned to make an independent determination of the status of this case. This decision is subject to further appellate review. Motions for reconsideration or petitions for review to the Arizona Supreme Court may be pending.

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.

OPINION

Page 137

 Donn Kessler, Judge.

[¶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),[1] 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 ...


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