from the Arizona Tax Court No. TX2016-001024 The Honorable
Christopher T. Whitten, Judge
DeConcini, McDonald, Yetwin & Lacy, PC, Tucson By James
M. Susa, Sesaly O. Stamps Counsel for Plaintiff/Appellee
Arizona Attorney General's Office, Phoenix By Benjamin H.
Updike, Scot G. Teasdale Counsel for Defendant/Appellant
Presiding Judge Jon W. Thompson delivered the opinion of the
Court, in which Judge Peter B. Swann joined and Judge James
P. Beene specially concurred.
THOMPSON, Presiding Judge
The Arizona Department of Revenue (Department) appeals from
the tax court's grant of summary judgment in favor of
Empire Southwest LLC (Empire). Because we conclude that the
sale of Empire's fuel truck was exempt from transaction
privilege tax, we affirm.
AND PROCEDURAL HISTORY
The facts in this case are undisputed. Empire is an equipment
retailer operating in Arizona. In 2014, Empire sold a
modified Caterpillar 777G WT truck (the Truck) to the Pinto
Valley Mine (the Mine) for use in its open pit copper mining
operation. Pinto uses the Truck to transport fuel and
lubricants from the Mine rim to equipment located in the pit.
Empire added $121, 777.68 in transaction privilege tax to the
Truck's purchase price, but Pinto refused to pay the tax
claiming the Truck was exempt from tax pursuant to Arizona
Revised Statutes (A.R.S.) section 42-5061(B)(2) (2018), which
exempts equipment used directly in the process of extracting
ores or minerals from the earth. Empire paid the tax itself
and, thereafter, sought a refund, which the Department
After an unsuccessful administrative appeal, Empire filed a
complaint in tax court. The parties filed cross-motions for
summary judgment. The tax court granted Empire's motion
and denied the Department's motion finding that the Truck
qualified for the tax exemption. The Department timely
appealed, and we have jurisdiction pursuant to A.R.S.
§§ 12-120.21(A)(1) and -170(C) (2016).
The sole issue on appeal is whether the Truck is exempt from
transaction privilege tax pursuant to A.R.S. §
42-5061(B)(2). We review this issue of statutory
interpretation de novo. See Chevron U.S.A. Inc. v. Ariz.
Dep't of Revenue, 238 Ariz. 519, 520, ¶ 6 (App.
2015). Because A.R.S. § 42-5061(B) creates a tax
exemption, we strictly construe this provision and
acknowledge a presumption against the exemption. See
id. We will not, however, construe the exemption so
strictly "as to defeat or destroy the [legislative]
intent and purpose." State ex rel. Ariz. Dep't
of Revenue v. Capitol Castings, Inc., 207 Ariz. 445,
447, ¶ 10 (2004) (citation omitted).
The Arizona transaction privilege tax is an excise tax on the
privilege of conducting business within the state. See
Ariz. Dep't of Revenue v. Mountain States Tel. & Tel.
Co., 113 Ariz. 467, 468 (1976). The retail
classification imposes a tax on the gross proceeds or income
derived from "the business of selling tangible personal
property at retail." A.R.S. § 42-5061(A).
There are numerous exemptions to the retail transaction
privilege tax, including the one at issue here, which permits