Tetra Tech EC, Inc., and Lower Fox River Remediation LLC, Petitioners-Appellants,
Wisconsin Department of Revenue, Respondent-Respondent.
from an order of the circuit court for Brown County: No.
2015CV132 MARC A. HAMMER, Judge. Affirmed.
Stark, P.J., Hruz and Seidl, JJ.
In this sales and use tax case, the Tax Appeals Commission
concluded: (1) Stuyvesant Dredging, Inc.'s (SDI) activity
of separating dredged material from the Fox River into its
constituent parts constituted "processing" of
tangible personal property under Wis.Stat. §
77.52(2)(a)11. (2007-08),  and thus is a service subject to
Wisconsin's retail sales and use tax; and (2) Wis.Stat.
§ 77.59(3) did not preclude the Department of Revenue
from raising an alternative legal basis for taxation before
the commission that was not first asserted in the
Department's written notices of determination to Lower
Fox River Remediation, LLC (Fox River Remediation) and Tetra
Tech EC, Inc. (Tetra Tech).
We determine the commission's legal conclusions are
entitled to great weight deference and, under that
deferential standard, we conclude they are reasonable. We
also conclude the Department complied with the requirements
of Wis.Stat. § 77.59(3). Therefore, we affirm the
circuit court's order affirming the commission's
The material facts are undisputed. In 2007, the Environmental
Protection Agency ordered several Wisconsin paper companies
to remediate the environmental impact caused by
polychlorinated biphenyls (PCBs) the companies had previously
released into the Fox River. In response, the paper companies
created Fox River Remediation. Fox River Remediation hired
Tetra Tech as its general contractor to perform the
remediation. Tetra Tech, in turn, hired SDI as one of its
subcontractors. SDI was hired to separate the material
dredged from the Fox River into its constituent components so
that those components could be delivered to, and disposed of,
by Tetra Tech. More specifically, SDI removes the sand from
the dredged material and then extracts the water from the
finer-grained sediments left over from the desanding through
the use of membrane filter presses. The remaining material,
consisting of the finer-grained sediments and PCBs, is then
disposed of by Tetra Tech.
In 2010, the Department conducted a field audit of Fox River
Remediation and Tetra Tech. After completing its field audit,
the Department issued written notices to both entities. The
Department concluded that Tetra Tech owed sales tax on the
portion of its sale of remediation services to Fox River
Remediation that represented SDI's activities. The
Department also concluded that Fox River Remediation owed use
tax on the portion of its purchase of remediation services
from Tetra Tech that represented SDI's activities. In its
written notices to both entities, the Department concluded
that SDI's activities were taxable under W . S . §
77.52(2)(a)10. The Department did not cite IS TAT
§ 77.52(2)(a)11. in its written notices as a legal basis
for imposing tax liability.
In 2011, both entities filed petitions for redetermination
with the Department. With respect to the taxability of
SDI's activities, the Department denied in part the
petitions for redetermination in 2012, again concluding that
SDI's activities were taxable under Wis.Stat. §
Fox River Remediation and Tetra Tech petitioned the
commission to review the Department's determinations. Fox
River Remediation, Tetra Tech, and the Department each moved
for summary judgment. The Department argued that SDI's
activities were taxable under Wis.Stat. § 77.52(2)(a)10.
or, alternatively, as "processing" of tangible
personal property under § 77.52(2)(a)11. The commission
agreed with the alternative argument, concluding that
SDI's activities constituted "processing" of
tangible personal property under § 77.52(2)(a)11. The
commission also rejected Fox River Remediation and Tetra
Tech's argument that W . S . § 77.59(3) precluded
the Department from raising § 77.52(2)(a)11. as is tat
alternative legal basis for taxation before the commission
even though it was not first asserted in the Department's
written notices of determination.
Fox River Remediation and Tetra Tech petitioned the circuit
court to review the commission's decision. The circuit
court affirmed the commission's order. Fox River
Remediation and Tetra Tech now appeal.
"In an appeal following a decision of the Tax Appeals
Commission, we review the [c]ommission's decision, not
the circuit court's." Xerox Corp. v. DOR,
2009 WI.App. 113, ¶8, 321 Wis.2d 181, 772 N.W.2d 677
(citation omitted). When reviewing the commission's
interpretation or application of a statute, we apply one of
three levels of deference: great weight, due weight, or no
deference. DOR v. A. Gagliano Co., 2005 WI.App. 170,
¶22, 284 Wis.2d 741, 702 N.W.2d 834 (citing Zip
Sort, Inc. v. DOR, 2001 WI.App. 185, ¶¶11-14,
247 Wis.2d 295, 634 N.W.2d 99).
The highest level of deference, great weight deference, is
(1) the agency was charged by the legislature with the duty
of administering the statute; (2) the interpretation of the
agency is one of long-standing; (3) the agency employed its
expertise or specialized knowledge in forming the
interpretation; and (4) the agency's interpretation will
provide uniformity and consistency in the application of the
Xerox Corp., 321 Wis.2d 181, ¶47 (citation
omitted). "Great weight deference is also applied to an
agency's interpretation 'if it is intertwined with
value and policy determinations inherent in the agency's
statutory decisionmaking function.'" Id.
(quoting Barron Elec. Co-op. v. PSC, 212 Wis.2d 752,
761 & n.5, 569 N.W.2d 726 (Ct. App. 1997)). When an
agency's legal conclusion is accorded great weight
deference, we will uphold the agency's conclusion
"as long as it is reasonable and not contrary to the