ÿWPC® …# VUNa %¯ 0DµU>ùb7 0`? w@Ÿ 4ß ó  0ˆ 0D’ 0JÖ 0T 0^t 0hÒ 0r: 0|¬ 0†( 0® 1u>U,³ 0dßU,CU>o D3­¦à B† 0@£U*ãB) DC6 AMy<ÆU6€8v~¸vÓ6 AO ÆX 0D D/b B‘˜HP LaserJet 4Si/4SiMX PS 600dpiPSCRIPTÀÌÀääÀÀÌ0 (ÖÃ9 Z ‹6Times New Roman RegularX(óf$¡¡Ò€°ÒÒÀ°Ò<èÀ( 9Z &Courier Regular- ù-(83‚ª$©©Ý ƒóf!ÝÒ€°ÒÒÀ°ÒÝ  Ý EDFUGDHDIPJUK PLDMÓ€WDÒ 3|xW(8(3ß«$¤¤Ý ƒóf!ÝÒ€°ÒÒÀ°ÒÝ  Ýà Ø àòòÚ  Ú0Ú  Úóó(#Ã$òòÚ  Ú0Ú  Úóó2 ÿÿ0Indent1Ô2ÔÔ3  Ô2" ÿÿ0Indent2à0 àÔ2ÔÔ3  Ô2, ÿÿ0Indent3à0 àà0 àÔ2ÔÔ3  Ô26 ÿÿ0Indent4à0 àà0 àà0 àÔ2ÔÔ3  Ô2@ ÿÿ0Indent5à0 àà0 àà0 àà0 àÔ2ÔÔ3  Ô2J ÿÿ0Indent6à0 àà0 àà0 àà0 àà0 àÔ2ÔÔ3  Ô2T ÿÿ0Indent7à0 àà0 àà0 àà0 àà0 àà0 àÔ2ÔÔ3  Ô2^ ÿÿ0Indent8à0 àà0 àà0 àà0 àà0 àà0 àà0 àÔ2ÔÔ3  Ô ÿÿ?AGMSYaioIndent0I.A.1.a.(1)(a)i)a)< Œ 9p`(ModernP ÿÿ8Mac DefaultMac DefaultÓ ` °šXÓ< Œ 9p`(Monaco< Œ 9p`(&Times New Roman,,,,'ÿÿdxd œÝ ƒ!ÝÑ#€d#ÑÔ€ ÔÔ€)ÔÒ € ÒÒ À ÒÝ  ÝÝ ƒ )ÝÝ  ÝÌÌÌ d("ÿÿ$££Ò  ÒÒ  Ò< Œ 9p`(Arial% Line 7 d////7Border 1dd€-0Cþÿ << Gÿÿ 2Ý ƒ!ÝÑ  ÑÑ#€d#ÑÔ€ ÔÔ€)ÔÒ € ÒÒ À ÒÝ  ÝÔ€.ÔÔ€.ÔÓ  Óò òÔ YYY ÔFILEDÔ€.XÔÌÌAugustÏ26,Ï1996ÌÌCecilÏW.ÏCrowsonÌAppellateÏCourtÏClerkÔ  Ôó ó< Œ 9p`(Courier New vÝ ƒ!ÝÑ#€d#ÑÔ€ ÔÔ€)ÔÒ € ÒÒ À ÒÝ  ÝÝ ƒ$Ýà àòòÚ  ÚÚ  ÚóóÝ  ÝÔ€)ôÔÔ€3ÔThe€State€does€not€contest€that€the€tax€is€not€due€on€the€purchaseÏprice€of€pagers€sold,€rather€than€leased,€by€Cape€Fear€to€its€customers.€€ÌPtPtHHÚ(ÿáÿâùFG(üHHÚ(d'@Styl{WP}01•ÃÃÃÃÃÃÃÃÃÃÃÃÃÃÃÃÃÃà Ãà Ãà Ãà Ãà ÃÃÃÃÃÃÃÃÃÃÃÐ ÐÐHHÐÐ  ÐÐ2ÐÐÿÿ¸æ$ÿÐÐHHÐÐÐÐÐÐÐÐ  ÐÐ ÐÐ ÐÑÑÑGenevaÑÑ ÑÑ € ÑÑ<Px–ÈÑÒÒÒ443!#4ÒÒ$ *$ÒÒ$*$ÒÒ ÿKK ÒÒ  Geneva ÒÒ  Geneva ÒÓ.,ÓÓÓÓ6ÓÓ ÓßßßßßßßßßßßßßßßßßßÑMonacoÑÑ ÑÒ  BA Op Monaco ÒÒ  BA Op Monaco Ò€-‚ƒCþÿ<< CÿÿƒLevel 1Level 2Level 3Level 4Level 5($$””ò òÚ  Ú1Ú  Úó ó„„'÷ÿ dxdüÿP PdÝ ƒ!ÝÔ . ÔÔ€ ÔÓ&€((X„d&ÓÑ#€((Xd#ÑÔ€)ÔÒ € ÒÒ À ÒÝ  Ý›Ñ , ÑÑ\R AØ'\ÑÑ\R AØ'\ÑÑ€ÑÑ7€jXXdÈdÈ7ÑÖ€+ÖÑ  Ñœò òÔ€.Ôà àà àà àà àà àà àà àà àAugust€26,€1996Ì›à àà àà àà àà àà àà àà àòòFOR€PUBLICATIONóóó óÌÌà@ àIN€THE€SUPREME€COURT€OFÏTENNESSEEÌ̜ـ€ÙÙ€€ÙßL€120;+'h|ÏM` à. `€€Lß›à@ àAT€NASHVILLEÌÌœ›ÌCAPE€FEAR€PAGING€COMPANY,€à à(Ìd/b/a€CUE€PAGING€OF€TENNESSEEà à(ÌAND€KENTUCKY,à àà àà àà à(Ìà àà àà àà àà àà à(Ìà àPlaintiff„Appellant,à àœà àà à(›Ìà àà àà àà àà àà à(€€DavidsonÏChanceryÌà àà àà àà àà àà à(Ìà àà àà àà àà àà à(€€Hon.€RobertÏS.€Brandt,Ìv.à àà àà àà àà àà à(€€ChancellorÌà àà àà àà àà àà à(Ìà àà àà àà àà àà à(€€No.€01A01„9502„CH„00037Ìà àà àà àà àà àà à(ÌJOE€B.€HUDDLESTON,€à àà àà à(ÌCOMMISSIONER€OF€REVENUE,€à à(ÌSTATE€OF€TENNESSEE,à àà àà à(Ìà àà àà àà àà àà à(Ìà àDefendant„Appellee.à àà à(à àÌÌÌÌòòFor€Plaintiff„Appellantóó:à àà àà àòòFor€Defendant„Appelleeóó:ÌÌC.€Michael€Nortonà àà àà àà àCharles€W.€BursonÌÒ € ÒÒ Ð ÒJanet€P.€Sparkmanà àà àà àà àAttorney€General€&€ReporterÌWyatt,€Tarrant€&€Combsà àà àà àNashvilleÌNashvilleÌà àà àà àà àà àà àMichael€E.€MooreÌà àà àà àà àà àà àSolicitor€GeneralÌà àà àà àà àà àà àNashvilleÌÌà àà àà àà àà àà àCharles€L.€LewisÌà àà àà àà àà àà àDeputy€Attorney€GeneralÌà àà àà àà àà àà àNashvilleÌÌÌÌà@ àòòò òO€P€I€N€I€O€Nóóó óÌÌJUDGMENT€OF€TRIAL€COURT€ANDÌJUDGMENT€OF€COURT€OF€APPEALSÌREVERSED;€CASE€REMANDED.à àà àà àà àà àREID,€J.ÌÒ € ÒÒ À ÒÓÓÓ` °‚X.h—XÓÔ€.ŠÔà àThis€case€presents€for€review€the€decision€of€the€Court€ofÏÑ  ÑAppeals,€affirming€the€judgment€of€the€trial€court,€which€denied€the€appellantÏtaxpayer's€claim€for€the€refund€of€sales€taxes.€€This€Court€finds€that€theÏtaxpayer€is€entitled€to€the€refund€claimed.€€The€Court€of€Appeals€is€reversed.ÌÌà@ àòòò òTHE€CASEóóó óÌÌà àThe€taxpayer,€Cape€Fear€Paging€Company€("Cape€Fear"),€is€aÏTennessee€corporation€engaged€in€the€business€of€providingÍtelecommunication€paging€services€in€the€Nashville€area€and€also€access€to€aÏnational€network€which€provides€paging€services€throughout€the€country.€€TheÏpaging€services€provided€by€Cape€Fear€utilize€a€unique€technology€owned€byÏa€Finnish€company,€Nokia,€which€has€granted€to€Cue€Paging€CorporationÏ("Cue€Paging")€the€exclusive€right€to€distribute€Nokia€pagers€in€the€UnitedÏStates.€€Cape€Fear€is€one€of€several€providers€of€paging€services€in€theÏNashville€area€which€utilize€the€Cue€Paging€system€and€Nokia€pagers.€€AÏNokia€pager€is€required€to€receive€the€paging€services€provided€by€CapeÏFear,€but€the€company's€customers€may€obtain€Nokia€pagers€from€sourcesÏother€than€Cape€Fear.€€ÌÌà àThe€paging€function€is€accomplished€by€a€telephone€call€to€CueÏPaging's€central€terminal€in€Chicago,€where€the€message€is€transmitted€byÏradio€signals€to€an€orbiting€satellite,€from€which€it€is€broadcast€to€a€network€ofÏFM€radio€stations€throughout€the€country,€and€relayed€by€radio€signals€to€theÏpager€to€which€the€message€is€directed.ÌÑ Ø ÑÌà àCape€Fear€charges€its€customers€a€monthly€fee€for€the€pagingÏservices€provided.€€It€also€makes€Nokia€pagers€available€to€its€customers€forÏpurchase€or€lease.€€However,€not€all€of€Cape€Fear's€customers€obtain€theirÍpagers€from€Cape€Fear.€€Approximately€20€percent€of€all€of€Cape€Fear'sÏcustomers€use€pagers€acquired€from€sources€other€than€Cape€Fear.ÏApproximately€45€percent€of€Cape€Fear's€customers€who€use€Cape€Fear'sÏpagers€purchase€rather€than€lease€them;€and€the€remaining€customers€leaseÏpagers€from€Cape€Fear,€for€which€they€pay€an€additional€monthly€charge.€€ÌÌà àIn€reliance€on€a€"resale€certificate"€from€the€TennesseeÏDepartment€of€Revenue,€Cape€Fear€did€not€pay€sales€tax€on€the€NokiaÏpagers€when€they€were€purchased.€€Cape€Fear€collected€from€its€TennesseeÏcustomers€and€remitted€to€the€Tennessee€Department€of€Revenue€sales€taxÏon€all€charges€made€for€paging€services,€including€the€additional€monthlyÏcharge€for€pagers€leased€by€Cape€Fear.€€The€claim€for€refund€is€for€salesÏtaxes€paid€under€protest€on€the€purchase€price€of€pagers€leased€by€CapeÏFear's€customers€for€which€an€additional€monthly€fee€was€charged.× ƒ4 ××  ×€€ÌÌà àBoth€the€trial€court€and€the€Court€of€Appeals€found€thatÏpurchases€by€Cape€Fear€of€pagers€leased€to€the€taxpayer's€customers€wereÏnot€exempt€from€taxation.Ì€€Ìà@ àòòò òSTANDARD€OF€REVIEWóóó óÌÌà àThe€construction€of€statutes€and€of€regulations€promulgatedÏpursuant€to€statutes€and€the€application€of€those€statutes€and€regulations€toÏundisputed€facts€are€questions€of€law.€€òòBeare€Co.€v.€Tennessee€Dept.€ofÏRevenueóó,€858€S.W.2d€906,€907€(Tenn.€1993).€€While€ambiguities€in€statutesÏimposing€taxes€generally€must€be€resolved€in€favor€of€the€taxpayer,€statutesÏproviding€exemptions€from€taxation€are€strictly€construed€against€the€claim€ofÏexemption.€€òòPan€Am€World€Services,€Inc.€v.€Jacksonóó,€754€S.W.2d€53,€55Ï(Tenn.€1988)€(quoting€òòTennessee€Farmers'€Co„op.€v.€Jacksonóó,€736€S.W.2dÏ87,€90€(Tenn.€1987)).€€òòSeeóó€òòalsoóó€òòTibbals€Flooring€Co.€v.€Huddlestonóó,€891ÏS.W.2d€196,€198€(Tenn.€œ1994)›€œ("Every›€presumption€is€against€the€exemptionÏand€a€well„founded€doubt€is€fatal€to€the€œclaim.").›ÌÌà@ àòòò òANALYSISóóó óÌÌà àEven€in€accordance€with€the€strict€rule€regarding€exemption€fromÏtaxation,€the€undisputed€facts€in€this€case€show€that€the€purchases€were€forÏresale€within€the€meaning€of€the€statute€and,€therefore,€they€are€exempt€fromÍtaxation.€€ÌÌà àPursuant€to€the€Retailers'€Sales€Tax€Act,€Tenn.€Code€Ann.€ðð€67„6„101€„€ðð€67„6„712,€a€tax€is€imposed€upon€the€business€of€selling€tangibleÏpersonal€property€at€retail€unless€specifically€exempted€by€statute.€€"'RetailÏsales'€or€'sale€at€retail'€means€a€taxable€sale€of€tangible€personal€property€orÏspecifically€taxable€services€to€a€consumer€or€to€any€person€for€any€purposeÏother€than€for€resale."€€Tenn.€Code€Ann.€ðð€67„6„102(23)(A)€(Supp.€1995).€€TheÏterms€"sale"€and€"resale,"€as€used€in€the€statute,€include€the€lease€of€tangibleÏpersonal€property.€€Tenn.€Code€Ann.€ðð€67„6„102(24)(A)€(Supp.€1995).€ÏRegulations€issued€pursuant€to€the€statute€provide€that€"[t]angible€personalÏproperty€sold€to€be€used€exclusively€for€renting€or€leasing€may€be€sold€upon€aÏresale€certificate."€€Tenn.€Comp.€R.€&€Regs.€1320„5„1„.32(3)€(Jan.€1987).€ÏConsequently,€the€sale€of€tangible€personal€property€to€a€purchaser€who,€inÏturn,€leases€that€property€to€another€is€exempt€from€the€tax.€€Such€sales€areÏexempt€as€sales€for€resale.€€ÌÌà àThe€determinative€issue,€then,€is€whether€Cape€Fear€purchasedÏthe€pagers€for€the€purpose€of€leasing€them€to€its€customers€or€in€order€toÏprovide€paging€services€to€its€customers.€€These€alternative€purposes€are€notÍmutually€exclusive,€but€the€important€distinction€is€whether€furnishing€theÏpagers€was€a€constituent€aspect€of€providing€paging€service.€€ÌÌà àAlthough€no€single€fact€or€circumstance€is€determinative€in€thisÏcase,€the€totality€of€the€facts€and€circumstances€show€that€the€pagers€wereÏpurchased€for€the€purpose€of€leasing€them€to€the€taxpayer's€customers.€€EvenÏthough€furnishing€pagers€to€customers€for€an€additional€charge€was€beneficialÏto€Cape€Fear€and€was€a€part€of€its€business,€it€was€a€service€distinct€fromÏproviding€paging€services.€€It€was€a€service€not€provided€to€Cape€Fear'sÏcustomers€who€obtained€their€pagers€from€sources€other€than€Cape€Fear€or€toÏthose€customers€who€purchased€their€pagers€from€Cape€Fear.€€Since€pagingÏservices€were€also€available€from€other€providers€and€could€be€received€onÏany€Nokia€pager,€the€leased€pagers€had€value€separate€and€apart€fromÏCape€Fear's€paging€services.€€€€ÌÌà àThe€arrangement€between€the€taxpayer€and€its€customers€fitsÏthe€meaning€of€"lease€or€rental"€as€defined€in€the€statute.€€Section€67„6„102(15)€(Supp.€1995)€defines€"lease"€as€follows:€€ÌÌÓÓà8 à"Lease€or€rental"€means€the€leasing€or€renting€ofÍtangible€personal€property€and€the€possession€orÏuse€thereof€by€the€lessee€or€renter€for€aÏconsideration,€without€transfer€of€the€title€of€suchÏproperty€.€.€.€.ÌÌÌÌÓÓCape€Fear€retained€title€to€the€equipment€and€made€an€additional€charge€forÏits€use,€thus€it€"leased"€this€equipment.€€œÌ›Ìà àThe€taxpayer€collected€and€remitted€tax€on€the€charges€made€forÏthe€lease€of€the€pagers€to€its€customers,€as€required€by€Tenn.€Code€Ann.€ððÏ67„6„204.€€The€charge€made€by€Cape€Fear€to€its€customers€for€use€of€theÏpagers€is€not€exempt€from€taxation.€€Section€67„6„204(b)€(1994)€provides€thatÏœsuch€a›€lease€payment€œfrom€customers€is›€exempt€only€œ"if›€the€œowner€of€theÏproperty€maintains€continuous€supervision€over€the€personal€property€beingÏleased€or€rented,€and€furnishes€an€operator€or€crew€to€operate€such€property."€›ÏThat€statute€has€been€construed€to€apply€to€a€very€limited€type€of€leaseÏarrangement€and€is€not€applicable€to€the€facts€of€this€case.€€òòSeeóó€òòHyatt€v.ÏTayloróó,€788€S.W.2d€554€(Tenn.€1990).€€Since€the€lease€charge€is€not€exempt,Ïimposition€of€the€tax€on€the€purchase€of€the€pagers€leased€to€the€taxpayer'sÏcustomers€and€also€on€the€rental€charge€would€constitute€double€taxation,Ïwhich€is€prohibited€by€the€statute.€€òòSeeóó€Tenn.€Code€Ann.€ðð€67„6„203(a)Í(1994).ÌÌà àBoth€the€trial€court€and€the€Court€of€Appeals€relied€uponÏòòNashville€Mobilphone€Co.€v.€Woodsóó,€655€S.W.2d€934€(Tenn.€1983),€to€find€theÏtransactions€taxable.€€Even€though€that€case€and€the€case€before€the€CourtÏinvolve€a€similar€service,€the€critical€facts€in€the€two€cases€are€significantlyÏdifferent.€€œ€In›€òòNashville€Mobilphoneóó,€as€in€the€present€case,€the€taxpayerÏpetitioned€for€a€refund€of€sales€and€use€taxes€paid€under€protest.€€TheÏtaxpayer€provided€its€customers€with€two„way€radio€voice€communication€andÏpaging€œservices›€whereby€customers€with€a€radio€telephone€unit€couldÏcommunicate€through€any€conventional€telephone€in€the€Bell€telephoneÏsystem.€€In€connection€with€the€service,€the€taxpayer€also€leased€to€itsÏcustomers€various€types€of€radio€telephone€and€signaling€devices.€€At€issueÏwas€whether€the€taxpayer's€purchases€of€radio€phone€and€signalingÏequipment€which€it€leased€to€its€customers€were€exempt€as€"sales€for€resale."€ÏThe€Court€found€€the€following€statement€in€a€Florida€case€"persuasive":Ì€€€€€€€€€€ÌÒ € ÒÒ X ÒÓÓÓ` °‚XZÀ–XÓà8 à€€€"In€our€resolution€of€the€controversy€we€areÏprimarily€influenced€by€the€simple€fact€that€theseÏhooks,€ferrules,€wires€and€gadgets€are€unused,Ïunusable€and€of€no€value€in€and€of€themselvesÏto€the€customer,€so€as€to€support€payment€of€aÍseparate€consideration€for€their€possession,€untilÏsuch€time€as€appellant€makes€the€properÏconnections€to€its€system€so€that€the€customerÏcan€watch€cable€T.V.€€For€this,€and€nothing€else,Ïthe€customer€pays€a€consideration€in€the€form€ofÏhis€monthly€service€charge,€the€only€chargeÏmade,€except€for€the€initial€hook„up€andÏequipment€œdeposit."Ì›ÌÓÓÌòòId.óó€at€937€(quoting€òòAmerican€Video€Corp.€v.€Lewisóó,€389€So.2d€1059,€1061€(Fla.ÏApp.€1980)).€€The€Court€then€summarized€the€evidence€in€regard€to€the€equipmentÏfurnished€by€the€taxpayer€in€that€case.ÌÌÒ € ÒÒ à ÒÓÓà8 à€€€We€find€this€reasoning€persuasive.€€AsÏpreviously€stated,€appellant€does€not€rent€radioÏphone€or€signaling€equipment€to€the€generalÏpublic,€but€only€to€its€subscribers.€€While€aÏsubscriber€may€furnish€its€own€equipment€and€stillÏobtain€the€service,€it€may€not€rent€appellant'sÏequipment€without€subscribing€to€the€service.€ÏAppellant's€equipment€in€the€hands€of€theÏcustomer€is€completely€without€value€to€theÏcustomer€except€in€connection€with€and€as€part€ofÏthe€service€for€which€the€customer€subscribes.€ÏThe€ultimate€user€or€consumer€of€the€equipment,Ïtherefore,€is€the€appellant,€utilizing€the€equipmentÏas€a€part€of€its€own€"radio€common€carrierÏsystem,"€and€there€is€no€sale€for€resale€within€theÏmeaning€of€the€œstatutes.ÓÓÌ›ÌÒ € ÒÒ À ÒòòId.óó€at€937€(footnote€omitted).€€ÌÌà àIn€order€to€sustain€the€imposition€of€the€tax€in€the€presentÏcase,€the€rationale€of€the€òòNashville€Mobilphoneóó€case€would€require€a€findingÏthat€the€pagers€were€"unused,€unusable€and€of€no€value€in€and€ofÏthemselves€to€the€customer"€and€further,€the€pagers€are€"completely€withoutÏvalue€to€the€customer€except€in€connection€with€and€as€part€of€the€service€forÏwhich€the€customer€subscribes."€€òòSeeóó€òòidóó.€€Contrary€to€the€factual€finding€inÏòòNashville€Mobilphoneóó,€the€pagers€which€are€the€subject€of€this€case€do€haveÏvalue€separate€and€apart€from€the€taxpayer's€service.€€Consequently,Ïpurchases€of€the€pagers€leased€to€Cape€Fear's€customers€are€exempt€fromÏœtaxation.›Ìà@ àòòò òCONCLUSIONóóó óÌÌà àThe€proof€shows€that€the€taxpayer's€customers€are€theÏultimate€users€or€consumers€of€the€pagers€leased€by€the€taxpayer€to€itsÏcustomers.€€The€taxpayer's€purchase€of€those€pagers€was€for€resale€withinÏthe€meaning€of€the€statute.€€Consequently,€the€taxpayer€is€entitled€to€theÏrefund€claimed.€€ÌÌà àThe€case€is€remanded€to€the€trial€court€for€such€furtherÍproceedings€as€may€be€necessary.ÌÌà àCosts€are€taxed€against€the€State€of€Tennessee.ÌÌÓÓà àà àà àà àà à_________________________Ìà àà àà àà àà àREID,€J.ÌÌÌConcur:ÌÌBirch,€C.J.,€Drowota,€Anderson,Ì€€€and€White,€JJ.