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Posted by: Chandra Williams on Nov 10, 2015

Court: TN Court of Appeals

Attorneys 1:

Herbert H. Slatery, III, Attorney General and Reporter; Andre´e S. Blumstein, Solicitor General; and Nicholas G. Barca, Senior Counsel, Nashville, Tennessee, for the appellant, Richard H. Roberts, Commissioner of Revenue, State of Tennessee.

Attorneys 2:

Brett R. Carter, Nashville, Tennessee, for the appellee, Niuklee, LLC.

Judge(s): GOLDIN

The Commissioner of Revenue assessed a tax based on the taxpayer?s use of an aircraft purchased out of state. Taxpayer sought review from the Tennessee Department of Revenue but was denied relief following an informal hearing. Taxpayer paid the tax and filed a complaint in the Chancery Court for Davidson County seeking a refund on the ground that it qualified for the sale for resale exemption in the Tennessee Retailers? Sales Tax Act because it provided the seller with a certificate of resale and immediately leased the aircraft to third party users. The Department responded, arguing that the leases did not satisfy the exemption?s “bona fide sale” requirement. Following a non-jury trial, the Chancery Court reversed the Department?s assessment, concluding that the exemption applied because (1) the leases were legitimate and not illusory and were not chiefly motivated by tax avoidance, (2) the economic substance doctrine has not been adopted in Tennessee to analyze the “bona fide sale” requirement, and (3) the Department failed to present proof sufficient to pierce the corporate veil of the taxpayer. The Department appealed. Discerning no error, we affirm.