WILKIE, C. J.
The plaintiff-appellant, Wisconsin Department of Revenue, determined sales tax due by the defendant-respondent, A. O. Smith Harvestore Products, Inc., in the amount of $264,228.99 for the period from September 1, 1969, to May 9, 1971, on sales by the respondent to dealers of the component parts for a blue, cylindrical structure known as a Harvestore. This determination was reversed by the tax appeals commission, which, in turn, was affirmed by the circuit court. We reverse.
The usual assembly kit for a Harvestore includes 105 steel sheets, about 7,000 bolts, and sealant. The Harvestore, as erected by a dealer on farmland, typically
The Harvestore itself is a structure which converts fodder into silage in a more effective manner than the conventional silo. Oxygen is excluded from and carbon dioxide is retained within the glass-lined steel walls of the Harvestore. Breather bags, which are sold as part of each Harvestore unit, are installed at the top of the structure to compensate for changes in barometric pressure and temperature. These bags enhance the natural conversion of fodder into silage. While a conventional silo unloads from the top, a Harvestore is unloaded from the bottom by means of a mechanical unloader, which is part of the structure. The sale of these unloaders is in no way involved in this dispute.
When Harvestore did not collect taxes on sales to its dealers between September 1, 1969, and September 30, 1970, the Department assessed additional sales tax for this period in the amount of $163,836.52. Although Harvestore did collect taxes in the amount of $100,392.47 for the period from October 1, 1970, to May 9, 1971, it petitioned the Department for a refund, which was declined. The tax appeals commission ruling reversing these actions of the Department is the subject of this appeal.
One issue is dispositive of this appeal: Is the sale of the component parts of the Harvestore by the manufacturer to its dealers taxable on the ground that it is a sale of construction materials to contractors for the erection of structures or improvements of real property, within the meaning of sec. 77.51 (4) (i), Stats.?
The first crucial matter to be determined on this appeal is the proper standard of review to be applied. The respondent asserts that the commission determination that a Harvestore is personal property and therefore not a structure or improvement of real estate, is a finding of fact. Under its findings of fact, the commission did find (under finding 32) that the Harvestore unit "when assembled and set upon farm property, retains its character as personal property." The commission made the very same determination as a conclusion of law.
The essential matter to be determined in this case is whether the facts found by the commission fulfill a particular legal standard. The legal standard has both a statutory and a common-law aspect. The statutory element is whether the sale to Harvestore dealers is a sale of "building materials ... to ... contractors ... for the erection of ... structures ... or improvement of real property," within the meaning of sec. 77.51 (4) (i), Stats. The common-law element arises from the necessity that the Harvestores be considered real property or fixtures, rather than personal property.
This court has uniformly held that whether or not the facts found fulfill a particular legal standard is a question of law, not a question of fact.
Sale of "building materials" to "contractors" for the erection of "structures" or "improvements of real property."
Normally the sales tax is not imposed on the manufacturer-dealer transaction, but upon the dealer-customer transaction, since this is the final "retail" sale. However, when this final transfer involves the construction of real-property structures or improvements, the sales tax cannot be imposed at this level because there is no transfer of tangible personal property. In such a situation, sec. 77.51 (4) (i), Stats., defines the manufacturer-dealer transaction as a "retail" sale, and imposes the sales tax at this level. This approach is not unusual, and has been followed in many other states.
Contractors are defined in sec. 77.51 (18), Stats., as "consumers of tangible personal property used by them in real property construction activities." Because the dealers sell to farmers the completed structure rather than the individual parts purchased from the manufacturer, it must be concluded that they consume and use the kits in creating a new and different product. The fact that the parts are prefabricated only facilitates the construction job of the dealer; it does not prevent a conclusion that the dealer consumes and uses the kits.
The precise question to be determined in this case is whether the dealers are engaged in the construction of real property structures or improvements. In other words, is the Harvestore, when assembled on farm property, a fixture and therefore part of the realty?
This court has long followed a three-part test to determine whether or not particular articles of property are fixtures:
"`... Whether articles of personal property are fixtures, i.e., real estate, is determined in this state, if not generally, by the following rules or tests: (1) Actual physical annexation to the real estate; (2) application or adaptation to the use or purpose to which the realty is devoted; and (3) an intention on the part of the person
Although the application of this test is normally a question of fact, it becomes a question of law when only one reasonable conclusion may be drawn from the evidence.
We conclude as a matter of law that this criterion has been met. The Harvestore is firmly attached and affixed to a concrete foundation set in the ground specifically for this purpose. Numerous bolts are used to affix the Harvestore to the foundation. Indeed, in its advertising Harvestore emphasizes that the unit is so firmly attached to the ground that it can and has withstood the force of a tornado.
The Harvestore is clearly adapted to the use to which the realty is devoted. The Harvestore stores and processes fodder into silage, and this is clearly adapted to the use to which the farm realty is devoted.
The factor of intention is regarded as the most important of the three factors.
In several cases this court has held that, when the article in question is clearly adapted to and is in fact put by the owner of the realty to the use to which he has devoted the realty, this is conclusive evidence of an intent to make a permanent accession to the realty.
Here all of these objective circumstances are present, and thus it can be said as a matter of law that the average farmer, when purchasing a Harvestore, intends to make a permanent accession to his farm realty. The Harvestore is clearly adapted to the use to which the farmer devotes his real property and it is undisputed that the farmer afterwards uses the Harvestore for the storage and processing of fodder. Also, the Harvestore is affixed to a concrete foundation especially poured and formed for it. Finally, while not controlling, the factors of size, weight,
The commission made no determination regarding the intention of the farmer. It did make certain findings of fact which the respondent relies upon to support an inference that the farmer intends to regard the Harvestore as personal property.
The most important of these findings is that the Harvestore is financed under the Uniform Commercial Code as personal property. The evidence supporting this finding is unequivocal. Representatives of several banks, credit associations, and finance companies testified that they uniformly financed Harvestores as personal property. However, this is not at all determinative of the question of whether the Harvestore is personal property for other than the limited purpose of short-term financing. As noted above, the crucial element of intention must be determined from objective circumstances, and not from subjective agreements between the annexor and other parties. Indeed, Brown specifically states that "it is no concern to the question of fixture or not, that the landowner ... put a chattel mortgage on [the property in question]."
Other factors relied upon by the respondent are the findings of the commission that Harvestores are traded in, and that there is a market for used Harvestores. That Harvestores are traded in for a larger or different model is of no consequence to the question of intention to make
The respondent also relies upon the commission finding that Harvestores can be removed without material injury to the realty or to the unit itself. This is done by removing the bolts and leaving the concrete foundation in place. Yet this is an expensive procedure, costing around $7,000. In any event, as this court recently noted, "the element of removability without material damage [to the realty] no longer enjoys the position of prominence in the law of fixtures which it once held."
Legal support for the conclusion that Harvestores are realty can be found in the case of Wolfe Tax Appeal.
"... When we consider giving appellant the benefit of every doubt, as we are required to do, we find it impossible to classify the Harvestore after construction as a chattel or an item of personal property. In view of its massive size, the firm and permanent manner in which it is erected on a most substantial foundation, its purpose and function, the expense and size of the task and difficulty of removing same, and that it is not included as a fixture in another building, we are inclined to hold that it falls within the generally accepted classification of real estate and, under the above recited statute, taxable as such."
By the Court.—Judgment reversed.
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"(i) Sales of building materials, supplies and equipment to owners, contractors, subcontractors or builders for the erection of buildings or structures or the alteration, repair or improvement of real property. Such transactions are deemed retail sales in whatsoever quantity sold."