Swift & Co. v. Nebraska Dept. of Rev.

Swift and C ompany, appellee and CroSS-appellant, v.
nebraSka department of revenue , an agenCy of the
State of nebraSka , and douglaS a. ewald, tax
C ommiSSioner , appellantS and CroSS-appelleeS.
gibbon paCking , inC., appellee and CroSS-appellant, v.
nebraSka department of revenue , an agenCy of the
State of nebraSka , and douglaS a. ewald, tax
C ommiSSioner , appellantS and CroSS-appelleeS.
Skylark meatS, inC., appellee and CroSS-appellant, v.
nebraSka department of revenue , an agenCy of the
State of nebraSka , and douglaS a. ewald, tax
C ommiSSioner , appellantS and CroSS-appelleeS.
o’brien’S fine SauSage , appellee and CroSS-appellant, v.
nebraSka department of revenue , an agenCy of the
State of nebraSka , and douglaS a. ewald, tax
C ommiSSioner , appellantS and CroSS-appelleeS.
773 N.W.2d 381
Filed October 23, 2009. 	Nos. S-08-1095 through S-08-1099.
1. Judgments: Statutes: Appeal and Error. Statutory interpretation is a matter of
law, in connection with which an appellate court has an obligation to reach an
independent, correct conclusion irrespective of the determination made by the
trial court.
2. Statutes: Appeal and Error. In the absence of anything to the contrary, statutory
language is to be given its plain and ordinary meaning; an appellate court will
not resort to interpretation to ascertain the meaning of statutory words which are
plain, direct, and unambiguous.
3. Administrative Law: Legislature. The Legislature has power to authorize an
administrative or executive department to make rules and regulations to carry out
an expressed legislative purpose, or for the complete operation and enforcement
of a law within designated limitations.
4. Administrative Law. Agency regulations properly adopted and filed with the
Secretary of State of Nebraska have the effect of statutory law.
5. Administrative Law: Statutes. An administrative agency cannot use its rule-
making power to modify, alter, or enlarge provisions of a statute which it is
charged with administering.
Appeals from the District Court for Lancaster County: Jodi
nelSon, Judge. Reversed and remanded.
SWIFT & CO. v. NebRASkA DepT. OF Rev. 	763
Cite as 278 Neb. 763
Nebraska Supreme Court Online Library
www.nebraska.gov/apps-courts-epub/
11/01/2026 04:49 AM CST

Jon 	bruning, Attorney 	General, 	and 	L. 	Jay 	bartel 	for
appellants.
Michael L. Schleich and Timothy J. Thalken, of Fraser
Stryker, p.C., L.L.O., for appellees.
heaviCan, 	C.J., 	wright, 	C onnolly, 	gerrard, 	Stephan,
mCC ormaCk, and miller-lerman, JJ.
heaviCan, C.J.
INTRODUCTION
The Nebraska Department of Revenue (Department) and the
Tax Commissioner appeal the decision of the Lancaster County
District Court reversing the decision of the Department to deny
appellees’ requests for a refund. Appellees, four meatpacking
plants, had paid sales taxes on cleaning services, then filed for
a refund, which was denied by the Department. The district
court reversed the decision of the Department, found that the
regulation passed by the Department in its decision was beyond
the scope of its power, and remanded for further proceedings.
The Department and the Tax Commissioner appeal, and the
appellees cross-appeal.
bACkGROUND
The 	Nebraska 	Legislature 	passed 	2002 	Neb. 	Laws,
L.b. 1085, defining which “gross receipts” from services were
subject to state sales tax. The law, which has been amended
without substantive changes during the applicable time period
and is now codified at Neb. Rev. Stat. § 77-2701.16(4)
(Cum. Supp. 2008), provides in pertinent part that “[g]ross
receipts for providing a service means: (a) The gross income
received for building cleaning and maintenance, pest control,
and security.”
After § 77-2701.16 was passed, the Department promul-
gated 316 Neb. Admin. Code, ch. 1, § 098.03A (2003) (Reg.
1-098.03A), defining the types of “cleaning and maintenance”
covered by the statute as including “[c]leaning and mainte-
nance of tangible personal property located in a building, and
fixtures or any property annexed to real estate that is attached
to, is a part of, or is enclosed in, a building[.]”
764 	278 NebRASkA RepORTS

The four meatpacking plants—Swift and Company; Gibbon
packing, Inc.; Skylark Meats, Inc.; and O’brien’s Fine Sausage
(hereinafter collectively the taxpayers)—had contracts with
two different sanitation services. Mossberg Sanitation, Inc.,
and packers Sanitation Services, LLC, provided specialized
services to clean the packing plants and equipment in accord-
ance with U.S. Department of Agriculture standards. All five
contracts provided that the cleaning services would sanitize
the industrial equipment in the packing plants, as well as clean
other parts of the buildings.
The taxpayers paid sales taxes on those cleaning services
and then filed for a refund, claiming that the cleaning contracts
applied to the industrial equipment and therefore did not fall
under the definition of “gross receipts” contained in the stat-
ute. Swift and Company claimed a refund of $442,240.76 for
overpayments made between October 1, 2002, and April 30,
2004, and a refund of $538,454.38 for overpayments made
on a second contract between April 1, 2003, and September
12, 2005. Gibbon packing claimed a refund of $191,633.05,
Skylark Meats claimed a refund of $102,092.05, and O’brien’s
Fine Sausage claimed a refund of $52,749.35. The latter three
companies’ returns were claimed for the period between April
1, 2003, and September 12, 2005. The five cases were consoli-
dated for appeal.
The Department denied the refund, citing the statute and
Reg. 1-098.03A, which interpreted “gross receipts” as applying
to all “tangible personal property” located within a structure.
The taxpayers appealed the denial of their refund under the
Administrative procedure Act, see Neb. Rev. Stat. § 84-901
to § 84-920 (Reissue 2008). The district court found that Reg.
1-098.03A was an impermissible expansion of § 77-2701.16
and struck down Reg. 1-098.03A. The district court remanded
the case to the Department to determine what cleaning activi-
ties should have been taxed. The Department and the Tax
Commissioner appealed. The taxpayers cross-appealed, arguing
that the district court did not have the authority to reverse and
remand the case under § 84-917(6)(b) and that the portion of
the order remanding the case should be vacated. We reverse the
decision of the district court.
SWIFT & CO. v. NebRASkA DepT. OF Rev. 	765
Cite as 278 Neb. 763

ASSIGNMeNTS OF eRROR
The Department and the Tax Commissioner assign, consoli-
dated and restated, that the district court erred when it reversed
the decision of the Department denying the refund. The tax-
payers cross-appeal, assigning that the district court erred when
it remanded the case to the Department for further proceedings,
because there was no factual dispute regarding the amount of
the refund owed.
STANDARD OF RevIeW
[1] Statutory interpretation is a matter of law, in connection
with which an appellate court has an obligation to reach an
independent, correct conclusion irrespective of the determina-
tion made by the trial court.1
When reviewing an order of a district court under the
Administrative procedure Act for errors appearing on the
record, the inquiry is whether the decision conforms to the law,
is supported by competent evidence, and is neither arbitrary,
capricious, nor unreasonable.2
A judgment or final order rendered by a district court in a
judicial review pursuant to the Administrative procedure Act
may be reversed, vacated, or modified by an appellate court for
errors appearing on the record.3
ANALYSIS
The Department and the Tax Commissioner argue that the
district court erred when it reversed the Department’s refusal
of the taxpayers’ refund requests, because Reg. 1-098.03A
was a valid use of its powers. The Department and the Tax
Commissioner claim that § 77-2701.16(4)(a) is broad enough
to include the cleaning of tangible personal property located
within the building and that Reg. 1-098.03A is a permissible
clarification of the statute.
1 Japp v. Papio-Missouri River NRD, 271 Neb. 968, 716 N.W.2d 707
(2006).
2 Lackawanna Leather Co. v. Nebraska Dept. of Rev., 259 Neb. 100, 608
N.W.2d 177 (2000).
3 Id.
766 	278 NebRASkA RepORTS

[2] We first address the issue of whether Reg. 1-098.03A
impermissibly expands the definition of services covered by
§ 77-2701.16(4)(a), and whether, therefore, the services ren-
dered are not taxable. In the absence of anything to the con-
trary, statutory language is to be given its plain and ordinary
meaning; an appellate court will not resort to interpretation
to ascertain the meaning of statutory words which are plain,
direct, and unambiguous.4
[3-5] It is well established that the Legislature has power
to authorize an administrative or executive department to
make rules and regulations to carry out an expressed legisla-
tive purpose, or for the complete operation and enforcement
of a law within designated limitations.5 Agency regulations
properly adopted and filed with the Secretary of State of
Nebraska have the effect of statutory law.6 However, an admin-
istrative agency cannot use its rulemaking power to modify,
alter, or enlarge provisions of a statute which it is charged
with administering.7
The question, therefore, is whether Reg. 1-098.03A was an
impermissible expansion of the statute or merely a clarification
of the statute. In support of their argument, the taxpayers point
out that other statutes within the same section specifically men-
tion tangible personal property. For example, § 77-2701.16(4)(d)
taxes “[t]he gross income received for installing and applying
tangible personal property if the sale of the property is sub-
ject to tax.” And § 77-2701.16(4)(f) taxes “[t]he gross income
received for labor for repair or maintenance services performed
with regard to tangible personal property the sale of which
would be subject to sales and use taxes . . . .”
The Department and the Tax Commissioner counter by argu-
ing that the phrase “building cleaning and maintenance” is
broad enough to encompass the cleaning of tangible personal
4 Capitol City Telephone v. Nebraska Dept. of Rev., 264 Neb. 515, 650
N.W.2d 467 (2002).
5 Robbins v. Neth, 273 Neb. 115, 728 N.W.2d 109 (2007).
6 Id.
7 Capitol City Telephone, supra note 4.
SWIFT & CO. v. NebRASkA DepT. OF Rev. 	767
Cite as 278 Neb. 763

property within a building and that Reg. 1-098.03A is a per-
missible clarification of § 77-2701.16(4)(a). The Department
and the Tax Commissioner also argue that distinguishing the
cleaning of tangible personal property from cleaning the build-
ing in which it is located is illogical, particularly in a case
such as this, when cleaning the personal property is inciden-
tal to cleaning the building. In support of their argument, the
Department and the Tax Commissioner note that none of the
subject contracts distinguish between cleaning the building and
cleaning the property located within the building.
In deciding the case in the taxpayers’ favor, the district court
reasoned that the Legislature had been specific about services
regarding personal property in the past. The district court also
noted that the cleaning services at issue were specialized clean-
ing services which had to be performed up to high standards
and that the type of sanitization services performed in these
cases did not fall under the statute. Accordingly, the district
court found that Reg. 1-098.03A exceeded the Department’s
scope of rulemaking authority.
No case law exists interpreting § 77-2701.16(4)(a). However,
this court in Lackawanna Leather Co. v. Nebraska Dept. of
Rev.8 addresses the interpretation of Department regulations
in the context of the statutes they are meant to clarify. In that
case, the question was whether a variety of chemicals used in
the leather-tanning process could be considered a “component
part” of the leather.9 We stated that the focus was on the func-
tion of the chemicals, because the question was one of sales
and use tax. essentially, the Legislature imposed either a sales
or a use tax on each item of property sold. A product that
becomes a component of an item sold is exempt from taxa-
tion. because the chemicals did not become a part of the final
product, but were instead used up during the process, they
were not exempt from taxation. As we stated, “[a]n exemption
from taxation is never presumed,”10 and the same is true of the
8 Lackawanna Leather Co., supra note 2.
9 Id. at 102, 608 N.W.2d at 180.
10 Id. at 107, 608 N.W.2d at 184.
768 	278 NebRASkA RepORTS

current case. We cannot presume that the highly specialized
cleaning services involved in this case are exempt from taxa-
tion, nor can we presume that a contract for cleaning a building
that also involves cleaning tangible personal property within
the building is not taxable.
The Department and the Tax Commissioner concede that a
contract for cleaning only tangible personal property would not
be taxable under the statute, but insist that such was not the
case here. We agree. The contracts generally do not distinguish
between the “building” and the “tangible personal property”
to be cleaned. The contract between Swift and Company and
Mossberg Sanitation lists areas to be cleaned, including drive
chutes, rails, skinning stands, eviscerating area, carcass wash
area, back saws, tables, chutes, conveyors, floors, and lunch-
room. The other contracts provide similarly, and the taxpayers
admitted during oral argument that it would be impossible to
meet U.S. Department of Agriculture regulations without both
cleaning the building and cleaning the tangible personal prop-
erty, although the taxpayers also insisted that separate cleaning
contracts could be created.
In this case, we find that the Department did not exceed
the scope of its rulemaking authority. Although other sections
of the statute specifically mention personal property, those
situations are distinguishable. As previously noted, subsections
(4)(d) and (f) of § 77-2701.16 explicitly apply to “install-
ing and applying tangible personal property” and “labor for
repair or maintenance services performed.” The installation of
personal property and the repair and maintenance of personal
property are entirely separate from the installation and/or the
repair and maintenance of real property. The Department and
the Tax Commissioner argued, and the taxpayers could not
sufficiently refute, that cleaning personal property and clean-
ing the building in which the personal property is located are
nearly indistinguishable in this case.
We also find Reg. 1-098.03A contemplates that the cleaning
of tangible personal property must be incidental to cleaning the
building. As pointed out by the Department, most cleaning con-
tracts contemplate at least some cleaning of personal property
located within the building. Moreover, Reg. 1-098.03A shows
SWIFT & CO. v. NebRASkA DepT. OF Rev. 	769
Cite as 278 Neb. 763

it clearly contemplates that taxable cleaning and maintenance
of tangible personal property be incidental and related to the
cleaning and maintenance of the building and fixtures, which
it was in this case. Therefore, we find that Reg. 1-098.03A did
not exceed the Department’s rulemaking authority and that the
taxpayers are not entitled to a refund. because we have rein-
stated the decision of the Department, we do not need to reach
the taxpayers’ cross-appeal.
CONCLUSION
We find that the Department did not go beyond its authority
when it passed Reg. 1-098.03A and that it did not err when
it denied the requests for a refund. Therefore, we find that
the district court erred when it invalidated Reg. 1-098.03A,
and we remand the cause for proceedings consistent with
this opinion.
reverSed and remanded.
in re eState of Samuel JoSeph failla , Sr ., deCeaSed.
Samuel J. failla , Jr ., and liSa a. failla , huSband
and wife , and tereSa a. kreSak and gene kreSak ,
wife and huSband, appelleeS, v. diana l. failla ,
individually and aS perSonal repreSentative
of the eState of Samuel JoSeph failla , Sr .,
appellant, and bradley SChweer ,
truStee , et al ., appelleeS.
773 N.W.2d 793
Filed October 23, 2009. 	No. S-09-170.
1. Decedents’ Estates: Appeal and Error. Appeals of matters arising under the
Nebraska probate Code, Neb. Rev. Stat. §§ 30-2201 through 30-2902 (Reissue
2008), are reviewed for error on the record.
2. Judgments: Appeal and Error. When reviewing a judgment for errors appear-
ing on the record, the inquiry is whether the decision conforms to the law,
is supported by competent evidence, and is neither arbitrary, capricious,
nor unreasonable.
Appeal from the County Court for Cass County: John f.
Steinheider, Judge. Reversed and remanded with directions.
770 	278 NebRASkA RepORTS