COLORADO COURT OF APPEALS                                         2017COA118


Court of Appeals No. 16CA1355
Jefferson County District Court No. 15CV31189
Honorable Christopher C. Zenisek, Judge


Sodexo America, LLC,

Plaintiff-Appellant,

v.

City of Golden, Colorado; and Jeff Hansen, in his official capacity as Finance
Director of the City of Golden, Colorado,

Defendants-Appellees.


                       JUDGMENT REVERSED AND CASE
                        REMANDED WITH DIRECTIONS

                                  Division IV
                         Opinion by JUDGE J. JONES
                        Graham and Welling, JJ., concur

                         Announced September 7, 2017


Silverstein & Pomerantz LLP, Neil I. Pomerantz, Mark E. Medina, Michelle
Bush, Denver, Colorado, for Plaintiff-Appellant

Williamson and Hayashi, LLC, David S. Williamson, Mathew M. Munch,
Boulder, Colorado, for Defendants-Appellees

Cynthia H. Coffman, Attorney General, Stephanie Scoville, Assistant Attorney
General, Jeremy Hueth, Special Assistant Attorney General, Denver, Colorado,
for Amici Curiae Colorado Higher Education Institutions
¶1      Sodexo America, LLC (Sodexo) provides food services and food

 to the Colorado School of Mines (Mines) pursuant to a contract with

 Mines. Mines, in turn, contracts with its students to provide them

 food (the food obtained, prepared, and served by Sodexo) through

 different types of meal plans. The City of Golden (the City) taxes

 Sodexo for students’ use of the meal plans. This, Sodexo

 maintains, violates the Colorado Constitution and the Golden

 Municipal Code (2015) (Code or GMC).1

¶2      The district court disagreed with Sodexo and granted

 summary judgment for the City on Sodexo’s challenges to the City’s

 assessment and denial of refunds, leading to this appeal. Departing

 from the decision of another division of this court in City of Golden

 v. Aramark Educational Services, LLC, 2013 COA 45, involving a

 similar arrangement, we hold that, under the relevant contract and

 pursuant to the plain language of the Code, no sales occur between

 Sodexo and Mines’ students with meal plans. Instead, Sodexo sells

 meal plan meals to Mines at wholesale. And since the Code

 expressly exempts wholesale sales from taxation, the City’s

 assessment is invalid. We therefore reverse the district court’s

 1   We apply the 2015 version of the Code throughout.

                                   1
 summary judgment and remand the case for entry of judgment in

 Sodexo’s favor.

                             I. Background

¶3    The contract between Sodexo and Mines requires Sodexo to

 “provide food services for [Mines] students, faculty, staff, employees

 and invited guests.” It defines food services as “[t]he preparation,

 service and sale of food, beverages, and select goods, merchandise

 and other items to be agreed upon by [Mines] and Sodexo . . . ,

 including catering, concessions, retail and meal plans.” But the

 contract also says that the food and other tangible items Sodexo

 provides are deemed Mines’ property alone; Sodexo is essentially

 Mines’ go-between for that food.

¶4    Sodexo provides food services by operating and staffing all of

 the dining facilities on Mines’ campus, both traditional residential

 dining facilities and “branded” dining facilities, including the Slate

 Cafe, Diggers’ Den Food Court, Subway, and Einstein Bros. Bagels.

 A student buying a meal plan from Mines (pursuant to a contract

 with Mines, as explained below) can redeem her meal plan meals at

 any of these facilities. The facilities aren’t advertised to the public

 and are used primarily by Mines’ students and staff. On rare


                                     2
 occasion, members of the public buy food from the facilities using

 cash or a credit card.

¶5    Sodexo’s contract with Mines sets the prices Mines pays

 Sodexo for each meal that a student redeems pursuant to a meal

 plan the student has purchased from Mines. It also stipulates that

 any increase or decrease in these prices requires Mines’ prior

 approval.

¶6    Mines requires every student living in a residence hall to select

 a meal plan from among several options; students living off-campus

 may purchase meal plans. Each meal plan includes a certain

 number of weekly meals and a sum of “Munch Money,” a declining

 balance of points/dollars that can be used at any retail food

 location on campus. At the end of each semester, students lose any

 unused balance of meals and Munch Money. These terms are

 memorialized in contracts that Mines enters into with its students;

 Sodexo doesn’t enter into any food purchase contracts with Mines’

 students.

¶7    The students’ contracts describe the available meal plan

 options and how much they cost. Mines alone determines prices

 and terms, without Sodexo’s approval, and charges the cost of the


                                   3
  meal plans to the students’ Mines accounts. Only Mines can

  charge and collect amounts owed for meal plans.

¶8     Students redeem meal plan meals and Munch Money using

  “BlasterCards” provided by Mines. Mines electronically syncs each

  student’s BlasterCard with the meal plan the student has

  purchased from Mines. So each time a student “swipes” her

  BlasterCard on a card reader at a dining facility, Mines’ software

  automatically deducts a meal (or Munch Money) from the student’s

  account.

¶9     Periodically, Mines reports the number of meals used under

  each of its meal plans to Sodexo.2 Sodexo then invoices Mines

  based on the report. The per meal prices Mines pays Sodexo per

  their contract are significantly less than the prices Mines charges

  students under the meal plans.

¶ 10   The Code says the City may levy a three percent sales tax on

  the “purchase price” of “all sales of tangible personal property and

  services,” including food, unless expressly exempted. GMC

  § 3.03.010. Sodexo collects and remits sales tax on campus food

  2 The contract contemplates monthly reports, but it appears from
  the record that Mines may provide weekly reports.


                                    4
  purchases made with cash, check, or credit card.3 But the City has

  also assessed Sodexo sales tax on transactions whereby students

  swipe their BlasterCards in exchange for meal plan meals in the

  dining facilities. (Paradoxically, however, the City assesses the tax

  based on the prices Mines pays Sodexo, not on the prices students

  pay Mines.4) As noted, Sodexo’s challenges to this assessment have

  thus far failed.

                             II. Discussion

¶ 11   Sodexo contends that the City can’t tax it for meals purchased

  by Mines’ students under the students’ contracts with Mines

  because (1) doing so interferes with Mines’ constitutional authority

  to exercise “exclusive control and direction” of its funds and

  appropriations; (2) doing so unconstitutionally taxes Mines’

  students’ acquisition of education furnished by the State; (3)

  Sodexo’s sales of food to Mines under their contract are excluded

  3 Sodexo concedes that these sales are subject to the sales tax, and
  therefore they are not at issue.

  4 According to the Code, the purchase price is “the price to the
  consumer.” GMC § 3.02.10. The sales tax rate is “three percent of
  the purchase price.” Id. at § 3.03.10(a). The City claims that the
  student is the consumer, but the City doesn’t assess Sodexo based
  on the price to that consumer. Rather, it assesses three percent on
  the lower price Mines pays Sodexo.

                                    5
  from taxation under the Code as direct sales to Mines in its

  governmental capacity only; and (4) Sodexo does not sell food to

  students at retail, but instead sells food to Mines at wholesale, and

  the Code expressly exempts wholesale sales from taxation. Because

  we conclude that Sodexo doesn’t sell food to students at retail, and

  that the Code’s wholesale exemption applies to the sales Sodexo

  makes to Mines, we don’t address Sodexo’s first three contentions.5

               A. Standard of Review and Applicable Law

¶ 12   We review an order granting summary judgment de novo.

  Hamon Contractors, Inc. v. Carter & Burgess, Inc., 229 P.3d 282, 290

  (Colo. App. 2009). We similarly review the interpretation of a

  municipal ordinance. See Friends of Denver Parks, Inc. v. City &

  Cty. of Denver, 2013 COA 177, ¶ 45; Leggett & Platt, Inc. v. Ostrom,

  251 P.3d 1135, 1140 (Colo. App. 2010) (construing tax ordinances,

  including a tax exemption provision).



  5 Sodexo urges us to decide this case on constitutional grounds, as
  do the other public institutions of higher education that have filed a
  brief as amici curiae. But we avoid constitutional analysis if we can
  resolve a case on statutory grounds. City of Florence v. Pepper, 145
  P.3d 654, 660 (Colo. 2006); see also Taxpayers for Pub. Educ. v.
  Douglas Cty. Sch. Dist., 2015 CO 50, ¶ 11, cert. granted, judgment
  vacated, and case remanded, 582 U.S. ___ (2017).

                                    6
¶ 13     We construe such ordinances the same way we construe

  statutes, and so our ultimate goal is to determine and give effect to

  the municipality’s intent. Leggett & Platt, 251 P.3d at 1141; Waste

  Mgmt. of Colo., Inc. v. City of Commerce City, 250 P.3d 722, 725

  (Colo. App. 2010). To do this, we look first at the ordinance’s plain

  language. But we don’t look at the language in isolation: we must

  consider the language in context, looking to related provisions and

  construing them in a way that gives effect to all, in a harmonious

  way, if possible. Leggett & Platt, 251 P.3d at 1141; Waste Mgmt.,

  250 P.3d at 725.

¶ 14     If, after doing all this, we conclude that the ordinance’s

  meaning is clear, we won’t apply other rules of statutory

  interpretation. But if we conclude to the contrary — that is, that

  the relevant language is ambiguous — those other rules come into

  play. Leggett & Platt, 251 P.3d at 1141; Waste Mgmt., 250 P.3d at

  725.

¶ 15     A couple of special rules guide our interpretation of tax

  provisions.

¶ 16     First, as a general matter, we construe provisions purporting

  to impose a tax narrowly in the taxpayer’s favor. Associated Dry


                                      7
  Goods Corp. v. City of Arvada, 197 Colo. 491, 496, 593 P.2d 1375,

  1378 (1979) (“[T]axing powers and taxing acts will not be extended

  beyond the clear import of the language used . . . .”); Coors Brewing

  Co. v. City of Golden, 2013 COA 92, ¶ 18; Noble Energy, Inc. v. Colo.

  Dep’t of Revenue, 232 P.3d 293, 296 (Colo. App. 2010). This first

  rule requires us to resolve all doubts regarding imposition of a tax

  against the taxing authority. Associated Dry Goods, 197 Colo. at

  496, 593 P.2d at 1378; Noble Energy, 232 P.3d at 296.

¶ 17   Second, we construe tax exemptions narrowly in the taxing

  authority’s favor. Catholic Health Initiatives Colo. v. City of Pueblo,

  207 P.3d 812, 817-18 (Colo. 2009); Coors, ¶ 18. This second rule

  requires us to resolve all reasonable doubts about whether an

  exemption applies against the taxpayer. Catholic Health Initiatives,

  207 P.3d at 818; Coors, ¶ 18; Noble Energy, 232 P.3d at 296. And

  the taxpayer has the burden of clearly establishing that the

  exemption applies. Catholic Health Initiatives, 207 P.3d at 817.

                                B. Analysis

¶ 18   Section 3.03.010(a) of the Code provides that a three percent

  sales tax “is levied . . . upon all sales of tangible personal property

  and services specified in subsection 3.03.030(a).” As relevant for


                                      8
  our purposes, “sales of food, prepared food, or food for immediate

  consumption” are taxable sales. GMC § 3.03.030(a)(4).

¶ 19   Under the Code, “sale means the acquisition for any

  consideration by any person of tangible personal property or taxable

  services that are purchased.” GMC § 3.02.010. And the Code

  defines “gross sales” as “the total amount received in money, credit,

  property or other consideration valued in money for all sales, leases,

  or rentals of tangible personal property or services.” GMC

  § 3.02.010 (emphasis added). The plain language of the Code

  therefore limits taxable sales to exchanges where the one providing

  the tangible item receives consideration for the exchange.

¶ 20   In concluding that Sodexo makes meal plan sales directly to

  students, the district court erroneously determined that a sale

  occurs when a student swipes her BlasterCard. No sale by Sodexo

  occurs in that circumstance because, under the Code, a sale

  requires the receipt of consideration for the exchange, see GMC

  § 3.02.010, and a student doesn’t give consideration to Sodexo (or,

  arguably, to anyone else) when she swipes a BlasterCard to obtain a

  meal under the meal plan or with Munch Money.




                                    9
¶ 21   The relevant contracts and undisputed facts show that

  consideration is exchanged for food on two occasions: once when a

  student pays Mines for a meal plan or Munch Money, and again

  when Mines pays Sodexo periodically based on the number and

  types of meals provided to students pursuant to the students’

  agreements with Mines. As noted, the meal plans and Munch

  Money are “use it or lose it” propositions. The student can’t get a

  refund from Mines if she uses less than what she has already paid

  for. So the student isn’t truly paying anything when swiping a

  BlasterCard; she is merely reducing the number of meals she can

  obtain in the future under her meal plan. Certainly she is paying

  nothing to Sodexo. Simply put, when a student uses a BlasterCard,

  she and Sodexo aren’t engaging in a buyer-seller transaction.

¶ 22   As no sale by Sodexo occurs under the Code (as construed

  narrowly in favor of the taxpayer) when a student swipes a

  BlasterCard, Sodexo can’t be responsible for sales tax for any such

  transaction. See GMC § 3.03.010.




                                   10
¶ 23   To be sure, sales occur under the Code when Mines pays

  Sodexo for meals.6 But what kind of sales are they? If they are

  wholesale sales, as Sodexo contends, they are exempt from taxation

  under subsection 3.03.040(a)(13) of the Code, which says that “[t]he

  sales tax . . . shall not apply to . . . [a]ll wholesale sales.” We agree

  with Sodexo that this exemption clearly applies to its sales to

  Mines.

¶ 24   We begin, as we must, with the Code’s definition of wholesale

  sales. Such sales are “sales to licensed retailers, jobbers, dealers or

  wholesalers for resale.” GMC § 3.02.010.7 Sodexo sells meals to

  Mines, a licensed retailer. And Mines resells them to students at

  prices significantly higher than Sodexo charges it under its contract


  6Given that the City has thus far only sought to tax the
  BlasterCard swipe transactions, we arguably don’t need to
  determine whether the parties’ contractual relationships give rise to
  any other taxable sales. But we do so out of an abundance of
  caution, and because the City’s assessment is based on the prices
  Mines pays Sodexo.

  7 The Code also distinguishes wholesale sales from “retail sales”
  (defined as “all sales except wholesale sales”) in the way it defines
  “retailer”: “any person selling . . . tangible personal property . . . at
  retail.” GMC § 3.02.010. As discussed, Sodexo doesn’t sell to
  students at all, and it doesn’t sell to Mines at retail. Mines, on the
  other hand, sells to students at retail.


                                      11
  with Sodexo. So Sodexo’s sales to Mines meet the Code’s definition

  of wholesale sales. See also P.H. Collin, Dictionary of Business 474

  (3d ed. 2001) (a wholesaler “buys goods in bulk at a wholesale

  discount”).

¶ 25   The City’s reliance on Sodexo’s delivery of the meals to

  students misses the mark. Though Sodexo also provides the service

  of delivering the meals to the students, it does so in Mines’ stead.

  The meals, under the express terms of the contract, are Mines’

  property. And that is no less so just because Mines itself doesn’t

  physically receive the meals.8

¶ 26   Even less appealing is the City’s argument that because Mines

  is not the “ultimate consumer” of the meals, Sodexo can’t be a

  wholesaler. By definition, sales to end users are not wholesale

  sales. See GMC § 3.02.010 (“Sales by wholesalers to consumers are

  not wholesale sales.”); see also Black’s Law Dictionary 1832 (10th

  ed. 2014) (defining “wholesale” as “[t]he sale of goods or

  commodities usu[ally] to a retailer for resale, and not to the

  ultimate consumer”); Encyclopedia of Small Business 1323 (Virgil L.

  8The City fails to cite any authority for the proposition that a sale
  can’t qualify as wholesale unless the purchaser takes physical
  possession of the goods.

                                    12
  Burton III ed., 2011) (defining “wholesaling” as “the selling of

  merchandise to anyone . . . other that the end consumer of that

  merchandise”). So the fact Mines isn’t the ultimate consumer of the

  meals it buys from Sodexo actually supports Sodexo’s position.9

¶ 27   In sum, we conclude that Sodexo’s sales to Mines are

  wholesale sales under the plain language of the Code’s exemption.

  Of this we have no reasonable doubt.

¶ 28   Though we rely on the plain language of the exemption as

  applied to the undisputed facts, we might be remiss if we failed to

  examine the issue using a test formulated by the supreme court to

  determine whether a sale is a wholesale sale.

¶ 29   In A.B. Hirschfeld Press, Inc. v. City & County of Denver, 806

  P.2d 917 (Colo. 1991), the court, interpreting tax provisions of the

  Denver Municipal Code that are substantially similar to those at

  issue in this case, held that a wholesale purchase occurs if “the

  primary purpose of the transaction is the acquisition of the item for

  resale in an unaltered condition and basically unused by the

  9That the contract between Sodexo and Mines doesn’t use the word
  “wholesale” is, contrary to the City’s argument, immaterial. The
  substance of the transaction is what matters, and nothing in the
  Code requires the taxpayer to formally label its transactions
  wholesale.

                                    13
  purchaser.” Id. at 921; see also Coors, ¶ 21 (applying this test to

  the GMC’s wholesale exemption). Mines doesn’t alter or use the

  meals provided to students, and the economic reality of the parties’

  relationships is that Mines acquires the meals to resell to its

  students at a higher price. It follows that Sodexo’s sales to Mines

  are wholesale sales under the primary purpose test.10

¶ 30   Decisions from other jurisdictions also support our conclusion

  that Sodexo makes wholesale sales. In Slater Corp. v. South

  Carolina Tax Commission, 242 S.E.2d 439 (S.C. 1978), for example,

  the South Carolina Supreme Court interpreted an almost identical

  statute under practically identical facts. In that case,

            [t]he students contracted with and paid the
            colleges, not [the food service supplier], for the
            meals. The colleges, in turn, contracted with
            and paid [the food service supplier]. The
            colleges, not [the food service supplier],
            determined who should be entitled to purchase
            meals at the dining hall, and if a refund was
            given, it came from the college, not from [the
            food service supplier].



  10The court in A.B. Hirschfeld Press, Inc. v. City & County of Denver
  identified a number of factors a court may consider in this context.
  806 P.2d 917, 921 (Colo. 1991). They don’t support the City’s
  position in this case, and indeed the City doesn’t make any
  argument along those lines.

                                    14
  Id. at 440.11 Therefore, the court concluded, “[t]he meals in

  question were clearly purchased for resale with the students buying

  their food from the colleges rather than from [the food service

  supplier].” Id.

¶ 31     In so holding, the Slater court drew from a Fifth Circuit case,

  Hodgson v. Crotty Brothers Dallas, Inc., 450 F.2d 1268, 1281 (5th

  Cir. 1971), holding that a food service supplier on school premises

  qualified as a “retail establishment” pursuant to the Fair Labor

  Standards Act (FLSA). The Fifth Circuit’s holding in Crotty Brothers

  rested on the FLSA’s definition of “retail or service establishments,”

  which expressly included catering services. Id. at 1280. But in its

  analysis of the question, the court recognized the wholesale-like

  nature of the types of transactions in that case, this case, and

  Slater, noting, “even though no completed meals ever passed from

  [the caterer] to the school, it would seem more reasonable to

  characterize the transactions involving [the caterer], the school, and




  11   Mines gives no refunds.

                                     15
  the students as sales for resale than as sales directly from [the

  caterer] to the students.” Id.12

¶ 32   Hodgson v. Prophet Co., 472 F.2d 196 (10th Cir. 1973), on

  which the City relies, is distinguishable. In that case, the court,

  like the court in Crotty Brothers, held that a food service supplier

  that contracted with a college to serve students qualified as a “retail

  and service establishment” under the FLSA. Our case is not, of

  course, an FLSA case; we construe materially different tax

  provisions. And, in any event, the Tenth Circuit relied on aspects of


  12 Our determination also adheres to the more general principle we
  follow when interpreting tax provisions, as articulated by the
  Supreme Court in Frank Lyon Co. v. United States:

             Where, as here, there is a genuine multiple-
             party transaction with economic substance
             that is compelled or encouraged by business or
             regulatory realities, that is imbued with tax-
             independent considerations, and that is not
             shaped solely by tax-avoidance features to
             which meaningless labels are attached, the
             Government should honor the allocation of
             rights and duties effectuated by the parties
             . . . . [T]he form of the transaction adopted by
             the parties governs for tax purposes.

  435 U.S. 561, 562 (1978). The City doesn’t even allege that the
  transactions at issue are structured solely (or at all) as a tax-
  avoidance scheme.


                                     16
  the contract before it that differ in important respects from the one

  before us. As the court explained,

             All the college did . . . was to collect from each
             boarding student . . . the amounts the contract
             stipulated [the food service supplier] was
             entitled to receive . . . and remit the same to
             [the food service supplier]. In other words, all
             the college did was to act in the role of a
             collection agent, rather than a purchaser.

  Id. at 204. The contract in that case “provided that [the food service

  supplier] should charge boarding plan students . . . $1.68 each per

  day . . . and that the college should remit the aggregate of such

  charges collected by it from boarding plan students monthly to [the

  food service supplier].” Id. at 199-200 (emphasis added).

¶ 33   In contrast to the terms of that contract, the contract between

  Sodexo and Mines stipulates that Mines will purchase from Sodexo

  all of the meals it requires to fulfill its contractual obligations to its

  students, after Mines alone determines the prices and terms of

  those plans. And Sodexo doesn’t charge students. Further, the

  food service supplier in Prophet Co. contracted to “operate on its

  own credit and at its own risk of loss,” id. at 206, whereas, in this

  case, only Mines, not Sodexo, bears the risk of loss if a student fails

  to pay for her meal plan.


                                      17
¶ 34   Lastly, we acknowledge that our holding conflicts with the

  division’s holding in City of Golden v. Aramark Educational Services,

  LLC, 2013 COA 45. But with all due respect to the division, we

  disagree with its analysis. In Aramark, the division held that

  although “both parties have presented several tenable arguments,”

  “Golden’s arguments are sufficiently tenable as to create reasonable

  doubts that [the food service supplier] is entitled to the wholesale

  sales exemption.” Id. at ¶¶ 32, 36. The division stopped there,

  declining to determine which of the parties’ “tenable” arguments

  was correct.

¶ 35   A “tenable” argument — that is, a merely nonfrivolous or

  defensible argument — isn’t necessarily a correct one. Though

  we’re required to construe tax exemptions narrowly, resolving all

  reasonable doubts against the taxpayer, we don’t think that means

  that a taxing entity’s assertion of a nonfrivolous argument for

  refusing to apply an exemption can, entirely on the basis of having

  been articulated, carry the day. Rather, we must resolve the

  meaning of the provision to ensure that a taxpayer isn’t subjected to




                                    18
  a tax that, under the correct interpretation, it has no legal

  obligation to pay.13

¶ 36   The City’s argument in this case is “tenable” but incorrect.

  Under the plain language of the Code, Sodexo makes wholesale

  sales to Mines; Sodexo doesn’t make direct sales to students who

  use BlasterCards. Therefore, under the Code, the City can’t assess

  sales tax against Sodexo.

                              III. Conclusion

¶ 37   The judgment is reversed, and the case is remanded for entry

  of judgment for Sodexo and for any other proceedings consistent

  with this opinion.

       JUDGE GRAHAM and JUDGE WELLING concur.




  13 We also observe that no other Colorado appellate case has taken
  this “tenable argument” approach, which treats the mere assertion
  of a nonfrivolous argument as dispositive. In fact, in Coors Brewing
  Co. v. City of Golden, 2013 COA 92, the division subsequently
  construed the same wholesale exemption without using that
  approach.

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