Request By:
Mr. Marvin P. Nunley
McCarroll, Nunley & Hartz
302 Masonic Building
P.O. Box 925
Owensboro, Kentucky 42302
Opinion
Opinion By: Steven L. Beshear, Attorney General; By: Alex W. Rose, Assistant Attorney General
You have requested an opinion concerning the effect, if any, of the 1982 amendments of KRS 132.750 on the application of the Kentucky sales tax to the sale by dealers of mobile homes. It is our opinion that these amendments effect no change in the application of sales tax to the dealer sale of mobile homes.
It should be noted at the outset that Chapter 395 of 1982 Kentucky Acts contains two separate sections each of which sets out an amended version of KRS 132.750. These two versions of Section 750 are in conflict, thus, a statutory construction problem is posed.
Section 6 of Chapter 395 of the 1982 Kentucky Acts with surplusage deleted is as follows:
"Section 6. KRS 132.750 is amended to read as follows:
If the wheels or mobile parts have been removed from a mobile home or recreational vehicle and the unit rests on a permanent, fixed foundation,
Section 25 of Chapter 395 of the 1982 Kentucky Acts with surplusage deleted is as follows:
"Section 25. KRS 132.750 is amended to read as follows:
Mobile homes shall be classified as real estate for the purpose of the levy and assessment of taxes, regardless of whether the wheels or mobile parts have been removed and the unit rests on a permanent, fixed foundation."
It is clear that the two versions provide for different treatment of mobile homes as real property. The requirements of Section 6 that a mobile home be treated as real estate when its wheels have been removed and it rests on a permanent, fixed foundation creates the logical implication that a mobile home will not be treated as real estate until those conditions are met. In contrast, Section 25 mandates treatment as real estate regardless of whether those conditions are met. Obviously, it is necessary to determine which of those versions is to dominate since they cannot be read together. In Gish v. Shaver, Ky., 131 S.W. 515 (1910), Kentucky's high court quoted the following language with approval:
"Where there is an irreconcilable conflict between different parts of the same act, the last in order of position must control, or the clause which is directed specially to the matter in preference to others mentioning it incidentally only." Id., 516.
In view of the fact that both Section 6 and Section 25 deal quite specifically with the matter at hand, it is necessary to apply the first portion of the above stated rule. Under this application Section 25, being the latter in position, must control. See also OAG 77-499.
Having addressed the initial issue of which of the amended versions of KRS 132.750 is applicable to the question at hand, it is now necessary to turn to the issue of the amended version's effect, if any, on the application of the Kentucky sales tax to the dealer sale of mobile homes.
Prior to the 1982 amendment KRS 132.750 read as follows:
"If the wheels or mobile parts have been removed from a housetrailer and the unit rests on a permanent, fixed foundation, it shall be treated as real property. "
When compared with the new version, it is plain that two changes have been effected. First, the term mobile home has been substituted for the term housetrailer. And second, the amended statute allows for a broader treatment of when a mobile home will be considered real property. This second change is what has created uncertainty as to the application of sales tax to mobile homes. The uncertainty arises because the sales tax applies only to tangible, personal property. KRS 139.100; 139.200. Thus, if a mobile home is already real estate while it still rests on the dealer's lot with utilities unconnected, then no sales tax would be assessed at the time of its purchase by the ultimate consumer. However, the amended KRS 132.750 does not, nor was it intended to, bring about that result. The purpose of the amendment was to close a tax loophole rather than create a new one. Prior to the amendment the anomalous situation existed where two mobile homes could sit side by side, be used by their occupants in the same manner, and yet still be treated differently for real property tax purposes simply because one home's wheels had been removed while the other's had not. This is the loophole the 1982 amendment was designed to remedy by providing that removal or non-removal of wheels and existence or nonexistence of a permanent, fixed foundation were not criteria for determining whether a mobile home is real estate for tax purposes. It does not follow, however, that the amended statute mandates that mobile homes be treated as real estate prior to their having any significant connection with a piece of land. Indeed, if the amended statute did mandate such a treatment, it (the statute) would be doing serious injury to the very foundation of our understanding of the nature of real estate.
At common law, real estate consisted ". . . of such things as are permanent, fixed, and immovable, as lands, tenements, and hereditaments of all kinds, which are not annexec to the person or cannot be moved from the place in which they exist." 63 Am.Jur. 2d Property § 11. By statute the necessity of permanence and immovability have been eroded, but the requirement of attachment to land has never been abrogated. For example, KRS 92.410(1) defines real estate as "land and improvements thereon" and further defines land as "the soil" and improvements as "everything attached to or built on the soil. " Chapter 132 used this same definition in a less detailed form for "real property. " KRS 132.010(3). Thus, by taking the applicable portion of the definition of real estate and inserting it in the amended statute in place of that term, it becomes plain that the legislature intended that mobile homes be treated as real estate for tax purposes after, and only after, they have been attached to the soil by the connecting of utilities or some other reasonable criteria. To illustrate:
"Mobile homes shall be classified as improvements, once attached to the land, for purposes of the levy and assessment of taxes, regardless of whether the wheels or mobile parts have been removed and the unit rests on a permanent, fixed foundation." (Substitute language underlined). KRS 132.750.
Under the foregoing analysis, the sale of mobile homes by dealers continues, as under past law, to be subject to the sales tax since at the time of sale the homes are still tangible, personal property rather than improvements to land. To hold otherwise would be contrary to the statutory definition of real estate since, while on the dealers lot, the homes are mere inventory with no significant attachment to the soil and are held with no intention that they become affixed to the soil until after they are sold and moved to the purchaser's lot.
In holding that dealers sales are subject to sales tax, we are mindful that had the legislature intended otherwise, it might have exempted those sales directly by including such an exemption in the exemption statutes of KRS Chapter 139. It also might have altered the definition of real estate so as to eliminate the requirement that improvements be affixed to the land. In its wisdom the legislature did neither of these things.
In summary, mobile home sales by dealers continue to be subject to the Kentucky sales tax on tangible personal property. The amended statutes concerning the treatment of mobile homes as real estate do not abrogate the requirement that in order for tangible personal property to become an improvement to the land it must be attached to or built upon the soil. In the case of mobile homes, this occurs when the utilities are connected or when some other relatively permanent attachment to the land is formed. The amendments of KRS 132.750 are intended to, and effectuate the purpose of, allowing similar tax treatment for similarly situated mobile homes regardless of vestigial differences between them.