Saturday, May 26, 2012

Newletter sales tax

In the Matter of the Petition of GLOBALSPEC, INC. for Revision of a Determination or for Refund of of Sales and Use Taxes under Articles 28 and 29 of the Tax Law for the Period September 1, 2005 through August 31, 2008.

Case Information:

Docket/Court: 823435, New York Division of Tax Appeals, Administrative Law Judge Determination

Date Issued: 05/10/2012

Tax Type(s): Sales and Use Tax



Petitioner, GlobalSpec, Inc., filed a petition for revision of a determination or for refund of sales and use taxes under Articles 28 and 29 of the Tax Law for the period September 1, 2005 through August 31, 2008.

A hearing was held before Dennis M. Galliher, Administrative Law Judge, at the offices of the Division of Tax Appeals, 500 Federal Street, Troy, New York on February 10, 2011 at 10:30 A.M., with all briefs to be submitted by December 23, 2011, which date commenced the six-month period for issuance of this determination (Tax Law § 2010[3]). Petitioner appeared by McNamee, Lochner, Titus & Williams, PC (G. Kimball Williams, Esq., of counsel). The Division of Taxation appeared by Mark F. Volk, Esq. (Anita K. Luckina, Esq., of counsel).


I. Whether petitioner has established that its purchases of newsletter content consisting of links to articles together with brief introductory comments pertaining to such articles, which content was formatted and published by petitioner as an electronic newsletter, did not constitute an information service subject to tax pursuant to Tax Law § 1105(c)(1), (9)(i).

II. Whether, if petitioner's service constitutes an information service, the same must be excluded from being subject to tax because the information provided is personal and individual in nature and is not or may not be substantially incorporated in reports furnished to others.


1. Petitioner, GlobalSpec, Inc. (GlobalSpec), is a Delaware corporation, authorized to do business in New York State. GlobalSpec's principal office is located in Troy, New York.

2. For many years, petitioner has maintained a narrow-scope, specialized vertical search engine, providing content geared to the needs of engineering, scientific, technical and industrial professionals. Petitioner's search engine is a “niche” search engine, and may be distinguished from other more general search engines (e.g., Google) based on the level of content screening. Petitioner's search engine provides search responses more specifically attuned to the engineering and scientific needs at the higher technical levels of those who utilize petitioner's search engine.

3. In responding to a Division of Taxation sales tax audit questionnaire, GlobalSpec described itself as follows:

GlobalSpec, Inc. is an internet-based business that links buyers and sellers in the electrical, electronic, mechanical, chemical and optical products markets. The Company is a provider of business-to-business advertising services. Specifically, the Company derives the majority of its revenue from selling product display and banner advertising to Companies (suppliers) that wish to advertise their products and services on GlobalSpec's internet site, on-line catalog, and electronic newsletters. Registered members of GlobalSpec's internet site may use the Company's search engine (found on GlobalSpec's internet site) free of charge.

GlobalSpec further describes itself as:

the leading specialized vertical search, information services and e-publishing company serving the engineering, manufacturing and related scientific and technical market segments. The company provides its buy-side users with domain-expert search engines, a broad range of proprietary and aggregated Web-based content and over 60+ product and industry e-newsletters that help engineers and related professionals perform their key job tasks with the highest levels of accuracy and productivity. GlobalSpec provides its sell-side client base of companies seeking to reach the worldwide engineering audience with highly filtered sales leads, product promotion and brand advertising platforms and a wide range of e-media advertising and marketing services .

4. GlobalSpec offers, among other services for marketers, “a variety of online advertising programs, including highly targeted product promotion, sales lead generating and brand advertising programs on GlobalSpec's e-newsletters ....” Petitioner states that “[s]ince its inception, GlobalSpec has strived to provide innovative Web-based and online information services that align with and support the job tasks of the engineering and related professional communities.”

5. Petitioner appeals to its advertising clients by noting that “[u]nlike a general search engine, the people searching on GlobalSpec are specifically looking for products, services and suppliers in the industrial market segments.” Petitioner provides “targeted exposure,” stating that “GlobalSpec connects buyers and sellers within the industrial marketplace, providing targeted exposure, increased brand visibility and traffic to your Web site” via searchable catalogs, company directories, e-Newsletters and banners, and pay-per-click.

6. Until 2004, GlobalSpec published, as an adjunct to its search engine, a single, general engineering newsletter. 1 Thereafter, and as the result of survey feedback from its newsletter subscribers, GlobalSpec determined that these newsletter subscribers were interested in receiving content providing more focused information pertinent to their specific everyday work experiences, as opposed to the single broad-based newsletter that GlobalSpec had been publishing. Consequently, GlobalSpec began to publish newsletters on a variety of topics aimed at more specific segments of its subscribers' fields of employment.

7. At present, petitioner publishes some 62 newsletters. Petitioner's newsletters are designed to appeal to the engineering, technical and industrial communities, and focus on various processes and product categories therein. In general terms, petitioner's newsletters are aimed at providing awareness of and access to content that will help the people in the engineering, scientific and industrial fields perform their jobs better, build their products faster and more efficiently, and bring them to market in a timely fashion.

8. The newsletters are delivered by e-mail to users of petitioner's website who have subscribed to receive them. The 62 newsletters are not sent out as a “blast” e-mail to all of GlobalSpec's subscribers. Instead, three or four newsletters are typically sent out to individual subscribers based on the specific newsletters those individuals signed up to receive. Petitioner's newsletters are also available on its website, including a searchable archive of its prior newsletters. Petitioner does not charge a subscription fee to receive the newsletters. Rather, similar to traditional print publications, petitioner derives revenue from manufacturers and suppliers who purchase advertising space from petitioner in those newsletters relevant to their target markets and products.

9. Registering (or subscribing) to receive petitioner's newsletters occurs in two ways. In some instances a person who visits petitioner's website for research would see a “pop-up” advertisement or invitation to subscribe, and would respond by giving certain demographic information so as to become a registered user. In turn, that person would receive more specialized content in their fields of endeavor. Alternatively, people can simply subscribe directly to receive some (or theoretically all) of petitioner's newsletters. Typically, subscribers are engineers that work in the design and manufacturing fields and desire to receive those newsletters of relevance to their particular area of work or interest.

10. Petitioner obtains the content presented in its newsletters by engaging the services of freelance content providers referred to as “editors.” Petitioner advertises for highly trained and experienced engineers, scientists and other technical professionals possessing notable credentials, including advanced educational degrees and work experience in their chosen fields. In addition to their education, technical training and work experience in their given area, the persons engaged by GlobalSpec also have writing experience. Nearly all of those engaged by GlobalSpec started their careers as working engineers, and then segued into journalism in the technical fields in which they were educated and had worked. Petitioner seeks to engage individuals who, by virtue of their training and experience, know the particular manufacturing or engineering sector and marketplace to which a given newsletter will pertain, the nomenclature of that marketplace, and the “key players” (individuals and companies) therein.

11. Petitioner's editors use their multidisciplinary knowledge and industry experience to find and highlight content in the fields covered by petitioner's newsletters. Petitioner subdivides its editors into three tiers consisting of a group editor, associate editors and freelance editors. Petitioner utilizes the three-tiered hierarchy to track and check the content and quality of the editors' newsletter submissions. This hierarchy and process may be described as follows:

a) The top of the tier is the group editor. The group editor chooses and oversees the associate and freelance editors, reviews and requests revisions to newsletter submissions, if needed, and ultimately approves the content submitted to petitioner for publication as a newsletter. In addition to the foregoing responsibilities concerning freelance and associate editors, the group editor also produces one or more newsletters in his own area of expertise. The group editor is an independent contractor and not an employee of GlobalSpec, and is compensated by petitioner pursuant to the negotiated terms of a Group Editor Agreement with petitioner. The Group Editor Agreement includes a non-compete clause.

b) Associate editors are independent contractors and not employees of GlobalSpec. They oversee, review and request revisions, if necessary, to newsletter content submitted by the freelance editors. In addition, associate editors produce one or more newsletters in their own areas of expertise. Associate editors are paid a set amount of $525.00 per newsletter they produce on their own, and are paid $60.00 per hour for the service of editing the newsletters submitted by the freelance editors, and for ancillary work such as rating the ongoing performance of freelance editors.

c) Freelance editors produce newsletters in their areas of expertise, and are paid a flat fee of $500.00 per newsletter produced. Freelance editors, like the group and associate editors, are independent contractors and are not petitioner's employees. Freelance editors do not have the oversight, review and revise responsibilities of the associate editors or of the group editor. The majority of petitioner's newsletters are produced by the freelance editors, and petitioner contracts with approximately 32 freelance editors, each of whom produces one or two of the 62 newsletters published by petitioner.

12. Each newsletter editor engaged by petitioner decides what content the subscribers would want to be apprised of and finds that content from a variety of sources, including the World Wide Web, various technical print magazines, the websites of key companies in the given sector and trade show news information. While petitioner's subscribers know how and where to search for information, GlobalSpec can save its subscribers time by “culling through” the vast amount of information available and vetting the same on the basis of relevance and reliability. Thus, petitioner aims to take the broad scope of possibly relevant material and narrow the same to fit the specific scope of a given newsletter. The editor's introduction or head note to an article is designed to tell the reader of a given newsletter why he or she should care to link to and access the information contained in the highlighted article. The full articles described in the newsletters are reachable by link, enabling the subscribers to access and read the full underlying referenced articles.

13. Petitioner's e-Newsletter Editorial Guidelines, pursuant to which its editors produce the newsletters, state that “GlobalSpec's e-Newsletter editorial vision is to provide unbiased, educational, and newsworthy information to the engineering, technical, and industrial professions. The content should be developed first and foremost to serve the needs and demands of the e-Newsletter readership base and not to appear self-serving to GlobalSpec.” Petitioner states the “ultimate goal” is to “aggregate the most newsworthy content - and become the newsletter that readers can go to for a summary of leading publication news stories,” with “GlobalSpec's e-newsletters [serving] as a portal to get readers to sites where original content resides.”

14. Petitioner's newsletters address topics within the particular engineering, scientific or technical area to which each pertains. However, neither the newsletters nor the editors answer specific questions posed by individual subscribers. Rather, each newsletter is intended to appeal to a target engineering, technical, scientific or industrial sector, and focus on various product categories and processes therein. The newsletters are typically published on a monthly basis, although some are published more frequently depending on the topic and the then-current evolution of the topic area.

15. Petitioner's witnesses noted that in prior years, the various industries and sectors had related trade or technical print magazines containing articles on emerging or changing technologies. In fact, many of GlobalSpec's editors wrote for such publications. However, with the advent of internet technology, much of this information now resides in electronic format rather than in traditional print format, and GlobalSpec's newsletters are designed to alert the working professional to such electronically available information.

16. Petitioner's description of its newsletters, as set forth in its job postings seeking to hire newsletter editors, states:

GlobalSpec's E-Newsletters provide engineering, technical, and industrial related content to the professional engineering, technical and industrial communities. Our E-Newsletter properties include over 55 business-to-business e-publications. These e-newsletters keep readers informed of product areas of interest, new technologies, the latest industry news and trends, and more, and use internet technology and creativity to help GlobalSpec clients reach their targeted audience of buyers on a monthly basis.

The Editor's primary responsibility is to write headlines and brief introductory/engaging content for a steady flow of high-quality news stories aggregated from the worldwide web. Editors will conduct research/search activity via the GlobalSpec Web site/Search Engine and worldwide web to find stories on news, trends, companies, profiles, new technology, product introductions, careers, and diversions that will interest the engineering, scientific and technical community of professionals.

17. The group editor follows petitioner's “e-Newsletter Freelance Editor Hiring and Termination Process” (Process) in selecting associate and freelance editors, who work pursuant to a verbal agreement with no specific length or term of engagement. The Process pursuant to which petitioner's associate and freelance editors are engaged (and terminated) includes a confidentiality agreement addressing nondisclosure of certain proprietary information, but does not otherwise prevent these editors from performing similar services for others, and many of the editors engaged by petitioner also write for other enterprises.

18. Petitioner's editors select the content to be included in the newsletter for which they are responsible, and then write a brief three to six line paragraph addressing the content contained in the underlying article in a manner aimed to encourage the reader to link to the original content (full article) on the web to learn more. Petitioner provides detailed editorial guidelines that the editors must follow in producing and editing the e-newsletters to be published, including a list of publications from which articles should not be taken due to unreliability, among other things.

19. All of GlobalSpec's newsletters have a standard format, and the content for petitioner's newsletters is provided to petitioner by its editors in this format. Under this standard format, each newsletter includes an “Industry Trends” section, four “Technology” categories, a “Careers and Commentary” section, “Diversions,” and “Discussion/Share Your Thoughts.” Each is described as follows:

a) “Industry Trends,” as its title suggests, presents an article which is not product-oriented but rather is broader in scope and pertains to advances or potential directions in a given field.

b) “Technology” addresses four categories within the particular newsletter's industry or sector, and presents new, emerging or changing technologies or products in those industries or sector categories. Often the name of the company that provides the product or technology described in the editor's paragraph (and in the underlying article) appears below the headline for the editor's paragraph.

c) “Careers and Commentary” covers career opportunities in the area covered by the newsletter.

d) “Diversions” is a lighter and more amusing section still focused, however, on the industry or sector of the given newsletter.

e) “Discussion/Share Your Thoughts” introduces a topic, selected by the particular newsletter editor, with the hope of piquing the interest of the newsletter readers so as to start a commentary discussion, linked by blog, among the readers and pertaining to the chosen topic.

The newsletters include images, pictures or graphics to accompany the newsletter content. This material is selected by the editors and is aimed at capturing the readers' attention. There is also, as noted, advertising that appears in the newsletters.

20. Petitioner's newsletters are not set up to receive and specifically respond to individual technical questions from petitioner's subscribing readership, and this is not part of the role performed for petitioner by its editors. Petitioner's editors do not author original technical solution-based work, in general or in response to any specific individual request for a solution to a particular problem, and generally do not have any direct contact with the newsletter subscribers. While some newsletter topics may overlap to some degree, the specific content provided by the editors, with rare exceptions, stands alone. The editor's paragraphs pertaining to the Technology categories are intended to influence the reader to go to the underlying full article, via the link, and read that article. Thus, the editor's paragraphs would be aimed at succinctly explaining why the reader would want to turn to the underlying article and read the same. As set forth by petitioner, the aim is not to simply reprint technical articles, or even so much to summarize such articles, but rather to convince the reader that the article is relevant and will be helpful to the working professional in performing job functions.

21. In September 2008, the Division of Taxation (Division) commenced a sales tax field audit of petitioner. As a result of its audit, the Division issued to petitioner a Notice of Determination (L-03265044-7), dated October 13, 2009, assessing sales tax due in the amount of $68,468.62, plus interest, on purchases of newsletter content in the amount of $855,858.00 for the period September 1, 2005 through August 31, 2008.


A. Tax Law § 1105(c) imposes tax upon the receipts from every sale, except for resale, of nine specifically enumerated services. As is relevant to this matter, Tax Law § 1105(c)(1) imposes tax upon the service of:

The furnishing of information by printed, mimeographed or multigraphed matter or by duplicating written or printed matter in any other manner, including the services of collecting, compiling or analyzing information of any kind or nature and furnishing reports thereof to other persons, but excluding the furnishing of information which is personal or individual in nature and which is not or may not be substantially incorporated in reports furnished to other persons....

In 1990, Tax Law § 1105(c) was expanded by the addition of paragraph nine so as to impose tax upon the receipts from every sale, except for resale, of an information service that is provided via telephony or telegraphy (Tax Law § 1105[c][9][i], as added by L 1990, ch 190, eff September 1, 1990). Section 1105(c)(9)(i) provides that “in no event (i) shall the furnishing or provision of an information service be taxed under this paragraph unless it would otherwise be subject to taxation under paragraph one of this subdivision if it were furnished by printed, mimeographed or multigraphed matter.”

B. Regulations of the Commissioner of Taxation and Finance, at 20 NYCRR 527.3, in relevant part identify taxable information services to include “credit reports, tax or stock market advisory and analysis reports and product and marketing surveys.” ( 20 NYCRR 527.3 [a][3].) Examples of taxable information services include a weekly newsletter showing the range of commodity prices, a monthly bound volume of current advertising rates, lists of prospective customers' telephone numbers, and a computer service company's print-out of cases and statutes containing the word “assessment” as requested by customers ( 20 NYCRR 527.3 [a], examples 1-4). Examples of nontaxable information services include a private detective agency's report to its client, an auto insurance damages appraisal report, and a computer services company's withholding tax payroll report to subscribers ( 20 NYCRR 527.3 [b], examples 1-3).

C. In contrast to Tax Law § 1105(a), which imposes sales tax on all retail sales of tangible personal property, except as otherwise provided, Tax Law § 1105(c) imposes tax only on certain specifically enumerated services (see Matter of Rochester Gas and Electric Corp., Tax Appeals Tribunal, January 4, 1991 ). Accordingly, whether a service is taxable as one of these specifically enumerated services is properly construed pursuant to the rule applicable when determining whether a transaction is subject to taxation at all (see Matter of Grace v. New York State Tax Commn., 37 NY2d 193, 371 NYS2d 715 [1975], lv denied 37 NY2d 708, 375 NYS2d 1027 [1975]) ; that is, most strongly against the government and in favor of the citizen (see Matter of Building Contractors Association v. Tully, 87 AD2d 909, 449 NYS2d 547 [1982] ). This rule of construction stands in contrast to the rule with respect to exemptions from tax, i.e., strictly and narrowly against the taxpayer (see Matter of International Bar Assn. v. Tax Appeals Tribunal, 210 AD2d 819, 620 NYS2d 582 [1994], lv denied 85 NY2d 806, 627 NYS2d 323 [1995] ). However, even with such a construction, proof of entitlement to the exclusion is petitioner's burden and it must show that the service it provides is not one of those set out in Tax Law § 1105(c).

D. The “furnishing of information” is such an enumerated taxable service under the law (Tax Law § 1105[c][1],[9]). However, there is a distinction between a taxable information service and the furnishing of a nontaxable service where information is merely a component of that service. In Matter of SSOV '81 Ltd. (Tax Appeals Tribunal, January 19, 1995) , the Tribunal explained that the term “information service”:

has been interpreted to mean “the sale of the service of furnishing information by a business whose function it is to collect and disseminate information which is taxable under Tax Law § 1105(c)(1) and not the mere sale of information” .... In order to determine a service's taxability, the analysis employed by the New York courts and the Tax Appeals Tribunal focuses on the service in its entirety, as opposed to reviewing the service by components or by the means in which the service is effectuated. (Citations omitted.)

In Matter of SSOV' 81 Ltd., the Tribunal focused on the “primary function” of the service, which was to enable members of a dating referral service to meet others. In concluding that such primary function was not one of the enumerated taxable services set forth in Tax Law § 1105(c), the Tribunal recognized that the proper focus should be on the primary function itself and not upon whether the service might, as an incident thereof, involve the provision of information, stating that, “[t]o neglect the primary function of petitioner's business in order to dissect the service it provides into what appears to be taxable events stretches the application of Article 28 far beyond that contemplated by the Legislature.”

Under the foregoing rubric, to be an information service the taxpayer's primary function and true aim must be the business of furnishing information. As the Tribunal has stated, “the mere fact [that] information is [being] transferred will not create a taxable event” (Id.; see Matter of Principal Connections, LTD., Tax Appeals Tribunal, February 12, 2004 ).

E. The primary function and true aim of petitioner's newsletters is to provide timely, current, reliable and presumably relevant and useful information to those who register or subscribe to receive petitioner's newsletters. Petitioner effects this function by providing, at regular intervals, information about the latest technical and scientific trends and developments in the engineering, manufacturing and industrial fields, including information about products and processes in these particular fields and about those who provide and sell the same. The editors, from whom petitioner purchases its newsletter content, locate, retrieve, review, analyze and present information of likely interest to a particular group or segment of potential users of such information. This function and process clearly fall within the ambit of Tax Law § 1105(c)(1) and its language of “collecting, compiling or analyzing information of any kind or nature and furnishing reports thereof to other persons....” GlobalSpec pays the appropriately trained and experienced people to find and set forth information that is, in their view, relevant. Of necessity, this requires a sophisticated knowledge of the particular field and an ability to convey that knowledge in writing. The newsletters are thus the “reports” that set forth the information culled, reviewed and analyzed, and determined by petitioner's editors to be useful to the target audience or segment served by each newsletter. This process, at the same time, undoubtedly serves to enhance the exposure of petitioner's advertisers to potential purchasers of the products described in the newsletters. While petitioner's editors' introductory or highlight paragraphs are written in their own words, petitioner's primary purpose is not to provide those few lines or summary but to compile and provide access to the underlying presumably relevant articles. The summary or highlight paragraphs are not the overriding function or goal of petitioner's business, but rather represent simply the strategy (or sub-strategy) petitioner employs to compel its newsletter readers to link to the articles and thus accomplish its primary purpose (see Findings of Fact 12 and 20). This conclusion is entirely consistent with petitioner's own self-description and with its stated vision for its newsletters (see Findings of Fact 3, 4, 5, 13 and 16), and fully supports the view that petitioner is providing an information service to its newsletter readers. In sum, the primary purpose and true aim of petitioner's newsletter service is to furnish information to a group of readers, and this function is not merely incidental to some other service.

F. The facts of this matter further support the conclusion that petitioner's newsletter service does not escape taxation via Tax Law § 1105(c)(1) as “the furnishing of information which is personal or individual in nature and which is not or may not be substantially incorporated in reports furnished to other persons....” The fact that the group or segment to which information is furnished is a smaller group than the general public and, by virtue of having several newsletters directed to various distinct segments or groups smaller than the entire field of engineers or scientists, does not convert petitioner's service into a personal or individual information service. Petitioner's service still entails providing information to a group or segment of potential users. The fact that each newsletter's informational content is made available in a convenient, helpful and efficient manner to a particular audience does not make the same personal or individual in nature so as to escape taxation. Nor is petitioner's service something akin to a consulting service. That is, petitioner's subscribers do not request a particular piece of information nor is the information presented in response to a particular problem discrete to a subscribing newsletter reader. In simplest terms, petitioner pays its editors to locate, analyze, choose, digest and present information to targeted groups of readers likely to be interested in the information presented and in turn to link to the underlying full source of that information. Hence, petitioner's information service is not personal or individual in nature and thus is not removed from the realm of a taxable information service upon that basis.

G. The petition of GlobalSpec, Inc., is hereby denied and the Notice of Determination dated October 13, 2009 is sustained.

DATED: Albany, New York, May 10, 2012

/s/ Dennis M. Galliher


Barnes Noble


Case Information:

Docket/Court: 31,231, Court of Appeals of New Mexico

Date Issued: 04/18/2012

Tax Type(s): Sales and Use Tax


Gary K. King, Attorney General, Santa Fe, NM, Tonya Noonan Herring, Special Assistant Attorney General, Santa Fe, NM for Appellant

Brann & Isaacson, George S. Isaacson, David W. Bertoni, Lewiston, ME

Brownstein, Hyatt, Farber & Schreck, P.C., Timothy R. Van Valen, Albuquerque, NM for Appellee




The New Mexico Taxation and Revenue Department (Department) issued an audit assessment to LLC (Taxpayer) for gross receipts tax (GRT) and interest in the amount of $534,563.11 for sales into New Mexico between January 31, 1998 and July 31, 2005 (the audit period). The sole issue on appeal is whether the hearing officer correctly concluded that Taxpayer did not have a substantial nexus with New Mexico, as required under the Commerce Clause of the U.S. Constitution. Because we conclude that the in-state use of the Barnes & Noble trademarks was sufficient to meet the constitutional standard, we reverse.


After Taxpayer filed a timely protest, both parties moved for summary judgment. The facts were not disputed, and the parties agreed that the GRT statute applied to Taxpayer's activities. However, Taxpayer argued that application of the statute was unconstitutional because there was no substantial nexus between Taxpayer and New Mexico. Department argued that the GRT statute applied to Taxpayer's sales and that the presence of Barnes & Noble Booksellers, Inc. (Booksellers) stores in New Mexico created a sufficient nexus to permit the tax.

A. Corporate Structure

Taxpayer is a limited liability company organized under the laws of the State of Delaware “with all of its operations, facilities, and personnel located outside of the State of New Mexico.” Taxpayer maintained its own offices separate from those occupied by other Barnes & Noble corporations. Taxpayer did not own or lease property in New Mexico, had no retail stores within the state, and had no sales agents or employees here.

During the audit period, Taxpayer was at all times a wholly owned subsidiary of barnes&, inc. The ownership of barnes&, inc. varied during the period; however, at least 40% was owned by B& Holding Corp. at all times. B& Holding Corp. was at all relevant times a wholly owned subsidiary of Barnes & Noble, Inc. (Parent). It follows that during the audit period, Parent had an interest of between 40% and 100% in Taxpayer.

Parent also owned several other companies relevant to our discussion. Most importantly, it owned Booksellers. Booksellers operates physical Barnes & Noble book stores throughout the United States, including three stores in New Mexico. Parent also owned Marketing Services (Minnesota) Corporation, Inc. (MSMC), which provided gift card services to Taxpayer and Booksellers.

B. In-state Activities

Booksellers performed activities at its three in-state stores that Department argues created a substantial nexus between Taxpayer and New Mexico. These include the sales of gift cards, the loyalty program memberships, and a return policy that allowed Booksellers to accept Taxpayer's merchandise.

Both Taxpayer and Booksellers, as well as other retailers, sold Barnes & Noble gift cards. These gift cards could be redeemed either in-store or online. The gift card program was run by MSMC. When Booksellers (or any other vendor) sold a card, it received a small fee from MSMC, and it sent the proceeds from the sale to MSMC. When a card was later redeemed by a customer, MSMC credited the value of the card to the retailer who had honored it. The reverse side of the Barnes & Noble gift cards displayed the address of Taxpayer's website.

Taxpayer and Booksellers also sold memberships to a loyalty program called the “Readers' Advantage Program.” Customers could purchase a membership in this program for $25. Membership entitled customers to discounts at Booksellers' stores and online. Fees went to Parent, who administered the loyalty program and deducted expenses from the fee income. Taxpayer and Booksellers each received a share of the remaining fees that was based on the percentage of discounts they accounted for.

Bookstores also implemented an expansive return policy. Customers could return salable items to Booksellers regardless of their origin. Booksellers provided in-store credit (or, equivalently, gift cards that could only be used in the stores) for such items. Customers could only return items for cash if they could produce a receipt showing that the items had been purchased in-store. Taxpayer provided information about Booksellers' return policy on its website. Taxpayer's website also provided a store locator and descriptions of in-store events.


Taxpayer prevailed below based on the hearing officer's conclusion that there was not a substantial nexus between Taxpayer and the State of New Mexico. The hearing officer concluded that the activities of Booksellers “did not create and establish and maintain a market for” Taxpayer. Department contends that the decision was in error because “the activities of Booksellers, an in-state affiliate, with a physical presence in this state, helped Taxpayer create, establish[,] and maintain a market in New Mexico.” Taxpayer argues that the hearing officer did not err and that imposition of the GRT would violate the Due Process Clause of the U.S. Constitution.

This Court will set aside the ruling of a hearing officer in a tax appeal if the ruling is found to be an abuse of discretion or if it is not in accordance with the law. See NMSA 1978, § 7-1-25(C) (1989). “[T]he trial court abuses discretion when it applies an incorrect standard, incorrect substantive law, or its discretionary decision is premised on a misapprehension of the law.” Aragon v. Brown, 2003-NMCA-126, ¶ 9, 134 N.M. 459, 78 P.3d 913 . The sole question on appeal is whether the hearing officer correctly applied the law to the facts when it determined that there was no substantial nexus between Taxpayer and New Mexico. “[O]ur review of the application of the law to the facts is conducted de novo.” State v. Elinski, 1997-NMCA-117, ¶ 8, 124 N.M. 261, 948 P.2d 1209 .

A. Commerce Clause

We begin with Department's argument that the hearing officer erred in concluding that no substantial nexus existed to support the assessment of GRT against Taxpayer. Department contends that a substantial nexus exists because (1) Taxpayer and Booksellers had close corporate connections, (2) Taxpaper and Booksellers used common trademarks and logos, and (3) Booksellers' in-state activities helped Taxpayer create and maintain a market in New Mexico. Taxpayer argues that it had no contact with New Mexico and that Booksellers' in-state activities should not be considered because they were not undertaken on Taxpayer's behalf.

Our Supreme Court has set forth a two-part analysis to determine whether the GRT applies in multi-state transactions:

First, we must engage in statutory interpretation to determine if the Legislature intended to tax those receipts under the GRT. Second, if we conclude [in the affirmative], we must determine whether the tax violates the Commerce Clause ... of the United States Constitution.

Kmart Corp. v. Taxation & Revenue Dep't, 2006-NMSC-006, ¶ 11, 139 N.M. 172, 131 P.3d 22 . In the instant case, the parties have stipulated that Taxpayer sold property in New Mexico that is subject to the GRT. The sole issue on appeal is whether such a tax violates the Commerce Clause.

It is well settled that under the Commerce Clause, a tax may not be applied to an activity absent a substantial nexus with the taxing state. Dell Catalog Sales L.P. v. Taxation & Revenue Dep't, 2009-NMCA-001, ¶ 40, 145 N.M. 419, 199 P.3d 863 (citing Complete Auto Transit, Inc. v. Brady, 430 U.S. 274, 279 (1977) ). In Quill Corp. v. North Dakota, 504 U.S. 298, 317 (1992) , the Supreme Court reaffirmed the bright-line rule from National Bellas Hess, Inc. v. Department of Revenue, 386 U.S. 753 (1967) , that a seller must have a physical presence in a state in order to satisfy the substantial nexus requirement. The physical presence requirement is met when “activities performed in this state on behalf of a taxpayer are significantly associated with the taxpayer's ability to establish and maintain a market in the taxing state for the sales.” Dell, 2009-NMCA-001, ¶ 43 (quoting Tyler Pipe Indus., Inc. v. Wash. State Dep't of Revenue, 483 U.S. 232, 250 (1987) (alteration and emphasis omitted)).

The threshold for establishing a physical presence is not high. It can result from the presence of a single employee. See Standard Pressed Steel Co. v. Wash. Dep't of Revenue, 419 U.S. 560, 561-64 (1975) (rejecting a commerce clause challenge to a tax on an out-of-state corporation that employed a single person in-state). It does not depend on whether the individual is classified as an employee or an independent contractor. See Tyler Pipe Indus., Inc., 483 U.S. at 249-51 ; Scripto, Inc. v. Carson, 362 U.S. 207, 211 (1960) (concluding that whether in-state salesmen were independent contractors or employees was “without constitutional significance”). It can be established by the presence of in-state offices even when the activities of those offices are not related to the in-state activity being taxed. Nat'l Geographic Soc'y v. Cal. Bd. of Equalization, 430 U.S. 551, 561 (1977) (“[T]he relevant constitutional test to establish the requisite nexus for requiring an out-of-state seller to collect and pay the use tax is not whether the duty to collect the use tax relates to the seller's activities carried on within the [s]tate, but simply whether the facts demonstrate some definite link, some minimum connection, between the [s]tate and the person it seeks to tax.” (alteration, internal quotation marks, and citation omitted)).

This Court has had the opportunity to apply both Scripto and Tyler Pipe. In Dell, we addressed the question of “the extent to which a third party ... can establish a substantial nexus on behalf of [an] out-of-state business.” 2009-NMCA-001, ¶ 43. Dell took mail and internet orders for computers from its location in Texas and delivered the computers to New Mexico customers via common carrier. Id. ¶ 4. Dell had no property, stores, sales agents, or employees in New Mexico. Id. ¶ 2. However, Dell did hire a third-party corporation to service machines in New Mexico. Id. ¶ 7. Consumers purchased service contracts through Dell. Id. ¶ 8. When they needed service, they made service requests through Dell. Id. ¶ 9. Complaints about service were also registered through Dell. Id. ¶ 12.

We began by recognizing that the Supreme Court had carved out a “safe harbor” protecting “out-of-state vendors whose only connection with the state seeking to impose taxation was the shipping of goods into the state by mail or common carrier.” Id. ¶ 42. However, we observed that in Scripto and Tyler Pipe, the Supreme Court had held that the activities of third parties performed in-state were sufficient to create a substantial nexus. Dell, 2009-NMCA-001, ¶¶ 44-45 . In Dell, technicians had been dispatched on 1273 service calls in New Mexico. Id. ¶ 49. The hearing officer found that the availability of in-home service was a significant factor in establishing a market for Dell sales and that about 75% of Dell's New Mexico customers had purchased a service contract. Id. ¶ 48. Because the service calls performed by the third-party provider on behalf of Dell helped establish and maintain a market for Dell computers, we concluded that a substantial nexus existed. See id. ¶ 51.

1. Physical Activities in State

With these cases in mind, we proceed to Department's argument that Booksellers helped Taxpayer create and maintain a market in New Mexico. Department identifies four types of activities it alleges helped Taxpayer create and maintain a market: (1) that Taxpayer “advertised Booksellers' physical locations and events happening in Booksellers' retail stores” on its website, (2) that Taxpayer discussed Booksellers' return policy on its website, (3) that both Taxpayer and Booksellers participated in a loyalty program, and (4) that both Taxpayer and Booksellers sold gift cards that could be redeemed at either business. Taxpayer argues that it had no contact with New Mexico and that none of Booksellers' in-state activities were undertaken on its behalf.

a. Store Finder and Return Policy

We begin with the portions of Taxpayer's website allowing users to find Booksellers' stores and listing events at Booksellers' stores. We do not believe that the transmission of this information was an activity that physically occurred within the State of New Mexico. In addition, this information was not provided on behalf of Taxpayer. Instead, Taxpayer was paid to provide this information on behalf of Parent. As the website had no physical connection to New Mexico and the information was not provided on behalf of Taxpayer, it could not have contributed to the creation of a substantial nexus.

A similar analysis applies to the portion of Taxpayer's website that discussed Booksellers' return policy. The posting of this information on Taxpayer's website was not a physical activity that took place within the state. However, Department asks us to conclude that Booksellers' policy, which allowed customers to return books purchased from Taxpayer for in-store credit useable only at Booksellers, created or helped create a substantial nexus between Taxpayer and New Mexico. This we cannot do. First, the record contains no evidence that any customer ever returned a book purchased from Taxpayer to any of Booksellers' New Mexico stores. Second, Booksellers' return policy did not give preference to Taxpayer. Customers could return salable books and other merchandise regardless of where they were originally acquired. Customers returning items were given gift cards or credits usable only at Booksellers' stores. Booksellers was not obligated to return or report on books originally purchased from Taxpayer. Indeed, since no receipt was required, Booksellers generally would not have known where the books had been originally purchased.

We are not persuaded by Department's argument that the return policy in this case is analogous to Borders Online, LLC v. State Board of Equalization, 29 Cal. Rptr. 3d 176 (Ct. App. 2005) . Unlike the instant case, the return policy in Borders Online treated Borders customers preferentially. Id. at 182. The Borders Online court distinguished SFA Folio Collections, Inc. v. Tracy, 652 N.E.2d 693 (Ohio 1995) , where “returns were accepted according to the department store's own policy for its own benefit and for the convenience of its customers.” Borders Online, 29 Cal Rptr. 3d at 191 . The same distinction applies here—Booksellers accepted returns without receipts for its own benefit, not on behalf of Taxpayer or any other third party. We cannot disagree with the hearing officer's conclusion that the return policy does not establish a substantial nexus.

b. Gift Cards

The gift card sales present a closer question. There are two relevant scenarios. In the first scenario, customers purchase a gift card from Taxpayer and redeem it instate at Booksellers. Taxpayer receives a fee from MSMC for selling the card and Booksellers receives from MSMC the amount redeemed from the card. This scenario does not create a nexus because Taxpayer performs no activity in-state and Booksellers' redemption of the card does not benefit Taxpayer. In the second scenario, customers purchase a card in-state from Booksellers and redeem it online from Taxpayer. Booksellers receives a fee from MSMC and Taxpayer receives from MSMC the amount redeemed. Booksellers' act of selling the gift card does result in a sale for Taxpayer, but this result is incidental. Booksellers has no control over where a gift card purchaser will redeem a card. To the extent that Booksellers can control where cards will be used, we have no doubt that it would prefer the customers to use the gift cards in one of its stores, thereby generating additional profits. Under these circumstances, we cannot say that the hearing officer abused her discretion in concluding that the gift cards did not create a substantial nexus.

c. Readers' Advantage Loyalty Program

The final and most difficult issue is the loyalty program. Both Taxpayer and Booksellers sold $25 annual memberships to a loyalty program called the “Readers' Advantage Program.” Members were provided discounts in stores and online. Although the record is silent on the issue, we presume that the purpose of the program was to encourage consumers, by means of a discount, to make purchases at Barnes & Noble stores and online that they would otherwise have made at competing retailers.

The loyalty program is analogous to the gift card program, if less intuitively obvious. Like the gift cards, loyalty program discounts could be used either in-store or online. As with the gift cards, Booksellers would prefer customers to use the discounts in-store, since this would increase both sales and the amount of the post-expenses membership fees it eventually received. The two differ in one respect: whereas the gift card created an incentive to spend the face value of the gift card at a store or online, members of the loyalty program had an incentive (the discount) to prefer Barnes & Noble over other retailers. This incentive was designed to capture sales that might otherwise have gone to other vendors, thus increasing the market for Barnes & Noble affiliates, including Taxpayer, in New Mexico.

The loyalty program could reasonably be viewed in one of two ways. First, the hearing officer could have concluded that Booksellers' sales of loyalty program memberships did not directly produce revenues to Taxpayer by means of sales made or orders taken in-state by Booksellers. See St. Tammany Parish Tax Collector v., 481 F. Supp. 2d 575, 581 (E.D. La. 2007) (Order and Reasons). This appears to be the course the hearing officer actually followed. [See RP 33] Alternatively, the hearing officer could have concluded that the effect of the program was to increase Taxpayer's sales in New Mexico. The hearing officer did not reach this conclusion. We view this as a close question and conclude that the hearing officer could have reached either conclusion without abusing her discretion.

Looking to all four activities, we cannot say that the hearing officer abused her discretion in concluding that there was not a substantial nexus between Taxpayer and New Mexico. Taxpayer's inclusion of a store finder on its website was not done instate and cannot be considered. Because Booksellers' return policy was not preferential to Taxpayer, it was not done on behalf of Taxpayer. The hearing officer could have concluded either way with respect to the gift cards and the reader loyalty program; however, especially given the absence in the record of any indication of the impact of these programs on Taxpayer's sales, we conclude that there was no abuse of discretion in the hearing officer's conclusion that these programs did not create a substantial nexus between Taxpayer and the State of New Mexico.

2. Trademark

The abuse of discretion discussion does not end our analysis, for we may also reverse if the hearing officer's ruling is not in accordance with the law. Department's second argument is that Taxpayer's use of shared marketing, name recognition, and trademarks and logos created and established a market in New Mexico. Taxpayer responds that Department did not cite, nor was Taxpayer aware of, any case “finding that the use of a common or similar corporate logo created a 'substantial nexus' for an out-of-state retailer.” Taxpayer also contends that Booksellers' use of the Barnes & Noble trademarks in-state was not done on behalf of Taxpayer. We conclude that, as a matter of law, the manner in which the Barnes & Noble trademarks were used by Booksellers in New Mexico was sufficient to create a substantial nexus.

This Court has previously held that the tangible use of trademarks at stores in New Mexico is “the functional equivalent of physical presence.” Kmart Props. Inc. v. Taxation & Revenue Dep't (KPI), 2006-NMCA-026, ¶ 39, 139 N.M. 177, 131 P.3d 27 . In KPI, the Kmart Corporation transferred the rights in its trademarks to a holding company in Michigan. The holding company then granted to Kmart the exclusive right to use the Kmart trademarks in the United States in return for 1.1% of Kmart's revenues. Id. ¶ 3. When New Mexico assessed the GRT against the holding company, the holding company protested, arguing that the assessment of the GRT against it was unconstitutional because there was no substantial nexus between it and the State of New Mexico. Id. ¶¶ 5-6, 10.

We acknowledged that the holding company in KPI “lack[ed] the usual indicia of physical presence described in Quill.” KPI, 2006-NMCA-026, ¶ 25 . However, we reasoned that the physical presence requirement could be satisfied if “the nature of trademarks and [the holding company's] relationship with Kmart Corporation within New Mexico ... constitute[d] physical presence or its functional equivalent.” Id. (emphasis added). Observing that “a trademark, and its goodwill, are inseparable property rights that, as a practical matter, are bound to the business that generates the goodwill,” id. ¶ 26, we turned our attention to the close relationship between goodwill and the physical business.

When a company acquires trademarks and goodwill, the essence of what it obtains is the right to inform the public that it is in possession of the special experience and skill symbolized by the name of the original concern, and of the sole authority to market its products. The value of what it obtains is tied to the underlying business that generates the goodwill associated with the trademarks. If there is no business and no good will, a trademark symbolizes nothing. Goodwill is bound to the business with which it is associated, and can no more be separated from a business than reputation from a person.

Id. ¶ 27 (internal quotation marks and citations omitted).

Given the facts in KPI and the close relationship between goodwill and conducting business, we concluded that Kmart Corporation and the holding company were “corporate 'Siamese Twins,' inextricably bound to each other.” Id. ¶ 28. The holding corporation needed access to the physical stores to maintain the goodwill behind its trademarks, and the stores needed to use the trademarks to differentiate themselves from other general merchandising stores. Id. Furthermore, “Kmart customers ... had no way of knowing that they were dealing with representatives of [the holding company's] goodwill; apparently few people were actually aware that [the holding company], and not Kmart Corporation, owned the [trademarks] and associated goodwill.” Id. ¶ 30. The nature of trademarks meant that the two could not be separated. We therefore concluded that the combination of Kmart Corporation's stores in New Mexico and the tangible presence in New Mexico of the trademarks owned by the holding company was “the functional equivalent of physical presence as afforded by the independent representatives in Scripto and Tyler Pipe” and that the imposition of the GRT on the out-of-state holding company was constitutionally sound. See KPI, 2006-NMCA-026, ¶ 39 .

Our Supreme Court ultimately reversed our opinion in KPI, concluding that the GRT statute did not apply to the licensing transaction at issue in that case. Given the statutory basis for its decision, the Supreme Court did not find it necessary to reach the constitutional question. Nevertheless, we regard then-Judge Bosson's analysis of the constitutional issues as persuasive. As we discuss below, pursuant to Judge Bosson's reasoning in KPI, Booksellers' in-state activities performed under the banner of the Barnes & Noble trademarks were sufficient to create a nexus between Booksellers and College Bookstores, the owner of the trademarks. In the instant case, however, we must go one step further, and decide whether Department may impute the in-state activities of one licensee (Booksellers) of the Barnes & Noble trademarks to another licensee (Taxpayer) who used the Barnes & Noble trademarks to make internet sales to residents of New Mexico.

We begin with the most obvious in-state activity: Booksellers' operation of three stores in New Mexico. As in KPI, Booksellers' in-state activities of running retail stores strengthened the goodwill behind the Barnes & Noble trademarks. Booksellers used the Barnes & Noble trademarks on and in its stores. By doing so, Booksellers personified the goodwill owned by College Bookstores and facilitated sales in New Mexico. See id. ¶ 30. Under the reasoning of Kmart, this activity cannot be separated from College Bookstores' ownership of the trademarks.

Because consumers expect to be able to find businesses on the internet, some of this goodwill inevitably accrues to Taxpayer. “[C]onsumers increasingly rely [on goodwill] to locate the true source of genuine goods and services on the Internet.” S. Rep. No. 106-140, at 5 (1999). Booksellers' customers “had no way of knowing that they were dealing with representatives of [College Bookstore's] goodwill,” KPI, 2006-NMCA-026, ¶ 30 , or that different corporate entities represented the goodwill of College Bookstore's Barnes & Noble trademarks on the internet and in physical stores. In fact, consumers saw only one entity: Barnes & Noble. Just as the goodwill generated by in-state business in KPI could not be separated from ownership of those trademarks, we believe that it is not possible to separate the goodwill generated by Booksellers' in-state stores into physical and internet components.

In addition to the vicarious accrual of goodwill to Taxpayer by virtue of Booksellers' stores in New Mexico, additional activities at the physical stores directly increased goodwill for Taxpayer's website. As noted above, the stores sold and accepted gift cards displaying the Barnes & Noble trademarks. These cards indicated that they could be redeemed at either the physical stores or through the Barnes & Noble website. Similarly, the stores sold and honored Readers' Advantage memberships. The memberships entitled customers to discounts at the stores and at the Barnes & Noble website. We have decided that these activities standing alone do not create a sufficient nexus. But viewing them as cross-marketing activities performed at in-state stores and explicitly mentioning the Barnes & Noble website—in the context of creating and enhancing goodwill not only for the Barnes & Noble trademarks but explicitly for Taxpayer's web business—they are probative.

By licensing the trademarks to Taxpayer and Booksellers, College Bookstores was in effect telling customers to consider Taxpayers and Booksellers to be one and the same. The goodwill developed both directly, by in-store activities promoting Taxpayer's website, and indirectly, by consumers' increased awareness of Barnes & Noble due to the presence of in-state stores, helped to establish and maintain a market in New Mexico for Taxpayer. This created a substantial nexus between Taxpayer and New Mexico sufficient to support the imposition of the GRT.

B. Due Process and the State Rules Act

Taxpayer asserts that even if the GRT is constitutional as applied in this case, imposition would nevertheless violate its due process rights and would violate the state rules act. This argument has no merit.

Throughout this litigation, Taxpayer's position has been that it was not required to pay the GRT because the constitutional requirement of substantial nexus between it and New Mexico was not met. As the hearing officer noted, “[i]f 'substantial nexus' is found, ... Department and Taxpayer have stipulated that there were net taxable sales of property in New Mexico ... and gross receipts tax would be due on the sales.” Taxpayer can hardly stipulate that the GRT applies and then argue that it was not clear that the GRT applied. And although Taxpayer has cited cases for the proposition that vague statutes and rules may violate due process, see Old Dearborn Distributing Co. v. Seagram-Distillers Corp., 299 U.S. 183, 145-46 (1936) , it has pointed to no authority suggesting that due process is violated when a question of constitutional law is resolved against it.

Taxpayer also suggests that the state rules act bars Department from applying the GRT against it. The basis for this argument is the assertion that “[w]hen an agency seeks to expand the reach of a statute to situations that are not reasonably apparent from its terms, it must engage in rulemaking.” However, Taxpayer provides no authority to support this assertion. In re Adoption of Doe, 100 N.M. 764, 765, 676 P.2d 1329, 1330 (1984) (stating that absent cited authority to support an argument, we assume no such authority exists.). We therefore decline to address this argument.


For the foregoing reasons, we reverse the order granting summary judgment and remand for further proceedings consistent with this Opinion.









Seabroook Property Tax

APPEAL OF TOWN OF SEABROOK (New Hampshire Department of Environmental Services)

Case Information:

Docket/Court: 2011-381, Supreme Court of New Hampshire

Date Issued: 05/22/2012

Tax Type(s): Property

Argued: February 9, 2012

Donahue, Tucker & Ciandella, of Exeter (Robert D. Ciandella & a. on the brief, and Mr. Ciandella orally), for the petitioner, Town of Seabrook.

Pierce Atwood, LLP, of Portsmouth (Jonathan A. Block & a. on the brief, and Mr. Block orally), for the respondent, NextEra Energy Seabrook, LLC.

Michael A. Delaney, attorney general (K. Allen Brooks, senior assistant attorney general, on the brief), for the New Hampshire Department of Environmental Services.



NOTICE: This opinion is subject to motions for rehearing under Rule 22 as well as formal revision before publication in the New Hampshire Reports. Readers are requested to notify the Reporter, Supreme Court of New Hampshire, One Charles Doe Drive, Concord, New Hampshire 03301, of any editorial errors in order that corrections may be made before the opinion goes to press. Errors may be reported by E-mail at the following address: Opinions are available on the Internet by N.H. Rev. Stat. Ann. § 9:00 a.m. on the morning of their release. The direct address of the court's home page is:

The petitioner, Town of Seabrook, appeals an order of the New Hampshire Department of Environmental Services (DES) granting the respondent, NextEra Energy Seabrook, LLC (NextEra), several tax exemptions under RSA 72:12-a (Supp. 2011). We affirm in part and reverse in part.

The following facts are supported by the record. NextEra is the majority shareholder and managing agent of the Seabrook Nuclear Power Station (Plant), located in Seabrook, near the Atlantic Ocean, the Browns River, and the Hampton Harbor marsh. The Plant is a single unit nuclear electric generating facility with a four-loop, pressurized water reactor. To produce electricity, the Plant uses nuclear fuel to create steam that is used to power a turbine generator. The water used during this process is drawn from and discharged to the Atlantic Ocean via intake and discharge tunnels.

In 1982, a previous owner of the Plant applied for local property tax exemptions pursuant to RSA 72:12-a. Two separate appeals to this court followed. See Appeal of Town of Hampton Falls, 126 N.H. 805 (1985) ; Appeal of Public Serv. Co. of N.H., 124 N.H. 79 (1983) . The Plant ultimately received various tax exemptions. The relevant tax exemption statute, RSA 72:12-a, provides the following:

Any person, firm or corporation which builds, constructs, installs or places in use in this state any treatment facility, device, appliance, or installation wholly or partly for the purpose of reducing, controlling, or eliminating any source of air or water pollution shall be entitled to have the value of said facility and any real estate necessary therefor, or a percentage thereof determined in accordance with this section, exempted from the taxes levied under this chapter for the period of years in which the facility, device, appliance, or installation is used in accordance with the provisions of this section.

RSA 72:12-a, I.

In 2010, pursuant to this statute, NextEra submitted an application to DES to obtain tax exemptions for the Plant, in part because the New Hampshire Department of Revenue Administration requested that the exemptions be updated. NextEra's Application (Application) was largely duplicative of the prior application. NextEra specifically claimed that the following facilities are entitled to the exemption:

Air Pollution Control Facilities:

1. Containment Structure

2. Containment Spray System

3. Containment Cooling System

4. Combustible Gas Control System

5. Containment Enclosure [and Fission Product Removal System]

6. Primary Auxiliary Building Filtered Exhaust System

7. Fuel Storage Building Exhaust System

8. Waste Processing Building Exhaust System

9. Containment On-Line Purge Exhaust System

10. Vent Stack

11. Radioactive Gaseous Waste System

Water Pollution Control Facilities:

12. Storm Water Run-Off and Treatment System

13. Chemical and Oily Waste System

14. Sanitary Waste System

15. Circulating Water Discharge Tunnel

16. Circulating Water Intake Tunnel

17. Radioactive Liquid Waste System

18. Steam Generator Blowdown Treatment System

19. Boron Recycle System

20. Service Water Cooling Tower

21. Demineralizer Regeneration Waste Neutralization System

In December 2010, DES notified the Town of Seabrook (Town) that it could submit comments on the Application. The Town asked DES to conduct a public hearing on the Application. The Town also alleged that NextEra failed to provide it with sufficient information to evaluate the Application.

DES declined to conduct a public hearing. The Town submitted comments on the Application. It also filed the following: Town of Seabrook's Petition for Intervention, Town of Seabrook's Motion for Reconsideration, and Town of Seabrook's Petition to Deny NextEra's Requested Exemptions or Limit DES Review of NextEra's Application Based Upon Prior Tax Exemption Determinations. NextEra filed responses. DES, however, declined to rule on any of the Town's filings on the basis that the 2010 Application was a non- adjudicative proceeding. In the spring of 2011, DES issued a lengthy order ruling that all of the aforementioned facilities are, at least to some extent, eligible for the exemption under RSA 72:12-a.

The Town has appealed this decision to us. See RSA 72:12-a, VI. It argues: (1) that DES erroneously granted exemptions for facilities that do not meet the requirements of RSA 72:12-a; (2) that there was not sufficient evidence to support DES's decision; (3) that DES was required to hold a hearing; (4) that NextEra's claims are barred by res judicata, collateral estoppel, and finality; and (5) that DES was required to use an adjudicative process.

“The scope of our review of agency decisions under RSA 72:12-a is narrow.” Appeal of Town of Bethlehem, 154 N.H. 314, 318 (2006) . We will overturn DES's decision only if it committed an error of law, or if the appealing party shows by a clear preponderance of evidence that DES's decision is unjust or unreasonable. RSA 541:13 (2007); Appeal of Town of Rindge, 158 N.H. 21, 24 (2008) . Bearing this in mind, we address each issue in turn.

I. RSA 72:12-a

Pursuant to the text of RSA 72:12-a, I, a facility is eligible for a tax exemption (1) if it is a treatment facility and (2) if its purpose is, at least partially, to control, reduce, or eliminate any source of air or water pollution. To satisfy the first requirement, the facility in question must perform some sort of “treatment,” which we have interpreted as “the subjection of something to some action or process with a special end in view, the end often being to improve the quality of the thing undergoing treatment.” Appeal of City of Berlin, 131 N.H. 285, 290 (1988) . With regard to the second requirement, although the statute is not concerned with the “size, shape, effectiveness, or virtually any other criteria relative to the pollution control [facility itself],” N. Country Envtl. Servs. v. State of N.H., 157 N.H. 15, 21 (2008) , it nevertheless requires the facility to have the “purpose of reducing, controlling, or eliminating any source of air or water pollution,” RSA 72:12-a, I. The statute additionally provides that the exemption is available for as long as the facility “is used in accordance with the provisions of [ RSA 72:12-a].” Id.

Some of the facilities at issue do not operate on a regular basis because they were designed to operate only in the event of a loss-of-coolant accident (LOCA). Nevertheless, DES ruled that the exemption applies to these facilities, which include the containment structure, the containment spray system, the containment cooling system, the combustible gas control system, and the containment enclosure and fission product removal system. DES ruled that the containment structure and the containment enclosure and fission product removal system are treatment facilities, relying on what it called our “broad interpretation” of the statutory term “treatment.” It determined that the containment structure has a partial pollution control purpose and is entitled to an 87% exemption. It determined that the containment enclosure and fission product removal system was “installed for the sole purpose of air pollution control” and is entitled to a 100% exemption. As to the containment spray system, the containment cooling system, and the combustible gas control system, DES ruled that they are integral components of the containment structure and are entitled to the exemption to the extent they serve a pollution control purpose.

The Town argues that these facilities are not eligible for the exemption because the plain language of the statute precludes exemptions for facilities “which might be used at some point in the future to control pollution resulting from an extraordinary disaster or emergency ... when those [facilities are] standing by and [are] not actually being used to treat pollution.” According to the Town, the facilities would, however, be entitled to the exemption in the years when they are actively used. To support its interpretation, the Town points to the language in RSA 72:12-a, I, that states the exemption is available “for the period of years in which the facility ... is used in accordance with the provisions of this section.” In the same vein, the Town argues that making the exemption available in years in which a facility is not actively used would be inconsistent with the statutory term “treatment.”

The Town further contends that, contrary to DES's ruling, the statute does not provide the exemption for integral components of treatment facilities. In its view, each component part must meet the statutory test. Finally, the Town argues that some of the facilities are not entitled to the exemption because their purpose is not to control or eliminate pollution, but rather to act as a safety mechanism in the event of a LOCA.

NextEra disagrees with the Town's construction of the statute. It first argues that the “is used” clause does not support the Town's position. That clause formerly provided that the exemption was available “for a period of 25 years.” RSA 72:12-a, I (1991). In 1998, the legislature replaced it with the current language. See Laws 1998, ch. 66 (effective April 1, 1998). Relying on legislative history, NextEra argues that the “is used” language was merely added to alter the time limitation on the exemption, and that there is no evidence that the legislature enacted this change to “restrict the applicability of the exemption to facilities or systems that continuously treat pollution.”

NextEra also asserts that the facilities “are 'used' because they are, and must be, deployed in place and ready as long as the [P]lant itself is in operation.” According to NextEra, our case law demonstrates that active, continuous use is not required to qualify for the exemption under RSA 72:12-a. For example, it points to two cases in which we upheld DES orders ruling that the exemption applies to storm water management systems — systems which operate only in the event of rain. See Appeal of Town of Bethlehem, 154 at 320-21 ; Appeal of Town of Newington, 149 N.H. 347, 351 (2003) . With regard to the Town's argument about integral components, NextEra argues that the term “facilities” encompasses the facilities' integral parts and that the Town's interpretation of the statute would defeat its purpose because “broken into small enough component parts, no part could individually control pollution and the statute would have no application.” Lastly, NextEra argues that the Town's interpretation of the statute is inconsistent with its underlying purpose, which we have held is to encourage the construction of pollution control facilities through tax exemptions. See Appeal of Town of Bethlehem, 154 N.H. at 323 .

Faced with this disagreement over the meaning of RSA 72:12-a, we must interpret its language. NextEra argues that DES's interpretation of RSA 72:12 a is entitled to deference. It relies on Appeal of Town of Hampton Falls, 126 N.H. at 809 , in which we said that “the legislature has entrusted [DES] with primary responsibility to administer RSA 72:12-a ... [and thus DES's] interpretations of the terms of RSA 72:12-a ... are entitled to great deference.” The Town argues that we need not give DES's interpretation deference. It relies on Appeal of Town of Rindge, 158 N.H. at 24 , in which we said that “we review an agency's interpretation of a statute de novo,” and Appeal of Town of Bethlehem, 154 N.H. at 319 , in which we said that “we are the final arbiter of the legislature's intent as expressed in the words of [ RSA 72:12-a].”

Regardless of the distinctions among these cases, it is well established in our case law that an interpretation of a statute by the agency charged with its administration is entitled to deference. See, e.g., Appeal of Morton, 158 N.H. 76, 78-79 (2008) (“[W]e accord deference to the [agency's] interpretation [of the statute it administers] ....”); Appeal of Weaver, 150 N.H. 254, 256 (2003) (“[S]tatutory construction by those charged with its administration is entitled to substantial deference ....”); Appeal of Salem Regional Med. Ctr., 134 N.H. 207, 219 (1991) (“[T]he construction of a statute by those charged with its administration is entitled to substantial deference.” (quotation omitted)); N.H. Retirement System v. Sununu, 126 N.H. 104, 108 (1985) (“[T]he construction of a statute by those charged with its administration is entitled to substantial deference.”).

The deference afforded, however, is not absolute. Appeal of Weaver, 150 at 256 . We are still the final arbiter of the legislature's intent as expressed in the words of the statute considered as a whole, Appeal of Town of Rindge, 158 N.H. at 24 , and we are not bound by an agency's interpretation of a statute, see Appeal of Weaver, 150 N.H. at 256 . We thus review an agency's interpretation of a statute de novo. Appeal of Town of Rindge, 158 N.H. at 24 . Furthermore, we will not defer to an agency's interpretation if it clearly conflicts with the express statutory language, Appeal of Stanton, 147 N.H. 724, 728 (2002) , or if it is plainly incorrect, Appeal of Levesque, 136 N.H. 211, 213 (1992) .

When we interpret a statute, we ascribe the plain and ordinary meaning to the words used. Appeal of Town of Rindge, 158 N.H. at 24 . We do not look beyond the language of the statute to determine legislative intent if the language is clear and unambiguous. Id. Nor will we consider what the legislature might have said or add words the legislature did not include. Id.

NextEra has described all of the facilities in question as facilities that collect, contain, and process airborne contaminants that would otherwise be released to the atmosphere during and subsequent to abnormal operating conditions, such as a LOCA. The ultimate interpretive question, then, is whether the plain language of RSA 72:12-a precludes the tax exemption for facilities that will only treat pollution upon the occurrence of a non-routine event. Our first task is to determine if the containment structure and the containment enclosure and fission product removal system fall within the parameters of the statutory term “treatment facility.” We hold that they do not. As mentioned above, we have interpreted the statutory term “treatment” to mean “the subjection of something to some action or process with a special end in view, the end often being to improve the quality of the thing undergoing treatment.” Appeal of City of Berlin, 131 N.H. at 290 . This definition is phrased in the active voice — it uses the word “subjection” and assumes that something will be “undergoing” treatment. Also, the definition does not describe treatment in a conditional manner: it describes it not as “the possible subjection of something to some action,” but rather as “the subjection of something to some action.” Thus, the term “treatment facility” presumes that the facility will be active in that it will routinely treat pollution, or, put in the language of our definition, will subject something to some action or process. Furthermore, this is not a novel way to interpret the term, for we have upheld the exemption only for facilities which operate on routine intervals. See, e.g., Appeal of Town of Rindge, 158 N.H. at 23-26 (upholding tax exemption for wastewater treatment facility that treated wastewater generated by a college campus); Appeal of Town of Bethlehem, 154 N.H. at 320-22 (upholding tax exemption for landfill facility components that controlled the runoff of water contaminated by the landfill and controlled the discharge of landfill gases); Appeal of Town of Newington, 149 N.H. at 349-52 (upholding tax exemption for a water injection system that injected water into a combustion turbine to reduce its operating temperature, a facility that managed the discharge of storm water, and temporary construction devices that prevented erosion and contained runoff caused by the construction of the primary facility at issue); Appeal of City of Berlin, 131 N.H. at 286-87, 291 (upholding tax exemption for tall stack that discharged pollutants created during paper production process); Appeal of Town of Hampton Falls, 126 N.H. at 807-08, 812 (upholding tax exemption for Seabrook Nuclear Power Plant discharge tunnels that discharge water used in the electricity generation process). In short, for a facility to be considered a “treatment facility” it must regularly operate.

Here, it is merely speculation whether either the containment structure or the containment enclosure and fission product removal system will ever operate to treat anything. Although the containment structure does protect equipment from the natural elements, in its Application NextEra unequivocally stated that the containment structure and the containment enclosure and fission product removal system “do not include any elements that are necessary for the normal operation of the Plant.” Indeed, these two facilities would operate only in the event of abnormal operating conditions, such as a LOCA, and presumably the Plant operators seek to avoid the catastrophic events that would actually trigger their operation. Thus, the only thing that can be said with certainty is that these facilities have the potential to treat something in the case of an accident. The facilities, therefore, are more akin to responsive safety systems; their speculative nature puts them outside the bounds of the statutory term “treatment facility.” Accordingly, we hold that the containment structure and the containment enclosure and fission product removal system are not eligible for the RSA 72:12-a tax exemption.

The containment spray system, the containment cooling system, and the combustible gas control system are likewise not eligible for the exemption. Even if we assume that integral components of treatment facilities are entitled to the exemption, these facilities still would not qualify because they are components of facilities which themselves are not treatment facilities. Moreover, if we were to consider these facilities individually, they would not qualify because, like the containment structure and the containment enclosure and fission product removal system, they operate only in the event of abnormal operating conditions, such as a LOCA, and, thus, are not treatment facilities.

We need not address the arguments regarding the purpose of the facilities and the underlying rationale of the statute because our holding is dispositive. Neither must we consider whether the facilities here would be eligible for the exemption in years in which they operate in response to an abnormal operating condition because that factual situation is not before us.

II. Factual Support for DES's Decision

The Town next argues that “[t]here was not proper, suitable or sufficient evidence or information for DES to decide NextEra's RSA 72:12-a Application.” DES's findings of fact are presumed to be prima facie lawful and reasonable, see RSA 541:13; Appeal of Town of Bethlehem, 154 N.H. at 318 , and this presumption may be overcome only upon a showing that there was no evidence from which DES could conclude as it did, see Legislative Utility Consumers' Council v. Public Utilities Comm'n, 118 N.H. 93, 99 (1978) . We do not sit as a trier of fact in reviewing DES's findings; nor do we resolve conflicts in the evidence. See Appeal of Town of Bethlehem, 154 N.H. at 318, 322 . Additionally, “we are reluctant to substitute our judgment for the expertise of administrative officials.” Appeal of Town of Hampton Falls, 126 N.H. at 814 (quotation omitted). However, if “[DES's] ruling is devoid of findings of fact that would permit meaningful review,” we will vacate and remand its decision for findings sufficient to permit such review. Appeal of Town of Newington, 149 N.H at 354-55 . And, as stated above, we will overturn a DES decision if the appealing party shows by a clear preponderance of evidence that the decision was unjust or unreasonable. RSA 541:13; Appeal of Town of Rindge, 158 N.H. at 24 .

The Town first challenges NextEra's Application as a whole. Specifically, it argues that the information provided in the Application was not sufficient to support DES's decision because the “Application contained only brief descriptions of each facility, with citations to documents not provided to DES and with over 150 pages of systems and costs with no explanation or support as to where those costs came from.”

We do not agree with this characterization of the Application. The documents cited in the Application were available to DES. NextEra stated that the documents were available for review at the Plant and neither party disputes this, and DES's investigation “included review of ... information collected during a [visit to the Plant].” NextEra also told the Town that it could review the documents if it so desired; the Town apparently declined to do so. Furthermore, NextEra did provide cost data. The appendix to the Application contained an “Asset Determination” spreadsheet that provided the costs of the relevant assets, descriptions of the assets, the identity tags associated with the assets, and the systems or areas in which the assets are located. That those descriptions were brief and did not cite original supporting documents is of no consequence. As stated above, we will only overturn DES's findings where there is no evidence from which DES could conclude as it did. Here, NextEra provided a detailed and lengthy Application, and opened the doors of the Plant to both DES and the Town. Thus, we will not disturb DES's ruling based upon the Town's general challenge to the evidentiary support for NextEra's Application.

The Town next advances several challenges to specific facilities. We address each claim in turn.

A. Buildings

The Town argues that there was no evidentiary support for DES's decision to grant exemptions for buildings associated with the containment spray system, the containment cooling system, the boron recycle system, and the service water cooling tower. We need not address the containment spray system or the containment cooling system because we have already determined that they do not qualify for the exemption. With regard to the boron recycle system, the Application specifically explains why the buildings associated with that system are entitled to the exemption, provides a detailed schematic drawing of the system, and provides citations to supporting documents. As to the service water cooling tower, it doesn't appear that there are any buildings associated with the tower, aside from the tower itself. In any event, the Application specifically explains why the tower is entitled to the exemption, provides a detailed schematic drawing of the tower, and provides citations to supporting documents. Therefore, the Town has failed to demonstrate that DES's findings regarding the tower lacked evidentiary support. We accordingly uphold the decision to grant the exemption to the buildings associated with the boron recycle system and the service water cooling tower.

B. Primary Auxiliary Building Filtered Exhaust System

The Town argues that DES erred in granting a 16.73% exemption for the building floor space occupied by the primary auxiliary building filtered exhaust system because that system's floor space had previously been granted a 9% exemption and, according to the Town, there was no evidence to support an increase in the percentage allocation. We disagree.

In 1984, DES's predecessor agency granted a 9% exemption for the primary auxiliary building because it determined that the primary auxiliary building exhaust system occupies 9% of that building's floor space. However, NextEra supported the increased percentage in its application by explaining that “[t]he Primary Auxiliary Building has a total floor area of 43,325 sq. ft. of which 24,478 sq. ft. is occupied by equipment,” and that the “[c]omponents of the Primary Auxiliary Building Exhaust System occupy 4,094 sq. ft.” The components of the primary auxiliary building filtered exhaust system (4,094 sq. ft.) make up 16.73% of the total floor space occupied by equipment (24,478 sq. ft.). From that, NextEra concluded that 16.73% of the building is entitled to the exemption. To support its claim, NextEra provided a schematic drawing of the system and cited various supporting documents available for review at the Plant. To explain the discrepancy between the original 9% exemption and the request for a 16.73% exemption, NextEra also explained that “[w]hile no physical changes have been made to the Primary Auxiliary Building to account for the difference between the 9% building space percentage identified in the original Application and the 16.73% set forth in the 2010 Application, the drawings that were available for use at the time the original Application was prepared were still in design development (post-conceptual engineering layout) and did not reflect the final design that was used in the preparation of the 2010 Application.... [T]he difference ... [resulted from] the evolving design of equipment placement and space utilization.” DES ultimately ruled that the building is entitled to a 16.73% exemption, basing its decision on the explanation provided by NextEra.

The decision complained of here was nothing more than a mathematical calculation based on that which DES determined to be the relevant amount of space occupied by the primary auxiliary building filtered exhaust system. The Town has failed to show that there was no evidence to support this factual determination. Accordingly, we uphold DES's decision to increase the exemption to 16.73%.

C. Containment On-line Purge Exhaust System

The Town argues that there was insufficient evidence to support DES's decision to grant a 100% exemption for the containment on-line purge exhaust system. DES found that “[t]he sole purpose of the Containment On-Line Purge Exhaust System is to reduce or eliminate (treat) the airborne radioactive materials (pollution) from an exhaust stream (air) prior to release to the environment.” DES accordingly ruled that the system is entitled to a 100% exemption.

The Town argues that “the purge system serves a dual function of maintaining adequate air circulation and temperature changes and of providing some pollution control.” According to the Town, DES should have granted an exemption only for “that portion of the purge system that is designed to filter radioactive particles from the air.” To support its contention, the Town submitted a report authored by George Sansoucy, a consulting engineer who is, among other things, an expert in valuation of nuclear power plants. That report concluded that “[s]ome portion of this system is generally pollution exempt up to the percent that is in excess of that which is required to maintain adequate normal air circulation and changes through the containment building as it would with any industrial building housing a nuclear reactor.”

NextEra claimed that 100% percent of the system is exempt. It stated that “[t]he Air Pollution Control Function of the Containment On-Line Purge Exhaust System is to control and reduce potentially contaminated air released from the Containment Structure.” It explained that “[t]his is accomplished by filtering the Containment Structure exhaust air prior to its release through the Plant Vent Stack.” It also provided supporting citations to documents available at the Plant and a schematic drawing of the exhaust system.

The essence of the Town's argument here is that DES should have resolved the conflicting evidence in its favor and found that only a portion of the system operates to control pollution. However, we do not resolve conflicts in the evidence, see Appeal of Town of Bethlehem, 154 N.H. at 322 , and DES had ample evidence to support its conclusion. Accordingly, we find no error in this finding.

D. Circulating Water Discharge System

The Town argues that there was insufficient evidence to support DES's decision to grant a 100% exemption for the circulating water discharge system. We disagree.

The circulating water system draws cooling seawater from the Atlantic Ocean to absorb the heat associated with the condensing of steam exhausted from the Plant's turbine. After the cooling water mixes with the steam condensation, heated water remains. The circulating water discharge system then transports the heated water back to the ocean through a tunnel that discharges it 5,500 feet from the shoreline. DES found that the discharge system is designed and constructed to convey heated water to a point in the Atlantic Ocean where it can be discharged without polluting or otherwise damaging the Hampton Harbor marsh and estuarine system.

In Appeal of Town of Hampton Falls, 126 N.H. at 814 , in which we addressed the 1982 tax exemption application, we upheld an agency decision to grant a 100% exemption to this system. There, the then owner of the Plant claimed that it could have simply discharged the water into the Browns River, the river that feeds the Hampton Harbor marsh, which it asserted is “incapable of receiving the physical quantity of water ... or the heat without environmental damage.” Id. at 813 (quotation omitted). It therefore argued that the entire system is entitled to the exemption because it is intended to prevent the environmental damage that would be caused by discharging the water into the Browns River. Id .

The Town of Hampton Falls first argued that the system is not a pollution control facility because it merely transports heated water to a point in the ocean where cooling will occur through dispersion in the ocean and thus it is the ocean, not the tunnel, that controls the pollution. Id. at 811. We disagreed. We first noted that the statute does not actually require the facility in question to remove pollution, but rather requires the facility to reduce, control, or eliminate pollution. Id . at 811. Then, we concluded that the discharge system does reduce and control thermal pollution because the transportation of the heated water to the ocean minimizes the effects of thermal discharge on the local estuarine system. Id. at 811-12.

The Town of Hampton Falls also took issue with the claim about the volume of water, arguing that damage caused by a high volume of water could not be characterized as damage caused by a pollutant and thus the system is entitled only to an exemption to the extent that it reduces thermal pollution. Id. at 812-13. A high-level employee of the Plant testified that the function of transporting a large volume of water cannot be separated from the function of transporting heated water because “without the heat, there would be no need to discharge the water.” Id. at 813. The agency agreed that the functions could not be separated and ruled that the sole purpose of the system is to carry pollutants to a receiving body of water and discharge them in a manner that will minimize adverse environmental impacts. Id. at 814. On appeal, we examined the supporting evidence, and held that the agency's finding was supported by the record. Id.

Here, NextEra has claimed the same exemption for the same reasons, and, with regard to the volume of water, the Town of Seabrook has responded in a nearly identical manner. Specifically, the Town asserts that if the water were to be discharged into the Browns River, it would overwhelm the surrounding marsh and beach area, as well as nearby roads, bridges, and other infrastructure. Thus, the Town contends that the purpose of the discharge system is, at least to an extent, to maintain and preserve public infrastructure. According to the Town, this is not a pollution control purpose. This is just another way of saying that damage caused by the discharge of a high volume of water is not damage caused by a pollutant. To the contrary, NextEra provided ample evidence to support a 100% exemption. It explained that the discharge system was designed to treat thermal discharge by transporting the heated water beyond the Hampton Harbor area. Thus, again, we hold that DES did not err in ruling that the discharge system is a pollution control facility entitled to a 100% exemption.

E. Circulating Water Intake Tunnel

The Town argues that DES erred in ruling that the circulating water intake tunnel is entitled to a 57% exemption. The intake tunnel is used primarily to draw cooling water from the ocean. However, it is periodically used as a discharge tunnel for purposes of biofouling control. NextEra claimed that the Environmental Protection Agency (EPA) required the tunnel to be 7,000 feet long because of environmental concerns associated with the periodic use of the tunnel for discharge. DES agreed, finding that “if not for this period[ic] use, the tunnel could extend 3,000 feet into the ocean; due to US EPA concern over thermal pollution when water is discharged, the tunnel must extend 7,000 feet.” Thus, DES ruled that the extended portion of the tunnel is entitled to the exemption — that is, the 4,000 feet that was added to address environmental concerns, or 57% of the total tunnel (4,000/7,000).

The Town argues that we should overturn this decision because DES did not have before it any documents from the EPA addressing the extension of the intake tunnel. However, DES did have before it ample other evidence to support the exemption. NextEra specifically explained that the pollution control function of the circulating water intake tunnel “is to control and reduce the effects of the thermal discharge by transporting the heated steam condenser cooling water beyond the estuarine system to the offshore point of discharge.” NextEra also cited supporting documents available at the plant. Furthermore, the outcome here is consistent with our ruling concerning the circulating water discharge tunnel; when the intake tunnel discharges, it is exactly like the discharge tunnel and thus its length likewise minimizes thermal pollution. There is no reason to treat the systems differently when they operate in an identical manner. Accordingly, we uphold DES's decision to grant a 57% exemption to the circulating water intake tunnel.

F. Storm Water Run-Off and Treatment System

The Town argues that the record does not support DES's decision to grant a 100% exemption for the Plant's storm water run-off and treatment system. We disagree. In Appeal of Town of Newington, 149 N.H at 351 , we upheld a DES decision to grant a 100% exemption to a storm water management system. We noted that testimony in the record stated that the system was designed to minimize erosion, stabilize embankments, and control runoff, as well as to trap sediment to prevent silt-laden runoff water from entering sensitive environmental areas. Id. The Application here similarly asserts that the system is designed to “prevent local flooding of the site area in a controlled manner to prevent erosion,” and that “[the system] is necessary to treat yard run-off to remove sediment before discharge from the site.” The Application also provides a schematic drawing of the system and cites available supporting documents. Accordingly, DES's decision to grant an exemption to this system was amply supported by the record and we decline to overturn it.

III. Hearing Requirement

The Town's third argument on appeal is that DES was required to hold a hearing on this matter. RSA 72:12-a proceedings are non-adjudicative. See N.H. Admin. Rules, Env-C 205.01(c) . New Hampshire Administrative Rule, Env-C 205.03(a)(4) provides, among other things, that DES “shall conduct an oral public hearing in a non-adjudicative proceeding ... [if] the department believes an oral public hearing would be of benefit.” The Town does not dispute that this regulation grants DES the discretion to determine whether a hearing is necessary. Nevertheless, the Town argues that RSA 72:12-a required DES to exercise its discretion to hold a hearing in this case because a hearing was necessary for DES to fulfill its statutory duties. Thus, it essentially argues that the statute itself requires a hearing. We disagree.

We accord statutory language its plain and ordinary meaning, and we will not add words the legislature did not see fit to include. Appeal of Town of Rindge, 158 N.H. at 24 . RSA 72:12-a, III requires DES to “investigate and determine” whether a facility is eligible for the exemption and, if so, to what extent. It also gives DES wide latitude in choosing its investigatory techniques, and permits, but does not require, DES to “inspect the facility and request such other information from the applicant as is reasonably necessary to assist it in making its determination.” RSA 72:12-a, III.

The statute does not, however, explicitly mention hearings, and the statutory text cannot be fairly construed as requiring hearings. First, a hearing requirement cannot be gleaned from the words “investigate and determine.” Investigate means “to observe or study closely.” Webster's Third New International Dictionary 1189 (unabridged ed. 2002). And, “determine” means “to settle a question or controversy.” Id. at 616. Though a hearing certainly could be helpful to the completion of these tasks, we see no reason why the statutory phrase “investigate and determine” necessarily requires DES to hold a hearing. Second, it would be plainly inconsistent with the statute's broad grant of investigatory discretion to interpret it as containing an atextual mandatory hearing requirement. Had the legislature intended to require hearings, it could have easily done so. Indeed, in other statutes, it has explicitly required hearings. See, e.g., RSA 4:44 (2003) (“Prior to making any judicial appointment with the governor under the provisions of the constitution, the executive council shall hold a public hearing ....”); RSA 485A:22, V-b(e) (2001) (“Before land is taken by eminent domain, the department shall hold a public hearing in the municipality.”); RSA 570-A:2, II(k)(2) (Supp. 2011) (“[T]he school board shall hold a public hearing to determine whether audio recording should be authorized in school buses ....”). We will not add a requirement the legislature did not see fit to include in the statute's text. See Appeal of Town of Rindge, 158 N.H. at 24 . Accordingly, we hold that RSA 72:12-a does not require DES to hold a hearing when it is determining whether a facility is entitled to the statutory exemption.

IV. Res Judicata, Collateral Estoppel, and Finality

The Town's fourth argument on appeal is that res judicata, collateral estoppel, and finality bar NextEra's application. Its basic argument is that “to the extent NextEra's application requests a change in the tax exemption status, or amount, from that previously determined in [the 1984 decision], DES should have required NextEra to establish that the changes are not barred by [collateral estoppel, res judicata, or finality].”

“[T]he doctrine of collateral estoppel bars a party to a prior action, or a person in privity with such a party[,] from relitigating any issue or fact actually litigated and determined in the prior action.” Gray v. Kelly, 161 N.H. 160, 164 (2010) (quotation omitted). Similarly, “[r]es judicata ... bars the relitigation of any issue that was, or might have been, raised in respect to the subject matter of the prior litigation.” Id . (quotation omitted). Both doctrines must be raised as affirmative defenses. Id. Thus, both doctrines operate in an adversarial setting to preclude an adverse party from rearguing certain issues of law or fact.

Here, DES's investigative process was non-adjudicative. There were no hearings. The Town was not a named party to the process. Nor did the Town have a right to be a party to the process. Appeal of Town of Bethlehem, 154 N.H. at 326-27 . Instead, at the administrative level, the Town merely had a right to receive notice and submit comments on the Application pursuant to RSA 541-A:39 (2007) and RSA 72:12-a, II . Furthermore, as we have previously recognized, “[DES is] statutorily authorized to investigate and make a determination regardless of submissions made by anyone, including the applicant and the Town.” Appeal of Town of Bethlehem, 154 N.H. at 330 (emphasis added). Thus, the proceeding has none of the hallmarks of a judicial proceeding. See Appeal of City of Keene, 141 N.H. 797, 800 (1997) (“An act is judicial in nature if officials are bound to notify, and hear the parties, and can only decide after weighing and considering such evidence and arguments, as the parties choose to lay before them.” (quotation omitted)).

In light of the character of DES's investigative process, the doctrines of res judicata and collateral estoppel do not apply. Both doctrines prevent relitigation of issues — here, there was no litigation. Both doctrines must be raised as affirmative defenses — here, there was no party who had a right to raise any defenses. Both doctrines operate in an adversarial setting — here, there was no adversary who had a right to be a party to the process. Simply put, NextEra was merely seeking a determination from DES regarding RSA 72:12-a tax exemptions and DES had no obligation to turn its investigatory process into a full-blown adversarial proceeding in which opposing parties may raise traditional legal defenses. Appeal of Town of Bethlehem, 154 N.H. at 326-29 . Although we have stated that res judicata and collateral estoppel may preclude the relitigation of issues decided in prior administrative decisions, see Tyler v. Hannaford Bros., 161 N.H. 242, 246 (2010) ; Cook v. Sullivan, 149 N.H. 774, 777-78 (2003) , these doctrines cannot operate in RSA 72:12-a determinations because the process used has a uniquely non-adjudicative character.

As to the Town's reliance on administrative finality, we note that doctrine “provides for a qualified and limited preclusion, wherein a second application for [a] substantially similar outcome from an administrative agency is barred unless the applicant can demonstrate a change in material circumstances between the two applications.” Johnston v. Ambulatory Surg. Assoc. v. Nolan, 755 A.2d 799, 809 (R.I. 2000) . We have not adopted this doctrine in the context of DES tax exemption investigations, but we have applied a similar doctrine in the context of zoning board of appeal decisions. See Appeal of Parkland Med. Ctr., 158 N.H. 67, 71 (2008) . Assuming the doctrine does apply here, the Town's argument nonetheless fails. There have been material changes since the prior application and the statute itself has been modified. Cf. Brandt Dev. Co. v. City of Somersworth, 162 N.H. 553 (2011) . Accordingly, NextEra's application would not be barred by administrative finality, and thus we need not determine whether administrative finality applies to DES decisions under RSA 72:12-a.

V. Adjudicative Process

The Town's final argument on appeal is that DES's adoption and application of rules providing for a non-adjudicative determination of RSA 72:12-a tax exemptions was ultra vires. This argument is foreclosed by our decision in Appeal of Town of Bethlehem, 154 N.H. at 326-29 , in which we held that towns affected by RSA 72:12-a tax exemptions have no right to formal adjudicative proceedings under the Administrative Procedure Act, RSA 72:12-a, DES's administrative rules, or our State Constitution. We repeat what we previously said: “If the legislature desired to permit a municipality which opposed a tax exemption application the opportunity for a formal hearing and to become a party to an adversarial-type proceeding, it could easily have done so. It did not.” Appeal of Town of Bethlehem, 154 N.H. at 326 .

Affirmed in part and reversed in part.

DALIANIS, C.J., and CONBOY and LYNN, JJ., concurred.