The Minnesota Supreme Court has affirmed the Tax Court’s award of attorney fees to a taxpayer in a sales and use tax case since the application for attorney fees was timely filed and the Tax Court did not abuse its discretion by finding that the Commissioner’s position was not substantially justified. The taxpayer had properly collected sales tax from its customers on sales of its manufactured products, but the Commissioner assessed additional use taxes and interest on the components that the taxpayer purchased to manufacture its products. The Tax Court disagreed with the Commissioner’s assessment, finding that the component purchases were not taxable retail sales of building materials, supplies, or equipment for the improvement of real property. The Tax Court held that the taxpayer’s subsequent application for attorney fees was timely and the Commissioner’s position was not substantially justified by a reasonable basis in law and fact. The Minnesota Supreme Court affirmed the Tax Court’s decision. The Supreme Court held that the Commissioner relied on superseded law and argued incorrectly that the trade-fixtures doctrine is not applicable to tax cases and the statute’s definition of real property is applicable only to property tax cases and is not applicable to sales or use tax cases. The Commissioner’s position misread or overlooked statutes and relevant precedent and was not substantially justified by a reasonable basis in law and fact. This is a significant win for the taxpayer and we recommend that in the case of an audit that takes unreasonable positions, the statute should be reviewed to determine if a claim for attorney fees can be claimed against the state as it can here in Minnesota. (Commissioner of Revenue v. Dahmes Stainless, Inc., Minnesota Supreme Court, No. A15-1920, August 31, 2016)