Freightliner of Grand Rapids, Inc. v. U.S.

Decision Date29 September 2004
Docket NumberNo. 1:02-CV-492.,1:02-CV-492.
Citation351 F.Supp.2d 718
PartiesFREIGHTLINER OF GRAND RAPIDS, INC., Plaintiff, Counter-Defendant, v. UNITED STATES of America, Defendant, Counter-Claimant.
CourtU.S. District Court — Western District of Michigan

Page 718

351 F.Supp.2d 718
FREIGHTLINER OF GRAND RAPIDS, INC., Plaintiff, Counter-Defendant,
v.
UNITED STATES of America, Defendant, Counter-Claimant.
No. 1:02-CV-492.
United States District Court, W.D. Michigan, Southern Division.
September 29, 2004.

Page 719

Mark S. Pendery, Terry L. Zabel, Rhoades McKee, Grand Rapids, MI, for Plaintiff.

Stephen T. Lyons, U.S. Department of Justice, Tax Division (Northern Region) Ben Franklin Station, Washington, DC, for Defendant.

Charles R. Gross, U.S. Attorney (Grand Rapids), Grand Rapids, MI, for Claimant.

OPINION

ROBERT HOLMES BELL, Chief Judge.


Plaintiff filed this action seeking a refund of the retail excise tax it paid on its sale of one incomplete chassis cab and one converted chassis cab. The government filed a counterclaim for the unpaid balance of its excise tax assessment for 19 incomplete chassis cabs and 21 converted chassis cabs sold by Plaintiff. This matter is before the Court on the parties' cross-motions for summary judgment.

I.

Plaintiff Freightliner of Grand Rapids, Inc. ("Freightliner") is a truck dealer located in Grand Rapids, Michigan. Freightliner deals in products manufactured by Freightliner U.S. LLC. Between January 1, 1995, and June 30, 1996, (6 quarters) Freightliner purchased 40 incomplete chassis cabs on a tax free basis from the manufacturer. Freightliner sold 19 of the incomplete chassis cabs to CTR, Inc. ("Cabriolet") without engaging in any further manufacturing to the vehicles. Cabriolet is a final stage manufacturer. Cabriolet converted the incomplete chassis into custom recreational vehicle ("RV") tow vehicles called Cabriolet Sportliners and Cabriolet Patriots (collectively referred to as "Sportliners") and sold them to other businesses for sale to individual consumers.

The 19 incomplete chassis cabs Freightliner sold to Cabriolet were not equipped with standard tractor safety devices. Freightliner did not obtain a certificate from Cabriolet that Cabriolet would not equip the incomplete chassis cabs for use as tractors ("will-not-equip" certificates). Neither did Freightliner obtain, at the time of the sale, a written certificate from Cabriolet that it would either resell the vehicles or lease them under a long-term lease and therefore become responsible for paying any excise tax on such sales. Freightliner did not pay an excise tax on any of the sales of the 19 incomplete chassis cabs at the time of sale.

Freightliner paid Cabriolet to convert the remaining 21 chassis cabs into custom RV tow vehicles and then to return them to Freightliner. Cabriolet provided Freightliner with a Manufacturers Certificate of Origin ("MCO"), which classified the body type as "recreational passenger/tow vehicle." Freightliner sold these

Page 720

21 vehicles during the applicable time period to its customers. Freightliner did not pay an excise tax on any of the sales of the 21 converted chassis cabs at the time of sale.

In 1996 the government audited Freightliner's excise tax returns and assessed an excise tax based, in part, on its determination that the sales of the 19 incomplete chassis cabs were subject to the 12% retail excise tax found in Internal Revenue Code § 4051, 26 U.S.C. § 4051.1 The IRS also assessed an excise tax on the sale of the 21 conversion vehicles. Freightliner paid the excise tax on one vehicle in each category for one quarter and filed a claim for refund of the amounts paid. When the claims were denied Freightliner filed this refund suit for abatement and refund of the alleged overpayments. The government has filed a counterclaim for the unpaid balance of the assessments plus penalties and interest.

The parties have each filed two cross-motions for partial summary judgment, one addressing the taxability of the sale of the 19 incomplete chassis cabs, and one addressing the taxability of the sale of the 21 converted chassis cabs.

II.

Under Rule 56(c) of the Federal Rules of Civil Procedure, summary judgment is proper if there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. In evaluating a motion for summary judgment the Court must look beyond the pleadings and assess the proof to determine whether there is a genuine need for trial. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). If the moving party carries its burden of showing there is an absence of evidence to support a claim then the non-moving party must demonstrate by affidavits, depositions, answers to interrogatories, and admissions on file, that there is a genuine issue of material fact for trial. Celotex Corp. v. Catrett, 477 U.S. 317, 324-25, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The mere existence of a scintilla of evidence in support of the non-moving party's position is not sufficient to create a genuine issue of material fact. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The proper inquiry is "whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." Id. at 251-52, 106 S.Ct. 2505.

III.

This case requires the Court to determine whether Plaintiff's sale of 19 incomplete chassis cabs and 21 converted chassis were subject to taxation under the relevant retail excise tax statutes and their implementing regulations.

IRC § 40512 imposes a 12% excise tax on the first retail sale of heavy trucks and trailers.3 In general terms, IRC § 4051

Page 721

provides that all tractors, regardless of their gross vehicle weight, are taxable, but trucks are only taxable if the gross vehicle weight is in excess of 33,000 pounds. There is no dispute that the 40 chassis cabs at issue in this case have a gross vehicle weight of less than 33,000 pounds. (Compl. & Answ. ¶ 9). Accordingly, the chassis cabs at issue are only taxable under § 4051 if they are classified as "tractors" pursuant to § 4051(a)(1)(E).

When engaging in statutory interpretation, the Court looks first to the language of the statute itself to ascertain its plain meaning. Walker v. Bain, 257 F.3d 660, 666 (6th Cir.2001). "Every word in the statute is presumed to have meaning, and we must give effect to all the words to avoid an interpretation which would render words superfluous or redundant." Id. at 667.

An agency's construction of the statute which it administers is evaluated under the principles set forth in Chevron, U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984). If the statute speaks clearly to the precise question at issue, "that is the end of the matter; for the court, as well as the agency, must give effect to the unambiguously expressed intent of Congress." Id. at 842-43, 104 S.Ct. 2778. If, however, the statute does not directly address the precise question at issue, "the question for the court is whether the agency's answer is based on a permissible construction of the statute." Id. at 843, 104 S.Ct. 2778. See also Barnhart v. Walton, 535 U.S. 212, 217-18, 122 S.Ct. 1265, 152 L.Ed.2d 330 (2002) (applying Chevron analysis in determining lawfulness of agency's interpretation of statute).

The regulations the government relies on in this case are Temporary Treasury Regulations that were adopted in 1983. The fact that the regulations at issue are temporary does not affect the analysis. Temporary regulations receive the same Chevron deference as do permanent regulations. Hospital Corp. of America v. Commissioner of Internal Revenue, 348 F.3d 136, 140-41 (6th Cir.2003)(evaluating 1987 Temporary Treasury Regulation under Chevron principles). See also E. Norman Peterson Marital Trust v. Commissioner, 78 F.3d 795, 798 (2d Cir.1996)("Until the passage of final regulations, temporary regulations are entitled to the same weight we accord to final regulations.").

IV.

The parties' first cross-motions for partial summary judgment concern the 19 incomplete chassis cabs.

A. Vehicles within IRC § 4051(a)(1)

IRC § 4051(a)(1) lists five categories of vehicles4 that are subject to the retail excise tax. Freightliner contends that because Congress specifically listed the five categories of vehicles subject to the excise tax, it intended to exclude all other vehicles. Freightliner contends that because Congress intended to exclude all vehicles

Page 722

that were not specifically enumerated in the statute, and because incomplete chassis cabs are not among the enumerated vehicles, that is the end of the Chevron analysis, and the Court must give effect to the unambiguously expressed intent of Congress that incomplete chassis cabs are not subject to taxation under IRC § 4051.

The Court agrees with Freightliner that statutes imposing a tax are construed liberally in favor of the taxpayer. Limited, Inc. v. Comm'r, 286 F.3d 324, 332 (6th Cir.2002). The Court also agrees with Freightliner that Congress intended to limit the application of IRC § 4051 to the five categories of vehicles listed. Under the "general rule of statutory construction, expressio unius est exclusio alterius, the specific mention of one thing in a statute implies an intent on the part of the legislature to exclude another." Warner v. Zent, 997 F.2d 116, 137 (6th Cir.1993). Moreover, the temporary regulations for IRC § 4051 state that "a chassis or body which is not enumerated in paragraph (a)(1) of this section is not taxable under section 4051(a)(1) even though such chassis or body is used as a component part of a highway vehicle...." 26 C.F.R. § 145.4051-1.

Nevertheless, Freightliner's argument that Congress intended to exclude incomplete chassis cabs from the scope of IRC § 4051 is not persuasive. Congress did not speak clearly to the precise question of incomplete chassis cabs. The statute does not specifically limit its application to "completed" automobile truck chassis, or "completed" tractors of the kind...

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