American Trucking Ass'n, Inc. v. Gray, s. 85-101

• Citation: 288 Ark. 488,707 S.W.2d 759
• Decision Date: 14 April 1986
• Docket Number: 85-112,Nos. 85-101,s. 85-101
• Parties: AMERICAN TRUCKING ASS'N, INC., et al., Appellants, v. Henry C. GRAY, Director, Arkansas Highway and Transportation Department, et al., Appellees. AMERICAN TRUCKING ASS'N, INC., et al., Appellants, v. Charles D. RAGLAND, Commissioner of Revenues, Revenue Division, et al., Appellees.
• Court: Supreme Court of Arkansas

Page 759

707 S.W.2d 759

288 Ark. 488

AMERICAN TRUCKING ASS'N, INC., et al., Appellants, v. Henry C. GRAY, Director, Arkansas Highway and Transportation

Department, et al., Appellees.

AMERICAN TRUCKING ASS'N, INC., et al., Appellants, v. Charles D. RAGLAND, Commissioner of Revenues, Revenue

Division, et al., Appellees.

Nos. 85-101, 85-112.

Supreme Court of Arkansas.

April 14, 1986.

ATA Litigation Center by William Busker, Daniel R. Barney & Robert Digges, Jr., Alexandria, Va., Mitchell, Williams, Selig, Jackson & Tucker by Eugene G. Sayre, Pat Moran & Timothy W. Grooms, Little Rock, for appellants.

Chris Parker, Ted Goodloe & Thomas B. Keys, Joe Morphew, Revenue Legal Counsel, E. Jeffery Story, Asst. Atty. Gen., Little Rock, for appellees.

HOLT, Chief Justice.

In this consolidated appeal, the constitutionality of Act 685 of 1983, Ark.Stat.Ann. §§ 75[288 Ark. 493] -817.2, 75-817.3 and 75-819(b) (Supp.1985), is challenged. The Act imposed a Highway Use Equalization (HUE) tax on all trucks that operate on Arkansas highways at maximum weights between 73,281 and 80,000 pounds. The appellants, American Trucking Association, Inc., (ATA), filed a complaint in Pulaski Chancery Court, fourth division, against appellees, Arkansas Highway and Transportation Department, alleging that the HUE tax would be an "illegal exaction." Appellants requested a temporary restraining order preventing the money collected under Act 685 from being deposited into the state treasury. Chancellor Bruce Bullion dissolved the temporary restraining order and denied appellants' requested preliminary injunction. That decision was appealed to this court. We affirmed Chancellor Bullion's decision and reserved any further consideration until after a trial on the merits. American Trucking Ass'n, Inc., et al v. Gray, Director, 280 Ark. 258, 657 S.W.2d 207 (1983).

The case was remanded, certified as a class action, and the trial on the merits was held. Appellants attempted to prove that the HUE tax as written and administered was violative of the commerce clause, the privileges and immunities clause, and the equal protection clause of the fourteenth amendment to the United States Constitution. Chancellor Bullion ruled on October 11, 1984, that the tax was constitutional and that appellants' counsel were not entitled to attorneys' fees.

On January 25, 1984, the companion case of ATA, Inc., et al v. Charles D. Ragland, et al, was filed in the second division of Pulaski Chancery Court. That complaint also challenged the tax as an illegal exaction and alleged that Act 685, which was approved by a mere majority vote of the General Assembly, was subject to the three-fourths voting majority required by amendment 19 § 2 of the Arkansas Constitution. Chancellor John Earl granted appellees' motion for summary judgment on this issue. Since the facts and issues in the two appeals are similar, they were consolidated in this court. Our jurisdiction is pursuant to Sup.Ct.R. 29(1)(a), (c), and (j). We uphold the constitutionality of Act 685.

Act 685 provides that the HUE tax is to be administered for all Arkansas base-registered trucks by the Commissioner of Revenues of the Revenue Division of the Department of Finance and Administration, while the Director of the Arkansas State Highway and Transportation Department administers the tax for all non-Arkansas base-registered trucks. The Act provides that the HUE tax for all vehicles can be satisfied through the election to pay:

1) an annual flat fee of $175;

2) a fee equal to 5cents per mile for every mile the truck travelled in Arkansas during the previous registration year; or

3) for the purchase of a trip permit at the rate of $8.00 per hundred miles driven.

The appellants primarily rest their arguments on the results of a survey conducted by ATA regarding Arkansas and non-Arkansas base-registered trucks upon which the HUE tax is imposed. The survey results, according to appellants, established that the average cost of complying with the HUE tax, on a per mile of operation basis, affects non-Arkansas base-registered trucks at a rate 370% higher than it impacts Arkansas base-registered trucks. Under these circumstances, appellants maintain the practical effect of the HUE tax is to unconstitutionally discriminate against the non-Arkansas based vehicles' use of the highways. The appellants urge seven points for reversal, which will be discussed individually.

I. THE HUE TAX VIOLATES THE COMMERCE CLAUSE

States are not permitted to tax interstate commerce in a manner that discriminates in favor of local interests. Northwestern States Portland Cement Co. v. Minnesota, 358 U.S. 450, 79 S.Ct. 357, 3 L.Ed.2d 421 (1959); Boston Stock Exchange v. State Tax Comm'n, 429 U.S. 318, 97 S.Ct. 599, 50 L.Ed.2d 514 (1977).

The appellants pursue two theories in their commerce clause argument. First, they state the HUE tax, although facially neutral, imposes a far higher effective tax rate on out-of-state trucks than on in-state trucks for the same use of the highways. Their second argument is that as a flat, nonproportional tax, it is not fairly related to the level of highway services provided by the state to each HUE taxpayer.

In Complete Auto Transit, Inc. v. Brady, 430 U.S. 274, 97 S.Ct. 1076, 51 L.Ed.2d 326 (1977), the United States Supreme Court considered the validity of a state sales tax under the commerce clause. The Court noted that under its prior decision in Spector Motor Service v. O'Connor, 340 U.S. 602, 71 S.Ct. 508, 95 L.Ed. 573 (1951), a state tax on the "privilege of doing business" was per se unconstitutional when it is applied to interstate commerce. In Brady, the Supreme Court overruled Spector, and instead, applied a four-part test to determine constitutionality under the commerce clause. Under that test a tax is valid when the tax (1) "is applied to an activity with a substantial nexus with the taxing State", (2) "is fairly apportioned", (3) "does not discriminate against interstate commerce", and (4) "is fairly related to the services provided by the State." In Burlington N.R.R. Co. v. Ragland Comm'r, 280 Ark. 182, 655 S.W.2d 437 (1983), we acknowledged that "whenever there is a challenge to any state tax on interstate commerce, the tax will be subjected to the Brady test."

The appellants maintain that the HUE tax fails to meet the third and fourth prongs of the Brady test. Since they admit that the tax is facially neutral, the appellants are claiming in their discussion of the third prong, that its practical effect is to discriminate against interstate commerce. This argument is based on the results of the ATA survey discussed previously. Although several arguments, pro and con, are made about the veracity of the ATA survey, we find no evidence that the HUE tax discriminates against interstate commerce. The tax is structured to offer three options for compliance. A truck that meets the criteria of the tax may pay an annual flat fee, a fee based on mileage, or buy a trip permit. These options are available to intrastate and interstate carriers alike. The money collected is used to offset highway repairs and costs and thus the HUE tax is in the nature of a user fee or tax.

In Aero Mayflower Transit Co. v. Georgia Public Serv. Comm'n, et al., 295 U.S. 285, 55 S.Ct. 709, 79 L.Ed. 1439 (1935), the U.S. Supreme Court discussed a Georgia statute imposing an annual license fee for the maintenance of the highways. The Court found the statute did not lay an unlawful burden on interstate commerce. In so holding, the Court noted that the fee is a moderate amount, it is used for the upkeep of highways, and "it is exacted without hostility to foreign or interstate transactions, being imposed also upon domestic vehicles operated in like conditions." There, too, the Court was confronted with the argument that the out-of-state carrier uses the roads of Georgia less than the local carriers, yet they pay the same amount. The Court held, "[t]he fee is for the privilege for a use as extensive as the carrier wills that it shall be. There is nothing unreasonable or oppressive in a burden so imposed ... One who receives a privilege without limit is not wronged by his own refusal to enjoy it as freely as he may" (citations omitted).

Here, the amount of the fee is not being challenged as unreasonable per se, the money is used for the upkeep of the highways traveled by the carriers being taxed, and the tax applies to foreign and domestic carriers alike. The interstate carriers can opt to pay the flat fee. The fact that they do not make extensive use of the state's highways, does not make the tax levied discriminatory.

Again, in Aero Mayflower Transit Co. v. Bd. of R.R. Comm'rs of Montana, et al., 332 U.S. 495, 68 S.Ct. 167, 92 L.Ed. 99 (1947), the Supreme Court discussed two flat highway taxes imposed "in consideration of the use of the highways of this state." The Court found neither exaction discriminated against interstate commerce since each applies alike to local and interstate operations and neither taxes traffic or movements taking place outside Montana. The Court stated:

Motor carriers for hire, and particularly truckers of heavy goods, like appellant, make especially arduous use of roadways entailing wear and tear much beyond that resulting from general indiscriminate public use ... Although the state may not discriminate against or exclude such interstate traffic generally in the use of its highways, this does not mean that the state is required to furnish those facilities to it free of charge or indeed on equal terms with other traffic not inflicting similar destructive effects ... Interstate traffic equally with intrastate may be required to pay a fair share of the cost and maintenance reasonably related to the use made of the highways. (citations omitted).

The appellants maintain that the Brady decision overruled the Court's early decisions in the two Aero Mayflower cases. We disagree. The Court...