BURRUSS LAND & LUMBER COMPANY v. United States
| Decision Date | 30 October 1970 |
| Docket Number | Civ. A. No. 67-C-5-L. |
| Citation | 318 F. Supp. 360 |
| Court | U.S. District Court — Western District of Virginia |
| Parties | BURRUSS LAND & LUMBER COMPANY, Inc., v. UNITED STATES of America. |
George D. Webster, Marmet & Webster, Washington, D. C., for the plaintiff.
Eugene P. Kopp, Dept. of Justice, Tax Division, Washington, D. C., and Leigh B. Hanes, Jr., U. S. Atty., Roanoke, Va., for defendant.
This case involves an interesting question which has arisen in the administration of the internal revenue excise tax on automotive parts and accessories. Int. Rev. Code of 1954, § 4061 (b). Plaintiff manufactures laminated wood flooring which is widely used as flooring in truck trailers and which it contends is a general purpose wood product exempt from tax. The Internal Revenue Service contends that the flooring is a part or accessory within the meaning of Section 4061(b) and therefore subject to tax. On July 15, 1966 the defendant assessed against Burruss for the year 1956 excise taxes, accrued interest, and penalties in the amount of $13,466.13 which the plaintiff paid and then sued for a refund. The defendant has filed a counterclaim covering the years 1957-1963 for taxes and penalties in the amount of $42,236.02 with interest of $16,000.10 to July 25, 1966 and statutory interest on $42,236.02 from July 25, 1966.
The plaintiff is a manufacturer of various wood products. In the early 1950's it began looking for products which could be made out of low-grade lumber and strips of lumber which were not suitable for its other products. These materials were suitable for the manufacture of laminated wood, which is made by gluing strips of wood together and which has been in existence for a number of years. On one occasion a representative from the Truck Body Corporation saw some stair treads made of laminated wood in the plaintiff's plant and asked that enough be produced to cover a trailer floor. This was done and the plaintiff proceeded to made inquiries among various trailer manufacturers with regard to the potentional market for such flooring. When the prospects appeared promising, the plaintiff expended approximately $150,000 in 1954 for new equipment to produce this flooring on a large scale. Additional production lines were installed in 1958, 1960 and 1966.
It appears that from the outset plaintiff's selling efforts have been pointed at the trucking industry. All of its advertising has been directed to suggest that its flooring is particularly suitable for truck trailer flooring. Indeed its corporate letterhead lists Lynchburg and Brookneal as the locations of its "Laminated Truck Flooring Plants." The plaintiff answered to an interrogatory that it has made sales of over $10,500,000 of laminated flooring over the years in question and apparently only 4%-5% of this total was sold for purposes other than truck trailer flooring. It is stipulated that "laminated flooring for trucks is processed and installed in substantially the same manner as other laminated wood material." It is also stipulated that there is a substantial market for laminated flooring as railway car decking and cargo container flooring, both of which uses are nontaxable. The particular value of laminated boards is claimed to be that they have uniform strength throughout and that they can apparently be produced to any desired length.
Prior to 1964 the defendant had taken no position as to the taxability of this laminated flooring but in that year it issued a revenue ruling attempting to deal with the problem. Rev.Rul. 64-261, 1964-2 Cum.Bull. 415. That ruling set forth three specific situations:
The plaintiff argues that this ruling is an incorrect application of the law and that, even if it is a proper interpretation, all of plaintiff's sales fall within situations one and two. Conversely the defendant contends both that the ruling is a correct statement of the law and that all of the sales fall within situation three. The case is submitted to the court upon stipulations, the deposition of James M. Gilley, who is the Secretary of Burruss, exhibits, briefs, and oral arguments.
Burruss contends that the flooring is a material of general use.1 It is the defendant's position that the plaintiff cuts or otherwise transforms laminated wood, which is a material of general use, into automobile parts or accessories. The question thus presented is not an easy one on the facts.
The starting point for a discussion of this problem is the case of Universal Battery Co. v. United States, 281 U.S. 580, 59 S.Ct. 422, 74 L.Ed. 1051 (1930), which dealt with the predecessor of Section 4061(b). Several cases were consolidated for purposes of an opinion and the Supreme Court attempted to set forth general principles to govern the interpretation of this section.
Certainly it would be unreasonable to hold that articles equally adapted to a variety of uses and commonly put to such uses, one of which is use in motor vehicles, must be classified as parts or accessories for such vehicles. And it would be also unreasonable to hold that articles can be so classified only where they are adapted solely for use in motor vehicles and are exclusively so used. * * * Articles primarily adapted for use in motor vehicles are to be regarded as parts or accessories of such vehicles, even though there has been some other use of the articles for which they are not so well adapted. 281 U.S. at 583-584, 50 S.Ct. at 423.
It is clear from the evidence that the plaintiff has always been most interested in the truck trailer flooring market. It was with this market in mind that it first began significant production of laminated flooring and all of its advertising has been directed towards that market. These facts are persuasive, Aran v. United States, 259 F.2d 757 (9th Cir.), cert. denied, 358 U.S. 866, 79 S.Ct. 100, 3 L.Ed.2d 100 (1958), but the court is unconvinced that they are determinative of the contention that this flooring is "primarily adapted for use in motor vehicles."
Although the overwhelming percentage of sales made have been for truck flooring purposes, this fact alone does not prove that the laminated wood is primarily adapted for that purpose. See Durkee-Atwood Co. v. Willcuts, 83 F.2d 995, 998 (8th Cir. 1936). In this court's view the intention of the manufacturer as to the market it wishes to exploit is not controlling. The real question is whether the product as it leaves the plaintiff's plant is "primarily adapted for use in motor vehicles" or is "equally adapted to a variety of uses." For example, in the Durkee-Atwood Co. case, supra, it was held that belts...
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BURRUSS LAND AND LUMBER CO. INC. v. United States
...Fourth Circuit, Burruss Land and Lumber Co., Inc. v. United States, 456 F.2d 38 (4th Cir. 1972), rev'g. Burruss Land and Lumber Co., Inc. v. United States, 318 F.Supp. 360 (W.D.Va.1970), to determine whether penalties should be imposed under § 6651(a) and § 6656(a) of the Internal Revenue C......
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BURRUSS LAND AND LUMBER COMPANY v. United States
...31, 1963. On a stipulation of facts, the deposition of James M. Gilley7 and the briefs filed by the parties, the district court, 318 F. Supp. 360, held that sales of the taxpayer's product were not subject to the excise tax imposed by section 4061(b). Implicit in this decision was the deter......