Archer Daniels Midland Co. v. PARISH SCHOOL BD.

• Decision Date: 28 November 2001
• Docket Number: No. 2001-C-0511.,2001-C-0511.
• Citation: 802 So.2d 1270
• Parties: ARCHER DANIELS MIDLAND COMPANY, et al. v. The PARISH SCHOOL BOARD OF THE PARISH OF ST. CHARLES, Individually and as Collecting Agent for the Parish Council of St. Charles, et al. Tulane Fleeting, Inc. v. The Parish School Board of the Parish of St. Charles, Individually and as Collecting Agent for the Parish Council of St. Charles, et al.
• Court: Louisiana Supreme Court

802 So.2d 1270

ARCHER DANIELS MIDLAND COMPANY, et al. v. The PARISH SCHOOL BOARD OF THE PARISH OF ST. CHARLES, Individually and as Collecting Agent for the Parish Council of St. Charles, et al.

Tulane Fleeting, Inc. v. The Parish School Board of the Parish of St. Charles, Individually and as Collecting Agent for the Parish Council of St. Charles, et al.

No. 2001-C-0511.

Supreme Court of Louisiana.

November 28, 2001.

Rehearing Denied March 18, 2002.

Roy M. Lilly, Jr., Minden, Andrew A. Lemmon, New Orleans, for Applicant.

William M. Backstrom, Jr., Laura L. Blackston, Jones, Walker, Waechter, Poitevent, Carrere & Denegre, New Orleans, for Respondent.

Larry Dewayne Dyess, Belle Chasse, for St. John Parish School Bd., Ascension Parish Tax Authority, West Baton Rouge Parish Dept. of Revenue (Amicus Curiae).

Johnette L. Martin, Houma, for Plaquemines Parish Government, Palquemines Parish Council (Amicus Curiae).

John D. Schoonenberg, Houma, for Terrebonne Parish Sales Tax & Use Dept. (Amicus Curiae).

Geneva Landrum, Baton Rouge, for Cynthia Bridges, Secretary of Dept. of Revenue (Amicus Curiae).

John L. Lanier, Thibodeaux, for Lafourche Parish School Bd. (Amicus Curiae).

Lea A. Batson, Baton Rouge, for East Baton Rouge Parish Dept. of Revenue (Amicus Curiae).

Alan G. Brackett, New Orleans, Stephen M. Huber, River Ridge, for Greater New Orleans Barge Fleeting Ass'n (Amicus Curiae).

KNOLL, Justice.¹

This writ concerns whether a group of taxpayers, which operates tugboats wholly within Louisiana waters, is entitled to a sales tax exemption under a parish ordinance exempting fuel purchases by "owners or operators of ships or vessels operating exclusively in foreign or interstate coastwise commerce." Because taxpayers' tugboats operate wholly within Louisiana waters, we find taxpayers' tugboats are not "operating exclusively in foreign or interstate coastwise commerce" within the meaning of the sales tax exemption. Accordingly, we hold taxpayers are not entitled to the sales tax exemption and reverse the lower courts.

FACTS AND PROCEDURAL HISTORY

Plaintiffs/taxpayers, Archer Daniels Midland Company, ADM/Growmark River Systems, Inc., and Tulane Fleeting, Inc. (Taxpayers), operate a fleet of tugboats in St. Charles Parish. The tugboats are used when river barges, loaded with grain originating in the northern and mid-western states and destined for points outside Louisiana, arrive by multi-barge tows in St. Charles Parish.² When a tow of barges arrives in St. Charles Parish, Taxpayers use their tugboats to break up the tow and shift the barges to a fleeting area along the Mississippi River for safekeeping until the barges are ready to be unloaded. When a barge is ready to be unloaded, Taxpayers' tugboats shift the barge from the fleeting area to the unloading area. The grain is then unloaded either directly onto an ocean-going vessel or into a grain elevator to wait for an ocean-going vessel. The tugboats then shift the barges back to the fleeting area until they are picked up for transport back up river. The parties stipulated that Taxpayers' vessels never leave the waters of St. Charles Parish while performing these fleeting and shifting services.

During the taxable period at issue, January 1, 1985 through December 31, 1993, Taxpayers purchased, and subsequently used, fuel to operate their tugboats. Believing the fuel purchases were exempt from parish sales tax pursuant to a St. Charles Parish ordinance exempting such purchases by "owners or operators of ships or vessels operating exclusively in foreign or interstate coastwise commerce," Taxpayers omitted payment of St. Charles Parish sales tax on the fuel purchases. Thereafter, defendant/taxing authority, St. Charles Parish School Board (St. Charles), audited Taxpayers for the taxable period at issue and determined Taxpayers' fuel purchases were not exempt. After paying the disputed taxes and related interest under protest, Taxpayers filed this suit for recovery of the protested amount and moved for summary judgment.

In support of their motion for summary judgment, Taxpayers argued that because their tugboats facilitate the movement of goods in foreign or interstate commerce, their tugboats operate "exclusively in foreign or interstate coastwise commerce," and, thus, they are entitled to the sales tax exemption. In opposition to the motion for summary judgment, St. Charles argued, although Taxpayers' tugboats may facilitate the movement of goods in foreign or interstate commerce, because Taxpayers' tugboats never leave Louisiana waters, Taxpayers' tugboats are not operating "exclusively in foreign or interstate coastwise commerce," and, thus, Taxpayers are not entitled to the sales tax exemption. Agreeing with Taxpayers, the district court granted summary judgment in favor of Taxpayers and ordered St. Charles to refund the taxes paid under protest plus interest. On appeal, the Fifth Circuit affirmed.³ We granted St. Charles' writ to examine the correctness vel non of the lower courts' holdings.⁴

DISCUSSION

By parish ordinance, St. Charles imposes a sales tax upon tangible personal property sold at retail within St. Charles Parish.⁵ Fuel is "tangible personal property" within the meaning of the ordinance. Thus, Taxpayers' purchases of fuel are subject to St. Charles Parish sales tax unless, as Taxpayers assert, they are exempted from the tax.

We note that the St. Charles Parish sales tax levied upon Taxpayers' fuel purchases does not raise any constitutional concerns. Under settled United States Supreme Court jurisprudence, a local sale with a local delivery may be subjected to a sales tax even if the purchaser is engaged in foreign or interstate commerce within the meaning of the Commerce Clause. See International Harvester Co. v. Indiana, 322 U.S. 340, 64 S.Ct. 1019, 88 L.Ed. 1313 (1944)

; Indiana v. Wood Preserving Corp., 313 U.S. 62, 61 S.Ct. 885, 85 L.Ed. 1188 (1941). Thus, because the sale and delivery of the fuel at issue occurred in St. Charles Parish, clearly, St. Charles may tax this totally intrastate transaction even if Taxpayers are, in fact, engaged in foreign or interstate commerce within the meaning of the Commerce Clause.⁶

See Oklahoma Tax Commission v. Jefferson Lines, Inc., 514 U.S. 175, 184, 115 S.Ct. 1331, 1338, 131 L.Ed.2d 261, 271 (1995) ("It has long been settled that a sale of tangible goods has a sufficient nexus to the State in which the sale is consummated to be treated as a local transaction taxable by that State."). Indeed, the issue before this court pertains only to whether Taxpayers are entitled to a sales tax exemption on otherwise taxable sales.

Taxpayers allege their fuel purchases are exempted from parish sales tax pursuant to Section 3.01 of the St. Charles Parish School Board General Sales and Use Tax Ordinance, which provides:

The taxes imposed by this ordinance shall not apply to transactions involving the following tangible personal property.

. . . .

(6) The sales of materials and supplies to the owners or operators of ships or vessels operating exclusively in foreign or interstate coastwise commerce, where such materials and supplies are loaded upon the ship or vessel for use or consumption in the maintenance and operation thereof;....

This parish sales tax exemption is modeled on the state sales tax exemption, see LSA-R.S. 47:305.1(B), and, thus, incorporates the interpretation of the state sales tax exemption. See Sales Tax Dist. No. 1 of Lafourche Parish v. Express Boat Co., Inc., 500 So.2d 364, 367 (La.1987)

. Moreover, LSA-R.S. 47:305.1(C) provides: "The exemption from the state sales tax provided in this Section shall be applicable to any sales tax levied by a local governmental subdivision or school board." Consequently, to decide the present matter, we must interpret LSA R.S. 47:305.1(B).

LSA-R.S. 47:305.1(B)

LSA-R.S. 47:305.1 was enacted by 1959 La. Acts 51 and contains the following sales tax exemption at issue:

The taxes imposed by R.S. 47:302 and R.S. 47:321 shall not apply to materials and supplies purchased by the owners or operators of ships or vessels operating exclusively in foreign or interstate coastwise commerce, where such materials and supplies are loaded upon the ship or vessel for use or consumption in the maintenance and operation thereof;....

LSA-R.S. 47:305.1(B). In order for a taxpayer to qualify for this sales tax exemption, the taxpayer must establish: (1) he is an owner or operator of a ship or vessel purchasing materials or supplies; (2) the materials or supplies purchased are used or consumed in the maintenance or operation of the ship or vessel; and (3) the ship or vessel operates exclusively in foreign or interstate coastwise commerce. See McNamara v. John E. Chance & Associates, Inc., 491 So.2d 154, 157 (La.App. 3rd Cir.1986)

.

In the present matter, Taxpayers are the owners or operators of vessels (i.e., tugboats). Taxpayers purchased supplies (i.e., fuels), which were consumed in the operation of their vessels (i.e., while performing fleeting and shifting services). Thus, the only issue before this court is whether Taxpayers' tugboats operate "exclusively in foreign or interstate coastwise commerce" within the meaning of the sales tax exemption.

Relying on this court's decision in Sales Tax Dist. No. 1 of Lafourche Parish v. Express Boat Co., Inc., 500 So.2d 364 (La. 1987) and the First Circuit's decision in Cooper Stevedoring Co., Inc. v. Secretary of Louisiana Dept. of Revenue and Taxation, 555 So.2d 32 (La.App. 1st Cir.1989), Taxpayers contend federal jurisprudence interpreting the Commerce Clause should be used to interpret LSA-R.S. 47:305.1(B)'s phrase "operating exclusively in foreign or interstate coastwise commerce."⁷ Under United States Supreme Court jurisprudence, Taxpayers assert, interstate and foreign commerce status is determined by examining the movement of the cargo, not the ship or vessel: "The U.S. Supreme Court holds that activities taking...