Brent Leasing Co. v. State Tax Assessor

• Decision Date: 15 June 2001
• Docket Number: Docket No. Ken-00-324.
• Citation: 2001 ME 90,773 A.2d 457
• Parties: BRENT LEASING CO., INC. v. STATE TAX ASSESSOR.
• Court: Maine Supreme Court

773 A.2d 457

2001 ME 90

BRENT LEASING CO., INC. v. STATE TAX ASSESSOR.

Docket No. Ken-00-324.

Supreme Judicial Court of Maine.

Argued February 13, 2001.

Decided June 15, 2001.

Roy T. Pierce, Esq., (orally), Michael L. Sheehan, Esq., Preti, Flaherty, Beliveau, Pachios & Haley, LLC, Portland, for plaintiff.

G. Steven Rowe, Attorney General, Crombie J.D. Garrett, Asst. Attorney General, (orally), Clifford B. Olson, Asst. Attorney General, Augusta, for defendant.

Panel: WATHEN, C.J., and CLIFFORD, RUDMAN, DANA, SAUFLEY, ALEXANDER, and CALKINS, JJ.

CALKINS, J.

[¶ 1] Brent Leasing Co., Inc. appeals the judgment of the Superior Court (Kennebec County, Marden, J.) affirming a decision of the State Tax Assessor which denied it an exemption from the Maine Sales and Use Tax Law, 36 M.R.S.A. §§ 1751-2113 (1990 & Supp.2000). Brent Leasing argues that its vessel, the Friendship IV, is an instrumentality of foreign commerce and exempt from the use tax pursuant to 36 M.R.S.A. § 1760(41) (Supp.2000). We agree that Brent Leasing is not entitled to an exemption, and we affirm that portion of the judgment.¹

I. FACTS AND PROCEDURE

[¶ 2] The parties stipulated to the facts. In May 1994, Brent Leasing purchased a vessel called the Friendship IV in Massachusetts. It paid no sales or use tax to any state. Within thirty days of the purchase, the Friendship IV sailed to Bar Harbor. Brent Leasing used the Friendship IV to carry passengers on whale watching and other nature cruises departing from and returning to Bar Harbor, without any intermediate stops. On the majority, if not all, of the cruises, the Friendship IV crossed into international waters.

[¶ 3] The Assessor issued an assessment against Brent Leasing for use taxes, interest, and penalties. Brent Leasing filed a timely petition for reconsideration pursuant to 36 M.R.S.A. § 151 (Supp.2000). The Assessor upheld the assessment and added additional interest. Brent Leasing sought review by the Superior Court pursuant to 36 M.R.S.A. § 151 and 5 M.R.S.A. § 11002 (1989). The parties filed cross-motions for summary judgment on the stipulated facts. The Superior Court, in a thorough and well-reasoned decision, granted the Assessor's motion, affirming the decision of the Assessor.

II. INSTRUMENTALITY OF INTERSTATE OR FOREIGN COMMERCE

[¶ 4] Submission of this matter on summary judgment was appropriate because there are no disputes of material fact. Estate of DiMillo v. State Tax Assessor, 1999 ME 154, ¶ 2, 739 A.2d 385, 386. We review de novo the Superior Court's determinations of law. Fairchild Semiconductor Corp. v. State Tax Assessor, 1999 ME 170, ¶ 7, 740 A.2d 584, 586.

[¶ 5] Brent Leasing's entitlement to a tax exemption for the Friendship IV depends upon whether the vessel is a "watercraft that is placed in use by the purchaser as an instrumentality of interstate or foreign commerce." 36 M.R.S.A. § 1760(41).² Our task is to determine the meaning that the Maine Legislature intended when it chose these words.

[¶ 6] When we construe a statute, we first look to the plain meaning of the language to determine legislative intent. Fairchild Semiconductor Corp., 1999 ME 170, ¶ 7, 740 A.2d at 587. Only if the language is ambiguous do we resort to extrinsic aids to glean the statutory intent. Lewiston Raceway, Inc. v. Maine State Harness Racing Comm'n, 593 A.2d 663, 665 (Me.1991). "In the absence of a legislative definition, the term must be given a meaning consistent with the overall statutory context and must be construed in the light of the subject matter, the purpose of the statute and the consequences of particular interpretation." Reagan v. Racal Mortgage, Inc., 1998 ME 188, ¶ 8, 715 A.2d 925, 928 (citation and quotation omitted). "`[W]e avoid statutory constructions that create absurd, illogical, or inconsistent results.'" Fairchild Semiconductor Corp., 1999 ME 170, ¶ 7, 740 A.2d at 587 (quoting Darling's v. Ford Motor Co., 1998 ME 232, ¶ 5, 719 A.2d 111, 114).

[¶ 7] Brent Leasing contends that the entry of the Friendship IV into international waters on the whale watching cruises qualifies it as an instrumentality of foreign commerce. Brent Leasing argues that the phrase "foreign commerce" is a term of art with extensive precedent defining the phrase in the context of the Commerce Clause of the United States Constitution.³ It contends that because the phrase is a term of art, the Legislature intended "foreign commerce" to carry the same meaning given to it by decisions interpreting the phrase in the Commerce Clause. The Assessor, on the other hand, argues that the Legislature did not intend the phrase to be coextensive with the Commerce Clause.

[¶ 8] Thus, the issue comes down to whether the Legislature intended the Commerce Clause definition of "foreign commerce" to be applicable to section 1760(41) or whether it intended a narrower meaning. If the Maine Legislature intended the phrase to have the same meaning and to be coextensive with the Commerce Clause, then we would likely have to interpret section 1760(41) as granting an exemption to a watercraft carrying passengers onto international waters during its cruises. Precedent from the United States Supreme Court and other courts would dictate this result. When interpreting "foreign commerce" as it is used in the Commerce Clause, the Supreme Court has included within the meaning of that phrase a ship that carries passengers between ports in the same state but enters into international waters on its route. See Lord v. S.S. Co., 102 U.S. 541, 544, 26 L.Ed. 224 (1880)

(declaring that ships sailing from San Francisco to San Diego without making any stops are engaged in foreign commerce while in international waters within the meaning of the Commerce Clause).⁴ Because the Maine Legislature is obviously aware of Supreme Court precedent, if it intended "foreign commerce" to carry the same meaning that it has in the Commerce Clause, that meaning would include vessels carrying passengers from Bar Harbor, crossing into international waters and returning to Bar Harbor. However, if the Legislature intended that the phrase "foreign commerce" not be read as broadly as it is read when used in the Commerce Clause, Brent Leasing may not be entitled to the tax exemption.

[¶ 9] The Supreme Court has recently reminded us that when Congress uses the phrase "interstate or foreign commerce" in a statute, it does not necessarily carry the same meaning as in the Commerce Clause. In Circuit City Stores, Inc. v. Adams, ___ U.S. ___, 121 S.Ct. 1302, 1309, 149 L.Ed.2d 234 (2001), the Court held that the phrase "workers engaged in foreign or interstate commerce," as used in the Federal Arbitration Act, was not intended by Congress to be coextensive with the Commerce Clause.⁵

[¶ 10] Just as the Supreme Court does not assume that Congress always uses the phrase "interstate or foreign commerce" to be coextensive with the Commerce Clause, we should not assume that the Maine Legislature uses the phrase coextensively with the Commerce Clause. Indeed, an examination of the purpose of the use tax causes us to conclude that the Legislature intended "foreign commerce" in section 1760(41) to carry a narrower meaning than the meaning in the Commerce Clause.

[¶ 11] "The purpose of the use tax is to minimize unfair competition between intrastate and interstate sales of tangible personal property." Harold MacQuinn, Inc. v. Halperin, 415 A.2d 818, 821 (Me. 1980).

The necessity of a use tax is obvious. It is well known that much personal property is purchased outside the borders of the state and brought into the state for use here. This State is without authority to tax sales beyond its territorial limits. Without some tax to complement and supplement the sales tax, not only would a tax advantage be enjoyed by the buyer who purchases outside of the state and uses that property here, but also local merchants would be at a disadvantage against competition by out of state merchants who may be able to offer lower prices by reason of lower tax burdens. A typical illustration is the purchase of an automobile in a non-taxable state by a citizen of this state for use here. A Maine dealer is obliged to collect a sizeable tax on such a transaction when made in this state. Without a use tax the aggregate purchases of this character would result in a severe tax loss to the State, and present a serious handicap to Maine dealers.

Hanbro, Inc. v. Johnson, 158 Me. 180, 184, 181 A.2d 249, 251 (1962).

[¶ 12] Because of the purpose of the use tax, it is apparent that the Legislature intended that any exemptions from the tax be limited to those otherwise required by the federal constitution or other laws or those demanded by public policy concerns. Extending the exemption beyond that required by public policy, other statutes, or the federal constitution does not advance the purpose of the use tax.

[¶ 13] The Legislature is aware that the Commerce Clause restricts a state's ability to tax instrumentalities of interstate and foreign commerce, but it is also aware that states are not prohibited from taxing instrumentalities of interstate and foreign commerce so long as the tax meets the requirements established by the Supreme Court.⁶ Brent Leasing has not challenged the imposition of the use tax on constitutional grounds, and it concedes that taxing the Friendship IV does not violate the Commerce Clause.

[¶ 14] Because the Legislature was aware of the constitutional limitation, it enacted the section 1760(41) exemption to meet that limitation. It is highly doubtful, given the purpose of the use tax, that the Maine Legislature intended to exempt more instrumentalities placed in foreign commerce than the federal constitution requires. It has not been suggested to us that the Legislature had any other public policy or rationale in mind for which it intended to expand the foreign commerce exemption beyond the confines of the constitutional restraint. There is no legislative...