Bruce Motor Freight, Inc. v. Lauterbach

• Decision Date: 19 June 1956
• Docket Number: No. 48880,48880
• Citation: 77 N.W.2d 613,247 Iowa 956
• Parties: BRUCE MOTOR FREIGHT, Inc., Appellee, v. Martin LAUTERBACH et al., Appellants. BRUCE MOTOR FREIGHT, Inc., Appellee, v. Ray E. JOHNSON et al., Appellants (two cases). BRUCE TRANSFER & STORAGE CO., Appellee, v. Ray E. JOHNSON et al., Appellants. BRUCE TRANSFER & STORAGE CO., Appellee, v. R. E. JOHNSON et al., Appellants.
• Court: Iowa Supreme Court

Page 613

77 N.W.2d 613

247 Iowa 956

BRUCE MOTOR FREIGHT, Inc., Appellee, v. Martin LAUTERBACH et al., Appellants.

BRUCE MOTOR FREIGHT, Inc., Appellee, v. Ray E. JOHNSON et al., Appellants (two cases).

BRUCE TRANSFER & STORAGE CO., Appellee, v. Ray E. JOHNSON et al., Appellants.

BRUCE TRANSFER & STORAGE CO., Appellee, v. R. E. JOHNSON et al., Appellants.

No. 48880.

Supreme Court of Iowa.

June 19, 1956.

Dayton Countryman, Atty. Gen., of Iowa, M. A. Iverson, Sp. Asst. Atty. Gen., of Iowa, and James M. Barrett, Des Moines, Sp. Counsel for Iowa State Tax Commission, for appellants.

Bradsaw, Fowler, Proctor & Fairgrave, Howard Steele and John Synhorst, Des Moines, for appellees.

PETERSON, Justice.

The question involved is the interpretation of Section 423.4, subd. 2, Code 1954, I.C.A., and whether or not plaintiffs are liable for use tax on motor vehicles and trailers, used in interstate transportation.

By agreement of counsel and order of the District Judge five cases were consolidated for trial, and by order of this court they have been consolidated on appeal.

The actions are in the nature of mandamus actions to require the State Tax Commission to refund use tax paid under protest to Polk County Treasurer or to Tax Commission. Plaintiff in three cases, is Bruce Motor Freight, Inc., a Missouri corporation engaged in interstate transportation. The company holds interstate authority to engage in regular operations between Minneapolis, St. Paul and Des Moines, and Des Moines, St. Louis and Kansas City. It also holds a certificate from Iowa Commerce Commission for intrastate operations between Des Moines and Perry and Des Moines and Centerville and intermediate points. Plaintiff in the other two cases is Bruce Transfer & Storage Company, an Iowa Corporation, engaged in the business of moving household goods. It has intrastate authority in Iowa, but has no interstate authority. It is a member, under lease and carrier contract, and stock ownership, of an interstate organization with nation-wide interstate authority, known as Allied Van Lines, Inc., an Illinois corporation. There are 88 motor vehicles and trailers involved in the five actions. 54 are owned and operated by Bruce Motor Freight, Inc.; 10 are owned by Bruce Transfer & Storage Company, and are under contract or lease to Allied Van Lines, Inc.; 24 are owned by Jobbers Supply Company, of Des Moines, and are leased to Bruce Motor Freight, Inc.; all are used in interstate transportation. The District Court decided in favor of plaintiffs and ordered repayment of taxes paid, under writs of mandamus. Defendants appeal.

I. Chapter 423, Code 1954, I.C.A., covers the subject of use tax. It was adopted as Chapter 198 of the 47th General Assembly, and became effective April 16, 1937. It is supplementary to the retail sales tax. It covers personal property not purchased in the state, but purchased for use in the state.

The provisions of the use tax law, which are under consideration in this case, are a part of Section 423.4 providing as follows:

'Exemptions. The use in this state of the following tangible personal property is hereby specifically exempted from the tax imposed by this chapter: * * * '2. Tangible personal property used (a) in interstate transportation or interstate commerce * * *.'

In 1940, an opinion was issued by the Attorney General stating that motor vehicles and trailers used in interstate transportation were exempt from use tax.

At that time a number of rules were adopted by the State Tax Commission to cover motor vehicles used in interstate transportation. Under the rules it was provided that when an application for license was made at the County Treasurer's office, an affidavit could be filed showing that the motor vehicle was going to be used in interstate transportation. On the basis of the affidavit, the treasurer was instructed to waive the use tax. These rules remained in force until June 27, 1952, when the Tax Commission adopted an order rescinding them, effective June 30, 1952. Thereafter when application was made to the County Treasurer for motor vehicle license, even if used in interstate transportation, the County Treasurer was instructed to collect use tax if purchased outside the State.

The rules outlined above are now cancelled, but their use for many years is evidence of a policy of the Commission, and of its interpretation of the intention of the legislature. During these years, while the legislature has amended other sections of Chapter 423 it has never amended or changed Section 423.4, subd. 2. The legislature was in session in 1954, but it did not adopt any changes in this Section to establish or re-enforce the rule changes adopted by the Commission in 1952.

The State Tax Commission audited the books of both plaintiffs from August, 1948, to September, 1950. During this period the exemption rules of the board were in force, and no use tax was paid on any of the vehicles. This had reference to 53 vehicles of Bruce Motor and 7 vehicles of Bruce Transfer. The other 28 vehicles were either purchased or leased after June 30, 1952.

II. It is necessary and proper for administrative departments of our state government, such as the Tax Commission, to adopt rules of procedure as to the matters coming under the jurisdiction of the commissions. Section 422.61 made applicable to Code Chapter 423 by Section 423.23, grants specific powers to the Tax Commission to adopt rules and regulations, as follows:

'The commission shall have the power and authority to prescribe all rules and regulations not inconsistent with the provisions of this chapter, necessary and advisable for its detailed administration and to effectuate its purposes.'

Rules cannot be adopted that are at variance with statutory provisions, or that amend or nullify legislative intent. Kistner v. Iowa State Board, 225 Iowa 404, 280 N.W. 587; Morrison-Knudsen Co. v. State Tax Comm., 242 Iowa 33, 44 N.W.2d 449, 41 A.L.R.2d 523; City of Ames v. State Tax Commission, 246 Iowa 1016, 71 N.W.2d 15; Michigan-Wisconsin Pipe Line Company v. Johnson, Iowa, 73 N.W.2d 820.

In Kistner v. Iowa State Board of Assessment and Review, supra [225 Iowa 404, 280 N.W. 593], we said: 'The Board does not have the right to legislate, and it is conceded * * * that it has no authority under the statute to adopt rules which are in the nature of laws. It cannot make a retailer out of someone who is not under the act a retailer. * * *'

In Morrison-Knudsen Co., v. State Tax Commission, supra [242 Iowa 33, 44 N.W.2d 454], we stated 'It [Commission] has authority to prescribe only such rules and regulations as are not inconsistent with the provisions of statute.'

In City of Ames v. State Tax Commission, supra [246 Iowa 1016, 71 N.W.2d 19], the court said: 'It will be noted that the rule making power of the commission may not be 'inconsistent with the provisions of this chapter.' The function of the commission is an administrative one, and it may enact reasonable rules and regulations necessary in carrying out the legislative enactments. But it may not make law, or by rule change the legal meaning of the common law or the statutes.'

The matter was again considered by this court in Michigan-Wisconsin Pipe Line Company v. Johnson, supra , in which it is stated:

'Administrative rules seek to implement the statutes but it is for the court to finally interpret them.'

III. Counsel for appellants allege five reasons as a basis for their contention that the exemption is not applicable.

1. Small percentage of intrastate use.

2. Ownership by Bruce Transfer & Storage Co., an Iowa corporation, of 10 of the motor vehicles, and contractual relationship for their use by Allied Van Lines, Inc.

3. Lease of 24 motor vehicles by Jobbers Supply Company, an Iowa company, to Bruce Motor Freight, Inc.

4. Some of the motor vehicles were delivered by the manufacturer at Des Moines, and licensed in Polk County, and safety equipment was added to prepare for interstate use.

5. In addition to the above claims, appellants contend that on the basis of some or all of these conditions, there was a 'taxable moment' at which time the motor vehicles and trailers became subject to use tax in Iowa, before entering into interstate transportation.

The statute exempts tangible personal property used in interstate transportation or interstate commerce. The property involved in these actions comes under the provision as to 'interstate transportation'. There is a difference between the two terms. The words 'interstate commerce' are broader than the transportation provision. State v. Western Transportation Co., 241 Iowa 896, 43 N.W.2d 739. Commerce includes interstate telephone projects, interstate telegraph services, interstate pipelines transporting gas or oil, and and other interstate commercial projects. Transportation covers passengers and personal property. Since these cases involve only motor vehicles and trailers we will use herein the phrase 'interstate transportation'.

IV. In connection with the question of intrastate use, it appears in the evidence, without conflict, that 95% of the tonnage of the motor vehicles and trailers used by Bruce Motor Freight, Inc., was interstate transportation.

It has been held by this court in several cases, and in numerous decisions in other states, that the exemption is effective, even though the use is not exclusively interstate transportation or commerce. Dain Mfg. Co. v. Iowa State Tax Commission, 237 Iowa 531, 22 N.W.2d 786; City of Ames v. State Tax Commission, supra; Michigan Allied Dairy Ass'n v. Auditor General, 302 Mich. 643, 5 N.W.2d 516; Republic Pictures Corporation v. Kappler, 8 Cir., 151 F.2d 543, 162 A.L.R. 228; State v. Western Transportation Co., supra.

In Dian Mfg. Co., v. Iowa State Tax Commission, supra, the question in the case was the exemption of personal property used in producing or preparing property intended for retail sale. This appears in Section 423.1,...