Bulkmatic Transp. Co. v. DEPT. OF STATE REV.

• Decision Date: 02 August 1999
• Docket Number: No. 49T10-9711-TA-00195.,49T10-9711-TA-00195.
• Citation: 715 N.E.2d 26
• Parties: BULKMATIC TRANSP. CO. et al., Petitioners, v. DEPARTMENT OF STATE REVENUE, Respondent.
• Court: Indiana Tax Court

715 N.E.2d 26

BULKMATIC TRANSP. CO. et al., Petitioners, v. DEPARTMENT OF STATE REVENUE, Respondent.

No. 49T10-9711-TA-00195.

Tax Court of Indiana.

August 2, 1999.

Robert W. Loser II, Patrick M. O'Brien, Steers Sullivan, P.C., Indianapolis, Indiana, Attorneys for Petitioners.

Jeffrey A. Modisett, Attorney General of Indiana, Indianapolis, Indiana, David A. Arthur, Deputy Attorney General, Indianapolis, Indiana, Attorneys for Respondent.

FISHER, J.

Bulkmatic Transport Co. and 59 other petitioners [hereinafter collectively referred to as petitioners] are commercial trucking companies who use Indiana highways in the course of their business. They challenge the constitutionality of the in Indiana limitation on the proportional use exemption from Indiana's motor carrier fuel tax and motor carrier fuel surcharge tax.¹

PROCEDURAL HISTORY

Each petitioner has filed a Department Form MF-6431 Proportional Use Exemption Claim For Refund requesting refunds of motor carrier fuel tax and motor carrier surcharge tax for various tax periods during 1991 to 1995.² See IND.CODE ANN. §§ 6-6-4.1-4(d), -4.5(d) (West Supp.1998) (amended 1999). The Department did not rule on the petitioners' refund claims, and on November 21, 1997, the petitioners filed this original tax appeal. See IND.CODE ANN. § 6-8.1-9-1(a), -1(c) (West Supp.1998). During the pendency of this original tax appeal, this Court issued its decision in Bulkmatic II. In that case, this Court held that the in Indiana limitation of the proportional use exemption violated the Commerce Clause.³ On September 30, 1998, the petitioners filed a motion for summary judgment asking that the Court once again declare the in Indiana limitation on the proportional use exemption unconstitutional and order the Department to refund the amounts claimed by the petitioners in their refund claims. On February 19, 1999, the Department filed its response. In that response, the Department raised a number of issues that, in the Department's view preclude the granting of summary judgment. On May 6, 1999, the Court heard oral argument on the petitioners' motion.

ANALYSIS AND OPINION

Standard of Review

The Court reviews final determinations of the Department de novo and is bound by neither the evidence nor the issues raised at the administrative level. See IND.CODE ANN. § 6-8.1-9-1(d) (West Supp.1998); ANR Pipeline Co. v. Department of State Revenue, 672 N.E.2d 91, 93 (Ind.Tax Ct.1996). Summary judgment is only appropriate where there are no genuine issues of material fact and judgment may be entered as a matter of law. See IND. T.R. 56(C); Hyatt Corp. v. Department of State Revenue, 695 N.E.2d 1051, 1053 (Ind.Tax Ct.1998), review denied.

Discussion

Indiana levies two taxes on motor carriers ⁴ who operate commercial vehicles in Indiana. These taxes are imposed on the consumption of motor fuel on Indiana highways, see IND.CODE ANN. §§ 6-6-4.1-4(a), -4.5(a) (West Supp.1998); see also generally Bulkmatic Transp. Co. v. Department of State Revenue, 648 N.E.2d 1156 (Ind.1995) (Bulkmatic I)

, and are for the benefit of using Indiana's public highways. See Roehl Transp., Inc. v. Department of State Revenue, 653 N.E.2d 539, 546 (Ind.Tax Ct.1995). These taxes are comprised of the motor vehicle fuel tax, which is imposed at the same rate ($0.16 per gallon) as the tax paid by the general public as everyday consumers of motor vehicle fuel,⁵ and the motor carrier surcharge tax, which is imposed at a rate of $0.11 per gallon. As a result, motor carriers pay $0.27 per gallon of motor fuel consumed on Indiana highways. See Bulkmatic II, 691 N.E.2d at 1373 n. 2; Roehl Transp., Inc.,

653 N.E.2d at 545 n. 3.

The two taxes [hereinafter collectively referred to as the motor carrier fuel tax] are calculated by using a straightforward apportionment formula. First, the motor carrier determines the amount of fuel it consumes in its entire operations, both within and without Indiana. See Bulkmatic II, 691 N.E.2d at 1373. This figure is then multiplied by a fraction, the numerator of which is the total number of miles traveled on Indiana highways and the denominator of which is the total number of miles traveled within and without Indiana. See Roehl Transp.,653 N.E.2d at 545. The resulting product, which putatively represents the number of gallons of fuel consumed by a motor carrier on Indiana highways, is then multiplied by the applicable rate of $0.27 to arrive at the motor carrier's motor carrier fuel tax liability. See Bulkmatic II, 691 N.E.2d at 1373.

Although all of the fuel consumed in a motor carrier's operations is included in the calculation of the tax, not all of the fuel consumed in a motor carrier's operations is due to highway driving. See Roehl Transp., Inc., 653 N.E.2d at 544. Some commercial vehicles have a single fuel tank that supplies both the vehicle's engine and attached equipment on the vehicle.⁶ See Bulkmatic I, 648 N.E.2d at 1156

. Under the statutory formula, fuel consumed while operating the attached equipment is treated the same as fuel consumed operating the engine, and, consequently, the motor carrier's tax liability will reflect the fuel consumed operating the attached equipment. See Bulkmatic II, 691 N.E.2d at 1373 & n. 3. (For the sake of consistency with the terminology used in Bulkmatic II, the Court will refer to the attached equipment as power take-off (PTO) equipment.)

To alleviate this result, the Indiana General Assembly exempted the fuel used in operating PTO equipment from the motor carrier fuel tax. See IND.CODE ANN. §§ 6-6-4.1-4(d), -4.5(d) (West Supp.1998) (amended 1999). The amount of fuel exempted from the tax is determined not by how much fuel is actually consumed in operating the PTO equipment, but rather by a rule adopted by the Department.⁷ See Bulkmatic II, 691 N.E.2d at 1373. The rule adopted by the Department exempts a fixed percentage of the fuel consumed. (Thus, the exemption is referred to as the proportional use exemption.) The fixed percentage varies according to the type of vehicle and the type of PTO equipment on the vehicle. See id.; IND. ADMIN. CODE tit. 45, r. 13-4-7 (1996). However, the Indiana General Assembly has limited this exemption to the use of PTO equipment in Indiana.⁸ As a result, although the fuel consumed in a motor carrier's operation of PTO equipment in all fifty states is considered in the determination of a motor carrier's tax liability, Indiana only exempts fuel consumed by operating this PTO equipment in Indiana.

The practical effect of the in Indiana limitation is to exact a different price for the use of Indiana roads based on where the motor carrier decides to operate its PTO equipment. See Bulkmatic II, 691 N.E.2d at 1376. For example, if 10,000 gallons of motor fuel are apportioned to Indiana under the statutory formula, the motor carrier's tax liability will be $2700 before the proportional use exemption. If the motor carrier's fleet only travels through Indiana and never uses PTO equipment in Indiana, then the motor vehicle's tax liability will remain at $2700. If, however, the motor carrier uses PTO equipment in Indiana, that tax liability will be decreased by the proportional use exemption, ⁹ thereby lowering the effective motor carrier fuel tax rate. As a result, if a motor carrier uses PTO equipment that motor carrier's tax liability depends on where it uses the PTO equipment. As noted above, in Bulkmatic II, this Court recently held that the disparity in tax treatment caused by the in Indiana limitation violated the Commerce Clause because it discriminated against interstate commerce. The Department chose not to appeal that decision. Now, the Department asks the Court to reconsider Bulkmatic II in this case.

By its terms, the Commerce Clause is only an authorization for Congress to regulate commerce. However, it is settled law that the Commerce Clause, even in the absence of Congressional action, acts as a limitation upon the power of the states. See Camps Newfound/Owatonna, Inc. v. Town of Harrison, 520 U.S. 564, 571, 117 S.Ct. 1590, 1596, 137 L.Ed.2d 852 (1997)

. One of these limitations is that a state may not discriminate against interstate commerce. See West Lynn Creamery, Inc. v. Healy, 512 U.S. 186, 192, 114 S.Ct. 2205, 2211, 129 L.Ed.2d 157 (1994). This limitation also acts upon the states' power to tax, and no state, consistent with the Commerce Clause, may impose a tax that discriminates against interstate commerce. See General Motors Corp. v. Tracy, 519 U.S. 278, 287, 117 S.Ct. 811, 818, 136 L.Ed.2d 761 (1997) ("The negative or dormant implication of the Commerce Clause prohibits state taxation ... that discriminates against ... interstate commerce...."); Westinghouse Elec. Corp. v. Tully, 466 U.S. 388, 403, 104 S.Ct. 1856, 1865, 80 L.Ed.2d 388 (1984) (collecting cases).

As noted by one commentator, the U.S. Supreme Court has never precisely delineated the scope of the doctrine that bars discriminatory taxation by states. See Walter Hellerstein, Commerce Clause Restraints on State Tax Incentives, 82 MINN. L.REV. 413, 415 (1997); see also West Lynn Creamery, Inc., 512 U.S. at 210, 114 S.Ct. at 2220 (Scalia, J., concurring) (labelling Supreme Court negative Commerce Clause jurisprudence a "quagmire" once one gets past facial discrimination against interstate commerce); Westinghouse Elec. Corp., 466 U.S. at 403, 104 S.Ct. at 1865 (case-by-case analysis of state taxation schemes has not always provided precise guides to the states). However, the basic principle is clear: a state taxation scheme must operate evenhandedly with respect to interstate commerce. See Fulton Corp. v. Faulkner, 516 U.S. 325, 331, 116 S.Ct. 848, 856, 133 L.Ed.2d 796 (1996)

("[A] State may not tax a transaction or incident more heavily when it crosses state lines than when it occurs entirely within the State.") (quotation omitted); Hellerstein, supra, at 415 ("A tax which by its terms or operation imposes greater burdens on...