Dillon Ranch Supply v. U.S., 78-3386

• Decision Date: 07 August 1981
• Docket Number: No. 78-3386,78-3386
• Citation: 652 F.2d 873
• Parties: 81-2 USTC P 16,371 DILLON RANCH SUPPLY, a corporation, Plaintiff-Appellee, v. UNITED STATES of America, Defendant-Appellant.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 873

652 F.2d 873

81-2 USTC P 16,371

DILLON RANCH SUPPLY, a corporation, Plaintiff-Appellee, v. UNITED STATES of America, Defendant-Appellant.

No. 78-3386.

United States Court of Appeals Ninth Circuit.

Argued and Submitted Sept. 3, 1980.

Decided Aug. 7, 1981.

John A. Dudeck, Jr., Washington, D. C., argued for defendant-appellant; Gary R. Allen, Washington, D. C., on brief.

John R. Kline, Kline & Niklas, Helena, Mont., for plaintiff-appellee.

Appeal from the United States District Court for the District of Montana.

Before ALARCON and CANBY, Circuit Judges, and HOFFMAN, ^* District Judge.

WALTER E. HOFFMAN, Senior District Judge:

This case involves the issue of the taxability of certain flatbed trailers and related attachments which are manufactured or assembled by Dillon Ranch Supply. Specifically, the Government appeals from a judgment of the United States District Court for the District of Montana which ordered the United States to refund to Dillon Ranch Supply the manufacturers' excise tax paid by taxpayer for the fourth quarter of 1972 through the second quarter of 1975, in the amount of $12,882.71, plus interest. ¹ For reasons stated herein, we reverse.

The facts are essentially undisputed. Dillon Ranch Supply is a Delaware corporation with its principal place of business in Dillon, Montana. It is engaged in the business of manufacturing, assembling, and selling supplies and equipment, including but not limited to gooseneck, flatdeck, self-ramping trailers and attachments which may be mounted on such trailers. During the tax periods at issue in this case, taxpayer was a distributor of "Maverick" brand trailers. It assembled the trailers from components which, except for the tires and wheels, were imported by Dillon Ranch Supply from Maverick M/C Manufacturing Co. Ltd., of Fort MacLeod, Alberta, Canada.

A. Facts pertinent to the "Maverick" brand flatbed, gooseneck trailers.

The standard "Maverick" brand trailers sold by taxpayer consisted essentially of a large flat deck mounted on a chassis with moveable tandem or triple axle undercarriages. As illustrated by the photographs and advertisements in the record, the trailers were suitable for transporting a broad range of products and commodities.

The chassis frame and trailer deck varied in length from 18 feet through 30 feet and, with minor exceptions, were 8 feet in width to conform with the size limitations prescribed for travel on the interstate highway system. ² They were rated by taxpayer as having gross vehicle weight capacities between 14,000 and 20,000 pounds. The main frame of the trailers was "very strong" seamless steel tubing with cross members and center bracing to prevent twisting of the frame under uneven loads. The trailer decks were solidly built with 2 inch by 8 inch fir deck boards mounted crosswise for stronger construction and supported by 1 inch angle iron and seamless tubing. Deck height was 3 feet off the ground.

Although the trailers were adaptable for use with practically any type and size of pulling vehicle, Dillon Ranch Supply's advertisement emphasized that the trailers were designed for use by 1/2 ton, 3/4 ton, and 1 ton pick-up trucks as the principal towing vehicle. The trailers featured "fifth wheel" hitches with adjustable goosenecks to accommodate various heights of pulling vehicles. These fifth wheel hitches operated on the same principles as used on large highway tractor-trailers and they had sufficient surface space to prevent "careening" of the trailer while turning. In addition, a farm tractor hitch was available for the trailers as an option.

The trailers were built on either tandem axles or triple axles. They were certified as having a weight capacity per axle of either 6,000 or 7,000 pounds. The axles were mounted on moveable undercarriages which could slide to a position within 48 inches of the rear of the chassis. This feature enabled the operator to properly distribute the weight between the pulling vehicle and the trailer. Depending upon the placement of the trailer axles, approximately 9 to 14 percent of the weight on the trailer could be shifted to the pulling vehicle, thereby increasing the gross vehicle weight capacity of the trailer. The moveable axle assemblage also contributed to the overall stability and highway maneuverability of the trailers. A special design feature permitted the axles to be moved to the extreme front of the chassis, the trailer deck tilted, thereby forming a ramp to assist in loading and unloading.

Each trailer sold by Dillon Ranch Supply had affixed to it a tag certifying that, as of the date of manufacture, it conformed with the federal safety standards applicable to highway vehicles. Thus, each trailer was outfitted with dual stop lights and turn lights which met or exceeded applicable Department of Transportation requirements. Similarly, the trailers were equipped with standard highway certified tires with ratings up to 3,100 pounds. Finally, the trailers featured electric brakes rated at 5,200 pounds per wheel (excluding the brake rating of the pulling vehicle), and heavy duty springs, equalizers, and rubber shackles.

Advertisements prepared by taxpayer emphasized that the trailers complied with the federal highway motor vehicle safety standards. Other advertisements prepared by Maverick stressed that the trailers could be used for a broad range of activities, many of which involved the transportation of loads over the public highways. Accordingly, one of the advertisements stated that the trailers could be used for the following applications:

What Are Its Applications?

For the transportation of many products and commodities. The trailer affords a large deck, making it especially suitable for bulky, long and irregular loads, machinery, hay, livestock, campers, pallets; the new containerized method of freight handling, furniture, building material, etc.

The advertisement then listed numerous businesses which use the "Maverick" brand trailers, including distributors, manufacturers, movers, an oil company, a steel company, lumber yards, modular home manufacturers, livestock dealers, an automobile dealer, and a Government utility in Canada.

B. Facts Pertinent to the Optional Trailer Accessories and Attachments.

Dillon Ranch Supply sold a number of optional attachments designed for use with the "Maverick" brand trailers. The accessories include, inter alia, detachable cattle racks, a haying attachment for hauling and stacking hay, and grain boxes. All of the attachments (excluding three cattle racks) were also manufactured by Maverick M/C Manufacturing Co., Ltd., in Canada.

The cattle racks were one piece bodies constructed with tubular steel, covered on the interior with plywood. Excluding the floors, these racks were self-contained units which could be used for transporting cattle and other livestock. The cattle racks were designed to be quickly mounted on the flatbed deck of a "Maverick" trailer by one man with out tools. The haying attachment consisted of an 8,000 pound electric winch, a hay ejector with a traveling head gate, and a hay tie down. This accessory mounted on the deck of the trailer with 4 bolts and it could be used to move and stack up to 7 to 9 tons of baled hay, loose hay, silage or chopped hay. Finally, the grain box available as an option on the trailers was a self-contained removable body which was complete in itself. It featured a 12-volt hydraulic hoist and had a capacity of up to 360 bushels when used as an accessory with the triple axle Maverick trailer.

C. Proceedings Below.

At some time prior to July 13, 1973, Internal Revenue Service Agent Tom Harris began an investigation into taxpayer's liability for federal manufacturers' excise tax on its sales of Maverick brand trailers and related accessories and equipment. After conducting a field investigation, Agent Harris subsequently requested technical advice from the National Office of the Internal Revenue Service concerning the taxability of the vehicles and related attachments. Thereafter, the national office issued a technical advice memorandum to the District Director of the Internal Revenue of the Helena, Montana District, regarding the trailers in question, concluding that the trailers were subject to tax under Section 4061(a) of the Internal Revenue Code of 1954. The memorandum concluded the trailers were taxable because their overall design characteristics allowed them to be used for general purpose hauling on the public highways, as well as for hauling on farms.

The Commissioner of Internal Revenue subsequently assessed federal excise taxes for the fourth quarter of 1972 through the second quarter of 1975 on taxpayer's sales of trailers and related accessories and attachments. Dillon Ranch Supply paid those assessments, filed timely claims for refund, and upon their denial, brought the instant suit for refund.

The district court held that the Maverick trailers were "farm wagons" primarily designed for use on the farms within the meaning of Section 4063(a) (2) of the Internal Revenue Code, although they may be used on the highway, also. ³ Additionally, the court held that the stock racks and haying attachments ⁴ were exempt from the manufacturers' excise tax imposed by Section 4061(a)(1) as accessories to vehicles excluded from the provisions of Section 4061(a). The district court failed to make a finding as to the taxability of the grain box attachment of the Maverick trailer. We reverse and remand the case for further proceedings consistent with this opinion.

D. Applicable Sections of the Internal Revenue Code.

Section 4061(a)(1) ⁵ of the Internal Revenue Code of 1954 imposes a ten-percent excise tax on sales by manufacturers or importers of certain enumerated articles, including truck trailer and semi-trailer chassis and bodies. Although an exemption from taxation does not appear on the face of the statute, the Treasury Regulations promulgated thereunder have...