Indiana Dept. of State Revenue v. Bulkmatic Transport Co., No. 49S10-9406-TA-586

• Docket Nº: No. 49S10-9406-TA-586
• Citation: 648 N.E.2d 1156
• Case Date: April 13, 1995
• Court: Supreme Court of Indiana

Page 1156

648 N.E.2d 1156 INDIANA DEPARTMENT OF STATE REVENUE, Appellant,
v.
BULKMATIC TRANSPORT COMPANY, Appellee. No. 49S10-9406-TA-586. Supreme Court of Indiana. April 13, 1995.

Pamela Carter, Atty. Gen., David A. Arthur, Deputy Atty. Gen., Indianapolis, for appellant.

Robert W. Loser II, Patrick M. O'Brien, Brett R. Fleitz, Steers Sullivan, P.C., Indianapolis, for appellee.

SULLIVAN, Justice.

Some large trucks have a single fuel tank that is used to provide fuel both for the truck engine and for specialized equipment on the trucks. The fuel used by the truck engine is

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subject to Indiana motor carrier fuel tax; the fuel used to operate the specialized equipment is exempt from that tax. This case involves such trucks where the specialized equipment is pneumatic pumping equipment used to load and unload liquid and dry bulk commodities. The taxpayer and revenue department dispute the percentage of the total amount of fuel used by the taxpayer's trucks that is exempt from motor carrier fuel tax and whether taxpayer is entitled to a similar exemption from the motor carrier fuel surcharge tax. The Tax Court ruled for the taxpayer in both respects. Bulkmatic Transp. Co. v. Indiana Dep't of State Revenue (1994), Ind.Tax., 629 N.E.2d 955.

Background

Taxpayer, Bulkmatic Transport Company, is engaged in the transportation of liquid and dry bulk commodities in pneumatic, tractor-trailer trucks throughout Indiana and surrounding states. A pneumatic truck is a tractor-trailer vehicle with pneumatic pumping equipment and a common fuel tank for transportation and operation of the pumping equipment. The Indiana State Department of Revenue audited taxpayer and assessed it $199,545.37 plus penalty and interest for failure to pay motor carrier fuel tax from 1987 through 1989. After unsuccessfully protesting the assessment, taxpayer paid the assessment and filed a refund claim. After unsuccessfully protesting the size of the refund provided, taxpayer initiated an original appeal in the Tax Court of Indiana. Taxpayer and the department filed summary judgment motions. On March 16, 1994, the Tax Court found in favor of taxpayer. Bulkmatic Transp. Co., 629 N.E.2d at 958-59. On April 15, 1994, the department petitioned this court for review of the Tax Court's decisions. We granted review on June 24, 1994. Ind.Appellate Rule 18.

I. Motor Carrier Fuel Tax

A.

Indiana's motor carrier fuel tax applies to operators of commercial vehicles in our state. Indiana Code § 6-6-4.1-4 (1985 Supp.) imposes this tax "[o]n the consumption of motor fuel by a carrier in its operations on highways in Indiana." Indiana Code § 6-6-4.1-4(d) (1985 Supp.) provides:

The tax imposed under this section does not apply to that portion of motor fuel used to propel equipment mounted on a motor vehicle having a common reservoir for locomotion on the highway and the operation of such equipment, as determined by rule of the commissioner.

Pursuant to this subsection of the statute, Ind.Admin.Code tit. 45, r. 13-4-7 (1986) sets forth the department's rules for exempting from the Indiana motor carrier fuel tax that portion of motor fuel used to propel equipment not used for locomotion. This regulation (the "1986 Regulation") read as follows during the tax years at issue in this case:

(b) The tax imposed under IC 6-6-4.1-4 does not apply to twenty-four percent (24%) of the motor fuel which is consumed on Indiana highways by a tank truck which has a common fuel reservoir for both locomotion on the highway and the operation of the pumping equipment....

....

(f) A portion of the tax imposed under IC 6-6-4.1-4 may be determined, by the administrator, not to apply to the motor fuel consumed on Indiana highways by firetrucks, streetsweepers and other motor vehicles which have a common fuel reservoir for both locomotion on the highway and the operation of other equipment after:

(1) a showing by the person or carrier of the proportion of motor fuel used for the operation of equipment other than for locomotion along the highway; and

(2) presentation of documents and information as requested by the administrator.

Ind.Admin.Code tit. 45, r. 13-4-7 (1986).

Following amendment in 1991, the rule (the "1991 Regulation") read as follows:

(a) A motor carrier subject to the [motor carrier fuel] tax ... is entitled to a proportional use exemption for tax paid on use of fuel for a commercial purpose when the fuel is placed into ... a common fuel supply reservoir for both locomotion on public highway and a commercial purpose

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which is exempt from the motor carrier fuel tax....

(b) For purposes of subsection (a), proportional use exemption shall be presumed to be as follows:

(2) For tank trucks, twenty-four percent (24%) ...

....

(18) For dump trucks, twenty-three percent (23%) ...

(19) For semitractor and dump trailer combinations ... fifteen percent (15%) ...

(20) For semitractor and tank trailer combinations (commonly referred to as a tank transport), fifteen percent (15%) ...

(21) For pneumatic tank trucks, fifteen percent (15%) ....

Ind.Admin.Code tit. 45, r. 13-4-7 (1992).

B.

In determining the amount of motor carrier fuel tax owed in this case, the department classified taxpayer's pneumatic trucks under subsection (f) of the 1986 Regulation as "other motor vehicles which have a common fuel reservoir for ... locomotion ... and the operation of ... equipment." Exercising its authority under subsection (f), the department determined the proportional exemption to be 15%.

Taxpayer appealed the department's finding in the Tax Court of Indiana. Ruling on cross motions for summary judgment, the Tax Court held that taxpayer's pneumatic trucks were "tank trucks" under subsection (b) of the 1986 Regulation and that taxpayer was therefore entitled to a 24% proportional exemption. Bulkmatic Transp. Co., 629 N.E.2d at 958. The Tax Court interpreted the term "tank truck" to be a truck with a receptacle for holding liquids, and found that taxpayer's pneumatic trucks met this definition. Id. at 957-58. Second, the Tax Court concluded that the 1991 Regulation clearly defining tank truck as a single unit truck, as opposed to a double unit pneumatic truck, was a change to the rule rather than simply a...