King Trailer Company v. United States

• Decision Date: 29 April 1964
• Docket Number: No. 63-937 WB.,63-937 WB.
• Citation: 228 F. Supp. 1013
• Court: U.S. District Court — Southern District of California
• Parties: KING TRAILER COMPANY, Inc., a California corporation, Plaintiff, v. UNITED STATES of America, Defendant.

228 F. Supp. 1013

KING TRAILER COMPANY, Inc., a California corporation, Plaintiff, v. UNITED STATES of America, Defendant.

No. 63-937 WB.

United States District Court S. D. California, Central Division.

April 29, 1964.

W. S. Rainbolt, Long Beach, Cal., for plaintiff.

Francis C. Whelan, U. S. Atty., Loyal E. Keir, Asst. U. S. Atty., Herbert D. Sturman, Asst. U. S. Atty., Los Angeles, Cal., for defendant.

BYRNE, District Judge.

This is an action for refund of excise taxes assessed and paid pursuant to 26 U.S.C. § 4061.¹

King Trailer Company, Inc., plaintiff, is a manufacturer of units denominated as "pickup coaches", which are primarily designed to be transported in the bed of a pickup truck. The pickup coach is similar in design to a house trailer, but for the sake of safety and convenience it is so shaped that it fits in the bed of the truck, and does not have a chassis of its own, or wheels. Each coach is a self-contained unit, having insulated walls, a roof, and a floor of its own, together with a door and window. The coaches are equipped with temporary living and sleeping quarters and have, or may have, furnishings and appliances similar to those commonly found in house trailers. The coaches have the plumbing features which are found in the typical house trailer, and they are subjected to the house trailer inspection standards. In addition, each is equipped with six volt wiring, 110 volt house wiring, and butane equipment. While the units are not spacious it is possible to take up a permanent residence in them, although this is seldom done. However, it is not uncommon for people to live in them for two or three-months at a time. The units are merely set in the bed of a pickup truck and are held therein by two turnbuckles, which can be attached to the post-holes in the body. No special drilling or other modification of the truck bed is required for the purpose of carrying a coach. The units are easily removed. They can be removed in from 10 to 15 minutes by simply jacking them up and driving the truck out from under them. Functioning of the units is not dependent upon the truck itself; they can as easily be used on a trailer, on the ground, and, indeed, on anything that will bear their weight. Of course, they are normally transported on pickup trucks, for their design is aimed at making such a method of conveyance ideal.

On May 25, 1955, R. J. Bopp, Chief of the United States Treasury Department's Excise Tax Branch, advised the plaintiff by letter that:

"The pickup coach and the sport top bodies are exceptionally like house trailer bodies with the exception that they are mounted on tax paid pickup trucks. In view thereof, we are of the opinion that the bodies in question are not automobile truck bodies within the purview of Section 4061 (a) (1) and (2) of the Code. Sales of these bodies are, therefore, not taxable under that section of the law."

However, on April 1, 1960, the Internal Revenue Service issued Rev.Rul. 60-39, C.B. 1960-1, p. 406, which states, in pertinent part:

"Advice has been requested whether the manufacturers excise tax on (1) motor vehicle articles * * * applies to the sales of the articles described below * * * `Situation (2). A company manufacturers and sells a so-called "slide in cabin" which is designed to be placed in the body of a pickup automobile truck. The cabin has a floor, a door, and windows. It is described as being waterproof and dustproof. It is used for temporary living and sleeping quarters and, generally, is sold equipped with an ice box, stove, light, cabinet, shelf, and two mattresses. When it is not in use on the truck, it may be placed on the ground, for use as a guest cottage or as a playhouse for children.' * * *

"With respect to the articles described in situations (1) and (2) above situation (1) described a unit like the one described in situation (2) but it was secured to the truck "frame" by four bolts., the Internal Revenue Service considers such articles to be bodies for automobile trucks within the meaning of section 4061(a) (1) of the Code. The fact that the articles are designed to be sold with eating and sleeping facilities does not bring them within the scope of the exemption provided by section 4063(a) of the Code. To be considered a house trailer body for purposes of that exemption, a body must be primarily designed to be mounted on a trailer or semitrailer chassis. Furthermore, it generally must also be designed to accomodate sufficient equipment to render it suitable for use as a residence, with facilities for essential living purposes such as sleeping, eating, and the storage and preparation of food. * * *

"Accordingly, sales of the above-described bodies and slide-in cabins by the manufacturer, producer, or importer thereof are subject to the manufacturer's excise tax imposed by section 4061(a) (1) of the Code."

Pursuant to this ruling plaintiff's coaches were considered "truck bodies", and it was required to pay an excise tax upon them for the period from May, 1960, through September, 1962.

After performing all the conditions precedent, plaintiff brought this action against the United States of America, defendant, to collect the taxes so paid. Two major issues are now before the Court: (1) Are plaintiff's coaches "automobile truck bodies" within the meaning of 28 U.S.C. § 4061 (a) (1); and (2)? If not, are they automobile "accessories" within the meaning of 26 U.S.C. § 4061 (b)?

This Court has jurisdiction of this action by reason of 26 U.S.C. § 7422 and 28 U.S.C. § 1346(a) (1). Venue is also proper. 28 U.S.C. § 1402(a) (2).

At the outset the defendant points out the fact that where a regulation construing an ambiguous statute has been acted upon by the officials charged with its administration it should not be disturbed except for cogent reasons. Brewster v. Gage, 280 U.S. 327, 50 S.Ct. 115, 74 L.Ed. 457 (1930), and Logan v. Davis, 233 U.S. 613, 34 S.Ct. 685, 58 L. Ed. 1121 (1914). On the other hand it has also been held that where the construction is "neither uniform, general, nor of long standing" and serves no particular purpose other than compliance with the supposed command of the statutes, it is not entitled to any great weight. 1 Mertens, Law of Federal Income Taxation § 3.20. See Haggar Co. v. Helvering, 308 U.S. 389, 60 S.Ct. 337, 84 L.Ed. 340 (1940), and United States v. Pleasants, 305 U.S. 357, 59 S.Ct. 281, 83 L.Ed. 217 (1939). Moreover, the deference normally given to regulations does not necessarily extend to informal rulings of the Internal Revenue Service in answer to taxpayer's questions. See, Biddle v. Commissioner, 302 U.S. 573, 58 S. Ct. 379, 82 L.Ed. 431 (1938). Similarly, rulings may not be arbitrary or unreasonable, or extend the scope or terms of a tax statute, and are entitled to no more weight than the reasons sustaining them. And, it has also been said that tax statutes should be construed strictly, though reasonably, and should not be unduly expanded. Hecht v. Malley, 265 U.S. 144, 44 S.Ct. 462, 68 L.Ed. 949 (1924), and United States v. Merriam, 263 U.S. 179, 44 S.Ct. 69, 68 L.Ed. 240 (1923).

Thus, the fact that the Internal Revenue Service has issued a Revenue Ruling provides no talisman which will answer the questions presented here. The reasonableness of the defendant's position cannot be decided in a vacuum, and this court must look to the legislative history; the particular facts involved here; and the Service's own interpretations in similar cases.

The germinal statute, upon which 26 U.S.C. § 4061 is based, was passed in 1932, 47 Stat. 261, c. 209 § 606, June 6, 1932. That statute provided for a tax on, in general, automobile truck bodies and chassis, parts, accessories, and tires; as well as other automobile chassis and bodies, etc. It did not specifically levy a tax on trailers. There were many statements made on the floor of Congress concerning this statute, and many letters were read into the record. Although no member of Congress, or letter writer, made any specific statement regarding the definition of a truck or automobile chassis or body, what was said is informative. One thing which stands out in the Congressional Record is the fact that although many Congressmen referred to all of the other items in this statute in detail, they referred to chassis and bodies simply as automobiles or trucks. This is to be expected. To the legislators, and to most people, an automobile or a truck is a unit made for carrying people or things. If one is required to state what remains when the body is removed he will probably say "the chassis". Thus, what was truly intended to be taxed was the truck or automobile itself. Of course, the tax cannot be evaded by selling the chassis and body separately, each is subject to the tax. Supporting this view is the fact that accessories were specifically mentioned. An accessory is distinguished from a body or chassis. The body and chassis together comprise the truck or automobile. If accessories are removed you still have the truck or automobile unit; not so if you take away the whole body. A further fact which can be distilled from the legislative history of 47 Stat. 261 is that the legislature considered it was taxing the "automobile industry". And, more importantly, it intended to tax things that were primarily designed for transportation purposes. Many of the objections to this statute centered around the complaint that only one means of transportation —trucks and passenger automobiles —was being taxed. Since trains, ships and airplanes were also used for transporting people and things it was said to be unduly discriminatory to tax this single mode of transportation. Despite the objections, the statute was passed. For the debates and letters bearing on this legislative history see, Congressional Record, vol. 75, 72d Cong., 1st Sess., pages: 1137-39; 1648; 2210; 5798; 7038; 7040-41; 7329; 9878; 10086; 10382; 10610; 11136-37; 12021; and 12024.

The later...