Ladehoff v. United States, Civ. No. 02409.

• Decision Date: 30 August 1966
• Docket Number: Civ. No. 02409.
• Parties: Robert W. LADEHOFF, Plaintiff, v. The UNITED STATES of America, Defendant.
• Court: U.S. District Court — District of Nebraska

257 F. Supp. 517

Robert W. LADEHOFF, Plaintiff, v. The UNITED STATES of America, Defendant.

Civ. No. 02409.

United States District Court D. Nebraska.

August 30, 1966.

William G. Line, of Kerrigan, Line & Martin, Fremont, Neb., for plaintiff.

Jerome Fink, Edward O. C. Ord, Washington, D. C., and Theodore L. Richling, U. S. Atty., for defendant.

MEMORANDUM

ROBINSON, Chief Judge.

This is an action for the recovery of excise taxes assessed by the Internal Revenue Service and paid by the plaintiff, Robert W. Ladehoff. The refund requested includes $2,356.35, the amount paid to the Internal Revenue Service on January 4, 1965 for excise taxes, penalties, and interest; and statutory interest thereon from the date of payment. The assessment was on the diesel fuel purchased by plaintiff from Socony Mobil Oil Company, Inc. during the period from January 1, 1959 to June 30, 1964. The jurisdiction of this Court has been invoked under 28 U.S.C. § 1346a 1.

The taxes were assessed pursuant to the provisions of the Internal Revenue Code of 1954, § 4041, 26 U.S.C. § 4041 1964 ed. which impose a 4 cents a gallon tax on all diesel fuel sold for use, or used in a diesel-powered highway vehicle. Basically, section 4041 provides for alternative liability; if the seller of the fuel does not pay the tax, the user must. This section also specifically excepts fuel sold for use or used for farming purposes. The allocation of this alternative tax liability is provided in 26 C.F.R. § 48.4041-4, and the questions presented by this case call for an interpretation of that regulation.

"§ 48.4041-4. Sales of diesel and special motor fuel; rules of general application.

a Taxability of liquid delivered into purchasers' tanks.

The sale of diesel fuel to an owner, lessee, or other operator of a diesel-powered highway vehicle, or of special motor fuel to an owner, lessee, or other operator of a motor vehicle, motorboat, or airplane shall be considered a taxable sale of such liquid 1 if the liquid is delivered by the seller into the fuel supply tank of the vehicle, motorboat, or airplane, or 2 where not so delivered, the purchaser indicates in writing to the seller prior to the time of the sale that the entire quantity of the liquid covered by the sale is for use by him for a taxable purpose as a fuel in such a vehicle, motorboat, or airplane. If such a written statement is not furnished by the purchaser, he shall be liable for the tax at the applicable rate on the quantity of the liquid which is used by him as fuel in such a vehicle, motorboat, or airplane see § 48-4041-5 or which is sold by him in a taxable transaction."

This regulation, having been in effect since 1939, must now be treated as having the force of law. Douglas v. Commissioner of Internal Revenue, 134 F.2d 762 C.A.8th, 1943 affirmed 322 U.S. 275, 64 S.Ct. 988, 88 L.Ed. 1271; Paragon Jewel Coal Co. v. Commissioner of Internal Revenue, 380 U.S. 624, 85 S.Ct. 1207, 14 L.Ed.2d 116 1965.

At all times material plaintiff was engaged in both the trucking and farm machinery businesses. The trucks which he used in his trucking operations were diesel powered, and some of the farm equipment which he sold from his International Harvester dealership also used diesel fuel. On February 20, 1958 the plaintiff entered into a contract with Socony Mobil Oil Company, Inc. by which Socony was to supply him with gasoline and diesel fuel. These fuels were delivered in bulk by a local jobber into large tanks located at the plaintiff's place of business. By far the greater portion of the diesel fuel so delivered was used in the trucking business. The remaining portion was placed in the tanks of the new diesel powered farm machinery when it was sold. Such fuel was given to the purchaser of the machinery as a convenience to him, and the amount given varied from a small quantity to a full tank. There appears to be no record of the exact amount of fuel drawn for this purpose, and the only indication of the amount at trial was Ladehoff's own estimate of one percent or less.

The contract drawn between Socony Mobil and Ladehoff contained the following provisions:

"1. Products; Quantities. * * * Products purchased are for Buyer's consumption and not for resale. * * 6. Taxes. The amount of any present or future governmental tax, fee, or duty not included in the price or otherwise paid by Buyer on or measured by a this contract, b the products or constituent materials covered hereby or c the manufacture, sale, use or handling of said products or materials, shall be paid by Buyer to Seller."

It is the contention of the plaintiff that the provision of the contract numbered 1 above, coupled with Socony Mobil's knowledge of plaintiff's diesel fuel needs, satisfies the notice requirement of 26 C.F.R. 48.4041-4; and shifts the tax burden back to Socony Mobil.

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