Louderback v. United States, Civ. A. No. 78-K-635.
| Decision Date | 20 October 1980 |
| Docket Number | Civ. A. No. 78-K-635. |
| Citation | 500 F. Supp. 575 |
| Parties | George LOUDERBACK and Strongbond Manufacturing Company, Inc., Plaintiffs, v. UNITED STATES of America, Defendant. |
| Court | U.S. District Court — District of Colorado |
Donald K. Smith, Sterling, Colo., for plaintiffs.
Jeffrey A. King, Trial Atty., Dept. of Justice, Washington, D.C., Donald M. Hoerl, Asst. U. S. Atty., Denver, Colo., for defendant.
This action for refund of taxes paid is before the court on defendant's motion for partial summary judgment. Defendant claims that there is no material fact in dispute between the parties regarding several issues in this case. The plaintiffs contend that the United States, through the Internal Revenue Service, illegally and erroneously assessed and collected manufacturer's excise taxes which are the subject of recovery in this claim for relief. Jurisdiction is invoked pursuant to 26 U.S.C. § 7422 and 28 U.S.C. § 1346(a)(1).
Plaintiff George Louderback, the sole proprietor of Strongbond Manufacturing Company between 1969 and October 1, 1974, is in the business of manufacturing and selling truck bodies and various parts and accessories used in connection with these items. During the period in question plaintiffs made numerous sales in which parts and accessories such as grain sides, grain doors, and stock racks were sold uninstalled together with truck bodies. Plaintiffs computed the tax on such articles at an eight per cent rate relying on 26 U.S.C. § 4061(b)(1). The Internal Revenue Service, relying on 26 U.S.C. § 4061(a)(1), computed the tax on such articles at the rate of ten per cent whenever such articles were deemed to have been sold on or in connection with a truck body.1
On July 11, 1977, the Commissioner of the Internal Revenue Service assessed against Louderback deficiencies in manufacturer's excise tax for the period July 1, 1972 through September 30, 1974 in the amount of $10,471.84. This amount represents $8,322.51 in manufacturer's excise tax, $2,107.71 in interest and $41.62 in penalties under 26 U.S.C. § 6651(a). On the same date the Commissioner assessed against Strongbond deficiencies in manufacturer's excise tax for the period of October 1, 1974 through March 31, 1975 in the amount of $2,385.89. This amount represents $2,041.51 in manufacturer's excise tax, $341.06 in interest, and $3.32 in penalties under section 6651(a).
Plaintiffs paid the assessed taxes, filed claims for refund thereof, and upon denial of the claims, filed this suit for refund.
The first issue on defendant's motion for summary judgment is the correct computation and payment of excise taxes by the manufacturer on the goods that are sold to customers. The deficiencies in payment alleged by the defendant arose from two questioned procedures used by the company to compute the amount of excise tax to be paid. Plaintiffs' primary claim is that the excise tax should be based only on manufacturing costs attributable to assembling the article to a finished state, while defendant claims that the tax should be based on the manufacturer's selling price or a percentage thereof. Plaintiffs also dispute what percentage should be used in computing the tax on various articles, differentiating between the uninstalled parts and accessories and the truck bodies themselves.
The second issue regards estoppel against the Internal Revenue Service. Plaintiffs argue that in 1969 Louderback asked for and received advice from the Internal Revenue Service regarding the computation of the excise tax which he claims is inconsistent with the assessments charged for the years 1972-1975. The plaintiffs contend that the Internal Revenue Service should be estopped from changing its position regarding the prior advice given.
The pre-trial order listed two contested issues of fact and four contested issues of law. The issues of fact are (1) whether the Internal Revenue Service properly computed constructive sale prices under 26 U.S.C. § 4216(b)(1) for purposes of Manufacturer's Excise Tax under 26 U.S.C. § 4061(a)(1) on plaintiffs' sales at retail of truck bodies, and (2) whether Louderback asked for and was given advice by the Internal Revenue Service on the method of computing the excise tax. The issues of law are (1) whether the correct tax base for computing the Manufacturer's Excise Tax is plaintiffs' selling price (as defendant alleges) or plaintiffs' costs of manufacturing or some percentage of selling price (as plaintiffs allege), (2) whether parts and accessories manufactured by plaintiff and sold as a part of, or in connection with, taxable truck bodies are subject to the ten per cent tax imposed by section 4061(a)(1) or the eight per cent tax imposed by section 4061(b)(1), (3) whether plaintiffs have met the requirements of section 6416(a) which allows for a credit or refund on an overpayment, and (4) assuming that Louderback asked for and received advice from the Internal Revenue Service regarding the computation of his Manufacturer's Excise Tax, whether the Internal Revenue Service is estopped from changing its position regarding the advice given. Defendant's motion addresses only issues of law numbered (1) and (4).
Defendant's motion for partial summary judgment is brought under Rule 56 of the Federal Rules of Civil Procedure. Rule 4(d) of the Local Rules states that briefs in opposition to a motion for summary judgment shall be filed within twenty days. Defendant's motion for summary judgment was filed April 15, 1980, and to date plaintiffs have not responded, clearly exceeding the twenty-day time limit.
Since plaintiffs have failed to oppose defendant's motion for summary judgment as required by Rule 4(d), the appropriateness of summary judgment depends solely upon the sufficiency of defendant's motion and supporting affidavits and material. Griess v. Climax Molybdenum Co., 488 F.Supp. 484, 486 (D.Colo.1979), Wilt v. GTE International Syst. Corp., 82 F.R.D. 686, 687 (D.Colo.1979).
In its motion for partial summary judgment, defendant contends that the applicable statutes and case law clearly bear out the government's interpretation of the appropriate tax computation. 26 U.S.C. §§ 4061, 4216. Under section 4061(a)(1) truck bodies and chassis, including parts and accessories sold on or in connection therewith, were taxed at ten per cent of the price sold before October 1, 1977. Under section 4061(b)(1) parts and accessories were taxed at eight per cent of the price sold before October 1, 1977.2 The plain language of the statute-"a percent of the price for which so sold"-indicates that the correct tax base for computing the manufacturer's excise tax is plaintiffs' selling price and not manufacturing costs attributable to assembling the article. "The price used by the computation of the excise tax in § 4061(a) is defined in § 4216(a) ...." United States v. Fruehauf Corp., 577 F.2d 1038, 1060 (6th Cir.), cert. denied, 439 U.S. 953, 99 S.Ct. 349, 58 L.Ed.2d 344 (1978).
Section 4216 states in part:3
In Fruehauf, which draws liberally from Fitch Co. v. United States, 323 U.S. 582, 65 S.Ct. 409, 89 L.Ed. 472 (1945), the Supreme Court case interpreting section 4216(a), the court further stated that the price used by the computation of the excise tax 577 F.2d at 1060.
In assessing the excise tax I find that the Internal Revenue Service correctly determined the constructive sales prices on plaintiffs' sales at retail during the period in question. Except for the years 1973 and 1975 constructive selling prices were deemed to be seventy-five per cent of the established retail prices.4 In 1973 assembling and marketing costs were 80.02 per cent of the established retail prices and the tax was therefore based on the actual manufacturing costs for that year.5 The manufacturer's costs for the first quarter of 1975 exceeded the actual selling prices and therefore the Internal Revenue Service based the tax on the lower sales prices.6 Moreover, the Internal Revenue Service properly included in the tax base all expenses (or a specific percentage of all expenses for sales at retail) incurred by the plaintiffs prior to shipment of the truck bodies and accessories. I conclude that the computations were appropriate under federal law and consistent with Fitch and Fruehauf. This determination settles the first contested issue of law relating to the proper tax base to be used in computing the manufacturer's excise tax. The plaintiff has presented no evidence or argument to the contrary and summary judgment as to this issue is granted.
The second issue presented by the defendant for summary judgment involves advice the plaintiff allegedly received from the Internal Revenue Service in 1969 regarding the computation of his manufacturer's excise tax. Allegedly this advice was that the excise tax was ten per cent of...
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