May Trucking Co. v. Oregon Dept. of Transp.

• Decision Date: 12 November 2004
• Docket Number: No. 03-35381.,03-35381.
• Parties: MAY TRUCKING COMPANY, Plaintiff-Appellant, v. OREGON DEPARTMENT OF TRANSPORTATION, Defendant-Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1261

388 F.3d 1261

MAY TRUCKING COMPANY, Plaintiff-Appellant, v. OREGON DEPARTMENT OF TRANSPORTATION, Defendant-Appellee.

No. 03-35381.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted September 14, 2004.

Filed November 12, 2004.

Gordon T. Carey, Jr., Attorney, Portland, OR, for the appellant.

Jas. Jeffrey Adams, Assistant Attorney General, Salem, OR, for the appellee.

Appeal from the United States District Court for the District of Oregon; Ancer L. Haggerty, District Judge, Presiding. D.C. No. CV-02-00413-ALH.

Before: GRABER, GOULD, and BERZON, Circuit Judges.

GRABER, Circuit Judge.

In this case of first impression, we hold that the Tax Injunction Act, 28 U.S.C. § 1341, applies to the International Fuel Tax Agreement (IFTA), a multi-jurisdictional taxation program in which one state collects taxes imposed by other states. We further hold that a taxpayer has a "plain, speedy and efficient remedy" within the meaning of the Tax Injunction Act so long as it may obtain a full and fair hearing in the courts of the state whose tax that taxpayer challenges. Accordingly, we affirm the decision of the district court, which held that the Tax Injunction Act deprives the court of subject matter jurisdiction to hear this claim that IFTA precludes Oregon's collection of certain fuel taxes.

BACKGROUND

A. Oregon's participation in IFTA.

The International Fuel Tax Agreement is a "multi-jurisdictional agreement that is intended to `encourage cooperation in the administration and collection of motor fuel use tax.'" Hi-Way Dispatch, Inc. v. Ind. Dep't of State Revenue, 756 N.E.2d 587, 594 (Ind. T.C.2001) (quoting Owner-Operator Indep. Drivers Ass'n v. State, 725 N.E.2d 891, 892 (Ind.Ct.App.2000)). IFTA itself imposes no taxes. "Rather, its member jurisdictions impose the motor fuel taxes, and IFTA permits the uniform administration and collection of those taxes as they pertain to multi-state carriers." Id. at 596-97. Under IFTA, an interstate motor carrier pays all its state fuel taxes quarterly to the "base jurisdiction" in which it registers as a licensee under IFTA.¹ The base jurisdiction then forwards the appropriate tax amounts to each individual state in which the motor carrier operates. That arrangement prevents a motor carrier from having to make multiple tax payments to the different states in which it operates. Id. at 594.

IFTA's provisions for obtaining a refund are somewhat more complicated. Pursuant to IFTA Article VIII, R830.300, a licensee "must submit claims for refund for tax paid on tax-exempt fuel directly to the respective jurisdiction." Thus, a licensee must file a request for a refund from each jurisdiction in which it paid taxes on tax-exempt fuel. At the same time, the base jurisdiction "shall allow credits and issue refunds for all of its licensees on behalf of all member jurisdictions" for "tax-paid fuel used outside the jurisdiction where the fuel was purchased." IFTA Art. XI, R1100. Thus, the proper procedure for obtaining a refund for fuel taxes depends in part on the type of refund claim at issue.

Federal law requires all states that have a fuel-tax reporting requirement to conform those requirements to IFTA. 49 U.S.C. § 31705. Thus, federal law mandates participation in IFTA for all states that impose a fuel tax. The provisions of IFTA itself, however, are not federal law. Rather, IFTA's Articles of Agreement and Audit and Procedures Manuals are the product of the International Fuel Tax Association, a private organization made up of representatives chosen by the 48 continental states and the ten Canadian provinces that have entered into IFTA. IFTA Art. XV, R1500-10. IFTA's Articles of Agreement govern the administration and amendment of IFTA.

By statute, Oregon has authorized the Oregon Department of Transportation (ODOT) to "enter into an international fuel tax agreement with jurisdictions outside of this state to provide for cooperation and assistance among member jurisdictions in the administration and collection of taxes imposed on motor carriers for the consumption of all fuels used in vehicles operated interstate." Or.Rev.Stat. § 825.555(1) (2002). In turn, ODOT has promulgated regulations adopting the provisions contained in IFTA's Articles of Agreement and certain IFTA manuals, and ODOT has applied them to Oregon-based motor carriers. Or. Admin. R. 740-200-0040. Thus, IFTA has the force of law in Oregon, and Oregon-based motor carriers can use the state as their base jurisdiction under IFTA.

Unlike the other 47 states that participate in IFTA, however, Oregon does not itself impose a fuel tax on interstate motor carriers operating in the state. Instead, Oregon relies on a complicated weight/mile tax system. Or.Rev.Stat. § 825.474.² As the sole member jurisdiction in IFTA that receives no fuel taxes from other base jurisdictions, Oregon's participation in IFTA does not generate revenue for the state.³ Rather, Oregon participates in IFTA as a service to Oregon-based motor carriers operating outside the state. If Oregon did not participate in IFTA, an Oregon-based motor carrier would be forced either to select another base jurisdiction or to purchase a single-trip permit every time its trucks operated in another state.⁴ Reliance on single-trip permits would place a substantial burden on Oregon-based motor carriers, placing them at a significant disadvantage relative to interstate motor carriers based in other jurisdictions.

B. Procedural background.

1. The state administrative proceedings.

Plaintiff May Trucking Company is an interstate motor carrier with its principal place of business in Brooks, Oregon. Plaintiff owns approximately 600 tractors and 1,200 trailers that operate throughout the continental United States. In 2000, ODOT mailed to Plaintiff a notice of assessment covering the period April 1, 1996, through December 31, 1998. The assessment determined that Plaintiff had underpaid fuel taxes and thus owed $491,891.14 in taxes calculated under IFTA. In a pair of administrative proceedings, Plaintiff disputed the assessment of taxes owed under IFTA.⁵

In addition to challenging ODOT's auditing procedures, Plaintiff argued that fuel consumed while idling was not taxable under IFTA. Plaintiff based that argument on IFTA Article VIII, R800, which states that "[t]he consumption of motor fuels used in the propulsion of qualified motor vehicles, except fuel consumed that is exempt from taxation by a jurisdiction, is the taxable event under this Agreement." (Emphasis added.)⁶ Plaintiff argued that, because fuel consumed while idling does not actually propel the vehicle,"idling time" is not a "taxable event" within the meaning of IFTA. Plaintiff separately argued that "fuel consumed while idling is exempt under various member states' statutes and it is entitled to seek a refund based on those exemptions from Oregon, the base jurisdiction." Plaintiff thus sought a refund for all fuel consumed by its tractor-trailers while idling. In addition to mounting that specific challenge, Plaintiff also contested, under various state and federal laws, the validity of Oregon's adoption of IFTA.

In a proposed order filed on July 23, 2001, an administrative law judge (ALJ) concluded that ODOT's audit of Plaintiff's fuel records was unreasonable and that the "idling time" issue was not ripe for adjudication. The parties ultimately settled their dispute with respect to the auditing procedures and stipulated that the sole remaining issue in the administrative appeal was the proper tax treatment of fuel consumed while idling. In a proposed order filed on March 28, 2002, the ALJ concluded that fuel consumed while idling is taxable under IFTA. The ALJ also held that Plaintiff, by stipulating that the remaining issue in the administrative appeal was the "idling issue," had waived its administrative-law and constitutional arguments.

The ALJ's conclusions with respect to assessed fuel taxes for the period between April 1996 and December 1998 were adopted in a final order issued on July 3, 2002. That order held that fuel consumed while idling was taxable under IFTA, noting that "[e]very appellate court that has considered the argument that Petitioner makes here has rejected it." The order also concluded that, to the extent that "idling time" fuel was tax-exempt under the statutes of various member jurisdictions, Plaintiff "must file its request directly with the respective jurisdictions as required by [IFTA Article VIII, R830.300]."

A separate final order reached the same conclusion with respect to Plaintiff's amended IFTA returns for 1999. Plaintiff timely appealed both rulings to the Oregon Court of Appeals, pursuant to Oregon Revised Statute section 183.482. On Plaintiff's motion, the two cases were consolidated.

2. District court proceedings.

While its consolidated case was pending before the Oregon Court of Appeals, Plaintiff filed the present action in the District Court of Oregon. In its amended federal complaint, which sought both declaratory relief and a refund, Plaintiff claimed that it was entitled to a refund for fuel consumed while idling and that it had "no adequate or speedy remedy at law." In addition, Plaintiff argued that IFTA itself was "illegal, invalid, and unenforceable" under the United States Constitution, as well as improperly adopted, improperly implemented, and improperly delegated to administrative bodies by both the United States Congress and the Oregon legislature.

The State sought dismissal of the action on three bases, arguing that the district court lacked jurisdiction under the Tax Injunction Act (the Act), the Eleventh Amendment, and the Younger⁷ abstention doctrine. The district court held that dismissal of the action was proper under both the Act and Younger abstention. The district court also concluded that the Eleventh Amendment barred Plaintiff's suit but that,"[i]f jurisdiction were not already precluded by the Tax Injunction...