May Trucking Co. v. Dept. of Transportation

• Decision Date: 04 January 2006
• Docket Number: A118893 (Control).,99044.,99706.,A121939.
• Citation: 203 Or. App. 564,126 P.3d 695
• Parties: MAY TRUCKING COMPANY, INC., an Idaho corporation, Petitioner, v. DEPARTMENT OF TRANSPORTATION, Respondent.
• Court: Oregon Supreme Court

126 P.3d 695

203 Or. App. 564

MAY TRUCKING COMPANY, INC., an Idaho corporation, Petitioner, v. DEPARTMENT OF TRANSPORTATION, Respondent.

99044.

99706.

A118893 (Control).

A121939.

Court of Appeals of Oregon.

Argued and Submitted February 1, 2005.

Decided January 4, 2006.

COPYRIGHT MATERIAL OMITTED

Gordon T. Carey, Portland, argued the cause and filed the briefs for petitioner.

Jas. Jeffrey Adams, Assistant Attorney General, argued the cause for respondent. With him on the brief were Hardy Myers, Attorney General, and Mary H. Williams, Solicitor General.

Before WOLLHEIM, Presiding Judge, and EDMONDS^* and SCHUMJAN, Judges.

WOLLHEIM, P.J.

Petitioner seeks judicial review of two final orders of the Oregon Department of Transportation (ODOT) that have been consolidated on review. Both orders denied petitioner's pursuit of a refund for fuel taxes paid pursuant to the International Fuel Tax Agreement (IFTA). The first order, issued on July 3, 2002, concerned fuel taxes paid for the year 1998, and the second order, issued on June 24, 2003, concerned fuel taxes paid for the year 1999. Petitioner makes four assignments of error: (1) ODOT erred in concluding that fuel used while a vehicle is idling is taxable under IFTA; (2) ODOT erred in concluding that petitioner must seek a refund for taxes paid from each respective jurisdiction; (3) ODOT erred in concluding that it lawfully adopted and implemented IFTA; and (4) ODOT erred in concluding that IFTA does not violate the Compact Clause, Article I, section 10, clause 3, of the United States Constitution. We reject each of petitioner's challenges and affirm.

I. FACTS

Petitioner is assessed a fuel tax by ODOT pursuant to IFTA, which is a "multi-jurisdictional agreement that is intended to encourage cooperation in the administration and collection of motor fuel use tax." May Trucking Co. v. Oregon Dept. of Transportation, 388 F.3d 1261-62 (9th Cir.2004) (internal quotation marks omitted).¹ Federal law mandates that states that choose to impose a fuel tax must participate in IFTA. 49 USC § 31705 (1994). ODOT has the authority to enter into an international fuel tax agreement under ORS 825.555.² In 1993, ODOT passed a resolution adopting the 1993 version of IFTA, with an effective date of January 1994. In 1996, ODOT renewed Oregon's membership in IFTA by adopting the 1996 amendments.³ Essentially, "IFTA enables carriers to file a consolidated tax return in a carrier's `base jurisdiction;' the base jurisdiction, upon collection of the tax, distributes the revenue to those other jurisdictions in which the carrier operates." Hi-Way Dispatch v. Dept. of State Revenue, 756 N.E.2d 587, 594 (Ind.Tax 2001). Because Oregon is petitioner's "base jurisdiction," IFTA allows petitioner to submit one fuel tax return to ODOT instead of having to file a return in every state where petitioner's trucks have operated. Oregon is in a unique situation because, unlike other jurisdictions, it does not itself assess a fuel tax, but instead relies on a weight/mile tax. Thus, Oregon's participation in IFTA is solely to ease the administrative burden that filing returns state by state would impose on Oregon-based motor carriers and other members to the agreement.

The current disputes originated in June 2000 from ODOT Case No. 86504. In that case, ODOT issued a Notice of Audited Tax Liability to petitioner for the period from April 1, 1996 through December 31, 1998, alleging that petitioner owed $491,891.14 in unpaid fuel taxes, interest, and penalties. Petitioner requested a hearing to contest the audit, and a hearing was held in March 2001. At the hearing, petitioner challenged ODOT's auditing practices and made arguments regarding whether the authority to enter into IFTA was properly delegated to ODOT, whether ODOT followed proper procedures in adopting IFTA, whether fuel consumed while idling was taxable under IFTA, and whether IFTA violated the Compact Clause of the United States Constitution. At the hearing, both parties presented lengthy testimony regarding petitioner's record-keeping practices and ODOT's auditing practices.

In a July 23, 2001, proposed order, the administrative law judge (ALJ) first found that petitioner's records were inadequate under IFTA. The ALJ concluded, however, that the audit ODOT performed was unreasonable. The ALJ based that conclusion on ODOT's exclusion of the highest miles per gallon segments of petitioner's records from its calculations, and ODOT's assumption that, every time petitioner's vehicles were refueled, they were "topped off." The ALJ ruled that petitioner's argument regarding idle time was not ripe for adjudication, and rejected petitioner's arguments regarding IFTA's validity. Ultimately, the ALJ concluded that neither party established petitioner's liability and that petitioner would be subject to further audit.

After the proposed order was issued, the parties entered into a written stipulation that provided:

"1. Petitioner and [ODOT] have agreed that [ODOT] will conduct no further IFTA Fuel Tax Audits for the Audit Period. Petitioner has paid the amounts due as reported in its original returns. No amounts for fuel tax, penalties, or interest are due from petitioner for the Audit Period.

"2. Petitioner agrees not to seek a refund for IFTA Fuel Taxes for the audit period, except for a refund for fuel consumed while a truck is idling (`idle time' issue), which petitioner intends to pursue for the year 1998. By execution hereof, respondent does not agree that petitioner is entitled to a refund, or that petitioner can pursue its refund claim from respondent ODOT.

"IT IS SO STIPULATED AND AGREED."

(Internal citations omitted; emphasis added.) The stipulation was signed by attorneys for both parties. No final order was ever issued by ODOT in Case No. 86504.

Based on that stipulation, petitioner requested another hearing to contest the "idle time" issue, which became ODOT Case No. 99044. In its brief to the ALJ, petitioner not only raised arguments regarding the "idle time" issue, but also raised the same arguments concerning the delegation of authority, the adoption of IFTA, and whether IFTA violates the Compact Clause. In response, ODOT filed a motion to strike all portions of petitioner's brief except for petitioner's argument regarding the "idle time" issue. ODOT argued that, due to the stipulation, petitioner had waived all of its arguments regarding the validity of IFTA, and that the only issue that could properly be argued was the "idle time" issue.

In a March 2002 proposed order, the ALJ concluded that, pursuant to the stipulation, petitioner had waived all of its arguments regarding the validity of IFTA. In addition, the ALJ concluded that IFTA did not preclude taxation for idle time and that the only tax year before him was 1998, not 1999 as petitioner argued. In a July 2002 final order, ODOT adopted the findings and conclusions of the ALJ. In addition, ODOT concluded that, under the language of IFTA, if petitioner wished to pursue a refund for idle time, it had to do so in the individual jurisdiction to which the tax was owed and could not file a refund request in Oregon. Petitioner sought judicial review of that final order.

While that petition was pending, petitioner requested a refund for idle time for the tax year 1999. ODOT denied petitioner's request, and petitioner requested a hearing, held in December 2002, which became ODOT Case No. 99706. Petitioner raised the same arguments as before regarding idle time and the validity of IFTA. In a proposed order, the ALJ again rejected petitioner's argument regarding idle time, and, this time, addressed and rejected on the merits petitioner's claims regarding IFTA's validity. In a June 2003 final order, ODOT rejected petitioner's claims and adopted the findings and conclusions of the proposed order. Petitioner sought judicial review. In July 2003, petitioner filed a motion to consolidate the petitions. We granted petitioner's motion. We address the two final orders issued by ODOT separately, beginning with the June 2003 final order.

II. JUNE 2003 FINAL ORDER

We begin with petitioner's contentions concerning the validity of IFTA. In its third assignment of error, petitioner argues first that "the Oregon Legislature failed to properly adopt IFTA and delegate its administration to ODOT pursuant to ORS 825.555 which only references a generic international fuel tax agreement, not IFTA." Second, petitioner argues that, even if the legislature properly delegated to ODOT the authority to enter into IFTA, ODOT failed to properly adopt both the 1993 version of IFTA and the 1996 amendments to IFTA. Third, petitioner argues that IFTA's adoption was subject to the rulemaking procedures of the Administrative Procedures Act (APA) and that ODOT failed to follow those procedures.

In response, ODOT asserts, respectively, that ORS 825.555 authorized ODOT to enter into IFTA, that petitioner has failed to present any evidence that ODOT failed to follow proper procedures, and that ODOT, by promulgation of OAR 740-200-040, adopted by rule the 1996 amendments to IFTA. We agree with ODOT.

A. Delegation

We first examine whether ORS 825.555 authorized ODOT to enter into IFTA. Our review is for errors of law. ORS 825.555 provides, in part:

"(1) The Department of Transportation may 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.

"* * * * *

"(3) An agreement may not provide for any benefit, exemption or privilege with respect to any fees or taxes levied or assessed against the use of highways or use or ownership of vehicles except for motor fuel taxes and requirements related to motor fuel taxes."

(Emphasis added.)

Petitioner asserts that ORS 825.555 is...