Meyer Waste Sys., Inc. v. Dept. of State Revenue

• Decision Date: 07 December 2000
• Docket Number: No. 45T10-9609-TA-124.,45T10-9609-TA-124.
• Citation: 741 N.E.2d 1
• Parties: MEYER WASTE SYSTEMS, INC., an Indiana corporation d/b/a Able Disposal, Petitioner, v. INDIANA DEPARTMENT OF STATE REVENUE, Respondent.
• Court: Indiana Tax Court

741 N.E.2d 1

MEYER WASTE SYSTEMS, INC., an Indiana corporation d/b/a Able Disposal, Petitioner, v. INDIANA DEPARTMENT OF STATE REVENUE, Respondent.

No. 45T10-9609-TA-124.

Tax Court of Indiana.

December 7, 2000.

Steven W. Handlon, Handlon & Handlon, Portage, IN, Attorney for Petitioner.

Karen M. Freeman-Wilson, Attorney General of Indiana, Joel Schiff, Deputy Attorney General, Indianapolis, IN, Attorneys for Respondent.

FISHER, J.

Meyer Waste Systems, Inc. d/b/a Able Disposal (Meyer Waste) appeals the final determination by the Indiana Department of State Revenue (Department of Revenue) assessing it use tax for the calendar years 1990, 1991, and 1992 (tax years in question). In this original tax appeal Meyer Waste presents the following issue for this Court's review: whether, pursuant to IND.CODE ANN. Section 6-2.5-5-27 (West 2000), Meyer Waste is exempt from the use tax on its trucks and other items associated with its garbage hauling business.

FACTS AND PROCEDURAL HISTORY

The undisputed facts follow. During the tax years in question, Meyer Waste was primarily in the business of transporting garbage. However, Meyer Waste also did some recycling business. Meyer Waste possessed a motor carrier permit issued by the Interstate Commerce Commission. Meyer Waste transported garbage generated by individual homeowners and tenants, commercial businesses, and governmental entities. Meyer Waste loaded the garbage onto its trucks, generally while the trucks were on public roadways, and drove the garbage to landfills via public roadways. In its business, Meyer Waste used and consumed tangible personal property that included garbage trucks, garbage loading and unloading equipment, replacement parts for trucks and loading equipment, and tools and machinery for repair and maintenance of said items.

Following an audit in 1995, the Department of Revenue issued a proposed assessment for 1990, 1991, and 1992 wherein it assessed use tax, penalties and interest that totaled $290,665.48. Thereafter, Meyer Waste protested the assessment and the Department of Revenue conducted a hearing thereon. In 1996, the Department of Revenue issued a letter of findings wherein it abated the penalties but affirmed the proposed assessments. In its findings, the Department of Revenue determined that Meyer Waste did not provide public transportation pursuant to IND.CODE Section 6-2.5-5-27 because it was carrying its own property. Therefore, the Department of Revenue concluded that Meyer did not qualify for the public transportation exemption to the use tax. Subsequently, the Department of Revenue issued its demand notices wherein it sought payment of the assessed use tax including interest. Thereafter, Meyer Waste paid the $287,171.92 that was demanded. On September 27, 1996, Meyer Waste filed its original tax appeal in this Court.¹ At the same time, Meyer Waste filed a claim for refund with the Department of Revenue. The Department of Revenue has not acted on Meyer Waste's refund. Additional facts will be provided as necessary.

ANALYSIS AND OPINION

Standard of Review

The Court reviews appeals from final determinations of the Department of Revenue de novo and is thus not bound by the evidence or the issues raised at the administrative level. National Serv-All, Inc. v. Indiana Dep't of State Revenue, 644 N.E.2d 954, 955 (Ind.Tax Ct.1994); IND.CODE ANN. § 6-8.1-5-1(h). When an appeal involves a claim for exemption, the taxpayer bears the burden to show it falls within the terms of the exemption. Id. If the exemption is ambiguous, the court is required to resolve the ambiguity in favor of the Department of Revenue. Id.

Discussion

Meyer Waste argues that it is entitled to the public transportation exemption from the use tax for the years in question. First, Meyer Waste asserts that it is not the owner of the garbage that it hauls. Second, even assuming arguendo that Meyer Waste is the owner, it argues that ownership does not preclude it from receiving the exemption. Third, Meyer Waste contends that if the exemption does not apply to it, then the exemption statute is unconstitutional. The Department of Revenue argues that Meyer Waste does not qualify for the exemption based upon prior precedent in this Court and that the inapplicability of the exemption to Meyer Waste is not violative of either the Indiana or United States constitutions.

The statute at issue provides an exemption to the following tax:

(a) An excise tax, known as the use tax, is imposed on the storage, use, or consumption of tangible personal property in Indiana if the property was acquired in a retail transaction, regardless of the location of that transaction or of the retail merchant making that transaction.

IND.CODE ANN. § 6-2.5-3-2(a) (West 2000). The following statute exempts taxpayers from the use tax in certain circumstances:

(a) The storage, use, and consumption of tangible personal property in Indiana is exempt from the use tax if:

* * * *

(2) the property was acquired in a transaction that is wholly or partially exempt from the state gross retail tax under any part of IC 6-2.5-5, except IC 6-2.5-5-24(b), and the property is being used, stored, or consumed for the purpose for which it was exempted.

IND.CODE ANN. § 6-2.5-3-4(a)(2) (West 2000). The specific exemption at issue, the public transportation exemption, provides as follows:

Transactions involving tangible personal property and services are exempt from the state gross retail tax, if the person acquiring the property or service directly uses or consumes it in providing public transportation for persons or property.

IND.CODE ANN. § 6-2.5-5-27 (West 2000) (emphasis added).

This Court has decided three previous cases that have analyzed the application of IND.CODE Section 6-2.5-5-27 to garbage haulers. These cases are Indiana Waste Systems of Indiana, Inc. v. Indiana Department of State Revenue, 633 N.E.2d 359 (Ind.Tax Ct.1994) (Indiana Waste I), Indiana Waste Systems of Indiana, Inc. v. Indiana Department of State Revenue, 644 N.E.2d 960 (Ind.Tax Ct.1994) (Indiana Waste II), and National Serv-All, Inc. v. Indiana Department of State Revenue, 644 N.E.2d 954 (Ind.Tax Ct.1994). In Indiana Waste I, this Court held that garbage constituted "property" within the meaning of IND.CODE Section 6-2.5-5-27. Indiana Waste I, 633 N.E.2d at 368; see also National Serv-All, 644 N.E.2d at 956. In all three cases, this Court also held that in order to qualify for the exemption the hauler must not be the owner of the garbage.²

Indiana Waste I, 633 N.E.2d at 367; Indiana Waste II, 644 N.E.2d at 961; National Serv-All, Inc.,

644 N.E.2d at 956. Moreover, the carrier must be predominantly engaged in transporting property of another to be entitled to the exemption. Indiana Waste II, 644 N.E.2d at 961.

With respect to ownership, this Court has held that "[a]t the point the garbage is abandoned, the generators of the garbage lose their ownership rights." Indiana Waste I, 633 N.E.2d at 367; see also National Serv-All, 644 N.E.2d at 956-57

. The Indiana Court of Appeals has held that a garbage generator abandons its garbage when it places garbage on the curb or curtilage to be picked up by the garbage hauler unless it takes affirmative steps to retain ownership or control. Long v. Dilling Mech. Contractors, Inc., 705 N.E.2d 1022, 1026 (Ind.Ct.App.1999),

reh'g denied, trans. denied. "Absent an agreement between a garbage generator and a garbage hauler reserving ownership in the generator, the ownership of the garbage passes when the hauler removes the garbage from the generator." Indiana Waste II, 644 N.E.2d at 961; see also National Serv-All, 644 N.E.2d at 956.

A. Ownership of the Garbage

This Court must first look to whether Meyer Waste owns the garbage that it hauls to determine whether it is entitled to the public transportation exemption. Meyer Waste argues that it does not own the waste that it transports. More specifically, Meyer Waste argues that the generators do not abandon the garbage because the generators demonstrate indicia of ownership (possession and control) by their ability to retrieve their garbage and designate where Meyer will make the final disposition of the garbage, that abandonment of garbage is violative of certain federal and state environmental laws so the generators could not intend to abandon the garbage, that Meyer Waste has no intent to own the garbage, and that Meyer Waste is merely a bailee of the garbage. The Department of Revenue argues that once Meyer takes possession of the garbage, it assumes ownership because Meyer has a better claim to the garbage than anyone else.

There is no question that the title to the garbage changes after the generator discards the garbage; the question has been to whom and when does the title pass. National Serv-All, 644 N.E.2d at 958. After a very thorough review of the different approaches taken by other jurisdictions regarding this ownership issue, this Court held that absent an agreement otherwise, the ownership of garbage passes from the generator to the hauler when the hauler removes the garbage from the generator. National Serv-All, 644 N.E.2d at 958-59; Indiana Waste II, 644 N.E.2d at 961. The chief incidents of ownership include: possession, the rights of use and enjoyment, and right of disposal of the property. National Serv-All, 644 N.E.2d at 957; Indiana Waste I, 633 N.E.2d at 367. When the generator relinquishes all the incidents of ownership, the hauler acquires them. National Serv-All, 644 N.E.2d at 959. While possession is not tantamount to ownership, it does raise a rebuttable presumption of ownership. Indiana Waste I, 633 N.E.2d at 367; National Serv-All, 644 N.E.2d at 957.

Meyer Waste seems to argue that despite the fact that it has not provided this Court with any written agreements by its customers that they would maintain ownership of the property after it was picked up by Meyer Waste, there is other evidence that its customers agreed to...