Mississippi State Tax Com'n v. Vicksburg Terminal, Inc., 07-CA-59509

• Decision Date: 18 December 1991
• Docket Number: No. 07-CA-59509,07-CA-59509
• Citation: 592 So.2d 959
• Parties: MISSISSIPPI STATE TAX COMMISSION v. VICKSBURG TERMINAL, INC., et al.
• Court: Mississippi Supreme Court

Page 959

592 So.2d 959

MISSISSIPPI STATE TAX COMMISSION v. VICKSBURG TERMINAL, INC., et al.

No. 07-CA-59509.

Supreme Court of Mississippi.

Dec. 18, 1991.

Bobby R. Long, Gary W. Stringer, Michael Stribling, Jackson, for appellant.

Ellis B. Bodron, Way Field & Bodron, Vicksburg, for appellee.

Before ROY NOBLE LEE, C.J., and PRATHER and BANKS, JJ.

PRATHER, Justice, for the Court:

The Mississippi State Tax Commission (hereinafter "MSTC") appeals from a judgment issued on July 22, 1988, by the Chancery Court of Warren County, Mississippi, reversing a decision by the commission assessing sales taxes against Vicksburg Terminal, Inc., (hereinafter "Vicksburg") and Delta Terminal, Inc., (hereinafter "Delta") in the wake of a determination by the MSTC that both Vicksburg and Delta were taxable as public storage warehouses. Vicksburg and Delta have cross-appealed on the issue concerning their "public" nature.

Three issues arise from the appeal and cross-appeal:

(1) Are Vicksburg and Delta taxable public storage warehouses within the meaning and purview of Miss.Code Ann. Sec. 27-65-23 (Rev.1990) [hereinafter "statute"] and Rule 67 of the Mississippi Sales and Use Tax Rules [hereinafter "rule"] during and/or after the periods they were assessed sales tax by the tax commission?

(2) Do Vicksburg and Delta operate facilities open to the "public" within the meaning of Sec. 27-65-23 and Rule 67?

(3) If the answer to (1) and (2) is yes, does the fact that Vicksburg entered into a contract to service only Placid Refining Company and Placid's designees eliminate Vicksburg's tax liability from April 2, 1982, forward?

The answer to these three inquiries is (1) Yes, (2) Yes, and (3) No. Accordingly, this Court reverses and renders on direct appeal, and affirms on cross-appeal.

I.

Vicksburg and Delta are Mississippi corporations which operate commercial businesses in Vicksburg and Greenville, Mississippi, respectively. Both claim they are engaged in what is known in the trade as the "terminaling" business which involves, in a nutshell, the receipt, storage, and redelivery or withdrawal of liquid petroleum products. More on that later.

On December 8, 1980, following an audit, assessments of sales tax were levied against Vicksburg and Delta for operating public storage warehouses within the meaning and purview of the statute and the rule. On October 8, 1981, after a hearing, the MSTC affirmed assessments of sales tax against Vicksburg for the period January 1, 1978 to September 30, 1980 (33 months), in the amount of $41,653.50 and against Delta for the period of September 1, 1977 to August 31, 1980 (36 months), in the amount of $25,541.15. Vicksburg and Delta paid the assessments, have continued to pay sales tax as public storage warehouses, and seek a refund of all amounts paid.

Vicksburg promptly filed a complaint in the Chancery Court of Warren County, and Delta filed its complaint in the Chancery Court of Washington County; both sought refunds of the assessments paid and all sales tax paid subsequent to the date of the assessments. On January 23, 1986, following amendments to the complaints, these cases were consolidated for hearing in the Chancery Court of Warren County. By agreed statement, the parties requested resolution of the matter on lengthy stipulations and briefs.

On July 22, 1988, the chancellor reversed the MSTC and entered judgment for Vicksburg and Delta from which judgment the MSTC has appealed.

The chancellor found that (1) both Vicksburg and Delta were "public", (2) that both Vicksburg and Delta engaged in the storage of tangible personal property, (3) that both Vicksburg and Delta received a fee for their services, and (4) the property was in the custody of a person operating a commercial business.

Nevertheless, the chancellor expressed concern over the fact the tax levied by Sec. 27-65-23 was five percent (5%) of the gross income of the business conducted by Vicksburg and Delta which, he held, included much more than warehousing or storing petroleum products. Equally disturbing to the trial court was the fact the income from the total business, not just from the public storage warehouse function, was included in the assessment.

II.

This Court is asked to decide whether a commercial business known in the trade as a "terminal company" which contracts with its customers to "receive," "store," "reship," and "handle" liquid petroleum products, is a "public storage warehouse" within the meaning of Miss.Code Ann. Sec. 27-65-23 and Rule 67 of the Sales and Use Tax Rules promulgated by the Mississippi State Tax Commission.

This Court's review of an administrative agency's decision has been stated as follows:

Our Constitution does not permit the judiciary of this state to retry de novo matters on appeal from administrative agencies. Our courts are not permitted to make administrative decisions and perform the functions of an administrative agency. Administrative agencies must perform the functions required of them by law. When an administrative agency has performed its function, and has made the determination and entered the order required of it, the parties may then appeal to the judicial tribunal designated to hear the appeal. The appeal is a limited one, however, since the courts cannot enter the field of the administrative agency. The court will entertain the appeal to determine whether or not the order of the administrative agency (1) was supported by substantial evidence, (2) was arbitrary or capricious, (3) was beyond the power of the administrative agency to make, or (4) violated some statutory or constitutional right of the complaining party. This rule has been thoroughly settled in this state.

Mississippi State Tax Commission v. Mississippi-Alabama State Fair, 222 So.2d 664, 665 (Miss.1969) (emphasis added); see also Mississippi State Tax Commission v. Dyer Investment Company, Inc., 507 So.2d 1287, 1289 (Miss.1987) ["Ordinarily the scope of judicial review of the actions of an administrative agency is limited by the familiar arbitrary and capricious standard. The State Tax Commission is such an agency and, accordingly, both the Chancery Court and this Court were and are limited in appellate authority."]

Relevant facts found within the four corners of the record of stipulations presently before us disclose the following:

(1) Vicksburg and Delta are engaged in commercial businesses referred to in the trade as "terminaling." They both facilitate the removal of liquid petroleum products from waterborn barges into land based tanks and subsequently from those tanks into tanker trucks operated by "jobbers." The title to the products never passes to Vicksburg or Delta. The custody of the products is transferred to Vicksburg and Delta when it enters their hoses. Customers do not receive, by contract or otherwise, any property interest in the real property surrounding the storage tanks or in the facilities. Neither Vicksburg nor Delta, under their contracts, rent or lease all, or any part, of their property or their facilities to customers by grant of exclusive possession.

(2) The barges and trucks are controlled by the customers who are oil companies. When the barges arrive at the dock, the customers, with some assistance from Vicksburg and Delta, pump the product from the barges into Vicksburg's or Delta's piping manifold. Vicksburg or Delta then directs the product into the appropriate storage tanks by choosing which valves to open and which to close.

(3) By directing the product to certain tanks, Vicksburg and Delta comingle like qualities of product. At the time of the assessments, Vicksburg and Delta each had seven (7) storage tanks. Both Vicksburg and Delta comingled products of their customers in at least four (4) of their storage tanks.

(4) The liquid petroleum products remain in the storage tanks of Vicksburg and Delta for various lengths of time. At least one delivery of product remained in storage for two and one-half years. A quantity of 15,000 barrels would normally remain stored in Vicksburg's or Delta's storage facilities for two to three months.

(5) All of the contracts with customers provide for Vicksburg and Delta to provide Workers' Compensation, Comprehensive General Liability and Comprehensive Automobile Liability Insurance. The contracts also provide for a certain percentage loss allowance for product, over and above which Vicksburg and Delta would be liable.

(6) Vicksburg and Delta are paid, according to their contracts, on a per-barrel or per-gallon of product basis. The contracts provide that the compensation is for product delivered for unloading, storing, and reloading or for product delivered for all terminaling services. The compensation is measured on a monthly basis by the barrels or gallons of product withdrawn from storage during the previous month, based upon Vicksburg's and Delta's own calculations from their computers, metering equipment, and manifest tickets. The amount of the compensation is determined by multiplying the number of barrels or gallons of product delivered to the tanker trucks by a "throughput" charge per-barrel. The per-barrel or per-gallon fees charged by Vicksburg and Delta vary according to the amount of product stored and/or "throughput" through the system. The amount of compensation is the same regardless of the length of time the product remains in the tanks of Vicksburg or Delta.

(7) During the time covered by the assessments, Vicksburg had contracts with four customers or shippers, viz., American Oil, Union Oil, Falco, Inc., and Placid Refining. Delta had contracted with six customers, viz., Amoco, Ergon, Exxon, Union Oil, Charter International, and Placid Refining.

(8) Since August of 1980, there has been no change in Delta's operations. Delta now, and since November of 1984, contracts with three instead of six customers.

(9) Since September of 1980, Vicksburg has not changed its basic operations. Vicksburg has contracted...