National Serv-All, Inc. v. Indiana Dept. of State Revenue

Decision Date19 December 1994
Docket NumberSERV-AL,No. 02T10-9202-TA-00005,INC,02T10-9202-TA-00005
PartiesNATIONAL, and National Serv-All, Inc., d/b/a Zent's, Petitioners, v. INDIANA DEPARTMENT OF STATE REVENUE, Respondent.
CourtIndiana Tax Court

Jay M. DeVoss, Harry W. Scott, Scott B. Ainsworth, DeVoss, Scott, Johnson & Baker, Decatur, for petitioners.

Pamela Carter, Atty. Gen., Joel Schiff, Thomas K. Caldwell, Deputy Attys. Gen., Indianapolis, for respondent.

FISHER, Judge.

The Petitioners, National Serv-All, Inc., and National Serv-All, Inc., d/b/a Zent's, (collectively, National), appeal the assessment of gross retail (sales) and use tax by the Respondent, the Indiana Department of State Revenue (the Department), for calendar years 1986, 1987, and 1988 (the years at issue).

ISSUES

I. Whether National is entitled to the sales tax exemption available to governmental agencies and instrumentalities under IND.CODE 6-2.5-5-16.

II. Whether National has met its burden of proof in showing that it is entitled to the sales tax exemption for public transportation of property under IND.CODE 6-2.5-5-27.

FACTS

National, an Indiana for-profit corporation, operates a garbage hauling business in the Fort Wayne area. During the years at issue, National, the successful bidder in a competitive bidding process, operated under an agreement (the Contract) with the Fort Wayne Board of Public Works (the Board). Under the Contract, National picked up garbage from residential and municipally owned sites and transported it to a landfill owned by National. The Contract established compensation rates, garbage pick-up times and locations, and other rights and obligations.

During the same period of time, National also hauled garbage under agreements with individual residential and business generators of garbage in areas near the area covered by the Contract. National used the same trucks for its Contract and non-Contract work. Accordingly, none of National's trucks were exclusively devoted to work under the Contract. National owned and repaired its own trucks and also repaired others' trucks.

DISCUSSION AND DECISION
Standard of Review

The court reviews appeals from final determinations of the Department de novo and is not bound by the evidence or the issues raised at the administrative level. Maurer v. Indiana Dep't of State Revenue (1993), Ind.Tax, 607 N.E.2d 985, 986. When an appeal involves a claim for exemption, as does the case at bar, the taxpayer bears the burden to show it falls within the terms of the exemption. See id. If the exemption is ambiguous, the court must resolve the ambiguity in favor of the Department. See Shoup Buses, Inc. v. Indiana Dep't of Revenue (1994), Ind.Tax, 635 N.E.2d 1165, 1168.

I

National first claims it is entitled to the benefits of I.C. 6-2.5-5-16, the sales tax exemption applicable to agencies or instrumentalities of the State of Indiana and its political subdivisions. In Indiana Waste Systems of Indiana, Inc. v. Indiana Department of State Revenue (1994), Ind.Tax, 633 N.E.2d 359, this court addressed an identical claim by a garbage hauler that operated under contract with the Indianapolis Board of Public Works. Applying the Indiana Supreme Court's analysis in Ayres v. Indian Heights Volunteer Fire Department, Inc. (1986), Ind., 493 N.E.2d 1229, the court rejected the notion that the garbage hauler was a governmental agency or instrumentality. Indiana Waste, 633 N.E.2d at 364.

In Ayres, our supreme court extended agency or instrumentality status to a volunteer fire department, relying largely on the comprehensive statutory scheme that creates volunteer fire departments and defines their relationships to the municipalities they serve. Ayres, 493 N.E.2d at 1235-36. Unlike the volunteer fire department in Ayres, however, the garbage hauler in Indiana Waste was not a statutory creation, but rather a private business. Indiana Waste, 633 N.E.2d at 364. Furthermore, while the statutes governing solid waste disposal in Indianapolis, contained in IND.CODE 36-9-31, were broad in scope and gave the Indianapolis Board of Public Works "authority over all matters relevant to garbage collection and disposal within Indianapolis ... [they did not] purport to define or create garbage collecting companies." Id.

The statutes governing solid waste disposal outside Indianapolis, IND.CODE 36-9-30, 1 are also broad in scope. They give the Board authority to contract for solid waste removal 2 and all other necessary and incidental functions in the discharge of its duties. 3 They also define permissible disposal methods, 4 allow the city and other governmental units to issue revenue bonds 5 and enter into leases, 6 and allow the Board to operate solid waste disposal facilities. 7 As with the statutes applicable to Indianapolis, however, I.C. 36-9-30 nowhere "purport[s] to define or create garbage collecting companies." Indiana Waste, 633 N.E.2d at 364. Therefore, National, like the garbage hauler in Indiana Waste, is not a governmental agency or instrumentality and is not entitled to the benefits of IC 6-2.5-5-16.

II

National also claims it engaged in public transportation of property within the meaning of I.C. 6-2.5-5-27, which provides: "[t]ransactions 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." (Emphasis added). The Department responds that the garbage National carries is valueless and therefore does not constitute "property." Nevertheless, the court rejected an argument nearly identical to this in Indiana Waste, as it held that the word "property," as used in the emphasized portion of I.C. 6-2.5-5-27, "refers to a physical thing, not to a valuable right or interest in a thing." Indiana Waste, 633 N.E.2d at 366-67. "Because garbage is undisputedly a physical thing, it falls within the terms of the exemption." Id. at 367.

Thus, the next question is whether National's hauling of garbage constitutes "public transportation" within the meaning of the statute. The public transportation exemption requires that the transporter perform its function for consideration. See State Dep't of Revenue v. Calcar Quarries, Inc. (1979), 182 Ind.App. 84, 394 N.E.2d 939; 45 I.A.C. 2.2-5-61. 8 In other words, someone other than the transporter must own the property being transported.

In Calcar, the taxpayer, Calcar, operated a construction and stone quarry business. Operating under permit from the PSC, Calcar used trucks to haul road building materials, stone, and equipment. Calcar kept its records for the trucking operation separate from those of its quarrying and other operations. While Calcar used the trucks to haul both its own stone and stone it sold to customers, the stone Calcar hauled for its own purposes "amounted to no more than ten percent of its crushed stone sales." Calcar, 182 Ind.App. at 87, 394 N.E.2d at 941. Because uncontroverted evidence revealed that Calcar predominantly used the trucks to haul its customers' property for consideration, it was entitled to the public transportation exemption: as the court noted in a footnote, the Department allowed exemption for items predominantly used for exempt purposes. Id., n. 1 (and accompanying text).

In the present case, then, the issue becomes whether National owns the garbage it hauls, for if National is predominantly engaged in hauling its own product, it is not entitled to the public transportation exemption. National claims that the garbage it hauls under the terms of the Contract is owned by the Board. The Department counters, however, that National, by virtue of its exclusive possession from the time of pickup, has better claim than anyone else.

In Indiana Waste, the court discussed possession and other factors relevant to determining ownership:

At the point the garbage is abandoned, the generators of the garbage lose their ownership rights and the Board's authority to handle the garbage takes effect. See O'Neal v. Harrison (1915), 96 Kan. 339, 341, 150 P. 551-52 (quoting 2 Dillon on Municipal Corporations § 678 (5th Ed.) (garbage is still "of value to the owner.... if [it] has not been rejected or abandoned as worthless ...").... [P]ossession, however, is not determinative of ownership because possession is not tantamount to ownership. Reissner v. Oxley (1881), 80 Ind. 580. Rather, it merely raises a rebuttable presumption of ownership. See Abel v. Love (1924), 81 Ind.App. 328, 143 N.E. 515 (discussing adverse possession). In addition to possession, "[t]he chief incidents of ownership ... are the rights of use and enjoyment, and of disposition." Rhoades v. State (1946), 224 Ind. 569, 70 N.E.2d 27, 29. Like "property," ownership is a malleable concept. See Black's Law Dictionary, [ (5th ed. 1979) ] 996-97.

Indiana Waste, 633 N.E.2d at 367 (emphasis added) (footnote omitted).

To demonstrate where the "chief incidents of ownership" lie, the parties have submitted the Contract between National and the Board. In reviewing the Contract, the court follows the rules of contract construction. Like the language of a statute, the language of a contract is generally given its plain and ordinary meaning, unless the contract makes clear the parties intended a different meaning. Whiteco Indus., Inc. v. Nickolick (1991), Ind.App., 571 N.E.2d 1337, 1339-40 (citing Underwriting Members of Lloyds of London v. United Home Life Ins. Co. (1990), Ind.App., 549 N.E.2d 67, aff'd (1990), Ind., 563 N.E.2d 609). "In construing a contract [the court] must be guided by the intent of the parties and ordinarily that intent is determined by examining the four corners of the written document." Kutche Chevrolet-Oldsmobile-Pontiac-Buick, Inc. v. Anderson Banking Co. (1992), Ind.App., 597 N.E.2d 1307, 1309.

The Contract consists of eleven separate documents and is comprehensive in scope, covering bid bonds, performance bonds,...

To continue reading

Request your trial
10 cases
  • Tri-State Group, Inc. v. Ohio Edison Co.
    • United States
    • Ohio Court of Appeals
    • 26 Diciembre 2002
    ...the refuse once it is collected by the disposal company, absent any agreement to the contrary. See National Serve All, Inc. v. Indiana Dept. of State Revenue (Ind.Tax 1994), 644 N.E.2d 954, for a summary of the case law in this {¶ 38} Under the "main purpose doctrine," a contract "must be c......
  • Northern Tier Solid Waste Authority v. Com.
    • United States
    • Pennsylvania Commonwealth Court
    • 5 Noviembre 2004
    ...Act and thus Act's preemption clause did not reach city's and county's regulation of the waste); National Serv-All, Inc. v. Indiana Dep't of State Rev., 644 N.E.2d 954 (Ind.Tax.Ct.1994) (waste is property owned by waste hauler prior to disposal and is subject to gross receipt retail tax); R......
  • Meyer Waste Sys., Inc. v. Dept. of State Revenue
    • United States
    • Indiana Tax Court
    • 7 Diciembre 2000
    ...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 t......
  • United States v. Bowser
    • United States
    • U.S. Court of Appeals — Seventh Circuit
    • 23 Agosto 2016
    ...(Ind. App. Ct. 1993) ; Womack v. State , 738 N.E.2d 320, 324 (Ind. Ct. App. 2000) ; National Serv–All , Inc. v. Indiana Dept. of State Revenue , 644 N.E.2d 954, 957 (Ind. Tax Ct. 1994) ; Meridian Mortgage Co. v. State , 182 Ind.App. 328, 339, 395 N.E.2d 433, 439 (1979) ; Rhoades v. State , ......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT