Otis Engineering Corporation v. United States, CA 3-3443-C.

• Decision Date: 30 January 1974
• Docket Number: No. CA 3-3443-C.,CA 3-3443-C.
• Parties: OTIS ENGINEERING CORPORATION v. UNITED STATES of America.
• Court: U.S. District Court — Northern District of Texas

376 F. Supp. 109

OTIS ENGINEERING CORPORATION v. UNITED STATES of America.

No. CA 3-3443-C.

United States District Court, N. D. Texas, Dallas Division.

January 30, 1974.

James K. Rushing and J. Edwin Fleming, Coke & Coke, Dallas, Tex., for plaintiff.

Frank D. McCown, U. S. Atty., Martha Joe Stroud, Asst. U. S. Atty., and Eugene Sayre, Atty., Tax Div., Dept. of Justice, Dallas, Tex., for defendant.

MEMORANDUM OPINION

WILLIAM M. TAYLOR, Jr., Chief Judge.

This is a suit for the refund of manufacturer's excise tax and interest paid in the amounts of $6,468.00 and $833.54 respectively for calendar years 1961 through 1964, plus statutory interest.

The issue is whether the truck bodies that plaintiff Otis Engineering Corporation ("Otis") designed and built for its own use on mobile wire line service units are "automobile truck bodies" subject to the ten percent excise tax imposed by §§ 4061(a) and 4218 of the Internal Revenue Code of 1954.

This case was tried before the Court on September 24 and 25, 1973. This Memorandum Opinion is based on evidence presented at the trial and the briefs and argument of counsel, and is submitted in lieu of findings of fact and conclusions of law. As will be explained below, I have concluded that the items in question are not truck bodies primarily designed for highway transportation and thus are not taxable. Otis will be allowed to recover the taxes and interest paid, plus stautory interest.

During 1961 through 1963, Otis fabricated in its Dallas, Texas, shop wire line service units that it used in its business. The units were constructed so that one could be mounted on a truck chassis (that Otis had purchased and paid tax on). The Internal Revenue Service ("IRS") required Otis to pay an excise tax on the fabrication and use of the outer covering, or housing, of the units. The IRS contended that the housing or cover was an "automobile truck body" as mentioned in the code. There is no question about the amount of the tax involved; the only issue is whether Otis is subject to the tax.

Otis, at the insistence of the IRS, prepared and filed, on or about August 10, 1964, an IRS Form 720 (Quarterly Federal Excise Tax Return) for the period January 1, 1961, through December 31, 1963, reporting a tax of $6,468.00. Otis paid that tax and $833.54 in interest, or a total of $7,301.54, on September 23, 1964, to the IRS district director in Dallas. This amount, plus statutory interest, is the amount in issue in this case.

Otis, on or about September 21, 1966, timely filed a proper claim for refund of the tax and interest on Treasury Form 843, and the IRS disallowed the claim on May 15, 1968.

Otis, after the disallowance, timely brought this suit, alleging that the amounts were wrongfully, illegally and improperly collected because Otis' fabrication and use of the outer covering or housing was an integral part of the wire line units and did not subject it to the manufacturer's excise tax as a manufacturer of automobile truck bodies under the provisions of § 4061(a) as the IRS contended, and furthermore that the units were not subject to tax under any other provision of the code.

Otis is in the business of servicing oil and gas wells by use of its wire line service equipment. This equipment is used to insert wire line service tools and safety equipment into the well tubing, and to remove them from the tubing. The units always perform their services at the well, and the units have no other function.

The wire line service equipment and the cover or housing that is the item in contention in this case are fabricated as a single unit and then mounted on a truck chassis. Otis pays the proper manufacturer's excise tax on the chassis at the time of purchase. The completed wire line unit is designed so that it can be bolted to the truck chassis with four U-bolts. The entire unit can be removed with minimum effort in a relatively short time. The unit is powered through a power takeoff that, when it is in use, transfers power from the truck's drive train to a hydraulic pump. It is impossible to operate the unit while the truck is in motion. Each unit was equipped with tail lights, clearance and stop lights and turn signals, and each was designed to comply with state and federal regulations pertaining to lights, axle load and length and width. Each truck chassis was licensed with a fixed load-bearing capacity equal to the weight of a unit...