Ranger Fuel Corp. v. U.S.
| Decision Date | 28 December 1998 |
| Docket Number | No. CIV.A. 3:98cv370.,CIV.A. 3:98cv370. |
| Citation | 33 F.Supp.2d 466 |
| Parties | RANGER FUEL CORPORATION, et al., Plaintiffs, v. UNITED STATES of America, Defendant. |
| Court | U.S. District Court — Eastern District of Virginia |
Robert Martin Rolfe, Hunton & Williams, David S. Lowman, Jr., Hunton & Williams, Richmond, VA, for Plaintiffs.
Debra Jean Prillaman, Office of U.S. Attorney, Richmond, Michael J. Martineau, Trial Attorney, Tax Division, U.S. Dept. of Justice, Washington, DC, for U.S.
DECLARATORY JUDGMENT AND ORDER
This matter is before the Court on plaintiffs' motion for summary judgment. Plaintiffs' motion for summary judgment is GRANTED in part and CONDITIONALLY GRANTED in part. For the reasons stated in the accompanying Memorandum Opinion, the Court hereby DECLARES Section 4121 of the Internal Revenue Code, 26 U.S.C. § 4121, to be unconstitutional. The Court FINDS plaintiffs to have satisfied the prerequisites imposed by Title 26, United States Code Section 6416(a)(1)(d) for a refund of taxes paid as a result of sales to eleven of the fourteen foreign customers at issue in this case. Accordingly, the Court GRANTS plaintiffs JUDGMENT in the amount of $587,357.91, which represents an amount equal to taxes paid as a result of sales to those eleven foreign customers.
Additionally, the Court CONDITIONALLY GRANTS plaintiffs JUDGMENT in the amount of $51,590.09, which represents an amount equal to taxes paid as a result of sales to three foreign customers whose consent to this action has not yet been secured. This conditional judgment is subject to plaintiffs' provision of consent forms from the three remaining foreign customers to the government and the Court within thirty (30) days of entry hereof.
It is so Ordered.
Let the Clerk send a copy of this Order and the accompanying Memorandum Opinion to all counsel of record.
MEMORANDUM OPINIONThis matter is currently before the Court on plaintiffs' motion for summary judgment. The plaintiffs in this action are seven subsidiary coal corporations (the "Pittston Companies")1 that export coal. Section 4121 of the Internal Revenue Code, 26 U.S.C. § 4121, imposes an excise tax (the "Coal Excise Tax") on American coal. The Pittston Companies seek a refund of amounts paid under the Coal Excise Tax and a declaration that the Coal Excise Tax is unconstitutional. For the reasons stated below, plaintiffs' motion is GRANTED in part and CONDITIONALLY GRANTED in part.
The material facts of this case are not in dispute. Each of the Pittston Companies exports coal for sale. During the tax quarter between January 1, 1997 and March 31, 1997 (the "Tax Quarter"), the Pittston Companies made export sales of 714,156.46 tons of coal to fourteen foreign customers.2 Those sales collectively resulted in $678,948.00 in Coal Excise Tax payments. Each sale was effected when the coal was loaded onto export vessels. In each case, title to the coal passed directly from the Pittston Companies to the respective foreign customer.
On September 15, 1997, the Pittston Companies filed refund claims with the Internal Revenue Service (the "IRS") to recover these Coal Excise Tax payments. In their complaint, the Pittston Companies alleged that they satisfied all procedural requirements for a refund claim. Defendant admitted this allegation in its answer. The Pittston Companies have also filed written consent forms from eleven of the fourteen foreign customers allowing the Pittston Companies to claim a refund of excise taxes paid.3 The IRS has taken no action on the refund claim.
The Coal Excise Tax was enacted to finance the Black Lung Disability Trust Fund. Unlike most manufacturers' excise taxes, which exempt export sales from federal taxation, the Coal Excise Tax applies to all sales of American coal, regardless of whether the coal is sold domestically or abroad. 26 U.S.C. § 4221 () (emphasis added).
In contrast, the Constitution states that "[n]o Tax or Duty shall be laid on Articles exported from any State." U.S. Const., Art. 1, § 9, cl. 5. Accordingly, the plaintiffs maintain that the Coal Excise Tax is unconstitutional. They seek a refund of all Coal Excise Taxes paid during the Tax Quarter. The government maintains that even if the Coal Excise Tax were found to be unconstitutional, the plaintiffs are not entitled to summary judgment because they have not fulfilled the statutory requirements for an excise tax refund claim.
Courts should avoid adjudication of constitutional issues unless necessary. See United States v. National Treasury Employees Union, 513 U.S. 454, 478, 115 S.Ct. 1003, 130 L.Ed.2d 964 (1995). Accordingly, the constitutionality of the Coal Excise Tax need only be analyzed if the Court determines that the Pittston companies have satisfied the statutory prerequisites for an excise tax refund claim.
To obtain a refund of an excise tax, a plaintiff must establish that the goods in question were in the stream of export when the excise tax was imposed and that the plaintiffs have fulfilled the requirements of Title 26, United States Code Section 6416(a). The government concedes that the coal at issue was placed into the stream of commerce when loaded on export vessels and title was transferred from the Pittston Companies to the foreign customers. Therefore, the only remaining prerequisite to an excise tax refund claim is satisfaction of Title 26, United States Code Section 6416(a).
That code section requires that the plaintiffs establish that they have "not included the tax in the price of the article ... not collected the amount of the tax from the person who purchased such article ... repaid the amount of the tax to the ultimate purchaser ... or filed with the Secretary the written consent" of the purchaser allowing the plaintiff to collect the tax refund. 26 U.S.C. § 6416(a). This statute is intended to "prevent[] unjust enrichment of manufacturers who have shifted the burden of the tax to their customers." Tenneco, Inc. v. United States, 17 Cl.Ct. 345, 349 (1989), aff'd 899 F.2d 1227 (Fed.Cir.1990). The plaintiff seeking the refund bears the burden of proving that the statute is satisfied. Andrew Jergens Co. v. Conner, 125 F.2d 686, 689 (6th Cir. 1942).
The Pittston Companies have provided written consent of eleven of the fourteen foreign customers allowing the Pittston Companies to collect the refund on the Coal Excise Tax paid as a result of sales to those foreign customers. This fact establishes the Pittston Companies' eligibility for a refund of the Coal Excise Taxes paid as a result of sales to those eleven foreign customers.
The Export Clause in the Constitution unambiguously states: "No Tax or Duty shall be laid on Articles exported from any State." U.S. Const., Art. I., § 9, cl. 5. The Supreme Court's holdings applying the Export Clause are equally prohibitive. See United States v. U.S. Shoe Corp., 523 U.S. 360, 118 S.Ct. 1290, 1292, 140 L.Ed.2d 453 (1998) (); United States v. International Business Machines Corp., 517 U.S. 843, 848, 116 S.Ct. 1793, 135 L.Ed.2d 124 (1996) (...
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