Shoup Buses, Inc. v. Indiana Dept. of State Revenue

• Citation: 635 N.E.2d 1165
• Decision Date: 25 May 1994
• Docket Number: Nos. 45T10-9111-TA-00061,TA-00003,45T10-9111-TA-00057,s. 45T10-9111-TA-00061
• Parties: SHOUP BUSES, INC., Tri-State Coach Lines, Inc., and United Limo, Inc., Petitioners, v. INDIANA DEPARTMENT OF STATE REVENUE, Respondent. , 45T10-9201-1
• Court: Tax Court of Indiana

Page 1165

635 N.E.2d 1165

SHOUP BUSES, INC., Tri-State Coach Lines, Inc., and United Limo, Inc., Petitioners, v. INDIANA DEPARTMENT OF STATE REVENUE, Respondent.

Nos. 45T10-9111-TA-00061, 45T10-9111-TA-00057,

45T10-9201-TA-00003. ¹

Tax Court of Indiana.

May 25, 1994.

Morris A. Sunkel, Hoeppner, Wagner & Evans, Valparaiso, for petitioners.

Pamela Carter, Atty. Gen. of Indiana, Thomas K. Caldwell, Deputy Atty. Gen., Indianapolis, for respondent.

FISHER, Judge.

Shoup Buses, Inc., Tri-State Coach Lines, Inc., and United Limo, Inc. (collectively referred to as the Taxpayers) appeal the Indiana Department of State Revenue's (the Department) final determinations denying their claims for refund of Indiana Special Fuel Tax ² for the years 1986, 1987, 1988, and 1989.

ISSUE

The court phrases the issue in two parts:

A. Whether out-of-state contiguous counties are included within the meaning of service area in IND.CODE 6-6-2.1-301(a)(6); and

B. Whether travel outside a service area renders a common carrier ineligible for the IC 6-6-2.1-301(a)(6) special fuel tax exemption entirely, both for fuel consumed within the service area and for fuel consumed outside the service area. ³

FACTS AND PROCEDURAL POSTURE

The undisputed facts reveal that the Taxpayers are common carriers that operate vehicles powered by diesel fuel. Diesel fuel is designated as a special fuel and is therefore subject to the Indiana Special Fuel Tax, IC 6-6-2.1 (repealed, now IC 6-6-2.5). Although the issue is the same for each individual petitioner, the facts in each instance are different. As a result, it is necessary to distinguish the relevant facts for each individual petitioner.

Shoup Buses, Inc. (Shoup) provides charter services, transporting its passengers anywhere they desire to go. It operates from two base counties: Lake County, Indiana, and Elkhart County, Indiana. Shoup filed claims for refund of Indiana Special Fuel Tax paid in 1987, 1988, and 1989.

Tri-State Coach Lines, Inc. (Tri-State) provides an intercity bus service from its base in Lake County, Indiana. More specifically, it provides two separate route services. On the first route, a van transports passengers from Portage, Indiana (Porter County) to Valparaiso, Indiana (Porter County) and then to Gary, Indiana (Lake County). ⁴ From Gary, Indiana, the van travels to Hammond, Indiana (Lake County) before it arrives at its final destination of Midway Airport in Chicago, Illinois (Cook County). The second bus route originates in Merrillville, Indiana (Lake County) and travels to Gary, Indiana (Lake County). ⁵ The bus then makes stops in Hammond, Indiana (Lake County), Harvey, Illinois (Cook County), and Crestwood, Illinois (Cook County), before it arrives at its final destination of O'Hare International Airport (Cook County). On both routes, passengers are permitted to embark and disembark at any stop. Tri-State filed claims for refund of Indiana Special Fuel Tax paid in 1986, 1987, 1988, and 1989.

United Limo, Inc. (United Limo) provides both charter and intercity route services from its base in St. Joseph County, Indiana. The majority of United Limo's passengers are transported over its regular intercity route: Elkhart, Indiana (Elkhart County) South Bend, Indiana (St. Joseph County); LaPorte, Indiana (LaPorte County); Michigan City, Indiana (LaPorte County); Portage, Indiana (Porter County); Highland, Indiana (Lake County); Hammond, Indiana (Lake County); and O'Hare International and Midway Airports (Cook County, Illinois). United Limo's passengers are permitted to embark or disembark at any point. United Limo filed claims for refund of Indiana Special Fuel Tax paid in 1986, 1987, 1988, and 1989.

On October 21, 1991, The Department issued a letter of finding to each petitioner. In all three letters, the Department determined that each of the petitioners' travel activities did not fall within the scope of IC 6-6-2.1-301(a)(6). Consequently, it denied each of the petitioner's claims for refund. The Taxpayers now appeal. Additional facts will be supplied as necessary.

DISCUSSION AND DECISION

"The court reviews appeals from the Department de novo." Kenny Kent Chevrolet Co. v. Indiana Dep't of State Revenue (1994), Ind.Tax, 627 N.E.2d 890, 891 (citing Maurer v. Indiana Dep't of State Revenue (1993), Ind.Tax, 607 N.E.2d 985, 986). Consequently, the court is bound by neither the issues nor the evidence presented at the administrative level. Id.

The Indiana Special Fuel Tax is imposed pursuant to IND.CODE 6-6-2.1-201 ⁶:

Except as otherwise provided by this chapter, a license tax of sixteen cents ($0.16) per gallon is imposed on the use of special fuel and on the placing of special fuel into the taxable storage facility of an authorized unlicensed user or an authorized unlicensed special fuel dealer.

IC 6-6-2.1-301(a)(6) ⁷, however, provides

Special fuel sold to a common carrier of passengers ... and used by the carrier to transport passengers within a service area which is not larger than one (1) county and counties contiguous to that county [is exempt from the special fuel tax].

Although both parties contend the language in IC 6-6-2.1-301(a)(6) is unambiguous, they purport different interpretations as to its meaning. The Taxpayers contend that all counties contiguous to a base county, whether in state or out, are included in the meaning of service area. Furthermore, the Taxpayers assert that all travel within a service area qualifies for the special fuel tax exemption, regardless of whether travel occurs outside a service area as well.

The Department responds, however, that the scope of the exemption statute is limited to contiguous counties within Indiana only. The Department further maintains any travel that occurs outside a service area renders a common carrier ineligible for the special fuel tax exemption entirely, both for fuel consumed within the service area and for fuel consumed outside the service area. To support its argument, the Department cites 45 I.A.C. 10-3-7:

(a) Special fuel sold to or used by a common carrier is exempt provided that the special fuel is placed into the fuel supply tank of a common carrier for the sole purpose of transporting passengers within a service area which is not larger than one county and counties contiguous to that county, all of which are located in Indiana.

. . . . .

(d) To be afforded this exemption, common carriers must embark, transport, and disembark passengers within the service area of the common carrier. Special fuel sold and delivered into the fuel supply tank of a motor vehicle operated by a common carrier for the purpose of transporting persons over routes that are outside the service area of the common carrier is subject to tax.

(Emphases added). The court must therefore determine the meaning of the language in IC 6-6-2.1-301(a)(6).

A court may construe and interpret a statute only if it is unclear and ambiguous. F.A. Wilhelm Const. Co. v. Indiana Dep't of State Revenue (1992), Ind.Tax, 586 N.E.2d 953, 955 (citing C & C Oil v. Indiana Dep't of State Revenue (1991), Ind.Tax, 570 N.E.2d 1376, 1380). Although a simple disagreement between parties does not necessarily indicate ambiguity, opposing interpretations are persuasive in suggesting that an ambiguity exists. Indiana Dep't of State Revenue v. RCA Corp. (1974), 160 Ind.App. 55, 59, 310 N.E.2d 96, 99. If an exemption statute is ambiguous, the court will strictly construe it against the taxpayer claiming the exemption. See Greensburg Motel Associates, L.P. v. Indiana Dep't of State Revenue (1994), Ind.Tax, 629 N.E.2d 1302, 1304 (citing General Motors Corp. v. Indiana Dep't of State Revenue (1991), Ind.Tax, 578 N.E.2d 399, 404, aff'd (1992), Ind., 599 N.E.2d 588). "Nevertheless, a statute must not be construed so narrowly that it does not give effect to legislative intent because the intent of the legislature embodied in a statute constitutes the law." Id. (quoting General Motors Corp., 578 N.E.2d at 404).

Thus, in the case at bar, the court's foremost goal in construing IC 6-6-2.1-301(a)(6) is to determine the true intent of the legislature. See Caylor-Nickel Clinic, P.C. v. Indiana Dep't of State Revenue (1991), Ind.Tax, 569 N.E.2d 765, 768 (citing Johnson County Farm Bureau Coop. Ass'n v. Indiana Dep't of State Revenue (1991), Ind.Tax, 568 N.E.2d 578, 580, aff'd (1992), Ind., 585 N.E.2d 1336), aff'd (1992), Ind., 587 N.E.2d 1311. To accomplish this, the court gives "statutory words and phrases their plain, ordinary, and usual meaning ..." Knauf Fiber Glass, GmbH v. State Bd. of Tax Comm'rs (1994), Ind.Tax, 629 N.E.2d 959, 961 (citing Kenny Kent, 627 N.E.2d at 893).

A.

First, the Taxpayers assert that the Department has misinterpreted the meaning of the term "contiguous." "Contiguous," as defined in WEBSTER'S THIRD NEW INTERNATIONAL DICTIONARY 492 (1981), means "touching along boundaries for considerable distances" or "next or adjoining...." Accordingly, the Taxpayers maintain that the service areas for Lake County-based Shoup and Tri-State should include not only Porter, Jasper, and Newton Counties in Indiana, but Kankakee, Will, and Cook Counties in Illinois as well. Likewise, the service area for the Shoup branch in Elkhart County should include LaGrange, Noble, Kosciusko, Marshall and St. Joseph Counties in Indiana, and Cass and St. Joseph Counties in Michigan. Finally, the service area for United Limo in St. Joseph County should include Elkhart, Marshall, Starke, and LaPorte Counties in Indiana, and Berrien and Cass Counties in Michigan. ⁸ The court agrees.

IC 6-6-2.1-301(a)(6) makes no mention at all that contiguous counties must be within Indiana only. In fact, that requirement is cited in 45 I.A.C. 10-3-7 only: "a service area [ ] is not larger than one county and counties contiguous to that county, all of which are located in Indiana." The court recognizes that the Department may issue rules and regulations to implement a statute, and that those...