US v. State of Colo., Civ. A. No. 86-K-2120.

• Decision Date: 18 August 1987
• Docket Number: Civ. A. No. 86-K-2120.
• Parties: UNITED STATES of America, Plaintiff, v. STATE OF COLORADO; and Alan N. Charnes, Executive Director, Department of Revenue of the State of Colorado, Defendants.
• Court: U.S. District Court — District of Colorado

666 F. Supp. 1479

UNITED STATES of America, Plaintiff, v. STATE OF COLORADO; and Alan N. Charnes, Executive Director, Department of Revenue of the State of Colorado, Defendants.

Civ. A. No. 86-K-2120.

United States District Court, D. Colorado.

August 18, 1987.

Dahil D. Goss, Asst. U.S. Atty., Denver, Colo., and Michael C. Durney, Edward J. Snyder, Richard A. Correa, Tax Div., U.S. Dept. of Justice, Washington, D.C., for plaintiff.

Anthony S. Trumbly, Asst. Atty. Gen., General Legal Services Section, Denver, Colo., for defendants.

MEMORANDUM OPINION AND ORDER

KANE, District Judge.

Plaintiff in this action seeks a declaration that it is not liable to pay gasoline sales taxes in the State of Colorado, an injunction restraining defendants from collecting such taxes and a refund of those taxes already paid by the Army and Air Force Exchange Service (AAFES) on purchases of gasoline for sale in exchange service stations on military reservations in Colorado. I assume jurisdiction in this action pursuant to 28 U.S.C. § 1345.

The AAFES operates as a joint military command of the Army and Air Force. It furnishes goods and services to military personnel and their families. These are provided at lower prices than those generally available to the normal consumer. The AAFES channels its profits back into military welfare and recreation programs.

Colo.Rev.Stat. § 39-27-101 et seq. imposes a general tax upon the sale and use of gasoline. The AAFES has paid this tax on its purchases of gasoline to date. It now alleges the terms of Colo.Rev.Stat. § 39-27-106 exempt it from the provisions of the taxing statute. It is claiming a refund on tax paid since October 1980. The amount allegedly in issue is in excess of $5 million.

The case comes before me now on three motions — defendants' motion to dismiss, defendants' motion for summary judgment and plaintiff's motion for summary judgment.

I point out at this inception that I have decided to dismiss without prejudice plaintiff's quasi-contractual claim for a refund of taxes paid. It is a clear prerequisite of such an action that defendants should have incurred some benefit at the expense of plaintiff. Here, however, at least a proportion, and possibly all, of the tax paid by the AAFES on gasoline purchased by it was passed on to the consumer. The law of restitution, to put it crudely, is designed to return to a plaintiff that which he has lost. It is not intended to facilitate the type of windfall plaintiff here anticipates. Plaintiff has adduced no evidence to sustain its claim to have suffered a quantifiable pecuniary loss as a result of the imposition of this tax. It is clearly not entitled to a refund of all the tax it has paid if such additional cost has been passed on to a class of unidentifiable consumers. It does claim that if the tax had not been imposed upon it, it should have made a greater profit over the six year period in question. If plaintiff thinks it can sustain proof of this loss, and I look forward to seeing how it intends to do so within the ambit of Rule 11, it may refile its claim for restitution but must plead the claim with particularity.

The motion to dismiss raises three questions. First whether the United States has standing to pursue the instant action. Second, whether the terms of 28 U.S.C. § 1341 bar the court from granting the relief sought, and finally whether the limitation provision, Colo.Rev.Stat. § 39-27-103 (1982) precludes recovery of the amounts claimed. The two summary judgment motions raise three further problems. Defendants argue plaintiff cannot bring itself within the terms of the exemption alleged. They further assert any valid claims plaintiff might have are barred by the doctrine of laches. Finally they claim any relief the court decides to facilitate should be prospective rather than retrospective.

Defendants submit two main contentions in support of their assertion that plaintiff suffers no injury as a result of the tax. First they claim the legal incidence of the tax under Colorado law falls upon the distributor rather than the retailer, such as the AAFES. I find this argument to be rhetorical in the extreme. Even if defendants are correct in their assertion that under the governing statute, the legal incidence of the tax falls upon the distributer, there can be little doubt that plaintiff still suffers cognizable injury because the cost of the gasoline it purchases is higher as a result of the imposition of the tax. This is the case even if the additional cost is passed on to the individual consumer. The up front payment for the gasoline being greater as a result of the tax along with the economic reality that the cheaper a product the greater the possibility of disposing of it in the market gives plaintiff standing to pursue the instant challenge. In Bacchus Imports, Ltd. v. Dias 468 U.S. 263, 267, 104 S.Ct. 3049, 3053, 82 L.Ed.2d 200 (1984) the Supreme Court decided the fact wholesalers passed a tax onto their customers did not deprive them of standing to challenge the tax. The wholesalers, the court held, had to pay the tax even if customers did not furnish payment for the goods. Further, they were entitled to litigate whether the tax had an adverse competitive impact upon their business. I see no basis for distinguishing this case from the instant one.

The next argument submitted by defendants is based on 28 U.S.C. § 1341 which precludes this court from interfering with state tax matters. The United States is exempt from the terms of this provision. Defendants seek to skirt this Chinese Wall by maintaining plaintiff has no real interest in the issues at stake and by claiming it is really seeking to protect the private interests of individual servicemen. I have already established the United States does have a real interest in the dispute. Accordingly this ground of challenge is rejected.

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