Response
August 20, 1993 and November 30, 1993
Request
June
7, 1993
Utah
State Tax Commission
160
East Third South
Salt
Lake City, UT 84134
Attention: Joe B. Pacheco, Commissioner
Dear
Mr. Pacheco:
XXXXX
seeks an Advisory Opinion on behalf of XXXXX, an authorized ICC carrier,
stating that if XXXXX purchases train engines out of state, the engines, first
load for hire are picked up out of state, and the engines are then used to haul
coal from XXXXX (sixty percent of which is destined for XXXXX), the train
engines qualify for tax exempt status under form TC 767.
In
order to answer this question, the issue of whether XXXXX engines are
“regularly used” in interstate commerce must be answered. See att. 3D, quoting form TC 767.
Whether
commerce is interstate or intrastate is determined by the essential character
of the commerce. Atlantic Coast Line
R. R. Co. v. Standard Oil Co., 275 U.S. 257 (1927) (att. 2B); Chicago,
Milwaukee & St. Paul Ry. Co. v. Iowa, 233 U.S. 334 (1914) (att.
2A). It is a maxim that interstate
commerce is not confined to transportation among the states; it includes all
the component parts of commercial intercourse between different states. 15 Am. Jur. 2d Commerce 4 (att. 1Div);
Black's Law Dictionary 819 Interstate commerce.
A
transportation agency operating entirely within the limits of a state may be
engaged in interstate commerce. 15A Am.
Jur. 2d Commerce 62 (att. 1Diii); The XXXXX, 77 U.S. (10 Wall.) 557 (1870)
att.2C). As long as the ultimate,
originally contemplated destination is some point in another state to be
reached by a continuous journey, a shipment or transportation from one point to
another within the same state is interstate commerce. Baltimore & Ohio Southwestern R.R. Co. v Seattle, 260
U.S. 166 (1922) (aa. 2I); United States v. Union Stock Yard & Transit
Co., 226 U.S. 286 (1912) (att.2D). See, e.g. Southern Pac. Co. v.
Corbett, 20 F. Supp. 940, 947 (N.D. Cal. 1937 (att.1A).
However,
if an interior shipment is not part of a continuous journey, it is not interstate
commerce, even if the final destination of the goods is in another state. 15A Am. Jur. 2d Commerce 62 (att. 1Diii; Atlantic
C. L. R. R. Co. v. Standard Oil Co., 275 U.S. 257 (1927) (att.2B).
“Commerce”
includes transportation for others as an independent business and the
instrumentalities, including engines and cards, by which such transportation is
carried on. 15 Am. Jur. 2d Commerce 73
(att. 1Dv.)
Services
performed by switching and terminal companies with respect to goods shipped
interstate is interstate commerce. 15A
Am. Jur, 2d Commerce 64 (att. lDiii); United States v. Brooklyn Eastern
Dist. Terminal, 249 U.S. 296 (1919) (att. 2E); United States v. Union
Stock Yard & Transit Co., 226 J.S. 286 91912) (att. 2D). However, if the facilities conduct both
intrastate and interstate businesses, there is no merger such that the state
cannot regulate the intrastate portion.
15A Am. Jur. 2d Commerce 64 (att lDiii).
State
use taxes on tangible personal property used or stored by a business engaged in
interstate commerce have uniformly been held to be constitutional, because such
property benefits from the protection of the state and should bear a portion of
the cost of that protection. This is
only true, however, if the local activity is not “an integral part of the
interstate process.” In other words,
“property used in interstate transportation or supplies or equipment actually
employed in conducting interstate commerce” is not taxable. 68 Am. Jur. 2d Sales and Use Taxes 190 (att.
1Di).
It
would seem from the above cited authorities that the sixty percent portion of
the coal whose originally contemplated and ultimate destination is XXXXX is
interstate commerce, and the shipping of that coal by XXXXX is an essential
component of the process. Therefore,
even though all of the coal is not interstate commerce, we feel that the
engines used by XXXXX are “regularly used” in interstate commerce as required
by form TC 767. Therefore, as long as
the other requirements of form TC 767 are met, the engines qualify for tax
exempt status.
Sincerely,
XXXXX
August
20, 1993
XXXXX
Re:
Advisory Opinion - Qualification of Train Engine Acquisition for Exemption from
Sales or Use Tax.
Dear
XXXXX:
Your
request for an advisory opinion as to whether purchases of train engines, whose
first use is outside Utah but subsequently used exclusively in Utah, are exempt
from Utah sales or use taxes was referred to the Auditing Division for their
analysis.
The
division's staff recommendations are as follows:
1.
The question at hand is whether use of the engines in hauling coal from XXXXX
constitutes regular use in interstate commerce as contemplated under the
provisions of form TC-767 for sales tax exemption.
2.
The Utah State Tax Commission has recently ruled in an appeal case that the
acquisition of trucks used to haul coal purely intrastate (subsequent to
initial delivery and use outside of Utah) did not qualify for the exemption
evidenced by the referenced form.
3.
The Commission found that "the purely intrastate use of the trucks in
hauling the coal did not transform the trucks into an instrumentality of
interstate commerce anymore than did the machinery that loaded the coal onto
the trucks became so."
4.
The situation that was the subject of the appeal is virtually identical to that
which is the subject of this advisory opinion.
5.
The tax properly applies to the purchase of engines used as outlined in your
request.
Based
upon the facts presented in your letter, we are in agreement with the Auditing
Division's recommendations. Obviously, if there are deviations from these
facts, this opinion may be negated.
If
you do not agree with this determination, you may appeal to the Tax Commission
for a formal hearing. The results of that hearing would constitute a
declaratory judgment and be appealable to the Utah State Supreme Court. A
Notice of Appeal Rights and a copy of the Utah Taxpayer Bill of Rights are
attached.
For
the Commission,
Alice
Shearer
Commissioner
Alice
Shearer, Commissioner
Utah
State Tax Commission
160
East 300 South
Salt
Lake City, Utah 84134
Dear
Commissioner Shearer:
Your
letter dated XXXXX has been received. It is clearly apparent that you have not understood
all of the facts or been a party to all of the facts. The train engines
involved travel out of state on a regular basis throughout any given month. The
train engines are not used exclusively in Utah.
XXXXX
uses XXXXX and on an average days per month, somewhere between 6 and 16, can
use those XXXXX Lines between XXXXX, Utah and XXXXX, Nevada. These days are
figured on the first quarter of XXXXX use.
I
would like you to reconsider your position taken in the XXXXX letter regarding
the facts upon which you have based your decision. Clearly the trains engines
are not used exclusively within the State of Utah but do travel outside of the
State of Utah on a monthly basis. In light of these facts that you have not
considered in issuing your Opinion Letter, I would request that you reevaluate
your position in that the engines do travel out of state on a regular basis,
some as far away as Las Vegas, Nevada.
In
any event, in order to make sure I do not miss an appeal time I am going to
file an appeal on this matter as well. If you feel that you are going to change
your position in this matter that will mute the need for an Appeal.
If
you have any questions please feel free to contact me.
XXXXX
XXXXX
Re:
Advisory Opinion - Qualification of Train Engine Acquisition for Exemption from
Sales or Use Tax
Dear
XXXXX:
Your
request (copy attached) for an advisory opinion as to whether purchases of
train engines first used outside Utah, subsequently used primarily in Utah, but
regularly used in powering trains across state lines are exempt from Utah sales
or use taxes was referred to the Auditing Division for their analysis.
The
division's staff recommendations are as follows:
1.
The Auditing Division previously made recommendations to the Commission based
on the facts as presented in your opinion request dated XXXXX.
2.
The response to that request concluded that the acquisitions did not qualify
for exemption because the information and arguments in your letter were
interpreted to mean the engines were to be used exclusively in Utah once they
came here.
3.
Subsequent to the issuance of the Commission's Advisory Opinion dated XXXXX,
you requested a reconsideration of the position taken and offered additional
clarifications stating that "the train engines are not used exclusively
within the State of Utah but do travel outside of the State of Utah on a
monthly basis."
4.
This additional information, and other information in your letter of XXXXX,
coupled with the information previously provided, results in the conclusion
that the engines used as described do qualify for exemption.
Based
upon the facts presented in your letter, we are in agreement with the Auditing
Division's recommendations. Obviously, if there are deviations from these
facts, this opinion may be negated.
For
The Commission,
Alice
Shearer
Commissioner