99-038
Response March 27, 1999
REQUEST LETTER
June 16, 1999
SUBJECT: Opinion
on IRP Issue Requested
Dear Kerry:
Brief Chronicle of Events:
An International Registration Plan (IRP) registrant
has been participating in the IRP with Utah serving as the base state for the registrant.
Prior to applying for 1998 IRP registration, the registrant met with NAME, the
Manager of the Motor Carrier Services Section of the Motor Vehicle Division of
the Tax Commission. After the meeting,
the registrant summarized particulars they intended to follow in completing the
1998 registration application in a letter and sent that letter to NAME for
signature "to memorialize" the conversations that had taken
place. In that letter (copy attached)
it stated that:
"A
fleet's in-jurisdictional miles and the total distance miles as referred to in
the IRP reporting schedules, means the mileage generated by only the trucks
which are part of the apportioned fleet for which registration is sought. In calculating total mileage, only the miles
generated by the power units of the fleet are to be calculated and [registrant]
has no obligation to track or record mileage of any of its Utah IRP registered
trailers."
The registrant completed their application in this
fashion. Later IRP audit staff from the
State of STATE made inquiry as to various aspects of the registrant's Utah IRP
application. After receiving
information, STATE auditors stated their intent to audit the STATE portion of
IRP registration fees paid. Also, Utah
has informed the registrant that in cases where trailer fleet operations are
not reflective of power unit operations, the advise cited in the letter drafted
by the registrant does not apply, but rather the registrant needs to register
trailers in a fleet separate from power units.
Discussion of Tax Issues;
Two legal issues have surfaced from the above events.
The first issue is whether or not STATE has the right
to audit the STATE portion of an IRP application filed through another state or
province of COUNTRY. The Auditing Division's position on this issue is that
yes, STATE does have the right to audit a Utah filed IRP application for STATE
fees. Our position is based primarily
on three authorities: 1) Utah Code '41
-la-104 which authorizes Utah to join IRP;
2) IRP agreement '1606, which provides for audits to be made by the
Commissioners of the several jurisdictions; and 3) an IRP Dispute Resolution
Committee ruling made on August 26, 1996 in which the committee upheld STATE's
right to audit STATE liability in a case with very similar facts.
Counsel for the registrant concedes that STATE may
have the right to audit the STATE portion of the IRP application filed with the
state of Utah, but suggests that Utah adopt the policy to insure that such
audits are supervised by Utah.
Rationale for the policy is: 1) to allow the a motor carrier to pursue
an appeal of such an audit in their base state; 2) to insure consistent
treatment of STATE fees on all Utah based carriers; and 3) to free the
registrant from conflicting reporting instructions given by Utah and other
jurisdictions.
The Auditing Division feels that it is not tenable to
expend Utah audit and appeal resources on an issue that is between the State of
STATE and the registrant. STATE intends
to expend their own resources in dealing with these STATE only issues (STATE is
the only member jurisdiction of the IRP having an exception to the IRP to
apportion trailers). STATE has stated that when conducting these types of
audits in other states, typically the base state does not participate in the
audit or appeal process.
The second issue is whether or not registrants
apportioning both trailers and power
units
can be required to register their power units and
trailers as separate fleets in cases where trailer
unit operations are not reflective of power unit
operations. The Auditing Division's position is
that Utah code '41-la-
102(24) and '41-1 a-301 are silent with respect to mandating
trailer units
to be combined with or separated from power unit
fleets; however, to satisfy STATE requirements and for proper fees to be paid
on trailers, fleets should be separated when operations are not
reflective. NAME did sign a letter that
supported the combining of the fleets (both power units and trailers) using
only power unit miles as the base. Upon later reflection, it was recognized
that this approach skews the STATE trailer registration fees paid in cases
where trailer fleet operations are not reflective of power unit fleet
operations; hence, the fleets need to be separated in order for the proper fees
to be paid. STATE routinely performs selective audits on this issue in several
states. STATE has made representations that they prevail when audits they
perform on this issue come into dispute.
Counsel for the registrant makes several arguments as
to why fleets should not be required to be separated. First, they represent that the IRP and Utah law favor a single
fleet (for power units and trailers), and that miles for the fleet should come
from the power units only. Second, they
argue the impracticality of any other solution. Refer to their letter (copy
attached) to get an understanding of the details of their position.
Respectfully,
NAME
Auditing Division
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Toll free #####
RESPONSE
LETTER
March 27, 2000
NAME
Auditing Division
210 North 1950 West
Salt Lake City, UT 84134
RE: Foreign
Jurisdiction Audits under the International Registration Plan (AIRP@)
Dear NAME,
You have requested an advisory opinion concerning the registration
of Utah-based interstate trailers under the IRP. You point out that a particular Utah-based taxpayer has contacted
Auditing Division concerning its apportioned interstate trailers and an
anticipated STATE audit concerning the trailers. Two issues have arisen from this contact. The first comes directly from the taxpayer
and concerns whether STATE may audit the interstate trailer mileage reported by
the Utah-based taxpayer to determine if the correct amounts of mileage and fees
have been apportioned to STATE. (STATE
is the only IRP member jurisdiction that has an exception from the IRP relating
to the apportionment of trailers.) The
second issue is raised by the Auditing Division and concerns whether a
Utah-based fleet may be required to register its power units and trailers as
separate fleets when the trailer unit operations are not reflective of the
power unit operations.
STATE=s Right to Audit a Utah-Based Registrant. The first
issue is whether STATE has the right to audit the STATE operations of an IRP
registrant when Utah serves as that registrant=s base state. Both STATE and
Utah are jurisdictions that are party to the IRP. The Utah-based IRP registrant at issue operates its power units
and trailers in several jurisdictions, including STATE. STATE auditors have stated their intent to
audit the STATE portion of the IRP registration fees paid by this Utah-based
taxpayer, specifically as they relate to the taxpayer trailer operations in
STATE.
While the taxpayer concedes that STATE may audit the
STATE portion of the IRP application filed with the state of Utah, legal
counsel for the registrant suggests that Utah should adopt the policy that any
audit of a Utah-based registrant by a foreign jurisdiction be supervised by Utah
as a dual audit in order: 1) to allow a motor carrier to pursue an appeal of
such an audit in its base state; 2) to insure consistent treatment of STATE
fees on all Utah-based carriers; and 3) to free the registrant from conflicting
reporting instructions given by Utah and other jurisdictions. The Auditing Division=s position is that it is not tenable to expend Utah
audit and appeal resources on an issue, STATE trailer apportionment, that is
only between the State of STATE and the Utah-based registrant.
Utah Code Ann. '41-1A-301(8)(f)
provides that Utah=s Motor Vehicle Division may enter into agreements
with other IRP jurisdictions for joint audits.
Currently, the Tax Commission has no agreements in place with other
jurisdictions for joint audits. In addition,
Section 1606 of the IRP agreement anticipates audits by multiple jurisdictions,
providing that A[a]udits may be made by the Commissioners of the
several jurisdictions.@
On August 26, 1996, the IRP Dispute Resolution
Committee heard the dispute of Knight Transportation v. California. At issue was California=s right to separately audit Knight Transportation (AKnight@), apart from
any base jurisdiction audit or joint audit.
Knight Transportation maintained three fleets, two with home bases in
Oklahoma and one with a home base in Utah.
Of particular concern to Knight was California=s audit of its trailer miles. Because of California=s trailer exception, Knight felt an independent
California audit would obtain different calculations than would an audit by the
base state and that the company was entitled to a uniform audit procedure. The Dispute Resolution Committee approved
motions that not only allowed California to audit Knight, but also to perform a
Asecond audit@ of
Knight for certain periods that had previously been audited by the base state.
Therefore, to summarize, Utah may not unilaterally
adopt a policy whereby Utah must supervise, as a joint audit, any audit of a
Utah-based registrant by a foreign jurisdiction. While Utah law does allow for Utah and other jurisdictions to
enter into such an agreement, Utah has not done so. Without such an agreement, the result in Knight v. California
would indicate that California has a right to independently audit a Utah-base
registrant about its trailer miles and apportionment.
Registration of Trailers in Utah. Utah law
allows a Utah-based registrant to combine its power units and trailers into a single
fleet and to report the mileage for that fleet in terms of the power unit
mileage. Utah Code Ann. ''41-1a-102(24), -102(60), -301(4). Where the registrant=s power unit operations are reflective of its trailer
operations, the power unit mileage recorded and reported by the registrant
would also identify its trailer mileage.
However, where the registrant=s
power unit operations differ from its trailer operations, the registrant might
still have need of separate trailer mileage records, as in the case of a STATE
audit. Separate trailer records would
exist if the power units and trailers were listed in separate fleets, but may
not exist if the power units and trailers are combined into one fleet. For this reason, Auditing Division asks
whether it can require a Utah-based registrant to list its power units in one
fleet and its trailers in a separate fleet whenever the power unit operations
are not reflective of the trailer operations.
Utah Code Ann. '41-1a-301(4)
provides that Atrailers ... of apportioned fleets may be
listed separately as Atrailer fleets@
with the fees paid according to the total distance those trailers were towed in
all jurisdictions during the preceding year mileage reporting period.@ (Emphasis added).
This language is permissive and, thus, does not require trailers to be
listed in separate fleets. Trailers may
therefore be listed in the same fleet as the power units. Accordingly, Utah cannot require a
Utah-based fleet to list its trailers in a separate fleet.
Also, Utah Code Ann. '41-1a-102(24), -102(60) provides that a fleet=s Ain-state miles@ and Atotal fleet
miles@ are determined from the mileage of the power units
in the fleet. These sections further
provide that only when a fleet is composed entirely of trailers does the
mileage of the trailers determine the in-state miles or total fleet miles of
the fleet. Were trailers required to be
listed in separate fleets, the word Aentirely@ in the phrase Acomposed
entirely of trailers@ could be deleted without any change of meaning. Common canons of statutory construction
require that statutes be interpreted so that each word in that statute is given
meaning; i.e., a word may not be interpreted so that the word could have been
omitted from the statute. To give meaning
to the word Aentirely@
requires an interpretation that there be fleets composed entirely of trailers
and also fleets composed of Amore@ than trailers, i.e., composed of both trailers and
power units. Accordingly, the Ain-state miles@
and Atotal fleet miles@ of
fleets that are composed of both power units and trailers should, for Utah=s purposes, be determined from the mileage of the
power units only.
Regardless of whether the power unit operations
reflect those of the trailer operations, Utah law allows a Utah-based
registrant the option to register its trailers in Utah either in a separate
fleet or in a Acombined@
fleet. If that taxpayer chooses to
register its trailers in a combined fleet, Utah law states that the mileage is
determined from the power units, not the trailers. Therefore, the Commission cannot require a taxpayer to list its
trailers as a separate fleet if that taxpayer chooses to register its trailers
and power units as a combined fleet.
Nor can the Commission require a taxpayer to track its trailer miles
separately from the power unit miles when the taxpayer chooses to register its
trailers and power units in a combined fleet.
Of course, a taxpayer may elect to register its trailers and power units
as separate fleets. Also, a taxpayer
with trailers and power units in a combined fleet, while required under Utah
law to track the mileage of the power units, may in addition, on its own, track
its trailer miles for other purposes.
Please contact us if you have any other questions.
For the Commission,
Marc B. Johnson
Commissioner
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