ATTORNEYS FOR PETITONER:
ATTORNEYS FOR RESPONDENT:
ROBERT W. LOSER, II
PATRICK M. OBRIEN
ATTORNEY GENERAL OF INDIANA
MICHAEL R. FRANCESCHINI
WILLIAM S. AYERS
RUTH E. MYER
AYRES CARR & SULLIVAN, P.C.
DAVID A. ARTHUR
Deputy Attorney General
INDIANA TAX COURT
JACK GRAY TRANSPORT, INC. )
et al., )
v. ) Cause No. 49T10-0002-TA-14
DEPARTMENT OF STATE )
ON APPEAL FROM FINAL DETERMINATIONS OF THE DEPARTMENT OF STATE REVENUE
February 20, 2001
FACTS AND PROCEDURAL HISTORY
The petitioners, Jack Gray Transport, Inc., as well as thirty-eight other similarly situated
(collectively Jack Gray) appeal the final determination of the Department of State
Revenue (Department), whereby the Department declined to apply Indianas proportional use exemption (Exemption)
to the motor fuel and surcharge taxes found at Ind. Code Ann. §§
6-6-4.1-4(d) and 6-6-4.1-4.5(d) (West 2000) for the second, third and fourth quarters of
1998, as well as for the first two quarters of 1999. In
its original tax appeal, Jack Gray raises two issues:
Whether the Court should certify a class consisting of Jack Gray
and an estimated 1536 other petitioners;
Whether the Department acted contrary to law when it
failed to apply the exemptions to the quarters at issue.
The Department has filed a Motion to Dismiss under Trial Rule 12(B)(6)
(Motion) for failure to state a claim upon which relief can be granted.
For the reasons explained below, the Court will not certify Jack Grays
proposed class. However, the Court finds that the Department acted contrary to
law when it failed to grant the exemption for the quarters at issue.
Therefore, the Court denies the Departments Motion and instead grants summary judgment
in favor of Jack Gray.
The material facts are not in dispute. Jack Gray is a motor
carrier engaged in the business of commercial trucking both within and outside of
Indiana. In 1991, the legislature limited the exemptions provided for in sections
6-6-4.1-4(d) and 6-6-4.1-4.5(d) to only those motor carriers who used power take-off (PTO)
equipment in Indiana by adding the words in Indiana to each statute.
This Court subsequently held in 1998, and again in 1999, that the in
Indiana limitation violated the Commerce Clause of the U.S. Constitution, art. 1, §
8. Bulkmatic Transp. Co. v. Department of State Revenue, 691 N.E.2d 1371,
1379 (Ind. Tax Ct. 1998) (Bulkmatic II); Bulkmatic Transp. Co. v. Department of
State Revenue, 715 N.E.2d 26, 36 (Ind. Tax Ct. 1999) (Bulkmatic III).
Following these decisions, the legislature amended the statutes at issue by removing the
in Indiana requirement in order to obtain a refund for taxes paid on
fuel used for non-highway use and by changing the exemptions to a credit.
Ind. Code Ann. §§ 6-6-4.1-4(d) and -4.5(d) (West 2000). The case
at bar involves the time period between this Courts Bulkmatic II decision on
February 13, 1998 and the legislatures most recent amendment of the law, which
became effective on July 1, 1999. P.L. 222-1999.
The Department denied Jack Grays application for the exemptions on February 23, 2000.
The Department filed its Motion on June 5, 2000. Thereafter, on
June 30, 2000, the Court held a hearing on the Departments Motion.
Additional facts will be supplied where necessary.
ANALYSIS AND OPINION
Standard of Review
The Court reviews findings of the Department de novo and is bound by
neither the evidence nor the issues raised at the administrative level. Ind.
Code Ann. § 6-8.1-9-1(d) (West 2000). Snyder v. Department of Revenue, 723
N.E.2d 487, 488 (Ind. Tax Ct. 2000). Summary judgment is only appropriate
where there are no genuine issues of material fact and the moving party
is entitled to judgment as a matter of law. T.R. 56(C), Roehl
Transp. Inc. v. Department of Revenue, 653 N.E.2d 539, 541 (Ind. Tax Ct.
1995). Summary judgment is particularly appropriate when the question is one of
the application of the law to undisputed facts. Id. When any
party has moved for summary judgment, the Court may grant summary judgment for
any other party upon the issues raised by the motion although no motion
for summary judgment has been filed by such party. T.R. 56(B).
Jack Gray first asks the Court to certify a class in which Jack
Gray would represent itself, as well as 1536 other similarly situated motor carrier
companies. The Department contends that Jack Gray has not met the requirements
of T.R. 23(A)(1)
and therefore should not have its class certified. In
the alternative, the Department argues that Jack Gray has not satisfied the requirements
of T.R. 23(B)(1). Second, Jack Gray argues that it is entitled to
the exemptions for the second, third and fourth quarters of 1998, as well
as the first two quarters of 1999. In its Motion, the Department
contends that this Courts Bulkmatic Transportation decisions authorized it to deny the exemptions
at issue. The Court will address each issue in turn.
I. Class Certification
To become certified as a class, the proposed class must meet all
four requirements of T.R. 23(A), which are:
The class is so numerous that joinder of all members is impracticable;
There are questions of law or fact common to the class;
The claims or defenses of the representative parties are typical of the claims
or defenses of the class; and
The representative parties will fairly and adequately protect the interests of the class.
Once this is established, a class must also meet one of the three
subsections of T.R. 23(B).
See footnote In this case, Jack Gray argues that its
class meets the numerosity requirement of T.R. 23(A)(1) as well as satisfies the
requirements of T.R. 23 (B)(3).
The Court notes that the numerosity prerequisite under T.R. 23(A)(1) is not simply
a test of numbers.
Connerwood Healthcare, Inc. v. Estate of Herron, 683
N.E.2d 1322, 1326 (Ind. Ct. App. 1997), distinguished on other grounds by Martin
v. Amoco Oil Co., 696 N.E.2d 383, 385 n.3 (Ind. 1998). Instead,
the Courts inquiry focuses on whether the number of litigants would make joinder
impracticable. Id. This inquiry requires the Court to consider both judicial
economy and the ability of the class members to institute individual suits.
Id. at 1326-27.
At the hearing, Jack Gray stated that it had the ability to join
all potential claimants in one petition, rather than in a class action.
(Hrg Tr. at 65) (We can certainly join in litigation every possible taxpayer
if [each] choose[s] to come in.) Thus, judicial economy is best served
by having all claimants joined in one action. Connerwood Healthcare, Inc., 683
N.E.2d at 1326-27. In addition, the Department did not challenge the ability
of any of the potential 1536 claimants to institute his own individual suit,
based on the Departments comments at the hearing. (Hrg Tr. at 67) (If
thats what it requires under the applicable law, yes, [The Department is] willing
to [try 1536 cases].) Considering Jack Grays expressed ability to join all
potential claimants in one action and the Departments willingness to try 1536 cases,
the Court concludes that joinder of all potential members is not impracticable under
the Indiana joinder rules.
Cf. Connerwood, 683 N.E.2d at 1329. (finding that
class certification was appropriate since elderly nursing home residents could not individually protect
their own interests.) The Court holds that Jack Gray has not met
the numerosity requirement of T.R. 23(A)(1)
See footnote and DENIES Jack Grays class certification request.
II. Scope of the Bulkmatic Transportataion cases
Jack Gray next contends that the Department acted contrary to law when it
refused to grant it the exemptions for the second through fourth quarters of
1998, as well as for the first two quarters of 1999. It
contends that this Courts 1998 and 1999 Bulkmatic Transportation cases only found the
in Indiana limitations of sections 6-6-4.1-4(d) and -4.5(d) unconstitutional and not the entire
statutes. Therefore, Jack Gray argues, it is entitled to a refund for
those quarters. The Department argues that the Bulkmatic Transportation decisions held those
statutes completely unconstitutional.
In Bulkmatic II,
this Court ruled that the in Indiana language violated the
Commerce Clause of the U.S. Constitution, Bulkmatic Transp., 691 N.E.2d at 1379, and
that it is unconstitutional to tax a transaction or incident more heavily when
it crosses state lines than when it occurs entirely within the state.
Id. at 1376 (quoting Fulton Corp. v. Faulkner, 516 U.S. 325, 331, 116
S. Ct 848, 854 (1996)) (internal quotations omitted). This Court further stated
The limitation of the [ ] exemption to only those carriers using PTO
equipment in Indiana also forecloses tax neutral decisions. If a motor carrier
does not operate PTO equipment in Indiana, that carrier will be charged a
higher rate for using the roads. Additionally, the availability of the lower
rate will encourage motor carriers to accept more deliveries to Indiana than it
otherwise would. This is impermissible discrimination against out-of-state interests.
Id. at 1378. The Court concluded its analysis by saying that the
in Indiana limitation on Indianas motor carrier fuel tax exemption discriminates against interstate
commerce and forecloses tax neutral decisions, a result which is not allowed under
the Commerce Clause. Id. at 1379.
Similarly, in Bulkmatic III, this Court stated that, The practical effect of the
in Indiana limitation is to exact a different price for the use of
Indiana roads based on where the motor carrier decides to operate its PTO
equipment. Bulkmatic Transp., 715 N.E.2d at 28. The Court further stated, [T]he
basic principle is clear: a state taxation scheme must operate evenhandedly with
respect to interstate commerce. The in Indiana limitation on the proportional use
exemption violates this basic principle and therefore violates the Commerce Clause. Id.
at 29. The Court concluded its analysis by saying, when a state
tax exemption has been declared unconstitutional under the Commerce Clause, the state may
either apply the exemption in a non-discriminatory manner or remove the exemption altogether.
In this case, the Indiana General Assembly has already made that choice
by substantially amending the proportional use exemption. Id. at 34-35.
In this instance, the Department contends that the Court should either resurrect the
amended 1991 statute (which resulted in discrimination) or declare there to be no
statute at all. (Respt Amended Br. at 6.) The Court does
neither. Indiana Code Ann. § 1-1-1-8(b) (West 2000) states that every Code
provision is severable unless an exception exists.
The intent of the legislature
embodied in a statute constitutes the law. Johnson Co. Farm Bureau Coop.
Assn v. Department of State Revenue, 568 N.E.2d 578, 580 (Ind. Tax Ct.
1991), affd, 585 N.E.2d 1336 (Ind. 1992). A statute invalid in part
is not necessarily void in its entirety. State v. Morrow, 723 N.E.2d
407, 415 (Ind. 2000) (citations omitted). See also Kinslow v. Cook, 165
Ind. App. 623, 627 (1975), 333 N.E.2d 819, 822 (Ind. Ct. App. 1975).
The test of severability is performed by analyzing whether
the Legislature would
have passed the statute had it been presented without the invalid features.
Ind. Code Ann. § 1-1-1-8(b)(1) and (2); see also Morrow, 723 N.E.2d at
As noted above, the statutes, in their pre-1991 form, did not contain the
in Indiana language that this Court found unconstitutional in Bulkmatic II and III.
Supra at 3. Before the 1991 changes, section 6-6-4.1-4(d) (West 1989)
read in relevant part, The tax imposed under this section does not apply
to that portion of motor fuel used to propel equipment mounted on a
motor vehicle having a common reservoir for locomotion on the highway . .
. . Section 6-6-4.1-4.5(d) (West 1989) read in part, The tax imposed
under this section does not apply to that portion of motor fuel used
to propel the continuous movement apparatus of a ready-mix concrete truck . .
. . In 1991, P.L. 69-1991, Sec. 12 added the phrase
in Indiana after the word used in section 6-6-4.1-4(d), while section 13 added
this same language to Ind. Code Ann. § 6-6-4.1-4.5(d), but removed the ready-mix
concrete truck language. In 1999, following the Bulkmatic Transport decisions, P.L. 222-1999,
Sec. 3 removed the phrase in Indiana from section 6-6-4.1-4(d) and changed the
exemption to a credit. Section 4 did the same for Ind. Code
Ann. § 6-6-4.1-4.5(d). Therefore, given the history of these statutes, the Court
finds that the legislature would have passed them without the invalid language quoted
above. See Morrow, 723 N.E.2d at 415.
Similarly, the intent of the legislature was never to abolish the exemption completely.
See Johnson Co. Farm Bureau Coop. Assn, 568 N.E.2d at 580.
Despite the Departments contention, at no time did any of these changes affect
the core substance of the statutes. Nowhere in the language of either
the pre-1991 form of the statutes, the 1991 amendments or the 1999 amendments
is the general purpose of the statutes negated. In every form of
the statutes an exemption has been available to qualified carriers. The Court notes
that the Indiana General Assembly is presumed to have meant what it said.
Hyatt Corp. v. Department of State Revenue, 695 N.E.2d 1051, 1053 (Ind.
Tax Ct. 1998). Indeed, the legislature has consistently permitted an exemption or
credit to qualified carriers throughout the history of the statutes.
Since no recognized exception exists to make the statutes at issue non-severable, the
Court holds that Bulkmatic II and III did not find all of the
1991 amended versions of sections 6-6-4.1-4(d) and 6-6-4.1-4.5(d) unconstitutional but merely the in
Indiana limitations present in both statutes to be so. The effect of
these cases, then, was to sever the infirm part of the statutes, while
leaving the rest of the law intact. Therefore, the Department acted contrary
to law when it failed to grant the exemptions and issue refunds to
the petitioners for the quarters at issue.
For the reasons explained above, the Court denies Jack Grays Motion for class
certification under T.R. 23. The Court finds that since there is no
genuine issue of material fact in this case, Jack Gray is entitled to
judgment as a matter of law. The Departments Motion is DENIED and
summary judgment is instead granted to Jack Gray. This case is REVERSED
and REMANDED to the Department with instructions to grant the exemptions and issue
refunds to the petitioners for the quarters at issue.
On April 20, 2000 Jack Gray filed a petition to
join thirty-eight other parties, which the Court granted on May 5, 2000.
This number is taken from Jack Grays amended petition.
Trial Rule 12(B) states that:
If, on a motion, asserting the defense number (6) . . . matters
outside the pleading are presented to and not excluded by the court, the
motion shall be treated as one for summary judgment and disposed of as
provided in Rule 56.
In this case, several exhibits, including a joint stipulation by the parties, were
submitted and accepted as evidence. (Petr. Exs. 1-5.) Therefore, the Court
will treat the Departments Motion as one for summary judgment.
Bronson, 448 N.E.2d 1231, 1232 (Ind. Ct. App. 1983).
Jack Gray filed its original tax appeal on February 10,
2000. The Department, however, did not issue its final determination until February 23,
2000. As of February 10, the Court did not possess subject matter
jurisdiction, since the Court is only authorized to hear appeals that are filed
within 90 days from a final determination made by the Department, or in
the absence of a final determination, any appeal that the Department has not
acted upon within 180 days. See Ind. Code Ann. §§ 33-3-5-2(a)(1) (West
1996 and Supp. 2000), 6-8.1-9-1(c)(2) and (3) (West 2000).
Jack Gray, however, in its amended petition filed on April 20, 2000, stated,
albeit fleetingly, that the Court possessed subject matter jurisdiction, since its amended petition
was filed after the Departments final determination. (Petr. Amended Tax Appeal ¶
5.) The Court agrees. Because the amended petition was filed within
90 days of the Departments final determination, the Court has jurisdiction to consider
this original tax appeal. See Ind. Code Ann. § 6-8.1-9-1(c)(2) (West 2000).
The Department has stipulated that Jack Gray meets the requirements of
T.R. 23(A)(2)-(4). (Hrg Tr. at 67.) Therefore, the Court will limit
its discussion to whether Jack Gray has met the numerosity requirement of T.R.
23(A)(1) as well as the requirements of T.R. 23(B).
T.R. 23 (B) consists of three subsections, of which a
class must meet one. Subsection one states that a class should be
certified if inconsistent adjudications could result with respect to individual members of the
class which would establish incomparable standards of conduct for the party opposing the
class. Subsection two states that the party opposing the class has acted
or refused to act on the class claims, thereby making final injunctive or
declaratory relief with respect to the class appropriate. T.R. 23(B)(3) states that
a class action may be maintained when
[T]he court finds that the questions of law or fact common to the
members of the class predominate over any questions affecting only individual members, and
that a class action is superior to other available methods for the fair
and efficient adjudication of the controversy. The matters pertinent to the findings
the interest of members of the class in individually controlling the
prosecution or defense of separate actions; ****
the difficulties likely to be encountered in the management of a class
The Court notes that the Indiana joinder rules encourage entertaining
the broadest possible scope of action consistent with fairness to the parties.
Harlan Sprague Dawley, Inc. v. Department of Revenue, 583 N.E.2d 214, 219 (Ind.
Tax Ct. 1991).
Since Jack Gray does meet the requirements of T.R. 23(A)(1),
the Court need not address Jack Grays claims under T.R. 23(B).
The first Bulkmatic Transportation case can be found at 629 N.E.2d
955 (Ind. Tax Ct. 1994).
Section 1-1-1-8(b) (West 2000) provides for the following exceptions to
this severability rule:
(1) the remainder [of a statute] is so essentially and inseperably connected with,
and so dependent upon, the invalid provision or application that it cannot be
presumed that the remainder would have been enacted without the invalid provision or
(2) the remainder is incomplete and incapable of being executed in accordance with
the legislative intent without the invalid provision or application.
The Court was not provided any information concerning which of
the potential 1536 claimants in this case would be entitled to relief.
Therefore, the Court emphasizes that its decision is limited to only Jack Gray
Transport Inc., as well as the thirty-eight other parties joined in its petition
that each claim refunds for all the quarters at issue.