ATTORNEYS FOR PETITIONER:
FRANCINA A. DLOUHY
BAKER & DANIELS
FRED O. MARCUS
MARILYN A. WETHEKAM
HORWOOD MARCUS &
ATTORNEYS FOR RESPONDENT:
ATTORNEY GENERAL OF INDIANA
DAVID A. ARTHUR
DEPUTY ATTORNEY GENERAL
INDIANA TAX COURT
WASTE MANAGEMENT OF INDIANA, LLC )
formerly d/b/a Waste Management of )
Indiana, Inc. )
COMPANY, Successor in Merger with
v. ) Cause Nos. 49T10-0006-TA-77
INDIANA DEPARTMENT OF )
STATE REVENUE, )
ON APPEAL FROM A FINAL DETERMINATION
OF THE INDIANA DEPARTMENT OF STATE REVENUE
February 21, 2002
Waste Management of Indiana, LLC (Waste Management), formerly doing business as Waste Management
of Indiana, Inc., appeals the Indiana Department of State Revenues (Department) denial of
Waste Managements request for a refund of $369,598.68 plus interest of the Indiana
motor carrier fuel tax and motor carrier surcharge tax (collectively the MCFT) for
five quarters from April 1, 1998 to June 30, 1999. The parties
raise the issue of whether the Department acted contrary to law when it
denied Waste Managements claims for a refund of the MCFT.
For the reasons stated below, the Court GRANTS Waste Managements motion for summary
FACTS AND PROCEDURAL HISTORY
The parties do not dispute any material facts. Waste Management provides non-hazardous
waste handling and disposal services in Indiana. The company is a commercial
See footnote using vehicles with a common fuel reservoir for highway locomotion and
non-highway uses. Specifically, Waste Managements vehicles have specialized refuse collection equipment, winching
and dumping mechanisms, and vacuum equipment that consume fuel from the vehicles common
During the five quarters in dispute, Waste Management paid the MCFT at a
rate of $0.27 per gallon.See footnote From July 27, 1999 to October 18,
1999, Waste Management filed with the Department five refund claims totaling $369,598.68.
The claims sought to recover the proportional use exemptions in Indiana Code Sections
6-6-4.1-4(d) and 6-6-4.1-5(d) (collectively the Exemption) for MCFT that Waste Management paid on
fuel consumed in Indiana for the operation of its equipment mounted on its
vehicles. On March 30, 2000, the Department issued a final determination denying
Waste Managements claims, stating that the Department has no statutory authority to pay
refunds for all non-highway usage for any period BETWEEN THE DATE OF THE
TAX COURT DECISION [in
Bulkmatic Transport Co. v. Indiana Dept of State Revenue,
691 N.E.2d 1371 (Ind. Tax Ct. 1998)]
See footnote AND JULY 1, 1999, when the
statute was amended. (Petr Original Tax Appeal Attach. A (original emphasis) (footnote
On June 27, 2000, Waste Management commenced an original tax appeal with this
Court. The Department filed a motion to dismiss, which the Court denied
on September 17, 2001. On October 15, 2001, Waste Management filed a
Motion For Summary Judgment. The Court held a hearing on December 20,
2001. Additional facts will be supplied as necessary.
ANALYSIS AND OPINION
Standard of Review
This Court hears appeals from denials of refunds by the Department de novo
and is not bound by the evidence or the issues raised at the
administrative level. Ind. Code § 6-8.1-9-1(d); Jack Gray Transport, Inc. v. Dept
of State Revenue, 744 N.E.2d 1071, 1074 (Ind. Tax Ct. 2001), rehg granted
in part, 757 N.E.2d 242 (Ind. Tax Ct. 2001). Summary judgment is
appropriate only when the pleadings, depositions, answers to interrogatories, admissions, matters of judicial
notice, and any other matters on which the Court relies for purposes of
the motion show there are no genuine issues of material fact and the
moving party is entitled to judgment as a matter of law. Ind.
Trial Rule 56(C); Roehl Transport, Inc. v. Dept of State Revenue, 653 N.E.2d
539, 541 (Ind. Tax Ct. 1995).
The issue is whether the Department acted contrary to law when it denied
Waste Managements claims for a refund of the MCFT pursuant to the Exemption.
The MCFT is a tax on fuel consumed by motor carriers on
Indiana highways. Bulkmatic Transport Co. v. Dept of State Revenue, 715 N.E.2d
26, 27 (Ind. Tax Ct. 1999) (Bulkmatic III); Bulkmatic Transport Co. v. Dept
of State Revenue, 691 N.E.2d 1371, 1373 (Ind. Tax Ct. 1998) (Bulkmatic II);
see also Anderson v. Dept of State Revenue, 758 N.E.2d 597, 601 n.3
(Ind. Tax Ct. 2001). Prior to its amendment in 1999, Indiana Code
Section 6-6-4.1-4(d) provided that [t]he [MCFT] does not apply to that portion of
motor fuel used in Indiana to propel equipment mounted on a motor vehicle
having a common reservoir for locomotion on the highway and the operation of
the equipment, as determined by rule of the commissioner. Ind. Code §
6-6-4.1-4(d) (1998) (amended by Pub. L. No. 222-1999, § 3, 1999 Ind. Acts
149293) (emphasis added). Indiana Code Section 6-6-4.1-4.5(d) contained identical language with regard
to the surcharge tax. Ind. Code § 6-6-4.1-4.5(d) (1998) (amended by Pub.
L. No 222-1999, § 4, 1999 Ind. Acts 149394).
In Bulkmatic II and III, this Court held that the in Indiana clause
of sections 4(d) and 4.5(d) violated the Commerce Clause.
Bulkmatic III, 715
N.E.2d at 32; Bulkmatic II, 691 N.E.2d at 1376. In 1999, the
Legislature amended sections 4(d) and 4.5(d) by removing the in Indiana requirement.
See Pub. L. No. 222-1999, §§ 34, 1999 Ind. Acts 149294 (codified at
Ind. Code §§ 6-6-4.1-4; 6-6-4.1-4.5 (Supp. 2000)).
Until the Legislature amended sections 4(d) and 4.5(d), however, doubt remained within the
Department during the same quarters at issue in the instant case whether the
Bulkmatic decisions rendered the Exemption unconstitutional in its entirety or in regard to
the in Indiana language only. This Court removed that doubt with its
decision in Jack Gray, where the Court found that the intent of the
legislature was never to abolish the exemption completely. Jack Gray, 744 N.E.2d
at 1076. Accordingly, the Court held that Bulkmatic II and Bulkmatic 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. Id. at 1077. As a result, the Court remanded
the case to the Department and instructed it to grant the Exemption for
the five quarters that are also at issue in the instant case.
Waste Management argues that, consistent with the Courts holding in Jack Gray, it
should receive a refund because it satisfied the statutory requirements for the Exemption.
The Department contends that this Court incorrectly decided Jack Gray because the
Courts holdings in Bulkmatic II and III rendered the Exemption void in its
entirety for the five quarters at issue.
See footnote Specifically, the Department argues here
(as it unsuccessfully argued in
Jack Gray) that this Court could not, as
a matter of law, simply declare the in Indiana clause of the Exemption
void but could only declare the Exemption void in its entirety.
The Legislature has provided that every code provision is severable absent an exception.
Ind. Code § 1-1-1-8(b); Jack Gray, 744 N.E.2d at 1076. To
determine whether part of a statute is severable, a court considersnot the location
of offending language within a sentencebut whether the Legislature would have passed thestatute
had it been presented without the invalid features. Jack Gray, 744 N.E.2d
at 1076 (citing Ind. Code § 1-1-1-8(b)(1) & (2)).
The Department bases its argument on a misreading of Wright v. Steers, 179
N.E.2d 721 (Ind. 1962), where our Supreme Court noted that it was impossible
to declare one clause in an excise tax statute unconstitutional without splitting the
sentence in two.
Wright v. Steers, 179 N.E.2d 721, 725 (Ind. 1962),
rehg denied. The Court held that the statute ran afoul of Article
X, Section 1 of the Indiana Constitution, which prevents any exemptions from ad
valorem property tax except property used for municipal, educational, literary, scientific, religious or
charitable purposes. Wright, 179 N.E.2d at 724 (internal quotation marks omitted).
The Court, however, ultimately decided not to split the sentence because the legislature
intended the provisions in [the] sentence to stand together or fall together.
Id. at 725 (emphasis added); accord State v. Gilbert, 219 N.E.2d 892, 894
(Ind. 1966). In other words, legislative intentnot some supposed canon against sentence
splittingcontrolled the Courts decision in Wright. Wright, 179 N.E.2d at 725; see
also Gilbert, 219 N.E.2d at 894. Likewise, legislative intent controlled this Courts
decision in Jack Gray to void the in Indiana clause of the Exemption.
Jack Gray, 744 N.E.2d at 1076. Accordingly, the Departments argument that
this Court incorrectly decided Jack Gray is without merit.
Furthermore, the Departments affirmative defense that it was merely administering the Exemption in
a non-discriminatory manner by denying all refund requests for the five quarters at
issue is also without merit. Specifically, the Department argues that this Court
in Bulkmatic III left open the possibility of the Department removing the Exemption
altogether to remedy the discrimination at issue in that case. The Department
This Court resolved the issue of the Exemptions discriminatory effect in Bulkmatic III
when the Court held the in Indiana clause to be unconstitutional; it resolved
the issue of whether the Exemption was unconstitutional in its entirety in Jack
Gray when it held that it was not.
See Bulkmatic III, 715
N.E.2d at 34; Jack Gray, 744 N.E.2d at 1076. Thus, the question
for the Department after Jack Gray is not whether to grant the Exemption;
the Legislature intended that the Exemption be granted.
Jack Gray, 744 N.E.2d
at 1076. The question for the Department after Jack Gray simply is
who qualifies for the Exemption.
The Department tries to justify its refusal to comply with the Courts holding
in Jack Gray by relying on the following sentence from Bulkmatic III:
[W]hen a state tax exemption has been declared unconstitutional under the Commerce Clause,
the state may either apply the exemption in a nondiscriminatory manner or remove
the exemption altogether. Bulkmatic III, 715 N.E.2d at 34 (emphasis added).
The Department has apparently confused itself with the Indiana General Assembly, for it
is the Indiana General Assemblynot the Departmentto which the Court was referring in
that passage when it referred to the state.
The Courts comment in
Bulkmatic III was limited to how the Legislature could fix the unconstitutional portions
of the law, which the Legislature did in 1999. See Pub. L.
No. 222-1999, §§ 34, 1999 Ind. Acts 149294. Thus, the Department has
misconstrued Bulkmatic III.
As Jack Gray indicates, nothing in Bulkmatic III rendered the Exemption a nullity
in its entirety. Jack Gray, 744 N.E.2d at 1077. Consequently, after
Jack Gray and until the Legislature amended the law in 1999, the Department
had no choice but to obey the intent of the Legislature and grant
the Exemption to those who qualified for it. See id. Therefore,
the Departments argument that it is administering the Exemption in a nondiscriminatory matter
is without merit. The Court finds that the Department acted contrary to
law when it denied Waste Managements claims for a refund of the MCFT
for the five quarters at issue. Accordingly, the Court GRANTS Waste Management's
motion for summary judgment.
For the reasons stated, the Court GRANTS Waste Managements motion for summary judgment.
The Court REMANDS this case to the Department and ORDERS the Department
to grant Waste Managements refund claim with interest.
Waste Management filed the same refund claims with the Department under its
original name, Waste Management of Indiana, Inc., and under its current name, Waste
Management of Indiana, LLC. The Department denied both claims and Waste Management
filed an original tax appeal from both refund denials. The Court has
consolidated these two appeals.
Footnote: A carrier is defined as a person who operates or causes to
be operated a commercial motor vehicle on any highway in Indiana.
Code § 6-6-4.1-1(a).
The motor carrier fuel tax and the motor carrier surcharge tax (collectively,
the MCFT) are comprised of a $0.16 per gallon tax and an $0.11
per gallon surcharge.
Ind. Code §§ 6-6-2.5-28(a); 6-6-4.1-4(a); 6-6-4.1-4.5(a).
This Court issued its opinion in
Bulkmatic on February 13, 1998.
The Commerce Clause states: Congress shall have Power . . .
[t]o regulate Commerce . . . among the several States[.] U.S.
Const. art I, § 8, cl. 3.
For MCFT first due and payable after July 31, 1999, the Legislature
also required carriers to obtain certification for the proportional use credit, and it
capped the amount of proportional use credits the Department could approve in a
state fiscal year at $3,500,000. Pub. L. No. 222-1999 §§ 56, 1999
Indiana Acts 149496 (codified at
Ind. Code §§ 6-6-4.1-4.7; 6-6-4.1-4.8).
The Department agrees, however, that if this Court follows its decision in
Jack Gray, then Waste Management is entitled to a proportional use refund of
the MCFT it paid during the five quarters.
The sentence read, There is hereby imposed an annual license
upon motor vehicles and mobile homes, which tax shall be in lieu of
the ad valorem property tax levied for state or local purposes, but in
addition to any registration fees imposed on such vehicles. Wright, 179 N.E.2d
at 723 (citing 1961 Indiana Acts 345 § 2) (emphasis in original).
Wright Court severed the offending language of the Act, it
would have created a new excise tax in addition to the annual registration
tax and the general property tax on motor vehicles, which would have violated
the intent of the Legislature to replace the property tax with the excise
tax. See Wright, 179 N.E.2d at 725. In contrast, this Courts
decision in Jack Gray created no additional tax, but rather preserved the Exemption,
which the Legislature never intended to abolish. See Jack Gray, 744 N.E.2d
at 1076. Moreover, our Supreme Court has acknowledged that constitutional and unconstitutional
provisions may  be expressed . . . in the same sentence, and
yet be perfectly distinct and separable, so that the first may stand though
the last fall. Caldwell v. State, 119 N.E. 999, 1000 (Ind.
1918) (quoting 1 Lewis Sutherland on Statutory Construction § 296 (2d ed.)) (emphasis
In other words, the Legislature did not intend to abolish the
amended version of the Exemption in its entirety. Jack Gray, 744 N.E.2d
at 1076. Accordingly, the Departments characterization of Waste Managements position as a
request to apply the law as it existed prior to 1991 is mistaken.
Waste Management simply requests that the law be applied in a manner
consistent with Jack Gray.
Hence, the Department's attempt to distinguish the instant case from
and Bulkmatic III on the basis that its denial of the Exemption constitutes
a prospective remedy for discriminatory taxation is without merit.
The next sentence in
Bulkmatic III indicates as much: In this
case, the Indiana General Assembly has already made that choice by substantially amending
the proportional use exemption. Bulkmatic III, 3435 (emphasis added).
See Ind. Admin. Code tit. 45, r. 13-6-5 (1996) (providing for the
calculation of interest on MCFT refunds).