Title: EXXON CORPORATION, A New Jersey Corporation v. WYOMING STATE BOARD OF EQUALIZATION

State: wyoming

Issuer: Wyoming Supreme Court

Document:

EXXON CORPORATION, A New Jersey Corporation v. WYOMING STATE BOARD OF EQUALIZATION1989 WY 215783 P.2d 685Case Number: 88-132Decided: 12/07/1989Supreme Court of Wyoming
EXXON CORPORATION, A NEW 
JERSEY CORPORATION, PETITIONER,

v.

WYOMING STATE BOARD OF 
EQUALIZATION, RESPONDENT.

Petition for review from 
the First Judicial District Court, LaramieCounty, Nicholas G. Kalokathis, 
J.

Lawrence J. 
Wolfe (argued) of Holland & Hart, Cheyenne, 
Alan Poe of Holland & Hart, Englewood, 
Colo., and Kenneth Reither, Exxon Co. 
U.S.A., Houston, Tex., for petitioner.

Joseph B. Meyer, 
Atty. Gen., Peter J. Mulvaney, Deputy Atty. Gen., Michael L. Hubbard, Senior 
Asst. Atty. Gen. (argued), and Robert J. Walters, Asst. Atty. Gen., for respondent.

Before CARDINE, C.J., and THOMAS, URBIGKIT, MACY 
and GOLDEN, JJ.

CARDINE, Chief 
Justice.

[¶1.]     Petitioner, Exxon 
Corporation, challenges the State's imposition of a use tax on pipe purchased 
out of the state and installed in a pipeline operating in Wyoming and the failure of the State to grant Exxon a 
credit against that tax for taxes already paid to the state of Colorado. The State Board 
of Equalization found that the tax was properly assessed, that it did not 
violate the commerce clause of the United States Constitution, and that the 
denial of the offsetting credit was proper.

[¶2.]     We 
affirm.

[¶3.]     Petitioner states the 
issues as:

"I. Did the Board err in 
upholding a Wyoming use tax assessment against Exxon's use of certain line pipe 
in Wyoming, when the first use of that pipe, as the term `use' is defined under 
Wyoming law, occurred in Colorado?

"II. Did the Board err in 
refusing to grant a credit against the Wyoming 
use tax assessment for taxes paid by Exxon to the State of Colorado with respect to the pipe, where such taxes were 
legally imposed under Colorado law?

"III. Did the Board's 
imposition of the Wyoming use tax against 
Exxon's use of the pipe in Wyoming, without 
providing a credit for the Colorado tax paid by Exxon, violate the 
commerce clause of the United States Constitution?"

Respondent 
phrases the issues:

"I. Is the decision of 
the appellee [respondent] State Board of Equalization holding appellant 
[petitioner] liable for Wyoming use taxes despite initial delivery of the 
underlying property to the State of Colorado is not [sic] arbitrary, capricious, 
an abuse of discretion, contrary to law, or unsupported by substantial 
evidence?

"II. Does the decision of 
the appellee [respondent] below violate the Commerce Clause of the United States 
Constitution?"

[¶4.]     The essential facts of 
this case are not disputed and are as follows. Between February and May of 1985, 
Exxon Corporation (Exxon), a New Jersey 
corporation, purchased 258,000 feet of 24-inch pipe from Marubeni American 
Corporation (Marubeni), a Texas vendor. The pipe, costing a total of 
$13,179,894.83, was to be installed as part of the Shute Creek to Rock SpringsCO[2] 
pipeline in Wyoming. After purchase, the pipe was shipped 
from Kasaoka, Japan, through Portland, Oregon, to 
Fort Collins, Colorado. There it was inspected, sand 
blasted, and coated with a thin-film epoxy, processes necessary for the ultimate 
use of the pipe. After these processes were completed, which took approximately 
90 to 120 days, the pipe was shipped to Wyoming and installed in the 
pipeline.

[¶5.]     Exxon later discovered 
through an internal audit that Marubeni had not collected any tax with respect 
to the pipe. Exxon determined that a 3 percent tax was due the state of 
Colorado and 
voluntarily filed an amended return covering the months of March and May, 1985, 
and paid a tax in the amount of $395,396.84 plus interest.

[¶6.]     Later, the Wyoming 
Department of Revenue and Taxation (Department) conducted a sales and use tax 
audit of Exxon, for the period of March 1, 1983, through February 28, 1986; the 
Department determined that Exxon was liable for a 4 percent use tax to the state 
of Wyoming on 
the pipe, pursuant to W.S. 39-6-504, 39-6-412, and 39-6-518.1 In a final administrative decision, 
the Department concluded that the first use of the pipe2 had occurred in Wyoming and assessed a 
use tax against Exxon in the amount of $527,195.79 plus interest. In assessing 
the tax, the Department further denied Exxon a credit against the use tax for 
the amount of tax previously paid to Colorado 
because the tax paid to Colorado was a use tax for which no credit was 
permitted under the governing statutes.

[¶7.]     Exxon timely appealed 
the Department's assessment to the State Board of Equalization (Board). At an 
evidentiary hearing, Exxon contended that its use of the pipe in Wyoming was not subject to the use tax because the "first 
use" of the pipe, as that phrase is contemplated in the tax commission's rules 
and regulations and as the term "use" is defined by Wyoming law, occurred in Colorado. Alternatively, Exxon argued that if 
a use tax were indeed owed, such a tax should be offset by the amount of tax 
paid to the state of Colorado as a result of the activities with respect to the 
pipe in that state. Finally, Exxon contended that the imposition of the use tax 
by Wyoming, without the offsetting credit for 
the tax already paid to Colorado, constituted a violation of the 
commerce clause by creating an undue burden on and discrimination against 
interstate commerce. The Board rejected each of Exxon's arguments and affirmed 
the use tax assessment against Exxon and the denial of the offsetting 
credit.

[¶8.]     Exxon paid the 
assessment and interest under protest and filed a timely petition for review of 
the Board's order in the First Judicial District Court. Pursuant to Rule 12.09, 
W.R.A.P., the case was certified to this court.

[¶9.]     When a case is 
certified to this court under Rule 12.09, "we must review the decision of the 
[Board] under the appellate standards applicable to a reviewing court of the 
first instance." Application of CampbellCounty, 731 P.2d 1174, 1175 (Wyo. 1987). The scope of 
review of an agency action is established in W.S. 
16-3-114(c):

"To the extent necessary 
to make a decision and when presented, the reviewing court shall decide all 
relevant questions of law, interpret constitutional and statutory provisions, 
and determine the meaning or applicability of the terms of an agency action. In 
making the following determinations, the court shall review the whole record or 
those parts of it cited by a party and due account shall be taken of the rule of 
prejudicial error. The reviewing court shall:

"(i) Compel agency action 
unlawfully withheld or unreasonably delayed; and

"(ii) Hold unlawful and 
set aside agency action, findings and conclusions found to 
be:

"(A) Arbitrary, 
capricious, an abuse of discretion or otherwise not in accordance with 
law;

"(B) Contrary to 
constitutional right, power, privilege or immunity;

"(C) In excess of 
statutory jurisdiction, authority or limitations or lacking statutory 
right;

"(D) Without observance 
of procedure required by law; or

"(E) Unsupported by 
substantial evidence in a case reviewed on the record of an agency hearing 
provided by statute."

See Safety 
Medical Services, Inc. v. Employment Security Comm'n, 724 P.2d 468, 471-72 
(Wyo. 1986); Trout v. Wyoming Oil and Gas Conservation Comm'n, 721 P.2d 1047, 
1049 (Wyo. 1986); Board of CountyComm'rs v. Teton County Youth Services, Inc., 652 P.2d 400, 411 (Wyo. 
1982). This court must examine the entire record to determine if there is 
substantial evidence to support the agency's findings; if an agency's decision 
is supported by substantial evidence, this court cannot properly substitute its 
judgment for that of the agency and must uphold the agency's findings on appeal. 
Trout, 721 P.2d  at 1050. Substantial evidence is "relevant evidence which a 
reasonable mind might accept in support of the conclusions of the agency." 
Id.

[¶10.]  In its brief on appeal, Exxon claims that 
the Board's order upholding the use tax assessment is arbitrary and capricious, 
unsupported by substantial evidence, and lacks statutory right in that it alters 
or impairs "the statutory definition of `use.'" The Board made findings of fact 
and conclusions of law in support of its order. Exxon agrees that the facts are 
not in dispute but contends that the Board's application of relevant law to the 
facts was erroneous.

[¶11.]  The Wyoming use tax statutes, W.S. 39-6-501 through -518, 
impose an excise tax upon "persons storing, using or consuming tangible personal 
property" in Wyoming. W.S. 39-6-504(b). The legislature 
intended that the use tax be complementary to the Wyoming sales tax. 
Morrison-Knudson Co., Inc. v. State Board of Equalization, 58 Wyo. 500, 135 P.2d 927, 
932 (1943). See also Chap. IV, § 3, Rules and Regulations of the Wyoming State 
Tax Commission - Department of Revenue & Taxation. The use tax is applied to 
property purchased outside the state and brought into the state for storage, use 
or consumption, so as to put that property on an equal footing with property 
purchased within the state that is subject to the Wyoming sales tax. 
Id.

[¶12.]  Wyoming has placed a self-imposed limitation 
on the broad authority to tax property bought outside but used inside this 
state. Through Chapter IV, §§ 3 and 8 of the Rules and Regulations of the 
Wyoming State Tax Commission - Department of Revenue and Taxation (hereinafter 
referred to as Chap. IV, §§ 3 and 8), the State is permitted to apply the use 
tax to particular tangible personal property bought out of state only if the use 
of the property in Wyoming constitutes its "first use."3 "Use" is defined in Wyoming as "the exercise 
of any right or power over tangible personal property incident to ownership or 
by any transaction where possession is given by lease or contract." W.S. 
39-6-502(a)(vii). By implication, and as a logical extension, if the first use 
of the property occurs in another state, Wyoming's use tax is 
inapplicable.

[¶13.]  Petitioner argues that the use tax 
imposed by Wyoming was improper because the "first use" of the pipe, as that 
phrase is contemplated by Chap. IV, § 3 and as the term "use" is statutorily 
defined, occurred in Colorado through its delivery and the coating process that 
occurred there. Thus, the question we must determine is whether the activities 
in Colorado constitute a bona fide first use of 
the property rendering the Wyoming use tax inapplicable. Exxon 
characterizes the actions taken in Colorado with respect to the pipe as an 
exercise of a "right or power over tangible personal property incident to 
ownership." W.S. 39-6-502(a)(vii). We disagree with this 
characterization.

[¶14.]  The activities in Colorado were merely processes necessary to prepare the 
pipe for the use intended, i.e., its installation into and ultimate use as part 
of the Shute Creek CO[2] pipeline in Wyoming. The Board properly concluded that it 
is a use of the property in the manner for which it was designed, constructed or 
intended that constitutes a "first use" as that phrase was intended by the 
Wyoming Tax Commission in Chap. IV, § 3. When making the determination as to 
whether the first use of the property occurred in Wyoming or another state, the 
Tax Commission looks to the nature of the property, its intended use, and 
whether the property was actually used in that manner in the other state. We 
hold that the Board properly found that the first use in this case was the 
incorporation of the pipe into the Shute Creek CO[2] 
pipeline.

[¶15.]  We next address Exxon's claim that the 
Board should have granted Exxon a credit for the tax paid to Colorado. As noted 
earlier, the general goal of use taxes is to place in-state sellers on the same 
footing as out-of-state sellers. Annotation, Use Tax - Credit for Out-of-State 
Taxes, 31 A.L.R.4th 1206 (1984). In furtherance of this goal, many states, 
including Wyoming, grant credits against their use taxes 
for sales taxes actually paid to other states on the same property. Testimony at 
the Board's hearing from a representative of the Department indicates that it is 
the routine practice of the Department to grant an offsetting credit for sales 
taxes legally imposed by another state. In this proceeding, however, the facts 
supported the Department's decision to refuse the credit. In its order, the 
Board found that the tax paid by Exxon to Colorado was a use tax and not a sales tax under 
Colorado 
regulation 26.202, Colorado Administrative Code. There is no statute, regulation 
or applicable principle of law which requires the Board to grant a credit for a 
use tax paid in another state. Under these circumstances, we are compelled to 
hold that the Board properly denied Exxon a credit for the use tax paid in 
Colorado.

[¶16.]  Exxon finally contends that the 
imposition of the Wyoming use tax on the use of 
the pipe in Wyoming is an unconstitutional burden on 
interstate commerce in violation of the commerce clause of the United States 
Constitution and that the application of the tax results in double taxation of 
the pipe. Section 8 of Art. I of the United States Constitution states that 
"Congress shall have Power * * * to regulate Commerce * * * among the several 
States."

[¶17.]  The seminal case regarding the issue of 
validity of a state use tax vis-a-vis the commerce clause is Complete Auto 
Transit, Inc. v. Brady, 430 U.S. 274, 97 S. Ct. 1076, 51 L. Ed. 2d 326 (1977). In 
that case, the United States Supreme Court articulated a four-prong test for 
analyzing whether a particular state tax can be upheld under the commerce 
clause. According to Complete Auto, a tax will survive a commerce clause 
challenge "when the tax [1] is applied to an activity with a substantial nexus 
with the taxing State, [2] is fairly apportioned, [3] does not discriminate 
against interstate commerce, and [4] is fairly related to the services provided 
by the State." Complete Auto, 430 U.S.  at 279, 97 S. Ct.  at 1079. Here, 
petitioner argues that the tax in question fails to fulfill the second and third 
requirements of the test, that it is not fairly apportioned, and that it 
discriminates against interstate commerce.

[¶18.]  The commerce clause does prohibit state 
regulations that either discriminate against interstate commerce or impose a 
burden on commerce that clearly outweighs the legitimate local benefits produced 
by the regulation. Henneford v. Silas Mason Co., 300 U.S. 577, 57 S. Ct. 524, 81 L. Ed. 814 (1937). In Complete Auto, however, the Supreme Court 
rejected the abstract notion that interstate commerce is immune from state 
taxation. Complete Auto, 430 U.S.  at 288, 97 S. Ct.  at 1083. The 
Court recognized that, with certain exceptions, interstate commerce could be 
required to pay its fair share of state taxes. Complete Auto, 430 U.S.  at 281, 97 S. Ct.  at 1080. 
Moreover, the Constitution does not prohibit uniform nondiscriminatory taxes on 
property merely because that property was subject to tax elsewhere. Nowak and 
Rotunda, Sales and Use Tax Credits, Discrimination Against Interstate Commerce, 
and the Useless Multiple Tax Concept, 20 U.C.Davis L.Rev. 273, 300 
(1987).

[¶19.]  The taxing scheme employed by Wyoming 
fulfills each prong of the Complete Auto test: (1) the activity being taxed has 
a substantial nexus to the taxing state; the pipe was delivered in Wyoming and 
installed in a pipeline operating solely in this state; (2) it is fairly 
apportioned, since it taxes only the use of the pipe in Wyoming; (3) it does not 
discriminate against interstate commerce because the tax is designed to 
compensate the State for revenue lost on out-of-state purchases of goods used in 
this state and is equal to the sales tax on the same goods had they been 
purchased in Wyoming, W.S. 39-6-404(a); and (4) it is fairly related to 
state-provided services that facilitate Exxon's use of the pipe in Wyoming, 
including fire and police protection for the pipeline facilities and state 
maintenance of roads to the area. See D.H. Holmes Co., Ltd. v. McNamara, 486 U.S. 24, ___, 108 S. Ct. 1619, 1624, 100 L. Ed. 2d 21 (1988). Because each of the 
prongs is fulfilled, we hold that the use tax imposed by the Board does not 
violate Art. I, § 8 of the United States Constitution. We need 
not speculate whether the tax Exxon voluntarily paid Colorado could survive 
this same analysis.

[¶20.]  In light of the foregoing, we hold that 
the Board's decision was not arbitrary or capricious, an abuse of discretion, 
nor in excess of statutory authority. The Board's decision was supported by 
substantial evidence.

[¶21.]  Affirmed.

FOOTNOTES

1 W.S. 39-6-504 provides 
for a 3 percent excise tax on persons storing, using or consuming tangible 
personal property in the state. An additional 1 percent tax is imposed pursuant 
to W.S. 39-6-412 and 39-6-518, which allow a county to impose its own excise tax 
upon storage, use and consumption of tangible personal property in the county. 
SweetwaterCounty, where the pipe was 
installed, elected to impose the additional tax.

2 See infra fn. 3, for 
wording of Chapter IV, § 3 of the Rules and Regulations of the Wyoming State Tax 
Commission.

3 Chap. IV, § 3 
provides:

"The purchase or lease of 
all tangible personal property outside this state for first use, storage or consumption within 
this state, is subject to use tax, providing the same transaction would be 
subject to sales tax if the transaction had occurred wholly within the State of 
Wyoming." 
(emphasis added)

Chap. IV, § 8 
provides:

"When tangible personal 
property is purchased in another state and is brought into Wyoming for use, the burden is upon the purchaser to show 
that there was a bona fide first use of the property outside the State of 
Wyoming."

URBIGKIT, Justice, 
dissenting.

[¶22.]  Appellant, Exxon Corporation (Exxon), 
purchased Japanese manufactured pipe for construction of its billion dollar 
Shute Creek to Rock Springs, 
Wyoming carbon dioxide natural gas 
production plant. The raw pipe was shipped by boat to Portland, Oregon, reloaded 
by rail, and unloaded in Fort 
Collins, Colorado. 
Following processing, the pipe was reloaded for delivery to the industrial plant 
for line installation in Wyoming. With an invoice price of 
approximately $13 million, Exxon paid a $421,839.38 tax to the state of 
Colorado, 
$395,396.84 plus interest of $26,442.54, calculated by a three percent 
transaction tax. It is the additional $703,551.28 tax assessed by the Wyoming 
Department of Revenue and Taxation as a use tax computed at four percent, 
$527,195.79 plus $176,355.49 in interest, which creates this 
appeal.

[¶23.]  I dissent philosophically in opposition 
to a double tax imposed with both adverse affect on interstate commerce and 
significant contribution to the appearance of Wyoming as inhospitable to desperately needed 
economic development. Technically, I would find a first use in Colorado, as contrary to the conclusion of the Wyoming 
Department of Revenue and Taxation, with resulting credit to be given by 
Wyoming for the Colorado tax paid. Present justification for 
the double personal property enterprise or transaction tax following acquisition 
and initial processing in Colorado and reshipment for final installation in 
Wyoming on the basis that the tax in Colorado was a use tax and not a sales tax 
fails, in my opinion, to satisfy a commerce clause federal constitutional 
challenge.

[¶24.]  The Colorado events require factual examination. 
The pipe was unloaded in Portland, Oregon, shipped by interstate commerce, probably through 
Wyoming, to Fort 
Collins to be processed for ultimate use, and then reloaded and 
shipped for installation in Wyoming. Amended purchase orders were executed 
to secure the pipe preparation services of Energy Coating Company (Encoat) in 
Fort Collins, 
which accepted delivery from the Japanese shipper, Marubeni American 
Corporation, as an agent for Exxon. Processing by Encoat in Fort Collins included 
unloading, inspection, sandblasting, coating and reloading as a 90 to 120-day 
process, totalling an order value subject to time adjustments of $709,500. A 
third-party hauler accepted delivery from Encoat to deliver the pipe to the 
Exxon plant site in Wyoming. Exxon took technical possession and 
acquired title to the pipe following delivery "F.O.B.," where payment was made 
to the vendor. This record reveals no conflict of fact on these transactional 
events.

[¶25.]  The significant dispute in this appeal 
considers whether a first use and consequent taxable event occurred in 
Colorado and, if so, whether there was a basis 
upon which credit against that tax should have been given on the subsequent tax 
levied in Wyoming. In order to escape the persuasion of 
constitutional arguments otherwise available, it is the apparent thesis of the 
Wyoming Department of Revenue and Taxation that payment of the tax in Colorado was an unnecessary gift and only Wyoming had a right to tax the product during transit and 
until actually consumed in use at the Wyoming gas plant. The majority rejects the 
first use in Colorado as "merely processing 
necessary to prepare the pipe for its use intended, i.e. its installation into 
and ultimate use as part of the Shute Creek CO2 pipeline in Wyoming."

[¶26.]  Thus presented are the strange 
ingredients in this case. First, it is said the pipe was not used in Colorado, 
it is then argued the Colorado tax was a use tax, and since the Colorado 
assessment was for a use tax, to be opposite of a sales tax, no credit would be 
given for the Wyoming tax. I perceive a clear first use in Colorado to process for 
ultimate usability. Next, I find no constitutional basis to differentiate the 
transactional tax in Colorado to be a use tax 
and then discern the pipe was not used until final destination in Wyoming.

[¶27.]  In simple yet absolute terms, this 
adaptation by taxing authorities as now approved by this majority permits a 
double taxation of a product in the interstate stream of commerce. It would be 
no different than if the manufacturing exemption might be ignored so each 
jurisdiction could assess the transactional tax on raw materials and components 
until the finished car could be completed and finally delivered to a Wyoming buyer. By then, 
the tax burden would make the price beyond the capacity of most prospective 
purchasers. The all-embracing Wyoming depression, as a product of the 
national decade of greed of the 1980's, needs no acceleration from appearances 
of additional tax greed when wealth producers and not wealth removers are 
required to restore the economic capacities for this 
state.

[¶28.]  My review of the premier United States 
Supreme Court decisions does not lead to a countervailing persuasion. In the 
Grand Coulee Dam construction case, Justice Cardozo said:

A use tax is never 
payable where the user has acquired property by retail purchase in the state of 
Washington, except in the rare instances in 
which retail purchases in Washington are not subjected to a sales tax. 
On the other hand, a use tax is always payable where the user has acquired 
property by retail purchase in or from another state, unless he has paid a sales 
or use tax elsewhere before bringing it to Washington. * * *

* * * * * 
*

Equality is the theme 
that runs through all the sections of the statute. There shall be a tax upon the 
use, but subject to an offset if another use or sales tax has been paid for the 
same thing. This is true where the offsetting tax became payable to Washington by reason of 
purchase or use within the state. It is true in exactly the same measure where 
the offsetting tax has been paid to another state by reason of use or purchase 
there. No one who uses property in Washington after buying it at retail is to be 
exempt from a tax upon the privilege of enjoyment except to the extent that he 
has paid a use or sales tax somewhere. Every one who has paid a use or sales tax 
anywhere, or, more accurately, in any state, is to that extent to be exempt from 
the payment of another tax in Washington.

Henneford v. 
Silas Mason Co., 300 U.S. 577, 581-84, 57 S. Ct. 524, 
526-27, 81 L. Ed. 814 (1937). Consequently, we can see the logic of Justice 
Cardozo would deny validity to the dual tax imposed here.

[¶29.]  Complete Auto Transit, Inc. v. Brady, 430 U.S. 274, 97 S. Ct. 1076, 51 L. Ed. 2d 326, reh'g denied 430 U.S. 976, 97 S. Ct. 1669, 52 L. Ed. 2d 371 (1977) does not 
lead to a contrary persuasion. A general review of the United States Supreme 
Court decisions in these cases reveals two categories. The first category is a 
gross receipts tax and the second is, as present here, a personal property 
acquisition or use tax. Emplaced in this case as different from Complete Auto 
Transit, Inc., which was measured by gross receipts, and similar to Henneford, 
which was measured by product acquisition, interstate commerce can be 
differently affected by embracing tax as an acquisitions tax rather than a gross 
receipts tax. Applying the Complete Auto Transit, Inc. criteria as a broader 
transactional tax limitation, we are still presented discrimination against 
interstate commerce as a result from the double tax assessed here, first by 
Colorado and then again after initial processing by Wyoming. Likewise, as a 
matter of definition, a double tax is not fairly apportioned (prong 2 of the 
test in Complete Auto Transit, Inc.). W.S. 39-6-505(a)(iii) requires that 
Wyoming's taxation system be in harmony with 
the laws and constitutions of the United States and this state. It was 
not altruistic of the legislature to provide this exemption, it is founded in 
constitutional law to assure the transactional tax is constitutional.1

[¶30.]  Nor are the limiting requirements of the 
Rules and Regulations of the Wyoming Tax Commission-Department of Revenue and 
Taxation, Chapter IV, Sections 3 and 8 altruistic either. Those regulations 
recognize that double application of the transaction tax impinges upon the 
Cardozo criteria prohibiting dual taxation from the state burden impressed upon 
interstate commerce. Unfortunately, and I suggest unconstitutionally, we accord 
general recognition to the transaction tax designated as a sales tax, but with 
undefinable logic to not apply where our state authorities determine that the 
foreign state tax was a use tax. It is not unreasonable to reflect if used 
there, it cannot be re-used for constitutional taxing purposes here. Recognizing 
the second character of reversible agency action which is found to be contrary 
to constitutional right, power, privilege, or immunity, I would reverse this 
decision and require appropriate apportionment to avoid a double burden on the 
property when it moves into Wyoming through the interstate commerce 
stream. How much more significant can we find a burden on interstate commerce 
than are accommodated by these facts. Had the Encoat plant been located in 
Cheyenne, this pipe could only have been taxed 
once; but with location of first processing in Colorado, a dual tax on the same transaction 
is created.

[¶31.]  In technical character, this appeal 
presents two separate inquiries. The first is procedural in analysis of the 
standard of deference to be given to the first use decision of the Wyoming 
Department of Revenue and Taxation. The second constitutionally implicates the 
unapportioned double tax on the pipe derived separately from acts of both 
Colorado and now Wyoming as it affects interstate commerce within the purview of 
Complete Auto Transit, Inc. and the "internal consistency" criteria concept by 
the United States Supreme Court in more recent cases, including most currently, 
Goldberg v. Sweet, ___ U.S. ___, 109 S. Ct. 582, 102 L. Ed. 2d 607 
(1989).

[¶32.]  Under the first issue, the majority 
introduces its opinion as though the Wyoming State Board of Equalization's 
decision involves a question of fact to which judicial deference is appropriate 
during review. I would argue the Wyoming State Board of Equalization's decision 
involves a question of law to which deference is inappropriate. This majority 
gives no deference to the view of the law taken by the trial court or 
administrative agency. We review legal conclusions for correctness as an 
original inquiry. Griffin v. Bethesda Foundation, 609 P.2d 459 (Wyo. 1980); Ron Case Roofing and Asphalt Paving, Inc. v. 
Blomquist, 773 P.2d 1382 (Utah 1989); Pulsfus 
Poultry Farms, Inc. v. Town of Leeds, 149 Wis.2d 797, 440 N.W.2d 329 (1989). A 
reviewing court is directed to "decide all relevant questions of law, interpret 
constitutional and statutory provisions, and determine the meaning or 
applicability of the terms of an agency action." W.S. 16-3-114(c). While the 
latter portion of this statute seems sufficient to direct this court to 
determine the Wyoming Department of Revenue and Taxation's meaning of "first 
use" under the statutory framework of "use" provided by the legislature in W.S. 
39-6-502(a)(vii), BHP Petroleum Co., Inc. v. State, Wyoming Tax Com'n, 766 P.2d 1162, 1165 (Wyo. 1989) guides our understanding of when a question for review is 
one of law. BHP Petroleum Co., Inc. draws support from Rocky Mountain Oil and 
Gas Ass'n v. State, 645 P.2d 1163 (Wyo. 1982), which deals in part with the 
intersection of a declaratory judgment action and a court also serving as an 
appellate court for the same issue. The declared principle which guides the 
granting or withholding of declaratory relief by that court is the guiding 
principle which separates questions of law from questions of 
fact.

[W]here the relief 
desired is in the nature of a substitution of judicial decision for that of the 
agency on issues pertaining to the administration of the subject matter for 
which the agency was created, the action should not be entertained. If, however, 
such desired relief concerns the validity and construction of agency 
regulations, or if it concerns the constitutionality or interpretation of a 
statute upon which the administrative action is, or is to be, based, the action 
should be entertained.

Id. at 
1168.

[¶33.]  Accordingly, I would not defer to the 
Wyoming Department of Revenue and Taxation's construction of "first use" as the 
"use of the property in the manner for which it was designed, constructed or 
intended." I would hold under W.S. 16-3-114(c)(ii)(C) the Wyoming Department of 
Revenue and Taxation acted in excess of its authority as it is not authorized to 
overwhelm the effect of the legislature's definition of "use" by the 
construction given its term "first use."

[¶34.]  The Wyoming legislature defined "use" to mean "the 
exercise of any right or power over 
tangible personal property incident to ownership or by any transaction where 
possession is given by lease or contract." W.S. 39-6-502(a)(vii) (emphasis 
added). I would confine the application of the Wyoming Department of Revenue and 
Taxation's term "first use" to operate only within the parameter established by 
the legislative definition of "use."

[¶35.]  There is no dispute in the record that 
Exxon took possession of the pipe in Colorado by contract and exercised a power of 
ownership by contracting to have the pipe coated with epoxy. This is the 
exercise of "any right or power over 
tangible personal property incident to ownership * * *." W.S. 39-6-502(a)(vii) 
(emphasis added). The legislature's definition of "use" captures the transaction 
which occurs by Exxon's exercise of a power of ownership. If a transaction can 
be captured by the legislature's definition of "use," I would not permit that 
transaction to escape capture by the construction of a term provided by an 
agency. I believe the Wyoming State Board of Equalization's conclusion of what 
the Wyoming Department of Revenue and Taxation meant by "first use" is improper 
under such clear language by the Wyoming legislature.

[¶36.]  My dissent on the first issue is not 
confined to the issue of deference on a question of law. I do not understand the 
precedent relied on by the majority to support the need for judicial deference 
to an agency alongside the facts in this case.

[¶37.]  In Safety Medical Services, Inc. v. 
Employment Sec. Com'n of Wyoming, 724 P.2d 468, 472 (Wyo. 1986), cited by the 
majority, ante at 689, Safety Medical Services, Inc. argued the plain language 
of a Wyoming statute was sufficient to undermine the Wyoming Employment Security 
Commission's interpretation of what constituted "misconduct." We disagreed 
because the definition given "misconduct" by that agency was "in accord with 
definitions in other jurisdictions and expresses the plain, commonly understood 
meaning of the word misconduct." Id. at 472. We held that way because we saw 
the Wyoming Employment Security Commission's definition of misconduct to be "in 
accord with the intent of the legislature." Id. at 473. For the reasons explained above, 
this seems not to be the case here. I do not find where the construction given 
"first use" by the Wyoming Department of Revenue and Taxation is in accord with 
other jurisdictions, nor do I find that definition to be the "commonly 
understood meaning" of the phrase "first use." See Maryland v. Louisiana, 451 U.S. 725, 101 S. Ct. 2114, 68 L. Ed. 2d 576 (1981); Great American Airways v. 
Nevada State Tax Com'n., 101 Nev. 422, 705 P.2d 654 (1985), cert. denied 479 U.S. 817, 107 S. Ct. 74, 93 L. Ed. 2d 31 (1986); and United Parcel Service, Inc. v. 
State, Dept. of Revenue, 102 Wn.2d 355, 687 P.2d 186 (1984); cf. Burroughs Corp. 
v. State Bd. of Equalization, 153 Cal. App. 3d 1152, 200 Cal. Rptr. 816, 820 
(1984), "primary purpose" test used to resolve taxable use from exempt use. The 
argument can reasonably be made that had the Wyoming Department of Revenue and 
Taxation's meaning of "first use" been commonly understood, it would have 
unveiled the sources which indicate such common construction accorded "first 
use."

[¶38.]  As for the two remaining precedents cited 
by the majority, Trout v. Wyoming Oil and Gas Conservation Com'n, 721 P.2d 1047, 
1049 (Wyo. 1986) says no more than this court will not substitute its judgment 
for the agency regarding the findings or conclusions necessary to questions of 
fact. Board of County Com'rs of Teton County v. Teton County Youth Services, 
Inc., 652 P.2d 400, 411 (Wyo. 1982) simply explains the need for a record to be 
developed for judicial review. Both propositions are established principles in 
Wyoming law, 
but do not add to the majority's dialogue.

[¶39.]  Finally, this result collides with common 
sense. The Wyoming Department of Revenue and Taxation held that Exxon must pay a 
use tax to Wyoming because the tax it paid Colorado was actually a use tax and 
not a sales tax - for which credit would have been given; yet if the tax paid in 
Colorado was actually for its use of the property, how could "first use" occur 
in Wyoming?

[¶40.]  While I disagree with the majority that 
Wyoming law permits an agency conclusion that Exxon's first use of its property 
in Colorado was not "first use", I do agree there is no state imposed 
requirement that Wyoming grant to Exxon a credit against our use tax for the 
"use tax" paid to Colorado. Beyond that narrowing to our disagreement, I would 
hold the requirement to grant that credit is imposed by the United States 
Constitution. If our national constitution requires a credit under the facts of 
this case, the answer to Exxon's third issue, that Wyoming's failure to 
grant it credit collides with the commands of the Commerce Clause, disposes of 
the second issue.

[¶41.]  This majority adduces that the Wyoming 
State Board of Equalization was correct in concluding that the Wyoming 
Department of Revenue and Taxation properly characterized the transactional tax 
paid to Colorado to be a use tax rather than a sales 
tax. That characterization is required to avoid the requirement under Wyoming law that a sales 
tax legally imposed by and paid to another state be credited against our use 
tax. Wyoming now imposes a use tax on property 
for which it is claimed that only a use tax was paid to Colorado. This majority 
then detects no constitutional hardship to multiple use taxes under this 
scenario. That conclusion and the argument used to support it have yet to be 
finally tested since the United States Supreme Court has not decided if the 
national constitution requires a sales or use tax paid in one state be credited 
against a use tax assessed in another state.2

[¶42.]  For the majority to be confident in their 
claim, their supporting argument should account for more than the four-pronged 
test in Complete Auto Transit, Inc., 430 U.S. 274, 97 S. Ct. 1076. It should also 
account for the relatively recent, Container Corp. of America v. Franchise Tax 
Bd., 463 U.S. 159, 103 S. Ct. 2933, 77 L. Ed. 2d 545, reh'g denied 464 U.S. 909, 
104 S. Ct. 265, 78 L. Ed. 2d 248 (1983), and obviously evolving, American Trucking 
Associations, Inc. v. Scheiner, 483 U.S. 266, 107 S. Ct. 2829, 97 L. Ed. 2d 226 
(1987), "internal consistency" test now used to measure cumulative tax burdens 
from multiple taxes on interstate commerce. Although this particular test is 
new, the problems arising from notions of fair apportionment and interstate 
discrimination from cumulative tax burdens were recognized a half century ago. 
So understood, this "internal consistency" test relates to the second and third 
prongs of the Complete Auto Transit, Inc. test. The question of effective 
discrimination against interstate commerce cannot be answered by reciting 
Wyoming's 
independent right to tax Exxon's use of its pipe.

[T]he state may not 
impose certain taxes on interstate commerce, its incidents or 
instrumentalities, which are no more in amount or burden than it places on its 
local business, not because this of itself is discriminatory, cumulative or 
special or would violate due process, but because other states also may have the 
right constitutionally, apart from the commerce clause, to tax the same thing 
and either the actuality or the risk of their doing so makes the total burden 
cumulative, discriminatory or special.

International 
Harv. Co. v. Department of Treasury of State of Indiana, 322 U.S. 340, 358, 64 S. Ct. 1019, 1035, 
88 L. Ed. 1313 (1944) (emphasis added).3 There is an easy way to see the 
danger which the "internal consistency" test appears designed to detect. Imagine 
corporations as ships and taxes as barnacles. If ships acquire new barnacles at 
each state line, there will come a point when the ships which make the longest 
journeys will exhibit the most drag because they will have acquired the most 
barnacles. These ships are disadvantaged unfairly relative to the local carriers 
and ultimately may not competitively get to a particular final 
destination.

[¶43.]  In Container Corp. of America, 463 U.S. 159, 103 S. Ct. 2933, the United States Supreme Court announced an "internal 
consistency" test which attached to apportionment questions on state income 
taxes for interstate businesses. Under the "internal consistency" approach, the 
United States Supreme Court imagined what would happen if all the states 
duplicated the defendant-state's taxing scheme. To pass constitutional muster, 
the formula could not result in "more than all of the unitary business' income 
being taxed" if repeated by all states. Id. at 169, 103 S. Ct.  at 
2942.

[¶44.]  In Armco, Inc. v. Hardesty, 467 U.S. 638, 
104 S. Ct. 2620, 81 L. Ed. 2d 540, reh'g denied 469 U.S. 912, 105 S. Ct. 285, 83 L. Ed. 2d 222 (1984), the court's decision of whether West Virginia's business and 
occupation tax scheme was constitutionally acceptable depended on the outcome of 
the "internal consistency" test applied to a non-income tax scheme inquiry. In 
hindsight, the elasticity to the "internal consistency" test first appeared in 
Armco, Inc. when the test moved effortlessly from income tax adaptations to 
excise tax systems.

[¶45.]  After Tyler Pipe Industries, Inc. v. 
Washington State Dept. of Revenue, 483 U.S. 232, 107 S. Ct. 2810, 97 L. Ed. 2d 199 
(1987), it became obvious the "internal consistency" test was gaining currency 
in the high court's vocabulary of commerce clause analysis. In discrediting 
General Motors Corp. v. Washington, 377 U.S. 436, 84 S. Ct. 1564, 12 L. Ed. 2d 430, 
reh'g denied 379 U.S. 875, 85 S. Ct. 14, 13 L. Ed. 2d 79 (1964), overruled sub nom. 
Tyler Pipe Industries, Inc. v. Washington State Dept. of Revenue, 483 U.S. 232, 
107 S. Ct. 2810, 97 L. Ed. 2d 199 (1987), relied on by Washington in Tyler Pipe 
Industries, Inc., the United States Supreme Court said that case was not 
controlling because it required "the taxpayer to prove that specific interstate 
transactions were subjected to multiple taxation in order to advance a claim of 
discrimination," Tyler Pipe Industries, Inc. 483 U.S.  at 242, 107 S. Ct.  at 2817, 
a requirement "categorically rejected" in Armco, Inc., 467 U.S. 638, 104 S. Ct. 2620. The burden of proof has been relocated from the interstate commerce 
plaintiff to the defendant state. Also, the United States Supreme Court made 
more than a passing reference to Henneford, 300 U.S. 577, 57 S. Ct. 524. The 
United States Supreme Court stressed the importance in Henneford, that the use 
tax did not apply to any article of tangible personal property "the sale or use 
of which had already been taxed at an equal or greater rate under the laws of 
Washington or 
some other state." Tyler Pipe Industries, Inc. 483 U.S.  at 245, 107 S. Ct.  at 2819. The dissent in Tyler Pipe Industries, Inc., 483 U.S.  at 255, 107 S. Ct.  at 2824 argued 
"the Court is compelled to overrule" the large block of cases which permitted a 
more liberal construction of state power to tax. The United States Supreme Court 
indeed appears poised to administer a more conservative and restrictive 
construction of state taxing power.

[¶46.]  In American Trucking Associations, Inc., 
483 U.S. 266, 107 S. Ct. 2829, 
the "internal consistency" test again demonstrated a new muscularity by its 
application to Pennsylvania's trucking axle flat tax scheme. 
The truckers had argued Pennsylvania's registration fees, fuel 
consumption taxes and "flat taxes" violated the commerce clause. The United 
States Supreme Court majority allowed the registration and fuel tax schemes 
before turning to the flat tax scheme. The registration fees posed no 
"impermissible interference with free trade because every State respects the 
registration of every other State." Id. at 283, 107 S. Ct.  at 2840. 
Across-the-board state reciprocity for registration fees paid to other states 
makes these fees constitutional. Fuel taxes apportion themselves, of course. The 
Pennsylvania 
flat tax scheme, however, had gone beyond requiring interstate commerce simply 
to pay its way.

[¶47.]  The "internal consistency" test was fatal 
to Pennsylvania's flat tax scheme because of the 
cumulative burden to interstate commerce if all other states adopted a like 
scheme. If all states cannot adopt the scheme simultaneously without crippling 
interstate commerce, no one state is allowed to do so.

[¶48.]  The point in bringing up these cases is 
to show that the "internal consistency" test appears to be 
growing.

In its guarantee of a 
free trade area among States, however, the Commerce Clause has a deeper meaning 
that may be implicated even though state provisions, such as the ones reviewed 
here, do not allocate tax burdens between insiders and outsiders in a manner 
that is facially discriminatory.

Id. at 281, 107 U.S.  at 2839. See also discussion of 
internal consistency by the Michigan Supreme Court in Trinova Corp. v. 
Department of Treasury, 433 Mich. 141, 445 N.W.2d 428 
(1989).

[¶49.]  That Wyoming chooses to call the Colorado tax a use tax 
should prove no impenetrable barrier to "internal consistency" test 
analysis.

[T]he trouble arises, 
under the commerce clause, not from any danger that either tax taken alone, 
whether characterized as "sales" or "use" tax, will put interstate trade at a 
disadvantage which will burden unduly its competition with the local trade. So 
long as only one tax is applied and 
at the same rate as to wholly local transactions, no unduly discriminatory clog 
actually attaches to the interstate transaction of 
business.

International 
Harv. Co., 322 U.S.  at 358-59, 64 S. Ct.  at 1035 
(emphasis added).

[¶50.]  The United States Supreme Court this past 
term returned to the internal and external consistency taxation review in the 
Illinois telecommunications excise tax case of Goldberg, 109 S. Ct. 582. It is 
significant for that decision that a credit against the Illinois tax was provided by the law for taxes paid "in 
another State on the same telephone call which triggered the Illinois tax." Id. at 586. At issue for 
challenged invalidity under the commerce clause was taxpayer's contention that 
the tax was not fairly apportioned as the second prong of the Complete Auto 
Transit, Inc. test. Writing for the six member majority, Justice Marshall 
discerned:4

In analyzing these 
contentions, we are mindful that the central purpose behind the apportionment 
requirement is to ensure that each State taxes only its fair share of an 
interstate transaction. See, e.g., Container Corp. of America v. Franchise Tax 
Bd., 463 U.S. 159, 169, 103 S. Ct. 2933, 2942, 77 L. Ed. 2d 545 (1983). But "we 
have long held that the Constitution imposes no single [apportionment] formula 
on the States," id., at 164, 103 S.Ct., at 2939, and therefore have declined to 
undertake the essentially legislative task of establishing a "single 
constitutionally mandated method of taxation." Id., at 171, 103 S.Ct., at 2943; 
see also Moorman Mfg. Co. v. Bair, 437 U.S. 267, 278-280, 98 S. Ct. 2340, 
2347-2348, 57 L. Ed. 2d 197 (1978). Instead, we determine whether a tax is fairly 
apportioned by examining whether it is internally and externally consistent. 
Scheiner, 483 U.S., at ___, 
107 S.Ct., at ___; Armco Inc. v. Hardesty, 467 U.S. 638, 644, 104 S. Ct. 2620, 2623, 81 L. Ed. 2d 540 (1984); Container Corp., supra, 463 U.S., at 169-170, 103 S.Ct., at 
2942-2943.

To be internally 
consistent, a tax must be structured so that if every State were to impose an 
identical tax, no multiple taxation would result. 463 U.S., at 169, 
103 S.Ct., at 2942. Thus, the internal consistency test focuses on the text of 
the challenged statute and hypothesizes a situation where other States have 
passed an identical statute. * * *

* * * * * 
*

The external consistency 
test asks whether the State has taxed only that portion of the revenues from the 
interstate activity which reasonably reflects the instate component of the 
activity being taxed.

Goldberg, 109 S. Ct.  at 588-89.

[¶51.]  The thesis of Goldberg fails completely 
here since Wyoming provided neither credit nor 
apportionment for the pipe acquisitional tax as separately levied by both 
Wyoming and Colorado. Consequently, I would perceive an 
inherent "internal consistency" inconsistency with the present Wyoming application of 
its unapportioned second tax to the Exxon pipe.

[¶52.]  I would reverse and remand to require tax 
apportionment between Wyoming and Colorado by credit for 
the benefit of the taxpayer.

FOOTNOTES

1 In addition to the 
constitutional basis for this exemption, the powers of the special interests can 
be found in approximately thirty other exemptions for sales and use tax within 
twenty-four specific provisions of the sales tax, W.S. 39-6-405, and thirteen 
other exemptions of the use tax, W.S. 39-6-505.

2 Hellerstein, Is 
"Internal Consistency" Foolish?: Reflections on an Emerging Commerce Clause 
Restraint on State Taxation, 87 Mich.L.Rev. 138, 160-61 (1988); Nowak & 
Rotunda, Sales and Use Tax Credits, Discrimination Against Interstate Commerce, 
and the Useless Multiple Tax Concept, 20 U.C.Davis L.Rev. 273, 275 n. 6 (1987); 
L. Tribe, American Constitutional Law, at 458 n. 26 (1988). See Williams v. 
Vermont, 472 U.S. 14, 21-22, 105 S. Ct. 2465, 2471, 86 L. Ed. 2d 11 (1985); 
Southern Pac. Co. v. Gallagher, 306 U.S. 167, 172, 59 S. Ct. 389, 391, 83 L. Ed. 586 (1939); and Henneford, 300 U.S.  at 587, 57 S. Ct.  at 
529.

3 See Hellerstein, supra 
n. 2, 87 Mich.L.Rev. at 139 n. 13. In concept, a state might have taxed on an ad 
valorem basis, the transactional facts of a boat unloading and reloading for 
land transportation.

4 See anticipatory 
discussion of Goldberg in Hellerstein, supra n. 2, 87 Mich.L.Rev. at 186. See 
also Hellerstein, State Taxation of Interstate Business: Perspectives on Two 
Centuries of Constitutional Adjudication, 41 Tax Lawyer 37 (1987) and Note, The 
"Internal Consistency" Test is Alive and Well: Tyler Pipe Industries, Inc. v. 
Washington Department of Revenue, 41 Tax Lawyer 587 (1988).