Opinion ID: 1219926
Heading Depth: 1
Heading Rank: 1

Heading: freight charges incurred by the appellant in importing equipment for use are properly includable in determining value, the use tax base.

Text: HRS § 238-2 provides that value is the use tax base for equipment imported to the State for use. Article 6(a) of the Rules and Regulations of the Director of Taxation Relating to the Use Tax Law under Chapter 238, HRS, provides that: `Value' means fair and reasonable cash value at the time of accrual of the tax which should include freight, insurance, handling charges less allowances for cash, trade, and quantity discounts. (Emphasis added). Employing this formula, the Director has computed the value of the imported equipment by adding the purchase price and the costs of importation. Puna Sugar argues that while such computation reflects an accurate measurement of cost, it does not accurately measure market value, which it argues is synonymous with fair and reasonable cash value. Puna Sugar contends that a market valuation should be resorted to but does not suggest an alternative method by which market value could be ascertained. Using hypothetical illustrations, Puna Sugar argues that employment of the Director's formula leads to valuations in conflict with market valuation. However, it fails to demonstrate any conflict in the instant case and at no time alleges what the market value should in fact be. Aside from merely charging that the method employed is incorrect, it is incumbent upon the taxpayer to show that the results incorporated in the assessment do not represent the fair and reasonable value. In re Taxes Ewa and Waialua, supra at 63, 384 P.2d 287; Bailey v. Megan, 102 F.2d 651 (8th Cir.1939); Knappton Towboat Co. v. Chambers, 202 Or. 618, 276 P.2d 425 (1954); In re Weyerhaeuser Land Co., 85 Or. 434, 165 P. 1164 (1917). Market value, as the appellants state, is no more than the value in money of any property for which that property would sell on the open market by a willing seller to a willing buyer. For highly specialized items for which there is a very limited market such as the boiler and diffuser equipment in the instant case, we think that the best and perhaps only indicator of market value is the expense including freight charges that a businessman or corporation is willing to bear in order to enjoy the use of such equipment in this State. The formula employed by the Director reflects the expenses willingly borne by Puna Sugar. The Director's formula, which includes calculation of freight charges, does not irrebutably determine value. Items imported for use may have depreciated or been damaged prior to landing in this State, thus reducing their value. The importing businessman may have been less than prudent in negotiating a purchase price or securing the most economical delivery terms, thus incurring expenses greater than the value of the property. However, in the instant case the taxpayer did not come forward with any evidence indicating that the value of the equipment was an amount different from that determined by the Director. In the absence of any countervailing evidence, we think that the calculation of purchase price plus freight charges reflects the fair and reasonable value of the imported equipment.