Opinion ID: 587380
Heading Depth: 1
Heading Rank: 1

Heading: Diesel Fuel

Text: 11 Wyo.Stat. § 39-6-404(a) (1977) provides in pertinent part as follows: 12 Except as provided by W.S. § 39-6-405, there is levied and shall be paid by the purchaser on all sales of twenty-five cents ($.25) or more an excise tax of three percent (3%) upon: 13 (1) the sales price of every retail sale of tangible personal property within the state (emphasis added). 14 Wyo.Stat. § 39-6-402(a)(iii) (1977) defines a sale as that term is used in the statute above set forth as follows: 15 Sale means any transfer of title or possession for a consideration including the fabrication of tangible personal property when the materials are furnished by the purchaser ... (emphasis added). 2 16 The United States argues that § 39-6-404(a) provides that the Wyoming sales tax shall be paid by the purchaser, and that under the undisputed facts the United States is the purchaser of the diesel fuel. 3 In this regard, the district court in its order granting Wyoming summary judgment did refer, several times, to the United States as being the purchaser of the diesel fuel. Notwithstanding, the district court, relying on the definition of sale in § 39-6-402(a)(iii), held that LAAW was in possession [of the diesel fuel] for a consideration and under § 39-6-402(a)(iii) and § 39-6-404(a)(1), was subject to a sales tax on the diesel fuel. The district court based this holding on the fact that LAAW accepted delivery of the diesel fuel and paid for it with their own business checks signed by an LAAW employee. However, as mentioned in the district court's summarization of the facts, the checks were drawn against funds deposited in a special checking account by the United States Department of Energy (DOE). 17 Under the described circumstances, it is doubtful that LAAW ever had legal possession of the diesel fuel, but, in any event, if the United States was the purchaser of the diesel fuel, Wyoming cannot impose and collect a sales tax from LAAW--a nonpurchaser. So, in our view, the validity of Wyoming's imposition of a sales tax on LAAW depends, in the first instance, on whether LAAW or the United States was the purchaser of the diesel fuel. 18 As indicated, NPR-3 is currently administered by the DOE, and it is undisputed that refined petroleum products, including diesel fuel, as well as gasoline, were purchased by the Defense Fuel Supply Center (DFSC), a sub-agency of the Defense Logistics Agency, which is itself a component part of the Department of Defense. In this regard each year, at DOE's direction, LAAW provides DOE with an estimate of the requirements for refined petroleum products at NPR-3 for the coming year. DOE then gives this information to DFSC, which thereafter purchases from various sources petroleum products for DOE in accordance with Federal Acquisition Regulations. After receiving bids, DFSC awards contracts to the successful bidders. Such contracts include specifications as to type, quality, price, and delivery location. The contracts also provide that the DFSC is liable for the nonpayment of the petroleum products. At no time did LAAW or its employees participate in the DFSC procurement process. These contracts further provide, as does the contract between LAAW and DOE, that title to the refined petroleum products purchased by DFSC passes directly from the vendor to DOE. 19 Further, it is not in dispute that when DOE's fuel storage and holding facilities at NPR-3 have available storage capacity, LAAW schedules deliveries of petroleum products by requesting that the contract supplier deliver a specific refined product in accordance with the DFSC contract. The products are then delivered to NPR-3 in the supplier's trucks and pumped from the truck by the driver into government-owned storage tanks, or into equipment, drilling rig tanks or temporary tanks at well sites. When delivery is made, an LAAW employee signs a receipt or delivery ticket and accepts a copy from the driver. 20 As concerns payment for the purchase of the diesel fuel here involved, as noted above, LAAW issues the supplier a check bearing its own name, signed by an LAAW employee, but drawn on federally owned funds deposited in a checking account opened and maintained pursuant to a DOE letter of credit. DOE maintains the account at the drawee bank which is funded by a letter of credit in favor of DOE and issued by the United States. 21 Under the described circumstances, it is quite clear to us that the United States, and not LAAW, is the purchaser of the diesel fuel here involved, and under § 39-6-404(a) the sales tax shall be paid by the purchaser. 4 Purchasers who, within Wyoming, take title to or the possession of tangible personal property, for their use and not for subsequent resale, owe sales tax on that transaction. Sublette County School District No. 1 v. State Board of Equalization, 770 P.2d 218, 220 (Wyo.1989). As above mentioned, the district court itself referred to the United States as the purchaser of the diesel fuel. 22 The district court's reliance on Wyo.Stat. 39-6-402(a)(iii) (1977) is misplaced. Under Wyoming law, it would appear that LAAW never had legal possession of the diesel fuel. Craig v. Gudim, 488 P.2d 316, 319 (Wyo.1971). Accepting delivery does not constitute possession. But, in any event, the sales tax falls on the purchaser, whether he be purchasing title or possession. Under Wyoming statutes, Wyoming cannot impose and collect from LAAW a sales tax on the diesel fuel purchased by the United States. The district court erred in holding that LAAW was liable for the sales tax on diesel fuel thus acquired by the United States. 23 Wyoming's reliance on United States v. New Mexico, 455 U.S. 720, 102 S.Ct. 1373, 71 L.Ed.2d 580 (1982) is misplaced. There the contractors under contract with the United States placed orders with third party suppliers in their own names and identified themselves as being the purchasers. In holding that the contractors were not protected by the Supremacy Clause of the Constitution and were subject to the New Mexico use tax, the Court stated that: 24 tax immunity is appropriate in only one circumstance: when the levy falls on the United States itself, or on an agency or instrumentality so closely connected to the Government that the two cannot realistically be viewed as separate entities, at least insofar as the activity being taxed is concerned. 25 Id. at 735, 102 S.Ct. at 1383. 26 In the instant case, the United States placed the orders for diesel fuel, as well as taking title thereto, directly from the vendor. Counsel suggests that this is a distinction without a difference. We disagree and believe that there is a critical difference between the instant case and United States v. New Mexico, supra.