Court Opinion

ID: 835729
Source: CourtListenerOpinion
Date Created: 2013-03-01 21:12:04.38367+00
Date Added: 2024-06-11T13:05:01.503695
License: Public Domain

FILED:  September 1, 2005
IN THE SUPREME COURT OF THE STATE OF OREGON
RENE C. and CINDY S. JULIAN,
Appellants,
v.
DEPARTMENT OF REVENUE,
Respondent.
(OTC 4594; SC S51618 (Control))
JOHN J. and CAROL J. HOLLIDAY,
Appellants,
v.
DEPARTMENT OF REVENUE,
State of Oregon,
Respondent.
(OTC 4595; SC S51619)
En Banc
On appeal from the Oregon Tax Court.*
Argued and submitted March 7, 2005.
Larry R. Davidson, Portland, argued the cause and filed the
briefs for appellants.
Jerry Bronner, Assistant Attorney General, Salem, argued the
cause for respondent.  With him on the brief was Hardy Myers,
Attorney General.
DE MUNIZ, J.
The judgment of the Tax Court is reversed.
*Appeal from Oregon Tax Court, Henry C. Breithaupt, Judge. 17 Or. Tax 384 (2004).
DE MUNIZ, J.
The issue in this tax case is whether Oregon Food Bank
(OFB) qualifies as a "motor private carrier" under 49 USC section
13102(13) when it transfers food to members of a food-distribution network.  If it does, then taxpayer, a driver for
OFB who lives in Washington, is exempt from Oregon income tax. 
If not, then taxpayer must pay Oregon income taxes.  The Oregon
Tax Court decided that OFB does not qualify as a motor private
carrier.  Julian v. Dept. of Rev., 17 Or. Tax 384 (2004).  Taxpayer
appealed. (1)
  We agree with taxpayer and reverse.
We take the statement of facts from the decision of the
Tax Court:

"During 1998 and 1999 taxpayers resided in
Washington.  Plaintiff Rene Julian (Julian) was
employed as an interstate truck driver by [OFB], a
private, nonprofit organization exempt from taxation
under Internal Revenue Code (IRC) section 501(c)(3). 
Based in Portland, OFB is the coordinating agency for a
network of 650 private, nonprofit agencies that serve
hungry people in Oregon and Clark County, Washington. 
OFB collects food from various sources and then
distributes that food to agencies in the network.  OFB
does not charge the agencies for the food it provides
except for a flat-fee delivery charge of 14 cents per
pound designed to recoup delivery costs.  Agencies
receiving donated food from OFB agree by contract that
none of the products will be sold, traded or bartered
and the products are tracked to ensure that they do not
reenter the marketplace.  OFB does not serve the public
directly, instead, it is a central conduit for food
donations that are then distributed to agencies that
provide food directly to the poor and hungry.
"In his primary duty as a truck driver for OFB,
Julian drove an 80,000 pound, 18-wheel truck, gathering
donations and distributing them to other nonprofit
agencies.  Julian possessed a Class A Commercial Driver
License during 1998 and 1999.  Julian's work required
weekly trips to Washington, monthly trips to California
and trips to Nevada and Idaho every other month.
"As a nonresident earning income in Oregon, Julian
was subject to Oregon income tax on income attributable
to his work in Oregon pursuant to ORS 316.127. 
Taxpayers claimed exemption pursuant to the Amtrak Act
and the Department of Revenue (the department)
subsequently issued a Notice of Deficiency on November
15, 2001 for the 1998 and 1999 tax years.  The
department issued a Notice of Tax Assessment on January
8, 2002.  Both notices were premised on the
department's position that taxpayers did not qualify
for exemption under the Amtrak Act."

17 OTR at 386 (footnotes omitted).  The parties filed cross-motions for summary judgment.  The Tax Court concluded that
"Congress in this instance did not draft the Amtrak Act to
clearly include truck drivers in the particular situation of
Julian, and this court declines to broaden the reach of the net
that Congress cast."  Id. at 400.  The Tax Court therefore denied
taxpayer's motion for summary judgment and granted the
department's motion for summary judgment.
This court's scope of review of a tax court judgment is
limited to questions of law.  ORS 305.445. (2)
  On appeal, the
court may affirm, modify, or reverse the order of the tax court,
with or without remanding the case for further hearing, as
justice may require.  Id.
Resolution of this dispute turns on application of
several federal tax statutes.  In construing and applying a
federal tax statute, federal law, rather than state law, governs. 
Shaw v. PACC Health Plan, Inc., 322 Or 392, 400, 908 P2d 308
(1995).  Our task is to identify and carry out the intent of
Congress when it enacted the statute in question.  Id.  In
recognition of a state's power to tax in the absence of
conflicting federal authority, federal law requires this court to
read narrowly any federal exemptions preempting a state's power
to tax, to avoid recognizing an exemption from state taxation
that Congress did not express clearly.  See California
Equalization Bd. v. Sierra Summit, 490 U.S. 844, 851-52, 109 S Ct
2228, 104 L. Ed. 2d 910 (1989) (so stating). 
With the foregoing rules in mind, we apply the
pertinent statutes.  The first statute at issue provides:

"No part of the compensation paid by a motor
carrier * * * or by a motor private carrier to an
employee who performs regularly assigned duties in 2 or
more States as such an employee with respect to a motor
vehicle shall be subject to the income tax laws of any
State or subdivision of that State, other than the
State or subdivision thereof of the employee's
residence."

49 USC § 14503(a)(1) (emphasis added).  The parties agree that
taxpayer received compensation for driving in two or more states
and that OFB regularly assigned such duties.  The dispute thus
centers on whether OFB qualifies as a "motor private carrier."
A second statute, 49 USC section 13102(13) defines the
term "motor private carrier" as follows:  

"The term 'motor private carrier' means a person,
other than a motor carrier, transporting property by
motor vehicle when--
"(A) the transportation is as provided in section
13501 of this title;
"(B) the person is the owner, lessee, or bailee of
the property being transported; and
"(C) the property is being transported for sale,
lease, rent, or bailment or to further a commercial
enterprise." (3)

Subsection (A) of 49 USC section 13102(13) indicates interstate
transportation, and the parties do not dispute that reading. 
Further, the Tax Court found, and the parties do not dispute,
that subsection (B) also is satisfied.  Julian, 17 OTR at 393
("The court agrees that the OFB is the owner, lessee, or bailee
of the property being transported.").
The key issue in this dispute is whether "the property
is being transported for sale, lease, rent, or bailment or to
further a commercial enterprise" under 49 USC section
13102(13)(C).  The Tax Court held that the transfer of food by
OFB was not a sale, lease, rent, or bailment:

"The food that OFB distributes is donated free of
charge to OFB and distributed by it without charge.  
The only money changing hands is 14 cents per pound to
defray the costs of delivery.  The food is not for sale
and in fact OFB tracks the food to ensure that it does
not reenter the marketplace.  OFB mandates that donated
products will not be sold, traded or bartered.  Based
on these facts the court determines OFB does not
transport property for sale, lease, rent or bailment."

17 OTR at 394.  Having rejected the other possibilities (sale,
lease, or rent), the Tax Court focused on the element of
"further[ing] a 'commercial enterprise'" under 49 USC section
13102(13)(C) and concluded that no such enterprise existed under
the circumstances of this case.  Id. at 394-95.
We need not decide whether the Tax Court correctly
determined that no commercial enterprise existed, because we
conclude that the Tax Court erred in concluding that OFB's
transfer of food does not qualify as a sale under 49 USC section
13102(13)(C).  "'A sale, in the ordinary sense of the word, is a
transfer of property for a fixed price in money or its
equivalent.'"  Rogers v. Commissioner of Internal Revenue, 103
F2d 790, 792 (9th Cir 1939) (quoting Iowa v. McFarland, 110 US
471, 478, 4 S. Ct. 210, 28 L. Ed. 198 (1884)); see also Guardian
Indus v. Comm'r, 97 TC 308, 318 (1991)  (relying on Uniform
Commercial Code, § 2-106(1), in stating that a "'sale' consists
of the passing of title from buyer to seller for a price.").  
Some ambiguity exists in this record regarding the
ownership of the food when OFB carries and delivers it.  If OFB
owns the food when it has possession of it and then transfers the
food to others for a price, then a transfer of title -- and
therefore a sale -- takes place.  That is true whether the
consideration paid is market-based or, as here, is calculated by
reference to delivery costs and the weight of the food.  
The Tax Court concluded that OFB is either the owner,
lessee, or bailee of the food.  17 OTR at 393.  The parties agree
that those are the only choices regarding OFB's relationship to
the food.  The department argued that OFB was not a bailee of the
food, and neither the record nor the parties suggest that OFB was
leasing or renting the food before OFB delivered it.  The only
choice left is that OFB owns the food, and the department
concedes that it does.  The department itself asserts that "[t]he
persons who transfer the food to the OFB release their ownership
in the food to the OFB."  Once donors give the food to OFB, OFB
owns the food until OFB transfers the food to the food banks.  We
therefore conclude (as the department appears to concede) that
OFB owns the food while transporting it and that OFB thereafter
transfers its title in the food to others.
As noted, the record show that OFB transfers the food
that it owns to the participating entities in the food network
for 14 cents per pound. (4)
  That transfer qualifies as the
passing of title from buyer to seller for a price; in other
words, it is a sale.  
We therefore conclude that the transfer of food in
question is a sale under 49 USC section 13102(13)(C).  As a
result, OFB qualifies as a motor private carrier under 49 USC
section 14503(a)(1), and taxpayer is exempt from Oregon income
tax under 49 USC section 14503.
The judgment of the Tax Court is reversed.

1. The Julian proceeding and the Holliday proceeding were
consolidated in the Tax Court and in this court.  As we
understand it, the facts in the Holliday proceeding are not
materially different from those in Julian.
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2. The actual wording of the statute is that "[t]he scope
of the review * * * shall be limited to errors of law or
questions of law or lack of substantial evidence in the record *
* *."  We use the shorthand description, "questions of law,"
because "substantial evidence" is itself a legal standard.
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3. 49 USC section 14503(a)(1) refers to both "motor
carrier" and "motor private carrier."  A "motor carrier" is "a
person providing motor vehicle transportation for compensation." 
49 USC § 13102(12).  The difference is that a motor carrier is
for hire to transport property, and a motor private carrier
transports property for the purpose of selling that property. 
The Tax Court concluded that "OFB does not hold itself out as a
transport for hire to the public and is not a motor carrier."  17
OTR at 392.  We see no reason to disturb that conclusion.
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4. In our view, it is of no moment that the "price" is
designed so that OFB recovers only certain costs.  We are not
concerned in this case with uses that OFB makes of the money that
it receives for transferring its title in the food to others.  It
is enough that OFB receives something.
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