May Trucking Co. v. ODOT, 388
F.3d 1261 (9th Cir. 2004)
Sukanya Mukherjee
Staff Attorney
Comptroller of Maryland
Background
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The Plaintiff, May Trucking Company is an interstate motor carrier with its principal
place of business in Brooks, Oregon. Plaintiff owns approximately 600 tractors and
1,200 trailers that operate throughout the continental U.S.
In 2000, the Oregon Department of Transportation (“ODOT”), mailed to Plaintiff a
notice of assessment covering the period of April 1, 1996 to December 31, 1998.
Plaintiff had underpaid fuel taxes and owed $491,891.14.
IFTA has the force of law in Oregon and Oregon based motor carriers can use the
state as their base jurisdiction under IFTA.
Oregon itself does not impose a fuel tax on interstate motor carriers in operating
in their state. Instead, Oregon relies on a complicated weight/mile tax system. As
the sole member in IFTA that receives no fuel taxes from other base jurisdictions,
Oregon’s participation in IFTA does not generate revenue for the state. Oregon
participates in IFTA as a service to Oregon based motor carriers operating outside
the state.
Plaintiff’s Arguments
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First, Plaintiff challenge’s ODOT’s audit procedures of the assessment levied on
Plaintiff.
Plaintiff argues that fuel consumed while idling was not tax-able under IFTA Article
VIII, R800 which states: “Consumption of motor fuels used in the propulsion of
qualified motor vehicles, except fuel consumed that is exempt from taxation by a
jurisdiction, is a taxable event under this Agreement.”
Plaintiff argues that because fuel consumed while idling does not propel the
vehicle, “idling time” is not a taxable event.
Plaintiff further contested that under various state and federal laws, the validity of
Oregon’s adoption of IFTA.
Administrative Hearing
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Parties resolved their dispute regarding auditing procedures
ALJ concluded that fuel consumed while idling was indeed a taxable event and that
every appellate court has considered the argument that Plaintiff has made and
rejected such argument.
Additionally, to the extent that “idling time” fuel was tax exempt under the
statutes of various other member jurisdictions, Plaintiff must file its request
directly with the respective jurisdictions.
Plaintiff appealed the ALJ’s decision to the Oregon Court of Appeals.
Additionally, Plaintiff brought action to the Federal District Court. Subsequently,
Plaintiff appealed to the Ninth Circuit.
Ninth Circuit Analysis
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Plaintiff sought both declaratory relief and a refund. Plaintiff claimed that it was
entitled to a refund for fuel consumed during “idling” because it had no adequate
or speedy remedy at law.
Moreover, Plaintiff argues that IFTA itself is illegal, invalid and unenforceable under
the United States Constitution, as well as adopted, improperly implemented, and
improperly delegated to the administrative bodies by both Congress and the
Oregon legislature.
Oregon sought dismissal of the action under 3 points:
– 1. The District Court lacked jurisdiction under the Tax Injunction Act (“the Act”);
– 2. The Eleventh Amendment; and
– 3. The Younger absentia doctrine from Younger v. Harris, 91 S. Ct. 746 (1971).
• Younger Absentia Doctrine - The United States has a federal court system with limitations on
the cases that federal courts can hear, while each state has its own individual court system. In
some instances, the jurisdiction of these courts overlap, so a lawsuit between two parties may
be brought in either or both courts. The latter circumstance can lead to confusion, waste of
resources, as well as the appearance that one court is disrespecting the other. Both federal and
state courts have developed rules determining when one court will defer to another's
jurisdiction over a particular case.
Analysis Continued…
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The Tax Injunction Act states that a district court shall not enjoin, suspend or
restrain the assessment, levy or collection of any tax under any state law, where a
plain, speedy and efficient remedy may be had in the courts of each state.
The Act applies to taxes collected under IFTA. The purpose of the act is implicated
by multijurisdictional taxation programs. Congress enacted the Act to protect the
compelling needs of many States for a more prompt disposition of tax
controversies.
The Act has two objectives:
– (1) to eliminate disparities between taxpayers who could seek injunctive relief in federal
court; and
– (2) to stop taxpayers, with the aid of a federal injunction, from withholding large sums of
money, thereby disrupting state government finances
Analysis Continued…
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Oregon itself does not collect fuel taxes, therefore, permitting federal action will
not result in a temporary delay or permanent loss of revenue to Oregon.
– However, Plaintiff’s challenge in federal court will disrupt revenue collection in every
one of the other jurisdictions that rely on fuel taxes.
– Recognizing the centrality of tax collection to the operation of government, the Act
prevents taxpayers from running to federal court to stymie the collection of state taxes.
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Speedy and adequate remedy at law:
The efficiency of a state court remedy generally turns on whether it imposes an
unusual hardship on the party challenging the state tax requiring ineffectual
activity or an unnecessary expenditure of time or energy.
Oregon allows 30 days for an appeal of an assessment, if a petition for
reassessment is timely filed, the Department will reconsider the assessment.
Additionally, if a request for a hearing is timely filed, the Department will schedule
a hearing.
Analysis Continued…
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Plaintiff had a hearing before an ALJ and appealed to the Oregon Court of Appeals.
Plaintiff nonetheless contends that it does not have a plain, speedy, and efficient
remedy in Oregon courts because the State concluded that IFTA does not provide a
refund remedy for fuel consumed while idling.
Oregon’s IFTA is a state, rather than a federal law, and it is a law under which state
taxes are assessed and collected. Therefore, the Act bars federal jurisdiction of
Plaintiff’s challenge to the interpretation of IFTA so long as Plaintiff has an
adequate remedy in Oregon courts with respect to Plaintiff’s challenge to IFTA.
Plaintiff’s argument confuses its entitlement to a full and fair hearing with its
entitlement to a favorable resolution on the merits.
Nothing prevents Plaintiff from challenging the State’s unfavorable ruling in a full
and fair hearing in the Oregon court system, and if successful, from receiving a
refund.
Conclusion
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The Act applied to Plaintiff’s challenge to IFTA and to the underlying state fuel
taxes.
The Court further held that Plaintiff had a plain, speedy, and efficient state-court
remedy with respect to both claims. Accordingly, the federal court lacked subject
matter jurisdiction.