Lakefront Lines, Inc. v. Tracy

[This opinion has been published in Ohio Official Reports at 

75 Ohio St.3d 627

.]




  LAKEFRONT LINES, INC., APPELLANT, v. TRACY, TAX COMMR., APPELLEE.
              [Cite as Lakefront Lines, Inc. v. Tracy, 

1996-Ohio-50

.]
Taxation—Motor vehicle fuel tax—R.C. 5735.14 does not exempt from taxation
        fuel used in operating a motor vehicle’s air conditioning equipment or in
        idling the vehicle.
      (No. 95-1216—Submitted February 1, 1996—Decided June 26, 1996.)
 APPEAL from the Board of Tax Appeals, Nos. 93-H-1125, 93-H-1126, 94-H-69,
                            94-H-70, 94-H-71 and 94-H-72.
                                  __________________
        {¶ 1} Lakefront Lines, Inc., appellant, carries passengers in its charter coach
business. The engine that powers the coach bus also runs an air conditioning
compressor that cools the passenger compartment for the comfort of Lakefront’s
passengers. The compressor is mounted near the engine compartment and is driven
by two high-horsepower belts that take power from the binary cylinder or directly
from the crankshaft of the coach engine. The air conditioning equipment also acts
as a defroster because it dehumidifies the vehicle in winter or summer.
        {¶ 2} Lakefront purchases fuel to run the buses.                Operating the air
conditioning equipment increases fuel consumption for the bus. Lakefront also
consumes fuel while running its buses at idle. The buses spend considerable time
off the road while its passengers are out of the buses visiting tour sites. Lakefront
idles the engines to operate the air conditioning equipment to maintain a
comfortable temperature for the return of the passengers.
        {¶ 3} R.C. 5735.05 imposed an excise tax on motor vehicle fuel. R.C.
5735.14 allows reimbursement to a person who uses fuel on which the tax has been
paid for “any purpose other than the propulsion of motor vehicles upon highways”
within Ohio.      Lakefront claims that the fuel consumed in operating the air
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conditioning equipment and idling the buses was not for the propulsion of the buses
upon public highways. Accordingly, it applied for refunds of motor vehicle fuel
tax under R.C. 5735.14.         The commissioner denied the refunds, ruling that
operating air conditioning for the comfort of a motor vehicle’s passengers was part
of operating the motor vehicle. The commissioner did not address the claims for
refunds for idling the buses. Lakefront appealed the commissioner’s denials to the
Board of Tax Appeals (“BTA”).
        {¶ 4} At the BTA, Lakefront presented tests and a study attempting to
establish the amount of fuel consumed under typical conditions in operating air
conditioning equipment and idling its buses.       Lakefront did not present any
evidence measuring how much fuel it actually consumed in these two activities
during the refund period.
        {¶ 5} Nevertheless, the BTA affirmed the commissioner’s order. First, the
BTA ruled that Lakefront had not raised the issue of the exemption of “idling time”
in its applications for refund or in its appeals to the BTA. Thus, the BTA declined
jurisdiction over this issue.
        {¶ 6} Without deciding whether Lakefront could claim exemption for the
fuel consumed in air conditioning the buses, the BTA found that Lakefront had not
met its burden of proof. The BTA questioned the tests and study Lakefront
presented.   It concluded that the tests and study only approximated the fuel
consumed and did not accurately measure it.
        {¶ 7} The cause is now before this court upon an appeal as of right.
                                 __________________
        Leonard A. Carlson, for appellant.
        Betty D. Montgomery, Attorney General, and Janyce C. Katz, Assistant
Attorney Generaly, for appellee.
                                 __________________
        Per Curiam.



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                                January Term, 1996




        {¶ 8} We hold that Lakefront specified all the errors it claims, but we rule
that motor fuel used for air conditioning and idle time is used for the propulsion of
or driving motor vehicles upon public highways. Thus, we hold that R.C. 5735.14
does not exempt the fuel consumed for these uses from the motor fuel tax.
        {¶ 9} First, as to raising the issue of idling consumption, Lakefront
supported some of its applications for refund with calculations that included refund
amounts for fuel used while the buses were idling. Furthermore, in paragraphs 11
and 12 of its notices of appeal to the BTA, Lakefront claims that the commissioner
failed to distinguish between fuel used to propel the motor vehicle and fuel used to
operate the motor vehicle while stationary. Lakefront thus set forth its claim for
refund for idling in its applications and specified the commissioner’s denial of this
as error under R.C. 5717.02.
        {¶ 10} Next, as to the merits of the exemption, R.C. 5735.05(A) levies “an
excise tax * * * on all dealers in motor vehicle fuel upon the use, distribution, or
sale within the state by them of motor vehicle fuel” to, among other purposes,
“distribute equitably among those persons using the privilege of driving motor
vehicles upon such highways and streets the costs of maintaining and repairing
them.” A user of motor vehicle fuel may seek a refund of the tax paid under R.C.
5735.14:
        “Any person who uses any motor vehicle fuel, on which the tax imposed by
section 5735.05 of the Revised Code has been paid, for * * * any purpose other
than the propulsion of motor vehicles upon highways * * * of this state, shall be
reimbursed in the amount of the tax so paid on such motor vehicle fuel as provided
in this section * * *.”
        {¶ 11} Lakefront relies for support on Shafer v. Glander (1950), 

153 Ohio St. 483

, 

41 O.O. 490

, 

92 N.E.2d 601

. In Shafer, the court exempted fuel consumed
by highway builders to propel vehicles used to build and repair highways. The




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vehicles did not convey freight or passengers on highways. The Shafer court, in
paragraph two of the syllabus, stated:
        “The use of diesel oil is exempt from the excise tax except where such oil
is used for the purpose of generating power for the driving or propulsion of motor
vehicles on the public highways.” (Emphasis added.)
        {¶ 12} After declaring this refund provision to be an exemption, the Shafer
court then applied an inappropriate principle in analyzing the exemption.             It
declared that “[a]ny ambiguity in a law imposing a tax shall be resolved in favor of
the taxpayer.” 

Id.,

 paragraph three of the syllabus.
        {¶ 13} However, we apply this interpretive principle when an ambiguous
statute defines a subject of taxation. Zalud Oldsmobile, Inc. v. Limbach (1994), 

68 Ohio St.3d 516

, 

628 N.E. 2d 1382

. For statutes that exempt items from taxation,
the type of statute at issue in Shafer and here, we strictly apply the statute against
the exemption. Vought Industries, Inc. v. Tracy (1995), 

72 Ohio St.3d 261, 264

,

648 N.E. 2d 1364, 1366

. “[T]axation is the rule, and exemption is the exception.
Since the reduction depends on legislative grace, the statute must clearly express
the exemption, Cleveland v. Bd. of Tax Appeals (1950), 

153 Ohio St. 97, 99-100

,

41 O.O. 176, 178

, 

91 N.E.2d 480, 482

, paragraph one of the syllabus, and a taxpayer
must show his entitlement to it, Natl. Tube Co. v. Glander (1952), 

157 Ohio St. 407

, 

47 O.O. 313

, 

105 N.E.2d 648

, paragraph two of the syllabus.” Ares, Inc. v.
Limbach (1990), 

51 Ohio St.3d 102, 104

, 

554 N.E.2d 1310, 1312

. See, also, Kroger
Co. v. Lindley (1978), 

56 Ohio St.2d 138, 141

, 

10 O.O.3d, 319, 320

, 

382 N.E.2d 1359, 1361

, which also calls the R.C. 5735.14 refund an exemption from the fuel
excise tax. Since R.C. 5735.14 exempts fuel from the fuel excise tax, we strictly
apply its terms.
        {¶ 14} The Shafer court concluded that the General Assembly, in levying
this tax on the use of motor fuel, intended “to distribute the cost of road construction
and repair equitably among those persons using the privilege of driving motor



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                                   January Term, 1996




vehicles upon such highways.” (Emphasis sic.) 153 Ohio St. at 487, 41 O.O. at
492, 

92 N.E. 2d at 603

. The Shafer court considered the definitions of “drive” and
“propulsion.” It did not regard these terms as “words of art” but words “to be given
their generally understood meanings.” 153 Ohio St. at 489, 41 O.O. at 493, 

92 N.E.2d at 604

.
          {¶ 15} While both terms connote, as the Shafer court stated, “forward
movement,” 

id.,

 these terms have more comprehensive meanings. Webster’s Third
New International Dictionary of the English Language (1986) 1820, defines
“propulsion” as “2: the action of driving forward or ahead: action or process of
propelling.”
          {¶ 16} This same dictionary defines "propel" as “2: to impel forward or
onward: push ahead by imparting motion: give motive power to: drive onward.”
          {¶ 17} Of particular interest to us is this dictionary’s definition, id. at 1817,
of “drive”: “vt * * * 2 * * * c: to operate the controls of (a locomotive) or to operate
the mechanism and controls and direct the course of (as a motor vehicle or
speedboat) * * * vi * * * 5 * * * b: to operate and steer a motor vehicle.” (Emphasis
added.)
          {¶ 18} Thus, these definitions mean more than providing forward motion to
a vehicle. They mean to operate and steer a motor vehicle. Included in operating
the buses at issue is running their air conditioning equipment and idling the buses
for the comfort of the passengers. Therefore, we hold that R.C. 5735.14 does not
clearly state an exemption from the motor fuel tax for fuel used in operating a motor
vehicles’s air conditioning equipment or in idling the vehicle.
          {¶ 19} Accordingly, we affirm the decision of the BTA.
                                                                      Decision affirmed.
          MOYER, C.J., DOUGLAS, RESNICK, F.E. SWEENEY, PFEIFER AND COOK, JJ.,
concur.
          WRIGHT, J., not participating.




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