Ammex v. USA

• Court: Court of Appeals for the Sixth Circuit
• Decided: May 6, 2004
• Docket: 02-2375
• Status: Published

Opinion

RECOMMENDED FOR FULL-TEXT PUBLICATION Pursuant to Sixth Circuit Rule 206 2 Ammex, Inc. v. United States, et al. No. 02-2375 ELECTRONIC CITATION: 2004 FED App. 0131P (6th Cir.) File Name: 04a0131p.06 _________________ COUNSEL UNITED STATES COURT OF APPEALS ARGUED: Craig L. John, DYKEMA GOSSE, Bloomfield FOR THE SIXTH CIRCUIT Hills, Michigan, for Appellant. Teresa E. McLaughlin, U. S. _________________ DEPARTMENT OF JUSTICE, Washington, D.C., for Appellees. ON BRIEF: Craig L. John, Mark H. Sutton, AMMEX , INC., X Christopher S. Olson, DYKEMA GOSSE, Bloomfield Hills, Plaintiff-Appellant, - Michigan, for Appellant. Teresa E. McLaughlin, U. S. - DEPARTMENT OF JUSTICE, Washington, D.C., Judith A. - No. 02-2375 Hagley, U. S. DEPARTMENT OF JUSTICE, TAX v. - DIVISION, Washington, D.C., for Appellees. > , HOOD, D. J., delivered the opinion of the court, in which UNITED STATES OF AMERICA ; - INTERNAL REVENUE SERVICE, - DAUGHTREY, J., joined. MERRITT, J. (pp. 11-12), delivered a separate concurring opinion. Defendants-Appellees. - - _________________ N Appeal from the United States District Court OPINION for the Eastern District of Michigan at Detroit. _________________ No. 00-73388—George C. Steeh, District Judge. HOOD, District Judge. Plaintiff-Appellant, Ammex, Inc. Argued: March 12, 2004 (“Ammex”) sued the United States to recover motor fuel excise taxes allegedly collected in violation of, inter alia, the Decided and Filed: May 6, 2004 Export Clause of the United States Constitution. Ammex now appeals the district court’s order granting Defendants- Before: MERRITT and DAUGHTREY, Circuit Judges; Appellees’ motion for summary judgment on the basis of lack HOOD, District Judge.* of standing. For the reasons set forth below, we AFFIRM the judgment of the district court. I. FACTUAL AND PROCEDURAL HISTORY Ammex operates a “sterile” U.S. Customs Class 9 bonded warehouse, commonly known as a duty-free store, or duty- free sales enterprise, in Detroit, Michigan. The designation ”sterile” means that the physical design and operation of the * facility guarantee the exportation of products sold therein. The Honorable Joseph M. Hood, United States District Judge for the Eastern District of Kentucky, sitting by designation. The store is located on West Lafayette Street adjacent to the

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Ambassador Bridge, which connects the United States and the fuel to customers who were necessarily required to take it Canada. Customers entering Ammex’s facility have into Canada. necessarily proceeded beyond the “point of no return” and must exit the United States. The Export Clause of the United States Constitution prohibits the imposition of any federal tax on duty-free As a duty-free sales enterprise, Ammex is permitted to sell merchandise. This constitutional proscription is confirmed by for export certain goods “duty-free.” These duty-free goods federal customs law. See, 19 U.S.C. § 1555(b)(3)(C), (8)(E). are sold to customers who transport them directly to Canada Ammex also cites to several provisions of the Internal after leaving Ammex’s store. At issue in the district court Revenue Code in support of its claim for a refund of the tax case was whether Ammex could sell gasoline and diesel fuel paid on the gasoline and diesel fuel at issue. on a duty-free basis. In part, Ammex relies on a letter ruling it received from the Ammex purchased the fuel in question with the intention of U.S. Customs Service Port Director for Detroit dated selling it for export from its duty-free store. This store has an September 5, 2000. In that letter, Ammex was granted Automatic Tank Gauging system, whereby its daily fuel permission to expand its Class 9 duty-free warehouse needs are automatically recorded and transmitted to its operation to include the sale of gasoline and diesel fuel. That purchasing agent, Fleet Fuel, LLC (“Fleet Fuel”). Based on letter ruling, however, was revoked in a notice-and-comment the data received from that system, Fleet Fuel prepares ruling letter and explanatory note dated November 1, 2001. purchase orders on behalf of Ammex. During the periods at The basis of the revocation was that only fuel on which issue, Ammex purchased both gasoline and diesel fuel from neither duty nor tax has been assessed can qualify as duty-free several local suppliers, including BP Oil Co., Atlas Oil Co., fuel under 19 U.S.C. § 1555(b)(8)(E), and the fuel sold by Viking Oil, Peerless Distributing Co., and Mooney Oil Co. Ammex had been assessed a federal excise tax. Customs was enjoined from effectuating its revocation because of a Because of the duty-free nature of its operations, Ammex temporary restraining order (“TRO”) issued by Court of requested to purchase the fuel free of federal excise tax. The International Trade Judge Evan J. Wallach on January 23, suppliers, however, as a condition of Ammex’s purchase of 2002. That TRO was subsequently dissolved by Judge the fuel, required payment of federal excise taxes at the time Wallach on February 22, 2002. of purchase. These taxes were imposed at the time the fuel was removed from the fuel terminal, known as the terminal Asserting that taxation of the fuel violated the Export rack, for delivery to Ammex’s duty-free store. This practice Clause of the Constitution, Ammex made refund claims with is consistent with I.R.C. § 4081, which places the legal respect to gasoline and diesel fuel for each of the tax periods incidence of the excise tax at this point in the chain of sales at issue. The total refund requested was $647,494 plus transactions. After removing the fuel from the terminal rack, interest. The IRS disallowed Plaintiff’s claims for two third-party carriers delivered the fuel directly to Ammex’s reasons: first, Plaintiff did not establish that the gasoline and duty-free facility and unloaded it into Ammex’s fuel diesel fuel sold constituted export sales, and second, Ammex dispensing tanks. Ammex’s purchasing agent remitted did not establish that it was the proper party to seek a refund. payment for the fuel within ten days of its delivery to Ammex’s fuel storage facility. After delivery, Ammex sold On February 3, 2000, Ammex filed its complaint against the United States and the Internal Revenue Service, seeking No. 02-2375 Ammex, Inc. v. United States, et al. 5 6 Ammex, Inc. v. United States, et al. No. 02-2375

recovery of fuel tax of $647,494.00, plus interest for quarterly III. DISCUSSION tax periods ending March 31, 1999, and June 30, 1999. Ammex based its claims on the Export Clause of the United A. Standing under the Export Clause States Constitution, art. I, § 9, cl. 5, and I.R.C. §§ 4221, 6421, and 6427. The “case or controversy” limitation of Article III of the Constitution requires that “a federal court act only to redress On November 19, 2001, Ammex filed a motion for injury that fairly can be traced to the challenged action of the summary judgment. On November 20, 2001, the Government defendant, and not injury that results from the independent filed its own motion for summary judgment. The district action of some third party not before the Court.” Simon v. E. court heard the cross-motions for summary judgment on Ky. Welfare Rights Org., 426 U.S. 26, 41-42 (1976). The February 7, 2002. On July 31, 2002, the district court granted district court’s conclusion that Ammex had no standing was the Government’s motion for summary judgment and denied based, in part, upon the fact that it was not the Government Ammex’s, holding that Ammex lacked standing to seek a that collected the tax from Plaintiff, but rather Plaintiff’s refund of fuel taxes because it could not establish “an injury suppliers. In other words, it was the action of a third party in fact caused by defendant.” The court did not reach the (the suppliers), as opposed to the Defendant (the merits of the Export Clause claim. Judgment was entered on Government), that caused Plaintiff’s alleged injury. August 1, 2002. In order to satisfy the standing requirements imposed by On August 14, 2002, Ammex filed a motion for Article III of the United States Constitution, reconsideration; the motion was denied by the district court on October 22, 2002. The instant appeal followed. A plaintiff must have suffered some actual or threatened injury due to the alleged illegal conduct of the defendant; II. STANDARD OF REVIEW the injury must be ‘fairly traceable’ to the challenged action; and there must be a substantial likelihood that the This Court reviews a district court’s grant of summary relief requested will redress or prevent the plaintiff’s judgment de novo. See Upsher v. Grosse Pointe Public injury. School System, 285 F.3d 448, 451, (6th Cir. 2002). The constitutional and statutory interpretation issues presented in Coyne v. American Tobacco Company, 183 F.3d 488, 494 this case are questions of law, also subject to de novo review. (6th Cir. 1999) (citing Valley Forge Christian College v. See Johnson v. Economic Dev. Corp., 241 F.3d 501, 509 (6th Americans United for Separation of Church & State, Inc., 454 Cir. 2001). U.S. 464, 473 (1982)). Plaintiff claims that (1) it suffered an economic injury in fact by the Government’s imposition of the challenged excise tax, (2) since the Government imposed this tax, its injury is fairly traceable to the Government, and (3) by reimbursing Ammex for the taxes paid, its injury will be redressed. Although the Government did impose an excise tax on the fuel that Ammex purchased and later sold at its “duty-free No. 02-2375 Ammex, Inc. v. United States, et al. 7 8 Ammex, Inc. v. United States, et al. No. 02-2375

facility,” that tax was not assessed against Ammex. Instead, administrative practice,2 the fuel sold by Ammex was not sold the tax was imposed on Ammex’s suppliers who, in turn, for export within the meaning of the statute. added the amount of the tax to the wholesale price of the fuel Ammex purchased.1 As noted by the district court, “The tax Because the excise tax provisions of the Code do not define burden at issue here is that of Ammex’s suppliers, and not “export,” extrinsic aids for construction may be relied on in Ammex.” Therefore, Ammex did not pay the challenged interpreting the meaning of export for purposes of § 6421(c) excise tax to the Government (nor was such a tax assessed and § 4221(a)(2). For more than 30 years, the IRS has taken against it), but instead paid a tax-included price to its the position that delivery of fuel into the fuel supply tank of suppliers. It was in the discretion of Ammex’s suppliers to a motor vehicle is use of that fuel, and that the subsequent charge Ammex for the challenged tax amount. Consequently, movement of the vehicle into a foreign country does not any alleged injury suffered by Plaintiff in the form of constitute exportation of that fuel for purposes of motor fuel increased fuel costs was not occasioned by the Government. excise taxes. Revenue Ruling 69-150.

It is difficult to see how, “[i]f the defendant did not lay, Whether or not Chevron deference is appropriately applied assess, exact, or otherwise collect from plaintiff any federal here, obviously some level of deference to the agency ruling excise taxes on the gasoline and diesel fuel during the periods is due. As the Supreme Court pointed out in United States v. at issue...,” Plaintiff can proceed under this theory. Ammex Mead Corp., 533 U.S. 218, 234 (2001), even though an Inc. v. United States, No. 99-338T (Court of Federal Claims, agency’s interpretation is not entitled to Chevron deference, April 10, 2002) at p. 12. Without an injury-in-fact, caused by such an interpretation may merit some deference whatever its the Government, we hold that Ammex does not have standing form, given the specialized experience, broader investigations to pursue its claim based on the Export Clause. and information available to the agency, and given the value of uniformity in its administrative and judicial understandings B. Fuel Sold “For Export” of what national law requires. Indeed, the Court in Mead reaffirmed the holding of Skidmore v. Swift & Co., 323 U.S. 26 U.S.C. § 6421(c) provides that if gasoline is sold to any 134 (1944), that “[t]he weight [accorded to an administrative] person for certain exempt purposes set forth in § 4221(a)(2)- judgment in a particular case will depend upon the (5), such person is to be paid an amount equal to the tax thoroughness evident in its consideration, the validity of its without interest. As relevant here, § 4221(a)(2) lists as an reasoning, its consistency with earlier and later exempt purpose, a sale “for export, or for resale by the pronouncements, and all those factors which give it power to purchaser to a second purchaser for export.” The district persuade, if lacking power to control.” Mead, 533 U.S. at 228 court determined that Ammex was not entitled to recover (quoting Skidmore, 323 U.S at 140). payments under § 6421(c) because, according to longstanding

2 The district court partially relied on Revenue Ruling 69-150, specifically holding that it was entitled to Chevron deference. While Chevron deference may not be the appropriate level of deference to which 1 revenue rulings are entitled, Ruling 69-150 is a long-standing and highly The tax was imposed on Ammex’s suppliers pursuant to 26 U.S.C. persuasive preced ent. Reasonable agency interpretations carry “at least § 4081(a)(1)(A )(ii) because it was the suppliers that removed taxable fuel some added persuasive force” where Chevron is inapplicable. from the terminal. Metropolitan Stevedore Co. v. Rambo, 521 U.S. 121 , 136 (1997). No. 02-2375 Ammex, Inc. v. United States, et al. 9 10 Ammex, Inc. v. United States, et al. No. 02-2375

Consideration of the above factors dictates that at least retail customers who departed the country. Ammex submits some level of deference is due Revenue Ruling 69-150.3 that its status as a “duty-free sales enterprise” means that, Revenue rulings are written and reviewed at the same level of although it is not a carrier of fuel into Canada, it must be the IRS and the Treasury Department as are Treasury considered an “exporter” because its “sole business is regulations, demonstrating that a “central board or office” arranging for merchandise to be sent to Canada by selling it accords a great “degree of ...care” to their issuance. Mead, for assured exportation.” 533 U.S. at 228, 236. Of course, the IRS possesses “relative expertness” in the application of the Code to particular facts, The definition of “duty-free sales enterprise” demonstrates given the technical complexity of federal tax law. See id. that Ammex is not an exporter. Congress has defined a Additionally, the fact that the IRS has left Revenue Ruling “duty-free sales enterprise” to mean “a person that sells, for 69-159 virtually unchanged for over three decades use outside the customs territory, duty-free merchandise that demonstrates the soundness of the decision there made. is delivered from a bonded warehouse to an airport or other Finally, Ammex has failed to identify any infirmity in this exit point for exportation by, or on behalf of, individuals longstanding and sensible interpretation of the statutory departing the customs territory.” 19 U.S.C § 1555(b)(8)(D); scheme. see also 19 C.F.R. § 19.35(a) (“A class 9 warehouse (duty- free store) may be established for exportation of conditionally Given the logical and long-standing agency interpretation duty-free merchandise by individuals...”). of a statue by the department charged with its administration, we believe Revenue Ruling 69-150 has the power to persuade According to the definition, a duty-free store does not itself and should be followed in a case such as this. Hence, we export, but rather sells duty-free goods for export by someone conclude that the district court did not err in holding that the else (i.e., a customer). Thus, Ammex’s assertion that it is an fuel sold by Ammex was not “for export” within the meaning “exporter” is belied by the definition itself. The district court of § 4221(a)(2) and § 6421(c). correctly held that Ammex was not an “exporter” under 26 U.S.C. § 6416(c). C. Ammex as an “Exporter” D. Constitutionality of I.R.C. § 4081 I.R.C. § 6416(c) allows an exporter of motor fuel to recover an illegally collected tax. The district court found that Because Ammex lacks standing to raise the Export Clause Ammex, a duty-free sales enterprise, was not an exporter but, claim, this Court need not decide whether § 4081 is instead a retailer that facilitated exportation by the individual unconstitutional with respect to fuel sold to a duty-free enterprise.

3 IV. CONCLUSION In Aeroquip-V ickers, this Court reversed the Tax Court’s failure to defer to a revenue ruling, holding that the Tax Court had For the above mentioned reasons, we AFFIRM the “mischaracterized the degree of d eference accord ed to revenue rulings...” judgment of the district court. Aeroquip-V ickers, Inc. C om missio ner, No. 01-2741 (Oct. 20, 2003 ). This Court stated th at the revenue ruling at issue was not entitled to Chevron deference. Id. Howeve r, by examining the factors set out in Skidmore, the Court co ncluded that “some deferenc e to Revenue Rul[ing] 8 2-20 is proper.” Id. at 14. No. 02-2375 Ammex, Inc. v. United States, et al. 11 12 Ammex, Inc. v. United States, et al. No. 02-2375

_________________ station which does the same thing a few blocks before reaching the bridge. CONCURRENCE _________________ MERRITT, Circuit Judge, concurring. Although I agree with the result reached in the majority opinion, I have serious doubts about the conclusion that Ammex does not have standing to bring this claim under the Export Clause of the Constitution. It seems to me that for the purposes of standing, Ammex alleges an injury that is fairly traceable to the Government. The fact that Ammex paid the tax to the wholesaler rather than to the Government does not mean that the higher price it paid cannot be easily traced to the Government’s imposition of the tax for the purposes of standing. If the gas were sold by Ammex in a separate container and not mixed with the gas in the purchaser’s tank before entry into Canada, it would presumably count as an “export” and there would be no question that Ammex has standing. I do not think that standing should turn on issues that go to the merits of the claim like the question of whether the gas is mixed in the fuel tank or sold in a separate container. Moreover, I do not understand how we can reach the merits of the statutory claim — implicitly holding that when pursued through that avenue the injury is fairly traceable to the Government — yet hold that Article III’s standing requirements prevent us from hearing a constitutional claim for the same injury caused in exactly the same way. This seems a distinction without a difference that should not encumber the constitutional law of standing to litigate. As for the merits of the Constitutional claim, I would interpret the meaning of “export” in the Constitution the same way the majority interprets it for the statutory claim, and uphold the judgment on those grounds. Ammex is not an “exporter” under the Constitution anymore than it is under the statute. When it pours gas into the tank of a car, mixing it with what is there, it is no more of an exporter than the gas