Tarver v. World Ship Supply, Inc.Tarver v. World Ship Supply, Inc.
- Reporters:
- ,
- Before:
- Schott, Barry, Plotkin
The issue in this case is whether the state may collect tax on the sale of supplies to the operators of foreign ships bound for foreign ports where the supplies are for use and consumption during the voyage in the absence of a specific statutory exemption from the tax. We hold that it may not.
This is an action by the Secretary of the Department of Revenue and Taxation to collect sales taxes for the period July 1, 1986 through June 30, 1989. The parties stipulated to the following facts:
Each sale at issue in this litigation involved the sale of goods by World Ship Supply, Inc., to the owners and operators of foreign flag vessels calling in Louisiana. Such goods were for use onboard the said vessels during their voyages and these goods were delivered to the foreign flag vessels. If these sales are taxable, the amount of taxes owed on the sales would be $48,070.51.
... materials and supplies purchased by the owners or operators of ships or vessels operating exclusively in foreign or interstate coastwise commerce, where such materials and supplies are loaded upon the ship or vessel for use or consumption in the maintenance and operation thereof; ...
Thus, as long as this section was in effect the exemption applied, but in 1986 the legislature adopted Resolution No. 55 which provided in pertinent part as follows:
THEREFORE, BE IT RESOLVED that the Legislature of Louisiana hereby suspends the exemptions from the additional one percentum tax levied pursuant to
R.S. 47:331 including but not limited to the exemptions provided in Chapter 2 of Subtitle II of Title 47 of the Louisiana Revised Statutes of 1950 insofar as they are made applicable to the additional one percentum tax levied pursuant toR.S. 47:331 by virtue of the provisions ofR.S. 47:332 and suspendsR.S. 47:332(B) ,(C) , and(D) .* * * * * *
BE IT FURTHER RESOLVED that this suspension shall become effective on July 1, 1986, and shall extend through June 30, 1987.
B. Notwithstanding any other provision of law to the contrary, including but not limited to any contrary provisions of this Section, for the period January 1, 1987 through June 30, 1988, the tax exemptions provided in Chapter 2 of Subtitle II of Title 47 of the Louisiana Revised Statutes of 1950 shall be inapplicable, inoperable and of no effect on the tax imposed and levied pursuant to the provisions of
R.S. 47:331 .
By suspending the exemption provided by
Act 842 of 1988 provided in pertinent part as follows:
F. Notwithstanding any other provision of law to the contrary, including but not limited to any contrary provisions of this Chapter, for the period August 1, 1988 through June 30, 1989, the exemptions to the tax levied pursuant to the provisions of this Section, except for those exemptions provided by
R.S. 47:305(A)(1) ,(B) ,(D)(1)(f) , (j), (k), (l), (m), (s),(G) ,305.1 ,305.2 ,305.3 ,305.8 ,305.15 ,305.20 ,305.37 ,305.38 ,305.46 , andR.S. 51:1787 , shall be in applicable, inoperable and of no effect.
According to the Act the pertinent exemption in
THEREFORE, BE IT RESOLVED that the Legislature of Louisiana does hereby suspend the exemptions from the additional one percentum tax levied pursuant to
R.S. 47:331 , including but not limited to the exemptions provided in Chapter 2 of Subtitle II of Title 47 of the Louisiana Revised Statutes of 1950, insofar as they are made applicable to the additional one percentum tax levied pursuant toR.S. 47:331 by virtue of the provisions ofR.S. 47:332(A) .* * * * * *
BE IT FURTHER RESOLVED that this suspension shall be effective on July 1, 1988, and shall extend through June 30, 1989....
These provisions were apparently in conflict with respect to the suspension of the exemption in question, but this conflict was resolved with the passage of Act 11 of the Second Extraordinary Session of 1988 which provided in pertinent part as follows:
F. Notwithstanding any other provision of law to the contrary, including but not limited to any contrary provisions of this Chapter, for the period August 1, 1988 through June 30, 1989, the exemptions to the tax levied pursuant to the provisions of this Section, except for those exemptions provided by
R.S. 39:467 and468 ,R.S. 47:305(A)(1) ,(B) ,(D)(1)(f) , (j), (k), (l), (m), (s),(G) ,305.1 ,305.2 ,305.3 ,305.8 ,305.15 ,305.20 ,305.37 ,305.38 ,305.46 , andR.S. 51:1787 , shall be inapplicable, inoperable and of no effect.
We have no doubt that the legislature intended for Act 11 to supersede Concurrent Resolution No. 163 because Section 2 of the Act specifically clarifies portions of the resolution which deal with provisions of the law other than the one here under consideration. But the last expression of the legislature deletes the exemptions provided by
The Louisiana law governing the imposition and collection of Sales Tax is in Chapter 2 of Subtitle II of Title 47.
E. It is not the intention of the Chapter to levy a tax upon articles of tangible personal property imported into this state, or produced or manufactured in this state for export; nor is it the intention of this Chapter to levy a tax on bona fide interstate commerce.... It is, however, the intention of this Chapter to levy a tax on the sale at retail, the use, the consumption, the distribution, and the storage to be used or consumed in this State, of tangible personal property after it has come to rest in this state and has become a part of the mass of property in this state.
If this section were construed so as to provide an exemption it could fall within the ambit of the legislation referred to above which suspended all of the exemptions in Chapter 2 for the period from July 1, 1986, through July 31, 1988. However, we construe this section to provide for an exclusion rather than an exemption. The difference can readily be seen by reference to the following from section 3.1 of Louisiana Sales & Use Taxation by Bruce J. Oreck:
Two well established rules of statutory construction come into play when considering exclusions and exemptions. A tax exemption is a provision which exempts from tax a transaction which would, in the absence of the exemption, otherwise be subject to tax. That is, there has been a statutory decision not to tax a certain transaction which is clearly within the ambit and authority of the taxing statutes to tax. On the other hand, an exclusion relates to a transaction which is not taxable because it falls outside the scope of the statute giving rise to a tax, ab initio. Transactions excluded from tax are those which by the language of the statutes are defined as beyond the reach of the tax.
The author goes on to say, citing a wealth of authority, that while exemptions from taxation are strictly construed against the taxpayer, statutes imposing the tax, of which exclusions are an integral part, are construed liberally in favor of the taxpayers and against the taxing authority.
This interpretation comports with
No state shall without the consent of the Congress, lay any imports or duties on imports or exports, except what may be absolutely necessary for executing its inspection laws ...;
and the historic role of the federal government in regulating foreign commerce by virtue of the Import-Export clause of the Constitution. See for example the discussions in Louisiana Land & Exploration Co. v. Pilot Petroleum Corp., 900 F.2d 816 (5th Cir.1990), cert. den. Alabama Department of Revenue v. Pilot Petroleum Corp., 498 U.S. 897, 111 S.Ct. 248, 112 L.Ed.2d 207 (1990); Michelin Tire Corp. v. Wages, 423 U.S. 276, 96 S.Ct. 535, 46 L.Ed.2d 495 (1976); Sales Tax Dist. No. 1 Lafourche Parish v. Express Boat Co., 500 So.2d 364 (La. 1987). See also Oreck, Ibid.
Accordingly, the judgment appealed from is affirmed.
AFFIRMED.
PLOTKIN, J., concurs with written reasons.
PLOTKIN, Judge, concurs with written reasons:
Although I agree with the majority‘s decision affirming the trial court‘s finding that consumable items sold to foreign flag ships were not subject to Louisiana‘s sales tax provisions, I disagree with much of the analysis. Accordingly, I concur.
The real issue here is whether the State of Louisiana has the authority to levy sales taxes on consumable ship supplies (food, clothing, medicine) sold and delivered to foreign flag vessels in foreign or interstate commerce.
The determination of this issue is complex, because several levels of analysis are required.1 Generally, Louisiana law imposes a sales tax on “the sale at retail, the use, the consumption, the distribution, and storage for use of consumption in this state, of each item or article of tangible personal property.”
Since these items fit the definition of “tangible personal property,” which is generally subject to the sales tax provisions, they may be taxed by the State of Louisiana unless they qualify for either an exemption from taxation or an exclusion from taxation. Both exemptions and exclusions from the sales tax provisions are set out in
Two well established rules of statutory construction come into play when considering exclusions and exemptions. A tax exemption is a provision which exempts from tax a transaction which would, in the absence of the exemption, otherwise be subject to tax. That is, there has been a statutory decision not to tax a certain transaction which is clearly within the ambit and authority of the taxing statutes to tax. On the other hand, an exclusion relates to a transaction which is not taxable because it falls outside the scope of the statute giving rise to a tax, ab initio. Transactions excluded from tax are those which by the language of the statutes are defined as beyond the reach of the tax.
Oreck, Louisiana Sales & Use Taxation § 3.1 (State Tax Press 1992). As the majority points out, both an exemption and an exclusion are involved in determination of whether the items in question in this case are subject to taxation.
I believe that the first portion of the majority‘s analysis, concerning the suspension of the exemption from taxation provided by
The next level of the analysis is whether the taxes are prohibited by an exclusion from taxation.
Thus, the final level of analysis for determining whether these transactions are taxable is simply a consideration of whether they fit into the category of “bona fide interstate commerce.” Unquestionably, the transactions at issue here are “bona fide interstate commerce” since the parties stipulated that all the tangible personal property involved was delivered to foreign flag vessels. Under general principles of international law, a foreign flag vessel is considered a fictitious part of the territory whose flag she flies. United States v. Flores, 289 U.S. 137, 53 S.Ct. 580, 77 L.Ed. 1086 (1933). Thus, any sale to a foreign flag vessel falls under the rubric of interstate commerce, just as a sale to someone in another state or country is a part of interstate commerce.
The majority reaches the same conclusion in this case through application of the principle of statutory construction that exclusions should be interpreted liberally in favor of taxpayers and against the taxing authority. I believe it is unnecessary to resort to this principle in this case since the transactions here are clearly a part of interstate commerce.
Additionally, I am concerned about the majority‘s rather confusing discussion of “supplies for export” as distinguished from “goods.” Certainly, the items involved here are not ship “cargo” and in that sense they are not “goods” for export. Taxes should be excused in this instance for one very clear reason—because the transactions to fictional foreign countries are interstate commerce—not because the particular goods in question fall into a certain category.
Finally, I would note that the same result would not attach to sales of supplies to vessels which operate only in Louisiana waters because they would not qualify as “bona fide interstate commerce.” Although such transactions would unquestionably have been excluded from taxation by the exemption in