V-1 OIL COMPANY, an Idaho corporation, on behalf of itself and all others similarly situated; and Harding Mechanical, Inc., a Utah corporation, and Robert G. Harding, an individual, on behalf of themselves and all others similarly situated, Plaintiffs and Appellants, v. UTAH STATE TAX COMMISSION and Utah State Department of Environmental Quality, Defendants and Appellees.
No. 950156.
Supreme Court of Utah.
Oct. 29, 1996.
Opinion on Rehearing Aug. 5, 1997.
914 P.2d 906
Jan Graham, Atty. Gen., Melissa M. Hubbell, Clark L. Snelson, Asst. Attys. Gen., Salt Lake City, for defendants and appellees.
ZIMMERMAN, Chief Justice:
V-1 Oil Company (“V-1“), a distributor of gasoline and other motor fuels, appeals from the district court‘s dismissal of its claim that Utah‘s one-half cent environmental “surcharge” on motor vehicle fuels delivered to underground storage tanks (“USTs“) is, in reality, a tax and, as such, violates
We treat the trial court‘s dismissal of V-1‘s claim as a grant of summary judgment in favor of the Utah State Tax Commission (“Commission“) and the Utah State Department of Environmental Quality (“Department“) (collectively, the “State“).1 Accord
In 1989, the Utah legislature enacted the Underground Storage Tank Act (the “Act“). Ch. 268, §§ 2-28, 1989 Utah Laws 843, 844-52. The Act established an annual underground storage tank registration fee, id. § 10 (currently codified as
As currently written, the Act requires that the revenues from installation company permit fees, petroleum tank storage fees, and the environmental surcharge be deposited into the Petroleum Tank Storage Fund (the “Fund“). Id.
Utah‘s Fund provides a mechanism for UST owners and operators to demonstrate that they meet EPA financial responsibility requirements. After a deductible of $10,
In March of 1994, V-1 filed a complaint against the State for declaratory and injunctive relief on behalf of itself and all others similarly situated. In its first claim, V-1 sought to have section 19-6-4108 of the Utah Code, which establishes the surcharge, declared violative of article XIII, section 139 of the Utah Constitution, which restricts spending of motor vehicle fuel “excise taxes”10 to highway purposes. V-1 claimed that the statute is unconstitutional because (i) the surcharge is an excise tax and (ii) it directs that the revenues from the surcharge be deposited into and spent from the Fund for nonhighway purposes. See
In response, the State moved to dismiss V-1‘s complaint insofar as it purported to rep
Summary judgment is appropriate only when there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law.
The issues to be resolved on this appeal are (i) whether V-1 has standing to challenge the surcharge as an unconstitutional tax, (ii) whether the surcharge is a tax, (iii) if it is a tax, whether it is unconstitutional, and (iv) if it is an unconstitutional tax, the remedy available for the constitutional violation. We address these issues in order.
We first address the issue of whether V-1 has standing to litigate its constitutional claim. Although the State raised the standing issue for the first time on appeal, that does not preclude our ruling on the point. “Standing is an issue that a court can raise sua sponte at any time.” State v. Tuttle, 780 P.2d 1203, 1207 (Utah 1989). The State claims that V-1 lacks standing because it is not sufficiently injured by the imposition of the surcharge. Essentially, the State reasons that (i) it is undisputed that a petroleum tax is constitutional; (ii) therefore, V-1 can legitimately complain only of the use to which the revenues are put, i.e., nonhighway purposes; and (iii) any such unconstitutional expenditures create no particularized harm to V-1 sufficient to give it standing.
We do not agree. We have liberally allowed taxpayers to challenge allegedly illegal or unconstitutional expenditures. In Jenkins v. Swan, we said that we have “long held that a taxpayer has standing to prosecute an action against municipalities and other political subdivisions of the state for illegal expenditures. . . . We have also extended the taxpayer‘s right to sue concerning illegal use of public monies to include an action against the state.” 675 P.2d 1145, 1153 (Utah 1983) (citing Lyon v. Bateman, 119 Utah 434, 228 P.2d 818 (1951)). A plaintiff in such cases need only meet our standing requirements.
Under Jenkins v. Swan and its progeny, a party seeking standing must demonstrate only one of the following:
(i) a personal stake in the controversy and some causal relationship between the injury, the governmental actions, and the relief requested; (ii) that no other party has a
Applying the Jenkins test here, we conclude that V-1 satisfies the first step of the three-part test and is to be awarded standing without further inquiry. V-1 pays the environmental surcharge, which increases V-1‘s tax burden. This is the causal relationship we spoke of in Jenkins. 675 P.2d at 1153. If we were to declare the surcharge unconstitutional, the adverse impact of the higher tax on V-1 would be relieved. See id. Therefore, V-1 has standing to make its constitutional challenge.
We next address whether the district court correctly ruled that the environmental surcharge established in
We can say, however, that these definitions of “fee,” as distinguished from “tax,” suggest that there are at least two broad types of fees: (i) a fee for service, i.e., a specific charge in return for a specific benefit to the one paying the fee, and (ii) a regulatory fee, i.e., a specific charge which defrays the government‘s cost of regulating and monitoring the class of entities paying the fee. We analyze the surcharge under both concepts to determine whether it can be fairly characterized as a legitimate fee under either concept. If it cannot, then it is a general revenue-raising measure and must be classified as a tax.
We first address whether the environmental surcharge can qualify as a fee for the insurance service the State provides. To be a legitimate fee for service, the amount charged must bear a reasonable relationship to the services provided, the benefits received, or a need created by those who must actually pay the fee. This requirement is intended to prevent a fee from being used to generate excessive revenues and becoming indistinguishable from a tax.13 See Banberry, 631 P.2d at 902. More specifically, for a fee for service to be reasonable, the total cost of the service so financed must fall equitably upon those who are similarly situated and in a just proportion to the benefits conferred. Id. at 903. We do not insist on exact mathematical precision, however, in holding that a certain charge is a legitimate fee instead of a tax. The revenues raised by the fee may exceed the precise cost of providing the service to those paying the fee, yet the fee may be reasonable as long as its reasonableness can be determined in some other manner. Walker v. Brigham City, 856 P.2d 347, 349-51 (Utah 1993). The nature of the service or benefit provided may also make it difficult or
We conclude that the environmental surcharge cannot be characterized as a legitimate fee for service under this test. First, the State concedes that V-1 independently meets federal financial responsibility requirements without reliance on the Fund. Second, and most important, the State concedes that although V-1 must pay the surcharge, a release from one of V-1‘s tanks would not be paid for by the Fund. Finally, the State concedes that V-1 gets no other benefit from the Fund‘s existence.14
Having found that the surcharge is not a legitimate fee for service because V-1 gets no benefit from it, we next analyze whether the surcharge qualifies as a legitimate regulatory fee. Like all fees, a regulatory fee must bear some reasonable relationship to the cost of the thing said to justify its imposition, in this instance, the costs of regulating the industry that pays the surcharge. Utah Restaurant Ass‘n, 709 P.2d at 1164; Consolidation Coal, 702 P.2d at 127; Mountain States Tel. & Tel. Co. v. Salt Lake County, 702 P.2d 113, 117-18 (Utah 1985); Weber Basin Home Builders, 487 P.2d at 867.
Here, the question is whether the environmental surcharge is used to defray the costs of regulation and, if so, whether the surcharge bears a reasonable relationship to the cost of regulating the UST industry. In undertaking this analysis, we must distinguish the surcharge from the other fees levied under the Act, specifically, the Act‘s tank registration and tank storage fees. Under the statutory scheme, the tank registration fee, levied on each facility with USTs, is earmarked for the Department to administer the underground storage tank program and the petroleum storage tank program and, through the Solid and Hazardous Waste Control Board, to regulate underground storage tanks and petroleum storage tanks.
We next address the environmental surcharge. Monies from the surcharge are deposited into the Fund and may be used to pay certain costs, which can be categorized into four types: (i) investigation, abatement, and correction of releases, and judgments, awards, and settlements for bodily injury and property damage to third parties; (ii) legal and claims-adjusting costs incurred by the State in connection with such third-party claims; (iii) expenses of the state risk manager in ensuring the actuarial soundness of the Fund; and (iv) administration of the Fund and the environmental surcharge. Id.
The first category of costs paid for by the Fund is, in reality, the insurance service that
We therefore conclude that Fund monies generated by the surcharge are dedicated to providing services to a segment of the UST industry, not to regulating it. Consequently, the surcharge cannot fairly be characterized as a regulatory fee. Because we determine that the surcharge cannot be validly characterized as a regulatory fee, we need not address the second part of the analysis—whether the fee bears the necessary relationship to the costs of regulation.
Because the environmental surcharge cannot properly be characterized as a service fee or a regulatory fee, we conclude that it is a tax. It is true, as the district court ruled, that monies from the surcharge “are used entirely for the purpose of dealing with the problems associated with storage of petroleum products.” However, it would stretch the concept of a “service fee” or a “regulatory fee” beyond the breaking point if we were to hold that any surcharge or fee could satisfy the legal tests distinguishing such exactions from a tax simply because the revenues generated are spent in connection with the industry from which they are paid. Virtually any tax could be disguised as a fee under such reasoning.
We next address whether this tax is constitutional. There is no dispute that the State has the authority to levy a motor fuel tax, but it must spend any revenues so raised in accordance with the Utah Constitution.
[T]he proceeds from the imposition of any excise tax on gasoline or other liquid motor fuels used for propelling such vehicle . . . shall be used exclusively for highway purposes as follows:
(1) The construction, improvement, repair and maintenance of city streets, county roads, and state highways, including but not restricted to payment for property taken for or damaged by rights of way, and for administrative costs necessarily incurred for such purposes.
(2) The administration of a driver education program.
(3) The enforcement of state motor vehicle and traffic laws.
(4) Tourists and publicity expense in any single biennium. . . .
Having determined that the environmental surcharge is, at least to the extent that it is levied on motor fuel, as defined in the consti
We have previously observed, “In fashioning an equitable remedy, reliance interests weigh heavily, and the court should seek a blend of what is necessary, what is fair, and what is workable.” Rio Algom Corp. v. San Juan County, 681 P.2d 184, 196 (Utah 1984). In Rio Algom, we responded to such reliance interests by declaring a taxing statute prospectively unconstitutional, except as to the plaintiffs to whom we granted retroactive relief for the year for which they sought a refund. Id. We later were asked to address the application of the unconstitutionality holding to different litigants seeking a refund. We noted that the retroactive or prospective operation of a judicial decision “is not a question of judicial power but instead depends ‘solely upon an appraisal of the relevant judicial policies to be advanced.‘” Kennecott Corp. v. Utah State Tax Comm‘n, 862 P.2d 1348, 1352 (Utah 1993) (quoting Van Dyke v. Chappell, 818 P.2d 1023, 1025 (Utah 1991)). In making that determination,
Id. (quoting Van Dyke, 818 P.2d at 1025). In Kennecott, we denied the refund because it would be contrary to the holding in Rio Algom and would place an undue and unexpected financial burden on the county to grant a refund to the plaintiff and unknown others of taxes paid before the statute was declared unconstitutional. Id.“we look to the impact retroactive application would have on those affected. When we conclude that there has been justifiable reliance on the prior state of the law or that the retroactive application of the new law may otherwise create an undue burden, the court may order that a decision apply only prospectively.”
The same factors we identified in Kennecott are pertinent to the remedy appropriate here. In opposition to V-1‘s class action claims in the present case, the State submitted numerous affidavits from UST industry groups indicating their members’ reliance on the Fund to meet EPA financial responsibility requirements. Many of these groups supported and were involved in establishing the environmental surcharge and the Fund. We think the record amply demonstrates reliance among those subjected to the surcharge and receiving the benefits of the program it finances, as well as the burdens that immediate and retroactive elimination of the surcharge, the Fund, and the program would work. We therefore hold that
Prospective application of our decision to V-1, the only party to this appeal, would have the potential of discouraging other litigants from challenging statutes of questionable validity. Rio Algom, 681 P.2d at 196. Indeed, we have said in the past that it would be unconscionable to deprive the litigant who has sustained the burden of attacking an unconstitutional statute of the fruits of victory. Salt Lake City v. Ohms, 881 P.2d 844, 854-55 (Utah 1994); see also Labrum v. Utah State Bd. of Pardons, 870 P.2d 902, 914 (Utah 1993). Therefore, as to V-1, our deci
We next address V-1‘s request for attorney fees pursuant to the Small Business Equal Access to Justice Act,
HOWE, DURHAM and RUSSON, JJ., concur in Chief Justice ZIMMERMAN‘S opinion.
STEWART, Associate C.J., does not participate herein.
On Petition for Rehearing
This court called for rehearing sua sponte in this case after issuing an opinion finding the environmental surcharge imposed by the Underground Storage Tank Act unconstitutional. See V-1 Oil Co. v. Utah State Tax Comm‘n, 302 Utah Adv. Rep. 30, 34 (Oct. 29, 1996); see also
As noted, our holding on that first opinion was based primarily on the factual premise that V-1 did not benefit from the Fund because it was self-insured. V-1, 302 Utah Adv. Rep. at 33; see also
We first state the standard of review. Because V-1 appeals from the district court‘s grant of summary judgment dismissing its claims, we view the facts and all reasonable inferences drawn therefrom in the light most favorable to the nonmoving party, V-1. Harline v. Barker, 912 P.2d 433, 435 (Utah 1996).
To the extent that our statement of facts in our prior opinion outlined the origins and general operation of the Fund, we will not restate them here. We hereby adopt that statement except to the extent it implies that the Fund would not pay to clean up a spill occurring at a tank owned by V-1. See V-1, 302 Utah Adv. Rep. at 30-31. Similarly, the analytical model for addressing whether the surcharge is a legitimate fee for service or a tax is also set out fully in our initial opinion. Id. at 32-33. We will not restate here.
Addressing the question of benefit, we find that V-1 does benefit from the Fund because a spill at one of its tanks would be covered by the Fund. The statute requires that V-1 have a certificate of compliance for each of its petroleum storage tank facilities.
V-1 argues that this benefit is illusory because, by the provisions of the statute, the State can turn around and recover from V-1 any costs paid by the Fund.
Here, as in other cases, “[w]hen faced with a question of statutory construction, we look first to the plain language of the statute.” CIG Exploration, Inc. v. Utah State Tax Comm‘n, 897 P.2d 1214, 1216 (Utah 1995), cert. denied, U.S., 116 S.Ct. 699, 133 L.Ed.2d 656 (1996). Under our rules of statutory construction, we need not look beyond the plain language of this provision unless we find some ambiguity in it. Schurtz v. BMW of North Am., Inc., 814 P.2d 1108, 1112 (Utah 1991). In analyzing a statute‘s plain language, we must attempt to give each part of the provision a relevant and independent meaning so as to give effect to all of its terms. Id. If we find the provision ambiguous, however, we then seek guidance from the legislative history and relevant policy considerations. World Peace Movement of Am. v. Newspaper Agency Corp., 879 P.2d 253, 259 (Utah 1994). In addition, “if doubt or uncertainty exists as to the meaning or application of an act‘s provisions, the court should analyze the act in its entirety and harmonize its provisions in accordance with the legislative intent and purpose.” Beynon v. St. George-Dixie Lodge #1743, 854 P.2d 513, 518 (Utah) (quoting Osuala v. Aetna Life & Casualty, 608 P.2d 242, 243 (Utah 1980)), cert. denied, 510 U.S. 869, 114 S.Ct. 195, 126 L.Ed.2d 153 (1993).
When we look to the statute as a whole, it is clear that the Fund will pay $990,000 to clean up a spill, with the owner being responsible for the first $10,000 and any costs over $1,000,000. See
We find further support for our reading of the statute in
The determination that V-1 benefits from the Fund is only the first prong in deciding whether the environmental surcharge is a fee or a tax. We must now consider whether the surcharge bears some reasonable relationship to the cost of the benefit said to justify its imposition. V-1, 302 Utah Adv. Rep. at 32-33; Utah Restaurant Ass‘n v. Davis County Bd. of Health, 709 P.2d 1159, 1164 (Utah 1985). We note that fixing the amount of a fee is a legislative act to which we grant great deference. See, e.g., Walker, 856 P.2d at 349; Banberry Dev. Corp. v. South Jordan City, 631 P.2d 899, 904 (Utah 1981). Such fees are presumed reasonable, and the burden is on the party challenging the fee to prove that the fee is unreasonable. Walker, 856 P.2d at 349; Banberry, 631 P.2d at 904. Here, V-1 has failed to meet its burden of proving that the environmental surcharge is unreasonable.
V-1 claims that the environmental surcharge is unreasonable because to date the Fund it establishes has taken in more money from the fees than it has paid out in cleanup costs. This fact alone does not, however, establish that the fee is unreasonable. We have held that a fee may exceed the cost of providing intended service and remain reasonable. See Walker, 856 P.2d at 350. Fee-setting bodies are entitled to flexibility in their legislative solutions to problems. Banberry, 631 P.2d at 904. The problems they address are “not susceptible of exact measurement.” Id. such bodies must also have
We vacate the ruling of our prior decision, affirm the trial court, and hold the environmental surcharge constitutional.
STEWART, C.J., and HOWE, DURHAM and RUSSON, JJ., concur in Chief Justice ZIMMERMAN‘S opinion.
Notes
(1) An environmental surcharge of one-half cent per gallon is imposed on all petroleum that is sold, used, or received for sale in this state, except under Subsection (2).
(2) The environmental surcharge is not imposed on petroleum delivered to any tank that is:
(a) not an underground storage tank, unless the petroleum is being held for subsequent retail sale; or
(b) exempt from this part, unless the tank becomes eligible for payments from the Petroleum Storage Tank Fund.
(3) The revenues generated by the environmental surcharge and any penalties for failure to pay the environmental surcharge shall be deposited in the Petroleum Tank Storage Fund.
(4) The State Tax Commission:
(a) shall prescribe by rule the method of payment of the environmental surcharge; and
(b) is responsible for the enforcement of this section.
(5)(a) The penalties and interest for failure to pay the environmental surcharge are the same as the penalties and interest for failure to pay a tax as specified in Sections 59-1-401 and 59-1-402.
(b) The State Tax Commission may also revoke any license issued by the commission to distribute petroleum if the distributor is delinquent in payment of the environmental surcharge.
[T]he proceeds from the imposition of any excise tax on gasoline or other liquid motor fuels used for propelling such vehicle . . . shall be used exclusively for highway purposes. . . .