Ammex v. USA ( 2004 )

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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No. 02-2375 Ammex, Inc. v. United States, et al. 3 4 Ammex, Inc. v. United States, et al. No. 02-2375
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