Thompson Truck & Trailer, Inc v. United States of America
ORDER granting 10 Motion to Dismiss by USA. The 2 Complaint is dismissed. The Clerk of Court is directed to close this case. Signed by Judge Linda R Reade on 08/07/2017. (jjh)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF IOWA
CEDAR RAPIDS DIVISION
THOMPSON TRUCK & TRAILER,
UNITED STATES OF AMERICA,
TABLE OF CONTENTS
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
RELEVANT PROCEDURAL HISTORY . . . . . . . . . . . . . . . . . . . . . . . . 1
Factual Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Tax Scheme . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
LEGAL STANDARD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ANALYSIS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
The matter before the court is Defendant United States of America’s (“the
government”) Motion to Dismiss (“Motion”) (docket no. 10).
II. RELEVANT PROCEDURAL HISTORY
On November 8, 2016, Plaintiff Thompson Truck & Trailer, Inc. (“Thompson”)
filed a Complaint (docket no. 2) alleging that the government erroneously denied
Thompson’s tax refund claims during tax periods ending in June of 2011 and September
of 2011. On February 24, 2017, the government filed the Motion. On March 17, 2017,
Thompson filed a Resistance (docket no. 16). On March 24, 2017, the government filed
a Reply (docket no. 18). The matter is fully submitted and ready for decision.
A. Factual Background
Accepting all factual allegations in the Complaint as true and drawing all reasonable
inferences in favor of Thompson, the facts are as follows.
Thompson is a heavy truck dealer. Complaint ¶ 5. In 2011, Thompson purchased
and resold a number of trucks equipped with diesel particulate filters (“DPFs”). Id. ¶ 6.
DPFs are ceramic devices that, when installed, collect “particulate matter” from truck
exhaust and “oxidize and break down” the particles in a manner that reduces harm to the
environment. Id. ¶¶ 7-8. This is the only function of DPFs. Id. ¶ 9. Thompson installed
DPFs onto the trucks at issue solely to meet emissions standards required by
Environmental Protection Agency (“EPA”) regulations. Id. ¶ 6.
The DPFs installed onto the trucks sold by Thompson added a value of
approximately $8,000 per truck. Id. ¶¶ 13, 21. Upon selling the trucks, Thompson paid
a twelve percent excise tax on the full sale price of each truck, pursuant to Internal
Revenue Code (“IRC”) § 4051(a)(1). Id. ¶¶ 14-15, 22-23. Acting under the belief that
IRC § 4051(a)(1) does not require payment of an excise tax for the value of the DPFs,
Thompson compiled supporting documentation and submitted a refund claim to the Internal
Revenue Service (“IRS”) seeking recovery of its perceived overpayments. See id. ¶¶ 17,
24; see also Ex. 1 to Complaint (docket no. 2-1) (refund claim); Ex. 2 to Complaint
(docket no. 2-2) (documenting the extent of Thompson’s perceived overpayment); Ex. 3
to Complaint (docket no. 2-3) (consent from truck purchasers regarding Thompson’s
entitlement to any refund issued by the IRS). The IRS denied Thompson’s refund claim.
Complaint ¶¶ 19, 27; see also Ex. 4 to Complaint (docket no. 2-4) (IRS letter denying
Thompson’s refund claim).
B. Tax Scheme Background
IRC § 4051 imposes a twelve percent tax on “the first retail sale” of “[t]ruck trailer
and semitrailer chassis,” “[t]ruck trailer and semitrailer bodies” and “parts or accessories
sold on or in connection therewith or with the sale thereof.” 26 U.S.C. § 4051(a)(1)(C)(D). Enacted by Congress in 1983, IRC § 4051 is the latest in a series of excise tax
provisions aimed at various types of automobiles, as well as “parts or accessories” of such
automobiles, dating back to 1917. See War Revenue Act of 1917, ch. 65-50, § 600(a), 40
Stat. 300, 316 (imposing tax on sale of “all automobiles, automobile trucks, automobile
wagons, and motorcycles”); Revenue Act of 1919, Pub. L. No. 65-254, § 900(1)-(3), 40
Stat. 1057, 1122 (imposing tax on sale of automobiles, motorcycles and “[t]ires, inner
tubes, parts, or accessories” for any taxable automobiles or motorcycles); Revenue Act of
1932, Pub. L. No. 72-154, § 606(a)-(c), 47 Stat. 169, 261-62 (imposing tax on sale of
automobile “chassis and bodies,” as well as “[p]arts or accessories (other than tires and
inner tubes)” for any automobile chassis and bodies); Internal Revenue Code of 1939, 26
U.S.C. § 3403 (1939) (imposing tax under substantially similar terms as the Revenue Act
of 1932); Internal Revenue Code of 1954, 26 U.S.C. §§ 4061-4063 (1954) (imposing tax
under substantially similar terms as the Revenue Act of 1932); Revenue Act of 1971, Pub.
L. No. 92-178, § 401(a), 85 Stat. 497, 530 (imposing tax on sale of “chassis and bodies”
of large trucks, buses, and truck and bus trailers and semitrailers, as well as “parts or
accessories therefor sold on or in connection therewith or with the sale thereof,” but
exempting from tax any “vehicle having a gross vehicle weight of 10,000 pounds or less”).
The terms “parts or accessories” are not expressly defined in IRC § 4051, and they
were not defined in the numerous prior iterations of the law. However, in certain
iterations of the law, Congress included examples of the types of items that it considered
to be parts or accessories, which included “spark plugs, storage batteries, leaf springs,
coils, timers, and tire chains, which are suitable for use on or in connection with, or as
component parts of any covered automobile.” E.g., Revenue Act of 1932, § 606(c), 47
Stat. 169, 262; Internal Revenue Code of 1939, 26 U.S.C. § 3403(c) (1939); Internal
Revenue Code of 1954, 26 U.S.C. § 4062(a) (1954). Furthermore, the United States
Department of Treasury (“Treasury”) has put forth regulations providing guidance as to
the meaning of “parts or accessories” subject to the tax. See, e.g., Ex. 1 to the Motion
(docket no. 10-2) at 15-17 (1920 regulation defining the terms as to the Revenue Act of
1918); Ex. 2 to the Motion (docket no. 10-3) at 21-22 (1932 regulation defining the terms
as to the Revenue Act of 1932); 5 Fed. Reg. 142, 152-53 (Jan. 11, 1940) (defining the
terms as to the Internal Revenue Code of 1939); 24 Fed. Reg. 5901, 5903 (Jul. 23, 1959)
(defining the terms as to the Internal Revenue Code of 1954). At present, Treasury
regulations define “parts or accessories” as follows:
The term “parts or accessories” includes (1) any article the
primary use of which is to improve, repair, replace, or serve
as a component part of an automobile truck or bus chassis or
body, or other automobile chassis or body, or taxable tractor,
(2) any article designed to be attached to or used in connection
with such chassis, body, or tractor to add to its utility or
ornamentation, and (3) any article the primary use of which is
in connection with such chassis, body, or tractor, whether or
not essential to its operation or use. . . . An article shall not
be deemed to be a taxable part or accessory even though it is
designed to be attached to the vehicle or to be primarily used
in connection therewith if the articles is in effect the load being
transported and the primary function of the article is to serve
a purpose unrelated to the vehicle as such.
26 C.F.R. § 48.4061(b)-2(a). Additionally, Treasury regulations incorporate a separate
regulation to aid in the ultimate determination of whether an item is taxable under IRC
§ 4051. See 26 C.F.R. § 145.4052-1(f)(2) (incorporating “Paragraphs (a)(2) and (3) of
§ 48.4061(a)-1). Specifically, the incorporated regulation provides that “equipment or
machinery installed on a taxable chassis or body” is only taxable if it “contributes toward
the highway transportation function of the chassis or body.” 26 C.F.R. § 48.4061(a)4
IV. LEGAL STANDARD
The government seeks dismissal of the Complaint pursuant to Rule 12(b)(6) of the
Federal Rules of Civil Procedure. See Motion at 1.
Rule 12(b)(6) provides for dismissal of a complaint for “failure to state a claim upon
which relief can be granted.” Fed. R. Civ. P. 12(b)(6). When analyzing a Rule 12(b)(6)
motion, the court must accept all of the factual allegations in the complaint as true. See
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). To survive a motion to dismiss under Rule
12(b)(6), “a complaint must contain sufficient factual matter . . . to ‘state a claim to relief
that is plausible on its face.’” Id. (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570
(2007)). “A claim has facial plausibility when the plaintiff pleads factual content that
allows the court to draw the reasonable inference that the defendant is liable for the
misconduct alleged.” Varga v. U.S. Bank Nat’l Ass’n, 764 F.3d 833, 838-39 (8th Cir.
2014) (quoting Iqbal, 556 U.S. at 678). This standard requires a complaint to “contain
factual allegations sufficient ‘to raise a right to relief above the speculative level.’”
Parkhurst v. Tabor, 569 F.3d 861, 865 (8th Cir. 2009) (quoting Twombly, 550 U.S. at
555). “Where the allegations show on the face of the complaint [that] there is some
insuperable bar to relief, dismissal under Rule 12(b)(6) is appropriate.” Benton v. Merrill
Lynch & Co., Inc., 524 F.3d 866, 870 (8th Cir. 2008).
In the Motion, the government seeks dismissal of Thompson’s claims because,
according to the government, Thompson was not entitled to the tax refund that it claims
it was erroneously denied. See Brief in Support of Motion (docket no. 10-1) at 9-10.
Specifically, the government argues that the DPFs were subject to taxation because: (1)
IRC § 4051’s imposition of a tax on “parts or accessories” unambiguously encompasses
the DPFs at issue, id. at 10-17; and (2) even if the meaning of “parts or accessories” is
ambiguous in IRC § 4051, the DPFs are nevertheless taxable under the Treasury
regulations defining those terms, id. at 17-18.
The government first argues that, “[e]xamining [IRC § 4051] on its face, the
ordinary meanings of ‘parts’ and ‘accessories’ encompass the filters at issue.” Brief in
Support of Motion at 10. Thompson argues that the absence of any definition of “parts or
accessories” within the text of IRC § 4051, combined with the long history of Treasury
regulations and IRS guidance defining the terms, establish that the terms are ambiguous.
Brief in Support of Resistance (docket no. 16-1) at 5-8.
The “first step in interpreting a statute is to determine whether the language at issue
has a plain and unambiguous meaning with regard to the particular dispute in the case.”
LaCurtis v. Express Med. Transporters, Inc., 856 F.3d 571, 578 (8th Cir. 2017) (quoting
Robinson v. Shell Oil Co., 519 U.S. 337, 340 (1997)). “The plainness or ambiguity of
statutory language is determined by reference to the language itself, the specific context
in which that language is used, and the broader context of the statute as a whole.” Id.
(quoting Robinson, 519 U.S. at 341). “A ‘statutory provision is ambiguous’ if ‘it is
susceptible to more than one reasonable interpretation.’” Id. (quoting Owner-Operator
Indep. Drivers Ass’n, Inc. v. Supervalu, Inc., 651 F.3d 857, 862 (8th Cir. 2011)). If a
statute is unambiguous, “the court, as well as the agency, must give effect to the
unambiguously expressed intent of Congress.” Chevron, U.S.A., Inc. v. Nat. Res. Def.
Council, Inc., 467 U.S. 837, 842-43 (1984); accord Stanley v. Cottrell, 784 F.3d 454,
465-66 (8th Cir. 2015) (“If the words are unambiguous, our inquiry is complete.”).
As an initial matter, the court declines to lend credence to Thompson’s theory that
the mere existence of Treasury regulations and IRS guidance regarding “parts or
accessories” renders the statutory text ambiguous. See Brief in Support of Resistance at
5-6. A statute’s ambiguity is not determined by the response it evokes among government
agencies, but rather from the statute’s text, interpreted from its language and its context
within a broader statutory scheme. See LaCurtis, 856 F.3d at 578; see also Supervalu,
Inc., 651 F.3d at 863 (stating that courts “may resort to legislative history and any other
authorities that might facilitate . . . efforts to discern Congress’s intent” only after
determining that “the statute’s language is not plain but instead ambiguous”); United States
v. Mendoza-Gonzalez, 520 F.3d 912, 914 (8th Cir. 2008) (“Only if the language is
ambiguous may we look beyond the text.”), vacated on other grounds 556 U.S. 1232
(2009). Even within the context of Chevron deference, Thompson’s argument seeks to put
the cart before the horse by looking to an agency’s interpretation as evidence of ambiguity.
See, e.g., Andrade-Zamora v. Lynch, 814 F.3d 945, 951 (8th Cir. 2016) (describing the
“familiar two-step framework” of Chevron deference, wherein resort to agency
interpretation occurs only after a determination of statutory ambiguity). Indeed, the
foundation of Chevron deference is the presumption that when “Congress has explicitly left
a gap for the agency to fill, there is an express delegation of authority to the agency to
elucidate a specific provision of the statute by regulation.” Chevron, 467 U.S. at 843-44.
Under Thompson’s proposed theory, an agency could unilaterally determine a statute’s
ambiguity simply by taking action to define or interpret the statute. Such a system would
distort the bedrock principle that agencies receive power only “by virtue of congressional
delegation.” Bowsher v. Synar, 478 U.S. 714, 752 (1986) (Stevens, J., concurring)
(quoting I.N.S. v. Chadha, 462 U.S. 919, 985 (1983) (White, J., dissenting)). Therefore,
the court does not consider the existence of regulations and guidance defining “parts or
accessories” to be probative of the ambiguity of such terms within the statute.
The court turns now, as it must, to the language of the statute. As noted above, the
terms “parts or accessories” are not defined within the statutory text. Thompson argues
that the absence of a statutory definition alone renders the terms ambiguous. Brief in
Support of Resistance at 6 (“Congress’s silence left a space for the agency to make a
regulation.”). However, that is not the case. “When a word is not defined by statute,
[courts] normally construe it in accord with its ordinary or natural meaning.” United
States v. Jungers, 702 F.3d 1066, 1071 (8th Cir. 2013) (quoting Smith v. United States,
508 U.S. 223, 228 (1993)). “If the words [of a statute] convey a definite meaning, which
involves no absurdity, nor any contradiction of other parts of the instrument, then that
meaning, apparent on the face of the instrument, must be accepted.” United States v. I.L.,
614 F.3d 817, 821 (8th Cir. 2010) (quoting Lake Cty. v. Rollins, 130 U.S. 662, 670
(1889)). “Ordinarily, a word’s usage accords with its dictionary definition.” Yates v.
United States, __ U.S. __, __, 135 S. Ct. 1074, 1082 (2015).
Generally, a “part” is something “relating to a portion or division of a whole.”
Part, n.I, Oxford English Dictionary Online, http://www.oed.com/view/Entry/
138188?result=1&rskey=mY2H5h& (last visited Aug. 4, 2017). In the specific context
at issue, a “part” refers to “[a]ny of the manufactured objects that go to make up a
machine or instrument” or, in other words, “a component.” Part, n.I.8, Oxford English
Dictionary Online, http://www.oed.com/view/Entry/138188?result=1&rskey=mY2H5h&
(last visited Aug. 4, 2017). Thompson argues that this definition of “part” remains
ambiguous with respect to this case. Brief in Support of Resistance at 7. Specifically,
Thompson emphasizes the definition’s reference to the relationship between a part and a
machine. Id. According to a definition identified by Thompson, a machine is defined by
its ability to perform a task. Id. Thompson argues that a truck’s task, as relevant to this
case, is the ability to “propel itself (and its cargo and occupants) down the highway” and
Thompson claims that DPFs do not contribute to that task. Id. The court declines to adopt
the excessive formality exhibited by Thompson’s nesting of one definition within another.
The definition and ordinary understanding of the word “part” imposes no essentiality on
the thing it describes. Therefore, even accepting Thompson’s logic that the sole task of
a truck is the basic act of locomotion, the fact that a DPF’s utility is merely collateral to
that task is of no significance to its status as a truck “part.”
In its typical non-legal context, an “accessory” is “[a] subordinate or auxiliary
thing; an adjunct; an accompaniment; . . . a minor fitting or attachment.” Accessory,
n.2.a, Oxford English Dictionary Online, http://www.oed.com/view/Entry/1046?
redirectedFrom=accessory#eid (last visited Aug. 4, 2017). According to Thompson, this
definition is also ambiguous with respect to this case because it describes something that
is “subordinate” or non-essential. Brief in Support of Resistance at 7-8. Thompson points
to the government’s argument that DPFs are required for trucks to meet EPA requirements
as indicating that the DPFs are essential to the truck’s operation and, therefore, not
accessories. Id.; see also Brief in Support of Motion at 16-17. The court finds this
construction to be overly simplistic. EPA compliance may, in fact, be essential to a
truck’s operation insofar as it is required by law. However, so too is basic locomotion
essential to a truck’s operation. A DPF may be essential in one area (EPA compliance)
and, simultaneously, “subordinate” or non-essential in another (basic locomotion). The
court finds that the definition of “accessory” is not rendered ambiguous simply because
there is more than one essential component to a truck’s operation. In sum, after consulting
the dictionary definitions of “part” and “accessory,” and considering Thompson’s
arguments regarding such definitions, the court finds that the ordinary meaning of the
terms comports with their dictionary definitions.
Furthermore, interpreting “parts or accessories” in a manner consistent with their
ordinary meaning creates no “absurdity, nor any contradiction” within the context of IRC
§ 4051. I.L., 614 F.3d at 821 (quoting Lake Cty., 130 U.S. at 670). First, the statute
broadly imposes a tax on automobile trucks and trailers exceeding a defined weight
threshold, and it extends the tax to “parts or accessories sold on or in connection therewith
or with the sale thereof.” 26 U.S.C. § 4051(a)(1). While the statute creates exceptions
for parts or accessories sold as replacements or that fail to meet a certain dollar-value
threshold, see 26 U.S.C. § 4051(b)(2), it creates no exception based on the type or
function of the parts or accessories subject to the tax. The absence of any fine grain
exception resembling the one urged by Thompson reveals Congress’s intent for the tax to
apply broadly to all parts or accessories sold on or in connection with a truck. See United
States v. Smith, 499 U.S. 160, 167 (1991) (“Where Congress explicitly enumerates certain
exceptions to a general [premise], additional exceptions are not to be implied, in the
absence of evidence of a contrary legislative intent.” (quoting Andrus v. Glover Constr.
Co., 446 U.S. 608, 616-17 (1980))). Second, the statute lacks an explicit provision
allowing certain truck attachments to be excluded from tax.
This further reveals
Congress’s intent that the tax apply broadly to all types of components—i.e. parts or
accessories—attached to a truck at the time of its sale, without inviting exceptions based
on the function of a particular component. In short, IRC § 4051 speaks broadly regarding
the imposition of tax on the first retail sale of trucks and their associated parts or
accessories, rendering the broad ordinary meanings of “parts or accessories” appropriate
Appearing in a broadly structured statute like IRC § 4051, the broad meaning of
“parts” and “accessories” does not signal ambiguity. Rather, it plainly signals Congress’s
intent for the taxation of such items to apply broadly. Thompson has furnished no other
reasonable interpretation for “parts or accessories” in light of this context, and the court
finds that IRC § 4051 is not susceptible to any other reasonable interpretation. See
LaCurtis, 856 F.3d at 578. Because the DPFs in this case were component items
“equipped” to the trucks sold by Thompson and functioned in relation to the trucks’
exhaust systems, see Complaint ¶¶ 6-8, they are “parts or accessories” of the trucks within
the ordinary meaning of those terms. Therefore, they were subject to tax under IRC
§ 4051. Accordingly, the court shall grant the Motion and shall dismiss Thompson’s
In light of the foregoing, the Motion (docket no. 10) is GRANTED.
Complaint (docket no. 2) is DISMISSED. The Clerk of Court is DIRECTED to CLOSE
IT IS SO ORDERED.
DATED this 7th day of August, 2017.
Because the court finds that IRC § 4051 is not ambiguous with respect to the issue
presented in this case, the court declines to address the government’s alternative argument
that Treasury regulations independently require dismissal of Thompson’s claims. See
Hawkins v. Cmty. Bank of Raymore, 761 F.3d 937, 940-41 (8th Cir. 2014) (“Only if we
conclude that ‘the statute is silent or ambiguous with respect to the specific issue’ presented
will we then proceed to the second step of the Chevron framework, which requires us to
consider whether ‘the agency’s reading [of an ambiguous statute] fills a gap or defines a
term in a reasonable way in light of the Legislature’s design.’” (quoting North Dakota v.
E.P.A., 730 F.3d 750, 763 (8th Cir. 2013))).
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