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AAA Oregon/Idaho Auto Source, LLC v. State

Supreme Court of Oregon, En Banc

August 2, 2018

AAA OREGON/IDAHO AUTO SOURCE, LLC; AAA Oregon / Idaho; and Oregon Trucking Associations, Inc., Petitioners,
v.
STATE OF OREGON, by and through the Department of Revenue, Respondent.

          Argued and submitted March 14, 2018

          On petition for judicial review under Oregon Laws 2017, chapter 750, section 112.

          Gregory A. Chaimov, Davis Wright Tremaine LLP, Portland, argued the cause and fled petition for review and the reply brief for petitioners.

          Peenesh Shah, Assistant Attorney General, Salem, argued the cause and fled the brief for respondent. Also on the brief were Ellen F. Rosenblum, Attorney General, and Benjamin Gutman, Solicitor General.

          Alan S. Dale, Senior Deputy Legislative Counsel, Salem, fled the brief for amicus curiae Oregon Legislative Assembly.

         Case Summary:

         In 2017, the legislature enacted Oregon Laws 2017, chapter 750, section 90, which imposes a tax “on each vehicle dealer for the privilege of engaging in the business of selling taxable motor vehicles at retail in this state.” Petitioners filed an original petition for judicial review with the Oregon Supreme Court to determine whether the tax is subject to Article IX, section 3a, which provides that taxes “on the ownership, operation or use of motor vehicles” “shall be used exclusively for the construction, reconstruction, improvement, repair, maintenance, operation and use of public highways, roads, streets and roadside [363 Or. 412] rest areas in this state.” Held: (1) Taxes “on the ownership * * * of motor vehicles” described in Article IX, section 3a, are limited to taxes levied on the status of ownership, and do not include taxes levied on actions-like a sale-that an owner may take; and (2) the privilege tax at issue here is not defined as, and does not function as, a tax based on the status of ownership. The tax imposed by Oregon Laws 2017, chapter 750, section 90, is not subject to Article IX, section 3a, of the Oregon Constitution.

         The tax imposed by Oregon Laws 2017, chapter 750, section 90, is not subject to Article IX, section 3a, of the Oregon Constitution.

          [363 Or. 413] DUNCAN, J.

         In 2017, the legislature enacted a law that provides, in part, "A tax is imposed on each vehicle dealer for the privilege of engaging in the business of selling taxable motor vehicles at retail in this state." Or Laws 2017, ch 750, § 90(1). The issue in this case is whether that tax is subject to Article IX, section 3a, of the Oregon Constitution. As relevant here, Article IX, section 3a, provides that taxes "on the ownership, operation or use of motor vehicles" "shall be used exclusively for the construction, reconstruction, improvement, repair, maintenance, operation and use of public highways, roads, streets and roadside rest areas in this state." For the reasons explained below, we conclude the tax is not subject to Article IX, section 3a.

         I. PROCEDURAL BACKGROUND

         This case is before this court because, in the same law that established the tax at issue, the legislature conferred original jurisdiction upon this court to determine whether the tax is subject to Article IX, section 3a. Or Laws 2017, ch 750, § 112(3)(a). The law also authorized "[a]ny person interested in or affected or aggrieved by" the tax to petition this court to make that determination. Or Laws 2017, ch 750, § 112(2). Pursuant to that authority, petitioners- AAA Oregon/Idaho Auto Source, LLC (Auto Source), AAA Oregon/Idaho, and Oregon Trucking Associations, Inc.- filed the petition for judicial review in this case. The state appears as respondent, and the Oregon Legislative Assembly appears as amicus curiae.

         Petitioners assert that they have standing for several reasons, including that Auto Source is a vehicle dealer who is subject to the tax. Respondent agrees that Auto Source is affected by the tax. Therefore, it is undisputed that Auto Source has standing. Accordingly, we proceed to our review of the tax. See MacPherson v. DAS, 340 Or. 117, 123-24, 130 P.3d 308 (2006) (in a case with multiple plaintiffs, only one needs to establish standing).

         II. DISCUSSION

         We begin with a description of the tax at issue, before turning to an examination of Article IX, section 3a, [363 Or. 414] and then addressing whether the tax is subject to Article IX, section 3a.

         A. The Tax

         The tax at issue was imposed by the legislature through Oregon Laws 2017, chapter 750, section 90, and we refer to it as the "Section 90" tax. By its terms, the Section 90 tax is a "privilege tax," and it is imposed on vehicle dealers "for the privilege of engaging in the business of selling taxable motor vehicles at retail in this state."[1] Id. § 90(1). It is "computed at the rate of 0.5 percent of the retail sales price of the taxable motor vehicle." Id. § 90(2). It is to be paid by vehicle dealers by means of quarterly tax returns filed with the Department of Revenue. Id. § 98(2), (4). "A vehicle dealer may collect the amount of the privilege tax computed on the retail sales price of a taxable motor vehicle from the purchaser of the taxable motor vehicle." Id. § 90(3)(a).

         As noted, the Section 90 tax is imposed on "vehicle dealers" and is based on retail sales of "taxable motor vehicles." A "vehicle dealer" is "[a] person engaged in business in this state that has been issued a vehicle dealer certificate under ORS 822.020." Or Laws 2017, ch 750, § 89(9)(a). A "taxable motor vehicle" is "a new motor vehicle with a gross vehicle weight rating of 26, 000 pounds or less" that is also, inter alia, a "vehicle as defined in ORS 744.850, other than an all-terrain vehicle" or a "commercial vehicle as defined in ORS 801.210."[2] Id. § 89(6). Thus, the Section 90 tax is [363 Or. 415] imposed only on vehicle dealers, and, it is calculated based only on certain sales. It is not triggered by all motor vehicle sales; specifically, it is not triggered by sales by persons who are not vehicle dealers, by sales to resellers, or by sales of used vehicles.

         The legislature did not view the Section 90 tax as a tax on the "ownership, operation or use of motor vehicles" for the purposes of Article IX, section 3a. Or Laws 2017, ch 750, § 112(1) ("It is the intent of the Legislative Assembly that revenue from the privilege tax imposed under section 90 of this 2017 Act is not subject to the provisions of Article IX, section 3a, of the Oregon Constitution."). In keeping with that view, the legislature provided that moneys received from the Section 90 tax shall be deposited into the Zero-Emission Incentive Fund and the Connect Oregon Fund, rather than the State Highway Fund (or other fund dedicated to the uses listed in Article IX, section 3a).[3]

         In addition to the Section 90 tax, which it refers to as a "privilege tax," Oregon Laws 2017, chapter 750, also establishes what it refers to as a "use tax." Specifically, [363 Or. 416] section 91 of the law imposes a tax "on the storage, use or other consumption in this state of taxable motor vehicles purchased at retail from any seller," and we refer to that tax as the "Section 91" tax. Id. § 91(1). The rate of the Section 91 use tax is the same as the rate of the Section 90 privilege tax: "0.5 percent of the retail sales price of the taxable motor vehicle." Id. § 91(2). The Section 91 use tax is a liability of the purchaser, but it is reduced by the amount of other taxes imposed upon the sale, including any privilege tax. Id. § 91(3), (4). Thus, if a dealer pays the Section 90 privilege tax (either on its own or after collecting the tax from the purchaser), the purchaser will not have to pay the Section 91 use tax. Because the amounts of the two taxes are the same, payment of the Section 90 privilege tax reduces the Section 91 use tax to zero.[4] The legislature provided that moneys from the Section 91 use tax shall be deposited into the State Highway Fund. Id. § 96(2)(b).

         As mentioned, the legislature conferred original jurisdiction upon this court to determine whether the Section 90 privilege tax is subject to Article IX, section 3a. Or Laws 2017, ch 750, § 112(2). It also provided that, if this court determines that the Section 90 privilege tax is subject to Article IX, section 3a, then both Section 90 and Section 91 are repealed. Id. § 112(8).

         B. Article ...


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