GLB ENTERPRISES, INC.,
Plaintiff,
v.
UNITED STATES OF AMERICA,
Defendant.
[1999 DSD 31]
United States District Court
District of South Dakota-Northern Division
CIV 96-1019
ORDER
Douglas E. Hoffman, Michael M. Billion
Myers, Peters, Hoffman & Billion, Sioux Falls, SD
Attorney for Plaintiff
Charles P. Hurley
Department of Justice, Special Litigation/Tax Division
Washington, DC
Attorney for Defendant
Dated Oct 29, 1999
KORNMANN, U.S. DISTRICT JUDGE
[¶1] This is the first case apparently tried in the United States involving the taxation of cotton module retrievers and the interpretation of Treas. Reg. §48.4061(a)-1(d)(2)(ii). Based upon the Court's jury instructions, the jury found, by answering in the affirmative two special interrogatories, that the cotton module retrievers manufactured and sold by the plaintiff were exempt from federal excise taxation because they were (1) specially designed for the primary function, in connection with a farming operation, of transporting a particular type of load other than over a public highway, and (2) the special design is such that the use of these GLB cotton module retrievers for transportation on public highways is substantially limited or substantially impaired.
[¶2] Along with other instructions, the Court instructed the jury (Instruction 10):
The plaintiff contends the cotton module retrievers it manufactures qualify for the tax exemption from the federal excise tax. In order for you to find for the plaintiff, you must find, by a preponderance of the evidence, that the cotton module retrievers manufactured and sold by GLB Enterprises, Inc.:
1. Were specially designed for the primary function of transporting, in connection with a farming operation, a particular type of load other than over a public highway; and
2. That there is a special design and, by reason of their special design, their use for transportation on public highways is substantially limited or substantially impaired.
Both factors must be present before the tax exemption may be found to exist.
A public highway includes any road (whether a federal or state highway, city street, or otherwise) which is not a private roadway.
[¶3] The Court also instructed (Instruction 11):
For purposes of determining whether the cotton module retrievers, by reason of this special design, are substantially limited or substantially impaired, you may consider, along with all other evidence, whether the vehicle may travel at regular highway speeds, requires a special permit for highway use, is overweight, over height or over width for regular use, and any other relevant considerations.
For purposes of determining the question of special design, where there is affixed to the vehicle equipment used for loading, unloading, handling or otherwise caring for a load transported by the vehicle over the public highways, the functions are related to the transportation of a load over the public highways even though such functions may be performed off the public highways.
[¶4] There is no claim that the Court erred in instructing the jury on the law. The sole claim of the United States at this juncture is a claim of insufficient evidence to justify the verdict of the jury. The United States has moved for a judgment as a matter of law (Doc. 80). In examining a jury verdict on a claim of insufficient evidence, the question is whether, viewing the evidence in the light most favorable to the verdict, a reasonable juror could have returned a verdict for the non-moving party. If so, the motion should be denied.
[¶5] The United States has moved, in the alternative, for a new trial (Doc. 80). In examining a motion for a new trial, such motion should be granted only if the jury's verdict was against the great weight of the evidence so as to constitute a miscarriage of justice. See Pulla v. Amoco Oil Co., 72 F3d 648, 656 (8th Cir. 1995).
[¶6] No case has been cited or found as to the interpretation of the phrase "specially designed for the primary function of transporting a particular type of load other than over the public highway" as found in the Treasury Regulation in question. This is a fact intensive inquiry as to which the plaintiff had the burden of proof as the party seeking an exemption from federal excise taxation. Plaintiff's practice was to purchase or have its customer purchase a straight truck, consisting of a cab with an engine and a chassis, without a truck box. The vehicle, of course, was equipped with brakes, headlights, running lights and a horn like any other highway vehicle. Federal excise tax was paid as the vehicle was purchased. Plaintiff insisted that only such trucks with high clearance off the ground could be used. Plaintiff would then substantially lengthen and reinforce the frame of the chassis, adding chains and other features so that the elongated bed could be pushed under the cotton module and then retracted, bringing the cotton module "on board". The manner of alterations and operations are much like that of the typical hay stack movers used in farming country. Once the cotton module was on board, the vehicle would transport the module through the field, sometimes over ridges and through streams and mud, and ultimately to the cotton gin, usually but not always on public highways after leaving the cotton field. No excise tax was ever paid on the modifications made to the vehicle by plaintiff. Plaintiff presented evidence, although in a largely conclusory fashion, that the modifications were specially designed by the owners of the plaintiff corporation for the primary function of transporting a cotton module other than over the public highways, i.e. in the cotton fields, especially in adverse weather conditions or in adverse field conditions. The jury may well have considered this question: who would know better about the purpose of a special design than the person who conceived, designed and built the modifications? This is despite the fact that the evidence was clear that the cotton module retrievers are actually used to a much greater extent to travel on public highways than "out in the fields". Actual use, while a proper and important consideration in answering the question of "special design", is not conclusive. Evidence was presented that the retrievers are used for no other purpose than transporting cotton modules and then during the harvest period only. If the government intended the test to be based on primary use of the cotton module retrievers, the Internal Revenue Service should have written the regulation in that manner. Although it is and was a very close question and although the Court would have found the facts against the plaintiff, sufficient evidence was presented to allow the jury to find that the first hurdle to obtain the exemption was cleared.
[¶7] Turning to the second hurdle for plaintiff, evidence was presented that there is some danger of a "tail swing" and blocking the oncoming lane of traffic while turning the vehicle, that prudence would dictate driving the vehicle at less than normal highway speeds, that braking problems and possible rollovers can occur, that the operation of the vehicles is not permitted on interstate highways, and that cotton producing states have varying requirements for special permits, hours of operation, and places of operation of cotton module retrievers. Without such special permits or exemptions, the retrievers would be over weight, over length and over width and thus illegal for highway usage. Again, while the evidence would not have been persuasive to the Court, this is not the test, and a reasonable jury could find that the design of the GLB cotton module retrievers is such that their use for transportation on public highways is substantially limited or substantially impaired.
[¶8] The motions of the United States should be denied. Now, therefore,
[¶9] IT IS ORDERED that the motion of the United States for judgment as a matter of law or, in the alternative, for a new trial (Doc. 80) should be and the same is hereby denied.
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