Amicus Curiae Brief — Eastern Airlines Inc. v. Florida Department of Revenue

|" "Supreme Court, U.S,

. ~ FILED

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(J IF) LY SEPT? 1985

Nos. 84-921, 84-926 and 84-929

JOSEPH Feo. aT

In the Supreme Court of the Gnited States

OCTOBER TERM, 1985

NORTHEASTERN INTERNATIONAL AIRWAYS, INC.,

AND ARROW AIR, INC., APPELLANTS

Vz.

FLORIDA DEPARTMENT OF REVENUE

EASTERN AIRLINES INC., APPELLANT

Vv.

FLORIDA DEPARTMENT OF REVENUE

DELTA AIR LINES, INC., APPELLANT

Vv:

FLORIDA DEPARTMENT OF REVENUE

BEST AVAILABLE COPY.

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ON APPEAL FROM

THE SUPREME COURT OF FLORIDA

a,

BRIEF FOR THE UNITED STATES AS

AMICUS CURIAE

CHARLES FRIED

Acting Solicitor General

ALBERT G. LAUBER, JR.

Assistant to the Solicitor General

Department of Justice

Washington, D.C. 20530

(202) 633-2217

JIM J. MARQUEZ

General Counsel

Department of Transportation

Washington, D.C. 20590

QUESTIONS PRESENTED

1. Whether a sales tax imposed by Florida on aviation

fuel purchased within that State violates the Interstate

Commerce Clause.

2. Whether Florida’s scheme of fuel taxation violates

the Equal Protection Clause by treating airlines dif-

ferently in some respects than other carriers.

3. Whether the Florida Supreme Court erred in deter-

mining that appellant in No. 84-926 lacks standing

under Florida law to challenge the validity of a tax

statute governing tax refunds to certain farmers and

fishermen.

(I)

TABLE OF CONTENTS

Page

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TABLE OF AUTHORITIES

Cases:

Allen v. Wright, No. 81-757 (July 3, 1984) ... 9

Boston Stock Exchange v. State Tax Comm’n,

ED ook sek vnc ccsasvapecessces 5

Complete Auto Transit, Inc. v. Brady, 430

a oa we ied Ciws nd ge x 0 0 6, 7

Eastern Air Transport, Inc. v. South Carolina

Tax Comm'n, 285 U.S. 147............... 6

Edelman v. Boeing Air Transport, Inc., 289

I ee ts gas ade wk bes s 6

Japan Line, Ltd. v. County of Los Angeles, 441

es rT ae wae ak a ee o's 7

Lehnhausen v. Lake Shore Auto Parts Co., 410

RU SS Se a re 8

Madden v. Kentucky, 309 U.S. 88 .......... 8

Metropolitan Life Ins. Co. v. Ward, No.

83-1274 (Mar. 26, 1985) ................. 9

United Air Lines, Inc. v. Mahin, 410 U.S. 623 6

Constitution and statutes:

U.S. Const.:

Art. 1, § 8, Cl. 3:

Foreign Commerce Clause .........

Interstate Commerce Clause .......

J

(III)

IV

Statutes — Continued:

Equal Protection Clause ...........

Fla. Stat. Ann. (West 1971):

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Fla. Stat. Ann. (West Supp. 1985):

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1985 Fla. Laws 85-348:

§ 2 (to be codified at Fla. Stat. 206.9855) .

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or or on

In the Supreme Court of the Gnited States

OCTOBER TERM, 1985

No. 84-921

NORTHEASTERN INTERNATIONAL AIRWAYS, INC.,

AND ARROW AIR, INC., APPELLANTS

Vv,

FLORIDA DEPARTMENT OF REVENUE

No. 84-926

EASTERN AIRLINES INC., APPELLANT

Vv.

FLORIDA DEPARTMENT OF REVENUE

No. 84-929

DELTA AIR LINES, INC., APPELLANT

Vv.

FLORIDA DEPARTMENT OF REVENUE |

ON APPEAL FROM

THE SUPREME COURT OF FLORIDA

BRIEF FOR THE UNITED STATES AS

AMICUS CURIAE

This brief is filed in response to the Court’s order in-

viting the Solicitor General to express the views of the

United States.

OPINIONS BELOW _

The opinion of the Florida Supreme Court in No.

84-921 (J.S. App. la-4a) is unreported. The opinion of

the Florida Supreme Court in No. 84-926 (J.S. App.

2-14) is reported at 455 So. 2d 311. The opinion of the

Florida Supreme Court in No. 84-929 (J.S. App. la-12a)

is reported at 455 So. 2d 317. The opinions of the

Broward County Circuit Court (84-921 J.S. App. 6a-19a)

and of the Leon County Circuit Court (84-926 J.S. App.

15-16; 84-929 J.S. App. 25a-37a) are unreported.

(1)

2

JURISDICTION

The judgment of the Florida Supreme Court was

entered in each case on June 14, 1984. Timely motions

for rehearing were denied in each case on September

12, 1984 (84-921 J.S. App. 20a; 84-926 J.S. App. 33;

84-929 J.S. App. 24a). Notices of appeal in the Florida

Supreme Court were filed respectively on December 6,

1984 (84-921 J.S. 11; J.S. App. 80a-81a), on November

28, 1984 (84-926 J.S. App. 34-35), and on October 30,

1984 (84-929 J.S. App. 48a-49a). The jurisdictional

statement in No. 84-921 was filed on December 10,

1984, and the jurisdictional statements in Nos. 84-926

and 84-929 were filed on December 11, 1984. The

jurisdiction of this Court is invoked under 28- U.S.C.

_ 1257(2).

STATEMENT

1. Florida for many years has imposed a variety of

taxes on different types of fuel purchased within that

State. Prior to April 1, 1983, gasoline and diesel fuel

were subject to an excise tax at the flat rate of 8¢ per

gallon. Fla. Stat. Ann. § 206.01 et seg. (West 1971).

This tax was paid principally by individual motorists,

bus lines, and trucking companies. Other carriers, such

as railroads, maritime shipping companies, and airlines,

were exempt from this tax. Instead, they paid the

general sales tax—technically imposed on the seller for

the privilege of doing business in Florida, but required

to be passed on to purchasers—at a rate of 5% of the

fuel’s retail price. Id. §§ 212.05, 212.07. The sales tax,

as applied to fuel purchased by these carriers, was pro-

rated on a mileage basis. That is, a carrier paid only that

portion of the otherwise-payable tax that represented

the ratio of its Florida mileage to its total mileage for

the previous fiscal year. Id. § 212.08(4)

3

Effective April 1, 1983, Florida amended its fuel tax

regime in the foilowing relevant respects:

(a) The scheme governing railroads and maritime

shipping companies remained basically the same. They

continued to pay the 5% general sales tax on the actual

price of the fuel they purchased, and their tax continued

to be prorated on a mileage basis.

(b) The scheme governing roadway users was changed

considerably. Gasoline and diesel fuel remained subject

to the flat excise tax, but the rate was reduced from 8¢

to 4¢ a gallon (84-926 J.S. App. 3). In addition, gasoline

and diesel fuel were made subject, for the first time, to

the 5% general sales tax (Fla. Stat. Ann. § 212.62 (West

Supp. 1985)). Rather than being applied to the actual re-

tail price, however, the 5% levy was applied in the case

of gasoline and diesel fuel to an “initially established

price” of $1.148 per gallon (id. § 212.62(3)(c)). This “ini-

tially established price” was to be adjusted for inflation

beginning June 1, 1985 (id. § 212.62(3)a)). No provision

was made for prorating the sales tax, as applied to

gasoline and diesel fuel, on the basis of mileage. See id.

§ 212.08(4). Thus, the aggregate tax burden on these

items was effectively increased from 8¢ a gallon to 9.7¢

a gallon.

(c) The scheme governing airlines was also changed

considerably. They remained exempt from the flat ex-

cise tax, and they remained subject to the 5% general

sales tax. However, the method of computing their sales

tax liability was assimilated to the newly-established

method of computing the sales tax on gasoline and

diesel fuel. That is, the 5% rate was applied, not to the

actual retail price of jet fuel, but to an “initially

established price” of $1.148 per gallon, the same figure

used for diesel fuel and gasoline. See Fla. Stat. Ann.

§§ 212.02(22), 212.62 (West Supp. 1985). And the

mileage proration formula, while remaining in effect for

railroads and maritime shipping companies, was re-

4

pealed in the case of airlines. Compare Fla. Stat. Ann.

§ 212.08(4) (West 1971) with Fla. Stat. Ann. § 212.08(4)

(West Supp. 1985). Finally, a new credit against the

State’s corporate income tax was created, providing for

an offset against that tax equal to one-half the carrier’s

fuel tax liability, up to a maximum credit of $5 million

(id. § 220.189). This credit was made available only to

air common carriers who had their home office in

Florida and who maintained a work force of more than

1,200 employees in the State. Ibid.; see 84-929 J.S. App.

2a.

2. Appellants in these three cases are domestic air-

lines incorporated under the laws of various states and

registered to do business in Florida (84-921 J.S. 1, 16;

84-926 J.S. 4; 84-929 J.S. App. 28a). Delta Air Lines, ap-

pellant in No. 84-929, has its home office in Georgia

(J.S. 8). Northeastern International Airways and Arrow

Air, appellants in No. 84-921, have their home offices in

Florida but have fewer than 1,200 employees based

there (J.S. App. 11a). Eastern Airlines, appellant in No.

84-926, has its home office in Florida and also has more

than 1,200 employees based in that State. Appellants

are principally engaged in interstate commerce, but also

fly on some foreign routes (84-921 J.S. 16; 84-926 J.S. 4;

84-929 J.S. 8).

Appellants brought these actions in Florida. trial

court, challenging various aspects of the State’s fuel tax .

regime under the Due Process and Equal Protection

Clauses of the Fourteenth Amendment and the Inter- -

state Commerce Clause, and on miscellaneous state-law

grounds (84-921 J.S. App. 10a-lla; 84-926 J.S. App.

15-16; 84-929 J.S. App. 25a). The triai courts upheld the

statute in all respects (84-921 J.S. App. 18a-19a; 84-926

J.S. App. 15-16; 84-929 J.S. App. 36a-37a). The cases

were certified directly to the Florida Supreme Court

(84-921 J.S. App. la; 84-926 J.S. App. 2; 84-929 J.S.

App. 2a), which affirmed in part and reversed in part.

5

It rejected appellants’ federal constitutional challenges

to the fuel tax itself (84-921 J.S. App. la-4a; 84-926 J.S.

App. 2-13; 84-929 J.S. App. 2a, 6a-12a). However, it sus-

tained a challenge, mounted by carriers other than

Eastern, to the constitutionality of the income tax

credit, holding that the credit “clearly discriminates

against interstate commerce because [it] provides a

direct commercial advantage to Florida-based air com-

mon carriers over non-Florida-based carriers” (84-929

J.S. App. 4a, citing Boston Stock Exchange v. State Tax

Comm’n, 429 U.S. 318 (1977) (emphasis in original)).

The credit provision was severed from the statute

(84-929 J.S. App. 6a, 12a) and the statute as thus

modified was sustained. The airlines-have appealed the

Florida Supreme Court’s judgment insofar as it is un-

favorable to them; Florida has not cross-appealed as to

the constitutionality of the income tax credit.!

DISCUSSION

1. Appellants contend that Florida’s sales tax on avia-

tion fuel places an unconstitutional burden on interstate

commerce, pointing out that the fuel they buy is con-

sumed on interstate flights and that Florida’s levy is no

1 Florida recently enacted, effective July 1, 1985, further amend-

ments to. its scheme of aviation fuel taxation. 1985 Fla. Laws

85-348. The amendments exempt aviation fuel from sales tax, but

impose upon it a new excise tax in approximately the same amount.

Compare id. §§ 2 and 3 with Fla. Stat. Ann. § 212.62 (West Supp.

1985). The invalidated income tax credit is replaced with a provi-

sion allowing refund of the new excise tax in an amount “not [to]

exceed six-tenths of one percent of the wages paid by the carrier to

employees located or based within this state” (1985 Fla. Laws

85-348, § 2 (to be codified at Fla. Stat. § 206.9855)). Enactment of

these amendments, which apply only prospectively (id. § 9), does

not moot the instant appeals, which continue to present a live

controversy concerning appellants’ sales tax liability from April 1,

1983, to July 1, 1985. We of course intimate no view as to the con-

stitutionality of the 1985 amendments.

6

longer prorated to reflect that fact. This contention is

insubstantial in light of this Court’s decision in Hastern

Air Transport, Inc. v. South Carolina Tax Comm'n, 285

U.S. 147 (1932). The Court there upheld a nondiscrim-

inatory, unapportioned sales tax as applied to aviation

fuel purchased within South Carolina for use in inter-

state commerce, reasoning that the taxable event was

sale of the fuel and that such sales were “purely intra-

state transactions” (285 U.S. at 152). Accord, United Air

Lines, Inc. v. Mahin, 410 U.S. 623, 629 (1973) (rejecting

Commerce Clause challenge to state use tax as applied

to aviation fuel “withdrawn from storage for consump-

tion in an interstate vehicle”); Edelman v. Boeing Air

Transport, Inc., 289 U.S. 249, 252 (1933) (same).

Appellants attempt to dismiss these cases as “out-of-

date” (84-929 J.S. 13-14) because they were decided

under the “direct burden” approach to interstate com-

merce which this Court abandoned in Complete Auto

Transit, Inc. v. Brady, 430 U.S. 274 (1977). However,

the “direct burden” approach was a doctrine that had

been used mechanically to strike down state laws which,

as drafted, technically imposed a levy on “the privilege

of doing [an interstate] business” (430 U.S. at 278-279

(original quotation marks omitted)). In repudiating that

doctrine, obviously, the Court cast no doubt on the con-

tinuing validity (at least as to result) of decisions that

had sustained state taxes under the old rubric.

In any event, there is no merit to appellants’ sugges-

tion (84-921 J.S. 35-36; 84-929 J.S. 10-18) that Florida’s

tax fails Complete Auto’s “fair apportionment” or “fair.

relation” tests. See 430 U.S. at 279. Because the taxable

event—sale of the fuel—takes place wholly within

Florida, no other state could undertake to impose a tax

on that transaction, and apportionment is thus not con-

stitutionally required. Appellants’ contention that

Florida’s tax is not “fairly related to the services

ee

7

provided by the State” (Complete Auto, 430 U.S. at 279)

is based on assertions that the tax is really a user fee,

that the proceeds of the tax are devoted to road con-

struction, and that airlines do not derive from Florida’s

roads a benefit proportional to the tax they pay. See

84-921 J.S. 37-39; 84-929 J.S. 11-17. As the courts

below pointed out, however, each of these assertions is

erroneous. See 84-921 J.S. App. lla-12a; 84-929 J.S.

App. 7a, lla, 29a, 34a. The tax is plainly a sales tax

because its legal incidence is upon the fuel seller and is

imposed for the privilege of selling fuel in Florida. The

proceeds of the tax are not devoted to “the construction

and maintenance of state roads,” as was once true (Fla.

Stat. Ann. § 206.46 (West 1971)), but go into a trust

fund to “be used for transportation purposes” (Fla. Stat.

Ann. § 206.46 (West Supp. 1985)). And appellants do

enjoy, not only the benefits of Florida’s public transpor-

tation network, but also “the benefits of a trained work

force and the advantages of a civilized society” (Japan

Line, Ltd. v. County of Los Angeles, 441 U.S. 434, 445

(1979)).?

2. Appellants’ equal protection challenge is also in-

substantial. They contend that Florida’s fuel tax regime

* Although appellants appear to engage in foreign as well as in-

terstate commerce (see 84-926 J.S. 4; 84-929 J.S. 8), they did not

contend in either court below that Florida’s tax as applied to them

violates the Foreign Commerce Clause. See, e.g., 84-921 J.S. App.

2a. Ina brief filed at the Court’s invitation contemporaneously with

this one, we express the view that Florida’s tax, as applied to avia-

tion fuel purchased by foreign airlines for use exclusively in foreign

commerce, is unconstitutional under the Foreign Commerce

Clause as interpreted in Japan Line, Ltd. v. County of Los Angeles,

441 U.S. 434, 451 (1979). See 84-902, 84-922 & 84-1041 Br. 30-35.

The Court in Japan Line specifically declined to reach “questions

as to the taxability * * * of domestically owned instrumentalities

engaged in foreign commerce” (441 U.S. at 444 n.7). Since ap-

pellants did not raise this question below and consequently do not

present it for review here, we have no occasion to address it.

8

places a heavier burden on airlines than on railroads and

maritime shipping companies, since the latter (a) have

their sales tax reduced by application of a mileage pro-

ration formula, a benefit airlines no longer enjoy, and

(b) pay tax based on the actual price of their fuel, rather

than (as is true for airlines) on an “initially established

price” of $1.148 per gallon (84-921 J.S. 29-34; 84-926

J.S. 5-6; 84-929 J.S. 18-22). And appellants contend that

Florida’s fuel tax regime places a heavier burden on

airlines than on trucking companies, even though both

pay sales tax at 5% of an “initially established price” of

$1.148 per gallon without mileage proration, since the

market price of jet fuel during the relevant period was

lower than that of diesel fuel and gasoline (84-921 J.S.

32-33; 84-929 J.S. 7 & n.4, 17). In appellants’ view, the

Equal Protection Clause requires that all carriers be

treated identically.

It was long ago established that “in taxation, even

more than in other fields, legislatures possess the

greatest freedom in classification.” Madden v. Ken-

tucky, 309 U.S. 83, 88 (1940). “The burden is on the one

attacking the legislative arrangement to negative every

conceivable basis which might support it.” An equal pro-

tection challenge can prevail “only by the most explicit

demonstration that a classification is a hostile and op-

pressive discrimination against particular persons and

classes.” Ibid. Accord, e.g., Lehnhausen v. Lake Shore

Auto Parts Co., 410 U.S. 356, 359-365 (1973) (citing

cases).

The courts below correctly concluded that appellants

“failed to demonstrate that a hostile and oppressive

discrimination has been made” (84-926 J.S. App. 5).

Florida’s fuel tax regime, as revised effective April 1,

1983, does appear to impose a heavier burden on

airlines than on other carriers, although the differential

burden depends in part on the relative market prices of

at ee ee”

9

various fuels, whose fluctuations are of course beyond

the Florida Legislature’s control. Florida’s overall tax

system, however, treats airlines more favorably in other

respects. See 84-921 J.S. App. 18a-14a; 84-929 J.S.

App. 3la. The State, moreover, cannot be said to have

lacked a rational basis for repealing the mileage prora-

tion formula in the case of interstate air carriers, since

“proration of mileage for aircraft has proven difficult in

the past because of flight patterns over the Gulf of Mex-

ico and Atlantic Ocean to avoid accumulation of in-

trastate mileage” (84-929 J.S. App. 31a). Although state

taxes are not altogether immune from equal protection

scrutiny (see Metropolitan Life Ins. Co. v. Ward, No.

83-1274 (Mar. 26, 1985)), the tax regime challenged

here, relieved of the income-tax-credit provision struck

down by the Florida Supreme Court, neither

discriminates against out-of-state competitors nor lacks

a rational relationship to Florida’s legitimate purpose of

raising money for public transportation.

3. Appellant in No. 84-926 challenges the holding that

it lacks standing to contest the constitutionality of pro-

visions governing fuel tax refunds to certain fishermen

and farmers (J.S. iv, 4-5). Appellant did not allege that

it competed, directly or indirectly, with farmers or

fishermen (84-926 J.S. App. 11), and the Florida

Supreme Court accordingly denied it standing to raise

this challenge, reasoning that “the constitutionality of

* * *a statute cannot be tested by a party whose rights

or duties are not affected by it” (id. at 11-12). In so rul-

ing, the court relied exclusively on Florida law. See id.

at 11-13. In any event, its ruling is fully consistent with

this Court’s decisions. See Allen v. Wright, No. 81-757

. (July 3, 1984).

10

CONCLUSION

The appea!s should be dismissed for want of a

substantial federal question.

Respectfully submitted.

CHARLES FRIED

Acting Solicitor General

ALBERT G. LAUBER, JR.

Assistant to the Solicitor General

JIM J. MARQUEZ

General Counsel

Department of Transportation

SEPTEMBER 1985

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