# Petition for Writ of Certiorari — Great American Airways v. Nevada State Tax Commission

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Petition for Writ of Certiorari
- **Published:** January 1, 1986
- **Citation:** 479 U.S. 817

## Text

~
Supreme Court, U.S,
FILED

The Due Process Clause imposes two limitations on state taxation,

mirroring the “nexus” and “fair relation” factors of Complete Auto:
First, no tax may be imposed unless there is some minimal
connection between those activities and the taxing State; and in the
second place, the [tax basis] must be rationally related to values
connected with the State imposing the tax.

P. Hartman, Federal Limitations on State and Local Taxation § 2:4 at

28 (1981); see Exxon Corp. v. Department of Revenue, 447 U.S. 207

(1980).

ae wre eu.

A. ead ee oh

5

“home port doctrine.” In fact, an alarming number of state courts
continue to decide Commerce Clause challenges to state taxes
without even acknowledging the Complete Auto standards which
this Court has developed and refined. See, e.g. Beatrice Foods
Co., Inc. v. Lindley, 434 N.E.2d 727 (Ohio 1982) (uphoiding use
tax under “taxable moment” approach); District of Columbia v.
W. Bell & Co., Inc., 420 A.2d 1208 (D.C. 1980) (to like effect).

This continued reliance on dated theories has been particularly
apparent in use tax cases involving aircraft used for interstate
transportation. See King v. L & L Marine Service, Inc., 647
S.W.2d 524 (Mo. 1983); Management Services, Inc. v. Spradling,
547 S.W.2d 466 (Mo. 1977); cf. Geometrics v. County of Santa
Clara, 129 Cal. App. 3d 415 (1982) (upholding apportioned ad
valorem tax under Complete Auto). Other courts are committing
errors akin to those of the state courts here. Despite this Court’s
general admonitions in cases concerning other forms of taxation,
see, e.g., Commonwealth Edison Co. v. Montana, 453 U.S. 609,
614-17 (1981) (state court erred in following “mechanical”
approach of pre-Complete Auto cases, and concluding that sever-
ance tax was not subject to the strictures of the Commerce
Clause), state courts continue to utilize discarded theories, not as
the test of constitutionality per se, but rather as a means of
characterizing the subject of taxation in such a way that it is
“excused” from the Complete Auto analysis. See, e.g., Master
Craft Engineering, Inc. v. Department of Treasury. 366 N.W.2d
235 (Mich. App. 1985).* State courts clearly need guidance on

‘The Master Craft court noted the four Complete Auto criteria, and
that “[ijn recognition of this prohibition concerning interstate com-
merce, Michigan provides an exemption from the use tax for property
which would otherwise be prohibited from taxation under the United
States or Michigan Constitutions.” 366 N.W.2d at 241 n. 3,242. Nevada
has a similar statutory provision. NRS 372.265. To determine whether
this exemption (and the Complete Auto test) would apply at all, the
Master Craft court first asked whether the aircraft in question had
“come to rest” in the state, whether a “taxable moment” had occurred.
Id. at 242. Relying on cases dating from the 1930s, the court concluded
that the taxable moment test was satisfied; although the aircraft was
ultimately “thrust into the interstate stream of commerce,” id. at 243,

6

this important federal question which, if answered wrongly,
promises dire consequences for interstate commerce.

The Nevada district court and Supreme Court reasoned that,
since GAA is based in Nevada, “only Nevada has a sufficient
nexus with GAA to levy a use tax upon its out-of-state airplane
purchase.” Appendix A at 12. Therefore, concluded the courts,
apportionment was not a relevant concern and Nevada could
impose a use tax on the full sales price of its aircraft. This analysis
is the essence of the home port doctrine, and the state courts were
wrong to embrace this antiquated rationale and ignore the affirm-
ative requirements of the Commerce Clause.

In Japan Line, Ltd. v. County of Los Angeles, 441 U.S. 434
(1979), this Court traced the history of the “home port doctrine”
first enunciated in Hays v. Pacific Mail S. S. Co., 17 How. 596, 15
L.Ed. 254 (1855), as

a corollary of the medieval maxim mobilia sequintur per-
sonam (“movables foilow the person,” see Black’s Law
Dictionary 1154 (rev 4th ed 1968)) and resulted in personal
property being taxable in full at the domicile of the owner.
This theory of taxation, of course, has fallen into desuetude,
and the “home port doctrine,” as a rule for taxation of
moving equipment, has yielded to a rule of fair apportion-
ment among the States.

Japan Line, Lid., 441 U.S. at 442. Clearly the Court has “aban-
doned” this “anachronistic” doctrine, id. at 443, one that in
earlier times would permit the domiciliary State to impose an
unapportioned on aircraft or other vessels so long as they had not
“acquired a permanent location, i.¢., a taxing situs, elsewhere.”
Northwest Airlines, Inc. v. Minnesota, 322 U.S. 292, 295-96
(1944).

Other state courts have properly “conclude[d] that a ‘home
port doctrine’ as a rule of state taxation of vessels engaged
exclusively in interstate commerce has been superceded by the
apportionment rule in Complete Auto,” specifically in use tax

the Master Craft court apparentiy saw no need to consider the Complete
Auto elements.

7

cases. State v. Zach, 502 A.2d 896, 905 (Conn. 1985). While
giving lip service to Complete Auto, the Nevada courts still
invoked the home port doctrine to sidestep the apportionment
requirement of this seminal decision. This Court can clarify that
Complete Auto has replaced older, wooden tests of state taxation
in all forms, while assuring a constitutional result in this case, by

Il

THE NEVADA SUPREME COURT WRONGLY DECIDED
AN IMPORTANT QUESTION OF FEDERAL LAW, IN
APPARENT CONFLICT WITH THE DECISIONS OF
THIS COURT, BY HOLDING THAT A USE TAX LEVIED
ON PROPERTY USED BY A NEVADA RESIDENT IN
INTERSTATE COMMERCE NEED NOT BE
APPORTIONED

In order to prevent multiple taxation of interstate com-
merce, this court has required that taxes be apportioned
among taxing jurisdictions, so that no instrumentality of
commerce is subjected tc more than one tax on its full value.

Japan Line, Lid., 441 U.S. at 448. The Nevada Supreme Court

ignored this apportionment requirement. Adopting the reasoning
of the state district court, the Nevada Supreme Court concluded:

[A] use tax is imposed upon an out-of-state purchase by a
state resident when the object of the purchase is used, stored
or consumed within the taxing state. NRS 372.185. The
incidence of taxation of the use tax is the residency of the
purchaser, the out-of-state purchase, and the use, storage or
consumption of the purchased object within the state. /f
these three incidents occur in one state, that state may assess
a use tax on the entire purchase price. Jd. Under these
circumstances, there is no danger of multiple state taxation
of the same tax incidences. The use tax is a fairly appor-
tioned tax.

8

Appendix A at 10-11 (emphasis in original). Assuming, as we
must, that it correctly construes Nevada law,° this pronouncement
runs afoul of the Commerce Clause and Due Process Clause,
because it fails to recognize that a Nevada resident engaged in
interstate commerce may indeed be subject to use taxes else-
where. Other states do not consider residency an incident of use
taxation, and do not exempt non-residents from use taxes which
represent a fair return for protections and benefits provided. See,
e.g., State v. Zach, 502 A.2d at 899 n.4, 902-03 (Connecticut
imposes use tax on federally-registered vessels of Delaware corpo-
rations having no connection with Connecticut other than in
interstate commerce). Because of the Nevada Supreme Court’s
failure to require apportionment, interstate commerce will suffer,
and GAA will be required to pay a levy not fairly related to
benefits provided it by the State of Nevada.

Apportionment has not been at issue in most of the recent state
taxation cases entertained by this Court. Because of the nature of
each taxing scheme under review, or some balancing feature built
into it, Complete Auto and its progeny have not outlined in detail
the minimum prerequisites of a validly apportioned tax. See, e.g.,
Commonwealth Edison Co. v. Montana, 453 U.S. at 617. This
lapse in state tax jurisprudence does not mean that apportionment
is left to the whim of the states, however; apportionment remains
an affirmative requirement of the Commerce Clause and of Due
Process.

Most state court opinions that address apportionment in depth
deal with ad valorem property taxation, but support the general
principle that apportionment of taxes is not at the option of a
state.° In Geometrics v. County of Santa Clara, 179 Cai. Rptr.

‘The referenced statute makes no reference to residency as an
incident of taxation. GAA knows of no other Nevada law or decision
which supports this reading. In contrast, residency is an express factor in
applying the statutory presumptions that property purchased out-of-state
by a Nevada resident is intended for use in Nevada, absent contrary
evidence. NRS 372.250-372.255.

* Notably, Nevada does apportion the ad valorem property tax it
assesses against GAA’s aircraft. The Nevada Administrative Code

ee |

Rented are

ee

9

850 (Cal. App. 1982), the parties stipulated that there was no
“multiple taxation in fact.” Jd. at 8-2. Still, after thorough and
scholarly consideration of key state and United States Supreme
Court precedents, the court concluded that Complete Auto re-
quired apportionment of any property tax imposed on aircraft
owned by a domiciliary corporation but located physically in
foreign countries for all or a portion of the tax year. See also
Montana-Dakota Utility Co. v. South Dakota Department of
Revenue, 337 N.W. 2d 818 (S.D. 1983) (requiring apportion-
ment of ad valorem tax, although validity of neighboring state’s
competing tax was in question); Flying Tiger Line, Inc. v. County
of Los Angeles, 333 P.2d 323 (Cal. 1959), following Slick
Airways v. County of Los Angeles, 295 P.2d 46 (Cal. App. 1956).
But while some state courts have properly acknowledged the
mandatory nature of Commerce Clause requirements, others have
not.

The Nevada Supreme Court’s refusal to enforce the apportion-
ment requirement brings its decision into conflict with other
aspects of Complete Auto. Nevada residents who do not employ
property out-of-state in the course of interstate commerce do not
face the threat of multiple use taxes, or the burden of maintaining
multiple protests to assessments that will not be apportioned
unless actual duplicative taxation is established. See infra. A use
tax that unfairly apportions the use of property in other States is a
form of discrimination against interstate commerce. Cf. Armco,
Inc. v. Hardesty, 467 U.S. 638, 645 (1984). Further, a system
that lacks any method of measuring the taxable activity that
occurs within the taxing State cannot produce a tax fairly related
to services and protections enjoyed by the taxpayer in that state.
Cf. Commonwealth Edison Co. v. Montana, 453 U.S. at 625-26
(“the measure of the tax must be reasonably related to the extent
of the contact”); see also Container Corp. of America v.
Franchise Tax Board, 463 U.S. 159 (1983) and Sjong v. Depart-
ment of Revenue, 622 P.2d 967 (Alaska 1981), app. dismissed,
454 U.S. 1131 (1982) (explaining requisites of valid apportion-

(“NAC”) contains extensive regulations for this purpose. NAC
361.451-361.4695.

10

ment formulae). Thus, Nevada’s unapportioned use tax falls short
of not only one, but three criteria of Complete Auto.

These unconstitutional aspects of Nevada’s use tax cannot be
overlooked simply because the tax is intended to be “compensa-
tory,” offsetting Nevada’s sales tax. Cf. Appendix A at 10-11; see
generally Armco, Inc. v. Hardesty, supra. “The concept of a
compensatory tax first requires identification of the burden for
which the State is attempting to compensate.” Maryland v.
Louisiana, 45i U.S. 725, 758 (1981). To be sure, Nevada has an
interest in preventing evasion of its sales tax, “to assure uniform
treatment of goods and materials to be consumed in the State.” Id.
at 759 (emphasis added). But no such equality exists where the
property is consumed in several States. Each State in which
GAA’s aircraft sets down has a similar incentive to compensate
for its sales tax. If each levies an unapportioned use tax, interstate
commerce will be impermissibly burdened. And, each State
would also be demanding more than a fair return for benefits
conferred on GAA.

Clearly, Nevada is constitutionally barred from levying its
sales tax on GAA’s out-of-state purchase. McLeod v. Dilworth
Co., 322 U.S. 327 (1944); State v. Obexer & Son, Inc., 99 Nev.
233, 660 P.2d 981 (1983). The State cannot effect the same
result under the guise of a compensating use tax, and any true use
tax liability must comply with the strictures of the Commerce
Clause.

iil

THE NEVADA SUPREME COURT IGNORED RECENT
DECISIONS OF THIS COURT WHEN IT REFUSED TO
CONSIDER APPORTIONMENT UNLESS’ GAA
DEMONSTRATED ACTUAL MULTIPLE TAXATION

The Nevada Supreme Court concluded that it “need not
address GAA’s concern that Nevada’s taxing scheme may result
in multiple taxation because GAA’s failure to demonstrate actual
multiple taxation is fatal to its assignment of error.” Appendix A
at 9 (emphasis added). The state court was wrong to place this
burden of proof on GAA, thereby avoiding consideration of the

11

constitutional minima of a state tax. While earlier decisions of
this Court were not entirely uniform on this point, the Court
recently made clear that the taxpayer need only show a risk of
multiple taxation. The Nevada court ignored this directive.

The state court in Armco, Inc. v. Hardesty, supra, also called on
the taxpayer to show a duplicative tax imposed by some other
state. This Court explained in reversing the state court, “This is
not the test.” 467 U.S. at 644. Rather, the tax must be judged as
“if applied by every jurisdiction.” Id., quoting Container Corp. of
America v. Franchise Tax Board, 463 U.S. at 169. See also
Central Railroad Co. of Pennsylvania v. Pennsylvania, 370 U.S.
607, 614 (1962) (“domiciliary State is precluded from imposing
an ad valorem tax on any property to the extent that it could be
taxed by another state, not merely on such property as is subject
to tax elsewhere”) (emphasis in original); Freeman v. Hewitt,
329 U.S. 249, 256 (1946) (“that, for the time being, only one
State has taxed is irrelevant to the kind of freedom of trade which
the Commerce Clause generated”).’

Despite these directives, the state courts are mired in confu-
sion. The Nevada courts ignored these authorities and imposed a
heightened burden on GAA before they would confront the
constitutional matter of apportionment. A Wisconsin court re-
cently voiced its view that a conflict among Supreme Court
opinions persists, although citing only the isolated case of General
Motors Corp. v. Washington, 377 U.S. 436 (1964), as suggesting
that actual multiple taxation must be demonstrated. Wisconsin
Telephone Co. v. Wisconsin Department of Revenue, 371 N.W.
2d 825, 830 (Wis. App. 1985). Perhaps the Nevada and Wiscon-
sin courts did not consider this Court’s recent examples to be
controlling in the use tax cases before them. In any event, the

7 Other cases commonly cited as establishing that the taxpayer’s
burden is to demonstrate a risk of multiple taxation include: Mobil Oil
Corp. v. Commissioner of Taxes, 445 U.S. 425, 443 (1980), Standard
Pressed Steel Co. v. Department of Revenue, 419 U.S. 560, 563 (1975),
and Northwestern States Portland Cement Co. v. Minnesota, 358 U.S.
450, 462-63 (1959). See Whitcomb v. Commissioner of Taxes, 479 A.2d
164, 168 (Vt. 1984).

12

Nevada Supreme Court’s imposition of an “actual multiple taxa-
tion” burden deprived GAA of a fair opportunity to correct an
unconstitutional, unapportioned tax. Review by this Court should
prevent the likely reoccurrence of similiar errors in other state tax
cases.

CONCLUSION

This Court should issue a writ of certiorari to the Supreme
Court of Nevada in this case. It is crucial to the smooth working
of interstate commerce that all States abide by modern Com-
merce Clause doctrine in administering all state taxes. The
factual scenario presented here—the imposition of a use tax on
aircraft employed in interstate transportation—is one which arises
time and again. Review in this case will redress the Nevada
Supreme Court’s conflict with this Court’s decisions, and comple-
ment the existing caselaw which construes and refines the Com-
plete Auto test.

Respectfully submitted,
LIONEL SAWYER & COLLINS

By: RICHARD G. CAMPBELL
Attorneys for Petitioner

(Appendices follow)

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APPENDIX A
OPINION

No. 15992. In the Supreme Court of the
State of Nevada.

Great American Airways, a Nevada corpo-
ration, Appellant, vs. Nevada State Tax
Commission, an administrative agency of
the State of Nevada, Respondent.

Filed: August 27, 1985.

Appeal from decision affirming the
judgment of the Nevada Tax Commission, and
ordering Great American Airways to pay a
use tax assessed against it for using,
consuming and storing in Nevada an air-
craft purchased in Kansas.

Affirmed.

Lionel Sawyer & Collins,
Laura B. Ahearn and
Richard G. Campbell, Reno,

for Appellant.

o2e
Brian McKay, Att'y Gen.
and Michael Dougherty, Deputy
Att'y Gen., Carson City,

for Respondent.

OPINION

PER CURIAM:

Great American Airways (GAA) is a
Nevada corporation, headquartered in Reno,
engaged in the interstate transportation
of charter air passengers. GAA primarily
transports charter groups for the Carson
City Nugget. Frequently, flights are made
to destinations outside of Nevada where,
in most instances, the aircraft remains
overnight before returning to Nevada.

On or about July 2, 1979 GAA purchased,
in Kansas, a DC=-9 aircraft from Trans

World Airways (TWA) for $3,600,000.00.

During oral argument before this court,

-3-
GAA's counsel admitted that GAA was not
required to pay a sales tax in Kansas.

The Department of Taxation conducted an
audit of the books and records of GAA
covering the period July 1, 1979 through
November 30, 1979. As a result of the
audit, GAA was assessed taxes and penal-
ties totaling $128,520.00 ($72,000.00
attributable to GAA's use, consumption and
storage, in Nevada, of the DC-9 aircraft
purchased in anaes).

The gravamen of GAA's complaint is: 1)
that the levying of a use tax on its
out-of-state aircraft purchase unconsti-
tutionally burdens interstate commerce,
and 2) that its aircraft purchase was
exempted from use taxation as_ an

“occasional sale" under NRS 372.320.+

l nRS 372.320 reads: "There are exempted
from the taxes imposed by this chapter the
gross receipts from occasional sales of
tangible personal property and the stor-

aha
We reject both propositions. Firstly,
the tax did not unconstitutionally burden
interstate commerce because it was fairly
apportioned, nondiscriminatory and fairly
related to services provided by Nevada.
See Complete Auto Transit, Inc. v. Brady,

430 U.S. 274 (1977), reh'g denied, 430

U.S. 976 (1977). Secondly, GAA presented
no evidence from which the Department of
Taxation or the trial court could have
determined that its aircraft purchase was
exempt as an “occasional sale” and thus
did not sustain its burden of proof. See
NRS 372.320.

Originally, interstate commerce was
immune from state taxation, but now inter-

state commerce is required to pay its just

age, use or other consumption in this
state of tangible personal property, the
transfer cof which to the purchaser is an
occasional sale.”

ate
share of state tax burdens. See Braniff
Airways, Inc. v. Nebraska State Board of
Eq. & A., 347 U.S. 590, 598 (1954), reh'g
denied, 348 U.S. 852 (1954). Where a tax
goes too far, it will be struck down as
burdening interstate commerce. In deter-
mining if a tax is excessively burdensome,
analysis focuses on the tax's practical
effects. “In reviewing Commerce Clause
challenges to state taxes, our goal has
instead been to ‘establish a consistent
and rational method of inquiry’ focusing
on ‘the practical effect of a challenged
tax.’” Commonwealth Edison Co. v. Mon-
tana, 453 U.S. 609, 615 (1981), reh'g

denied, 453 U.S. 927 (1981) quoting from

Mobil Oil Corp. v. Commissioner of Taxes,
445 U.S. 425, 443 (1980).

The four prong test announced in Com-

plete Auto Transit, Inc. v. Brady, 430

ao

U.S. 274 (1977), reh'g denied, 430 U.S.

976 (1977) culminated the United States
Supreme Court's efforts to focus on a
tax's practical effects. A tax will be
Sustained against a “Commerce Clause
challenge when the tax is applied to an
activity with a substantial nexus with the
taxing state, is fairly apportioned, does
not discriminate against interstate com-
merce, and is fairly related to the serv-
ices provided by the state." Id. at 279.

Complete Auto is the bench mark of

state taxation of interstate commerce. See
George S. Carrington Co. v. State Tax
Com'n, 377 N.E.2d 950, 952 n. 3 (Mass.

1978). ~ Complete Auto's four prong test

has been applied to a use tax on an air-
plane, Whitcomb v. Commissioner of Taxes,
479 A.2d 164 (Vt. 1984), a first-use tax

On natural gas, Maryland v. Louisiana, 45]

-7-
U.S. 725 (1981), a sales tax, George S.
Carrington Co. v. State Tax Com'n, 377
N.E.2d 950 (Mass. 1978), a privilege tax,
Complete Auto Transit, Inc. v. Brady, 430

U.S. 274 (1977), reh'g denied, 430 U.S.

976 (1977), and a severance tax, Common-
wealth Edison Co. v. Montana, 453 U.S. 609

(1981), reh'g denied, 453 U.S. 927 (1981).

At issue in this case is the propriety
of a use tax, NRS 372.185,2 imposed upon
GAA's out-of-state purchase of an airplane
used in interstate commerce and hangared
in Reno. GAA contends the use tax imposed

on its purchase violated the Complete Auto

2 WNRS 372.185 reads:

An excise tax is hereby imposed on the
storage, use or other consumption in
this state of tangible personal prop-
erty purchased from any retailer on or
after July 1, 1955, for storage, use or
other consumption in this state at the
rate of 2 percent of the sales price of
the property.

én
test because it was unapportioned, dis-
criminatory, and not fairly related to
values attributable to Nevada.? GAA's
nexus to Nevada is conceded.

A properly apportioned tax does not tax
activities carried on outside the state's
borders and does not result in multiple

taxation. Complete Auto, 430 U.S. at 282.

See also General Motors Corp. v. Washing-

ton, 377 U.S. 436, 440-441 (1964), reh'g
denied, 379 U.S. 875 (1964). Improper

apportionment results in multiple taxation

3 GAA also challenged the tax on due
process grounds. Due process challenges
have focused on the taxing jurisdiction's
nexus to the taxpayer and whether the
taxing jurisdiction provided services to
the taxpayer for which it could seek reim-
bursement, the first and fourth prongs of
the Complete Auto test. See Commonwealth
Edison Co. v. Montana, 453 U.S. at
622-629; Chicago Bridge & Iron v. State,
Dept. of Rev., 659 P.2d 463, 467 (Wash.
1983), appeal dismissed, U.S. ,
104 s.Ct. 542 (1983). Because of this
duplication, GAA's due process concerns
will not be treated separately.

--
and multiple taxation is clearly unconsti-
tutional. Northwestern States Portland
Cement Co. v. Minnesota, 358 U.S. 450, 452
(1959).

GAA's argument concerning apportionment
focuses on two points: 1) that because
NRS 372.3454 does not expressly provide an
exemption for sales and use taxes paid in
other states, there is the possibility of
multiple taxation and 2) that because
appellant's airplane is partially used and
consumed outside of Nevada, Nevada can
only tax a portion of the plane's value.

We need not address GAA's concern that
Nevada's taxing scheme may result in
multiple taxation because GAA's failure to

4 NRS 372.345 reads: “The storage, use or
other consumption in this state of prop-
erty, the gross receipts from the sale of
which are required to be included in the
measure of the sales tax, is exempted from
the use tax.”

=i0-
demonstrate actual multiple taxation is
fatal to its assignment of error. Whitcomb
Vv. Commissioner of Taxes, 479 A.2d 164,
168 (vt. 1984). GAA's counsel admitted
that no sales tax was paid in Kansas, and
there has been no showing that other
states are attempting to extract a func-
tionally equivalent use tax from GAA.
Because of this failure of proof, we need
not decide what effect a foreign jurisdic-
tion's uncredited sales or use taxes would
have on Nevada's taxing scheme.

GAA's argument that Nevada should
apportion its use tax based upon the
amount of miles flow in Nevada or hours
spent in Nevada would not only be adminis-
tratively complicated for both the state

and the taxpayer, but also misconceives

the function of a use tax,>- namely, to

> Use taxes are a form of excise tax. They
have long withstood constitutional chal-

o}le
prevent evasion of the state sales tax.
As the district court judge ably noted,

[A] use tax is imposed upon an
cut-off state purchase by ae state
resident when the object of the
purchase is used, stored or consumed
within the taxing state. NRS
372.185. The incidence of taxation
of the use tax is the residency of
the purchaser, the out-of-state
purchase, and the use, storage or
consumption of the purchased object
within the state. If these three
incidents occur in one state, that
state may assess a use tax on the
entire purchase price. Id. Under
these circumstances, there is no
danger of multiple state taxation of
the same tax incidences. The use tax
is a fairly apportioned tax. (Empha-
sis added.)

lenge and are employed "by all states that
have sales taxes in order to prevent
evasion of the sales tax, to equalize the
burdens on interstate and intrastate
transactions, and to expand the reach of
the sales tax beyond state boundaries. The
use tax is complementary to the _ sales
tax." White, State Sales and Use Taxes -
Variations, Exemptions, and the Aviation
Industry, 45 Journal of Air Law and Com-
merce, 509, 515-516 (1980). (Footnote
omitted. )

“it.

In Commonwealth Edison, whiie rejecting

the notion of a “local event," the Supreme
Court dismissed an apportionment challenge
by noting: "Nor is there any question
here regarding apportionment or potential
multiple taxation, for as the state court
observed, ‘the severance can occur in no
other state' and 'no other state can tax

the severance.'" Commonwealth Edison, 453

U.S. at 617. Viewing the use tax as
complimentary to the sales. tax, only
Nevada has a sufficient nexus with GAA to
levy a use tax upon its out-of-state
airplane purchase. The special relation-
ship between sales and use taxes, along

with the Complete Auto criteria, makes the

tax in the case at bar inherently appor-
tioned.
GAA also contends that Nevada's use tax

unduly burdens interstate commerce because

Pe ane ener oe

o)3-
it is discriminatory. The discrimination

prong of the Complete Auto test requires

that the state place no greater burden
upon interstate commerce than it places
upon competing intrastate commerce of like

character. Complete Auto, 430 U.S. at

282.

[A] State “may not discriminate
between transactions on the basis of
some interstate element." Boston
Stock Exchange, supra, 429 U.S., at
332-¢ Me La, 9? B-Ct., at 606, an. id.
That is, a State may not tax a
transaction or incident more heavily
when it crosses state lines than
when it occurs entirely within the
State.

Armco, Inc. v. Hardesty, U.S. P
, 104 S.Ct. 2620, 2622 (1984), reh'g

denied, U8. , 205 - Sees. fee

(1984).

Nevada's use tax, like the gross pro-
ceeds sales tax in Chicago Bridge & Iron
v. State, Dept. of Rev., 659 P.2d 463, 472

(Wash. 1983), appeal dismissed, U.S.

\
\

-14-
___, 104 S.Ct. 542 (1983) "treats intra-
state and interstate businesses equally,
making no distinction between them." Any
air carrier headquartered in Nevada,
whether intrastate or interstate, making
an out-of-state purchase of an airplane
which will be used, consumed or stored in
Nevada, is potentially subject to use
taxation. Under such circumstances, there
is no discrimination because intrastate
and interstate commerce are equally bur-
dened.

In passing, GAA argues that Nevada's
use tax is not fairly related to values
attributable to Nevada. This prong of the

Complete Auto test was addressed in Com-

monwealth Edison. The inquiry is premised

on whether the state has given anything

for which it can ask return and is closely

allied with the nexus inquiry. The greater

=} Se
the nexus, the less likely a benefits
challenge will be sustained. Because GAA
has a substantial nexus with Nevada and
derives many benefits from being a Nevada
corporation headquartered in Reno, the tax
is fairly related to values attributable
to Nevada. ®

NRS 372.320 exempts an "occasional

sale" from sales and use taxation. The

specific facts of each case are critical

6 we also conclude, under the former test
for state taxation of interstate commerce,
that there was a taxable moment, Southern
Pacific Co. v. Gallagher, 306 U.S. 167
(1939), in Nevada, when GAA's aircraft had
ended its interstate transportation and
not yet begun interstate operation. The
taxable moment was the storage which
occurred when the aircraft returned from
Kansas City and was stored in Reno prior
to beginning interstate operation on
September 26, 1979. Compare W. R. Grace &
Co. v. Comptroller of Treasury, etc., 258
A.2ad 740 (Md. 1969) with Management
Servs., Inc. v. Spralding, 547 S.W.2d 466
(Mo. 1977) and American Airlines, Inc. v.
State Bd. of Equalization, 30 Cal. Rprtr.
590 (Cal. App. 1983).

-16-

to evaluating whether a transaction is
exempted as an “occasional sale." Addi-
tionally, the taxpayer bears the burden of
proving that he is entitled to the exemp-
tion. See Pacific Pipeline Const. Co. v.
State Board of Equal., 321 P.2d 729, 732
(Cal. 1958). Because GAA failed to prove
that its purchase from TWA was an "“occa-
sional sale," the exemption does not
apply.

GAA's remaining contentions’ lacking

merit, we affirm the decision of the

district court.

ai Pa
APPENDIX B
ORDER DENYING REHEARING

No. 15992. In the Supreme Court of the
State of Nevada.

Great American Airways, a Nevada corpo-
ration, Appellant, vs. Nevada State Tax
Commission, an administrative agency of
the State of Nevada, Respondent.

Filed: March 5, 1986.

ORDER DENYING REHEARING

Appellant's petition for rehearing
has been considered and it is denied. NRAP

40(c).

It is so ORDERED.

-18-
APPENDIX C
DECISION

No. 80-9620. In the Second Judicial
District Court of the State of Nevada, In
and For the County of Washoe. Department
No. l.

Great American Airways, a Nevada Corpo-
ration, Petitioner, vs. Nevada State Tax
Commission, an administrative agency of
the State of Nevada, et al., Respondents.

Filed: June 22, 1984.

The parties to this petition for judi-
cial review have stipulated to the follow-
ing facts. Petitioner, Great American
Airways, is a Nevada corporation engaged
in providing contract air service in
interstate commerce. On July 2, 1979,
Petitioner purchased a DC-9 aircraft from
Trans World Airways (TWA) at a purchase

price of $3,600,000. Petitioner took

-19-

delivery of the aircraft in Wichita,
Kansas. The aircraft was then flown to
Kansas City, Kansas, for repairs according
to the maintenance contract. The aircraft
was registered in Kansas City, Missouri.

In September, 1979, the aircraft and
its crew underwent flight testing in order
to obtain federal certification with the
Federal Aviation Administration. The
crew, the federal inspectors, and some
non-paying passengers boarded the aircraft
in Kansas City and flew to Reno, Nevada.
The passengers deplaned in Reno. The
aircraft was refueled and resumed its
flight to Seattle, Washington. After
practicing landing maneuvers in Seattle,
the aircraft was returned to Reno where it
remained overnight. The next day the
aircraft, its crew and the _ federal

inspectors flew to Boise, Idaho, and

-20-
returned to Reno prior to September 26,
1979.

On September 26, 1979, Petitioner was
issued its operating certificate and it
commenced commercial air operations.
Petitioner assisted Evergreen Internation-
al Airlines with Evergreen's charter
commitments, including Evergreen's air
charter service agreement with the Carson
City Nugget (Nugget) from September 26,
1979, to September 30, 1979. Thereafter,
Petitioner contracted with the Nugget to
provide charter air service.

All Petitioner's flights are made to
locations outside the State of Nevada. In
most cases, the aircraft remains overnight
at an out-of-state location before return-
ing to Reno. All major maintenance of the
aircraft is done in Kansas City, Kansas,

under a contract with TWA. Minor mainte-

ee

nance is accomplished in either Oakland,
California, or Los Angeles, California.
All revenue that is received by Petitioner
arises from contracts with Nevada enti-
ties.

On February 1, 1980, Respondent noti-
fied Petitioner that a deficiency assess-
ment in the amount of $126,000, together
with interest in the amount of $2,000, had
been made pursuant to NRS 372.425. The
deficiency was determined for the period
beginning July 1, 1979, and ending Novem-
ber 30, 1979. $72,000 was assessed for
the Sales & Use Tax, $36,000 for the Local
School Support Tax, and $18,000 for the
County-City Relief Tax.

On February 14, 1980, a Petition for
Redetermination was filed by Petitioner.
That Petition alleged that Petitioner was

entitled to a constitutional exemption

-22-

from taxation under NRS 372.265. On May
12, 1980, the Petition for Redetermination
was set for hearing before a Nevada Tax
Commission Hearing Officer. On May 22,
1980, the Hearing Officer entered Findings
of Fact and Conclusions of Law which
rejected Petitioner's claim of a constitu-
tional exemption. Petitioner appealed
that decision to the Nevada State Tax
Commission. On October 7, 1980, the Tax
Commission denied Petitioner's appeal and
affirmed the Hearing Officer's decision.

This case comes before this court upon
a Petition for Judicial Review in accor-
dance with NRS Chapter 233B. NRS
233B.140(4) provides, in pertinent part,
that "“[t]Jhe court, upon request, shall
hear oral argument and receive written
briefs." The parties have submitted their

briefs in the form of Cross-Motions for

afi—
Summary Judgment pursuant to NRCP 54 and

have referred the court to Short v. Hotel

Riviera, Inc., 79 Nev. 94, 378 P.2da 979

(1963), as the applicable standard for
review. Since this is a matter for judi-
cial review, the court is bound to follow
the standards articulated in the Adminis-
trative Procedure Act, as provided in NRS
233B.140(5) and the cases of the Nevada
Supreme Court which interpret that statu-

tory section. See, e.g., Garvin v. State,

Dep't. of Mtr. Vehicles, 96 Nev. 827, 619

P.2d 534 (1980); Turk v. Nevada State

Prison, 94 Nev. 101, 575 P.2d 599 (1978);

Nevada Industrial Comm'n. v. Williams, 91

Nev. 686, 541 P.2d 905 (1975). NRS Chap-
ter 233B does not provide for the applica-
tion of the Nevada Rules of Civil
Procedure. This court will, therefore,

ignore the procedural dereliction of the

yo

parties and will consider this matter as
if the parties had followed proper proce-
dure.

Petitioner has alleged that Respon-
dent's decision is not in accordance with
the United States Constitution or statu-
tory provisions and has applied for judi-
cial review in accordance with NRS
233B.140(5)(a). The Petitioner has raised
two issues in its Petition for Judicial
Review. They are:

l. That Respondent accepted new evi-
dence while acting in an appellate capac-
ity, refused to allow Petitioner to
respond to this new evidence, and in doing
so, denied Petitioner its constitutional
right to due process; and

2. That the tax imposed upon Peti-
tioner is an impermissible burden upon

interstate commerce in violation of the

-25-
Commerce Clause of the United States
Constitution.

This court believes that the first
issue raised by Petitioner is without
merit. The record provided this court
fails to show any evidence that Respondent
considered additional evidence. Further-
more, at oral argument, counsel for the
parties informed this court that there
were no real statutory problems in this
case. Counsel conceded that the real
issue in this case is the _ constitu-
tionality of the assessed tax. In view of
that concession, this court will only
consider the constitutional argument
raised by the Petitioner.

Petitioner contends that its aircraft
has been engaged in interstate commerce
since the date of purchase on July 2,

1979. Petitioner argues that since the

-26-
aircraft has been in the stream of inter-
state commerce, a "taxable moment" did not
occur in the State of Nevada. Therefore,
the use tax is per se unconstitutional as
an impermissible burden on interstate

commerce. See Southern Pac. Co. Vv.

Gallagher, 306 U.S. 167, 59 §.Ct. 389

(1939); King v. L & L Marine Service,

Inc., 647 S.W.2d 524 (Mo. 1983). Addi-
tionally, Petitioner asserts that although

Gallagher has not been overruled by the

United States Supreme Court, that the High
Court has adopted a new test which applies
to all state taxation of interstate com-
merce. Petitioner asserts that this court

must apply this new test, as pronounced in

Complete Auto Transit, Inc. v. Brady, 430
U.S. 274, 97 S.Ct. 1076 (1977), reh'g
denied, 430 U.S. 976, 97 S.Ct. 1669, to

this case. It is Petitioner's contention

woth,

ow.

that the use tax will fail the apportion-

ment prong of the Complete Auto four-prong

test.
Respondent argues that the test of

Complete Auto has not been applied to a

state use tax and, therefore, it should
not be applied in this case. Respondent
also contends that a “taxable moment"
occurred in this state and urges this

court to apply the analysis of Gallagher

to this case.

After reading the administrative re-
cord, the briefs which were submitted by
the parties, several constitutional
treatises, and several law review arti-
cles, this court is persuaded that the
proper analysis to be applied in this case

is the four-prong test of Complete Auto.

Although Gallagher has not been specific-

ally overruled by the United States Su-

=28<
preme Court, the "taxable moment" theory
of the case does not appear to be the
appropriate modern analysis of = state
taxation and the Commerce Clause of the

federal constitution. See e.g., Common-

wealth Edison Co. v. Montana, 453 U.S.

609, 101 S.Ct. 2946 (1981), reh'g denied,

453 U.S. 927, 102 S.Ct. 889 (Complete Auto

applied to state severance tax); Nat.

Geographic Soc. v. Cal. Bd. of Equal., 430

U.S. 551, 97 S.Ct. 1386 (1977) (Complete

Auto applied to state use tax); L. Tribe,
American Constitutional Law $6-14 to 19,

at 344 to 369 (1978); Note, A Deferential

Interpretation of the Complete Auto Tran-

sit Test for Determining Whether a State

Tax Unconstitutionally Burdens Interstate

Commerce: Commonwealth Edison Co. Vv.

Montana, 1982 B.Y.U. L. Rev. 765;

Hellerstein, State Taxation in the Federal

=29—

System: Perspectives on Louisiana's First

Use Tax on Natural Gas, 55 Tul. L. Rev.

601 (1981); White, State Sales and Use

Taxes - Variations, Exemptions. and the

Aviation Industry, 45 J. Air. L. and Comn.

509 (1980). Since the United States
Supreme Court has declared that interstate
commerce must pay its way, states may now
tax property which is in interstate com-
merce if the tax scheme falls within the

ambits of the Complete Auto test. A

state court, however, in analyzing a state
tax scheme is also free to determine that
the tax is too burdensome upon interstate

commerce. See, e.g., King v. L & L Marine

Service, Inc., supra.

I believe that the use tax as applied
to Petitioner's aircraft is a valid state

tax and falls within the test of Complete

Auto. In Complete Auto, the United States

a

-30-
Supreme Court held that a tax on the
privilege of doing business in a state
does not violate the commerce clause,
absent a claim (1) that the business's
activity does not have sufficient nexus
with the state, (2) that the tax dis-
criminates against interstate commerce,
(3) that the tax is unfairly apportioned,
or (4) that the tax is unrelated to the
services provided by the state. See L.
Tribe, supra. At the outset, I note that
Petitioner has only challenged the appor-

tionment prong of Complete Auto. There-

fore, I will analyze the case at bar in
view of this prong only. Since this is
the only challenge to the validity of the
tax, this court assumes that Petitioner is
satisfied that the use tax passes federal

constitutional muster as to the three

other prongs. I, therefore, turn to this

«3i-
analysis.

Apportionment as used in the Complete

Auto test is a means to prevent multiple
taxation of the same tax incidence. See

White, State Sales and Use Taxes - Varia-

tions, Exemptions, and the Aviation Indus-

try, supra; Note, The Supreme Court, 1976

Term, 91 Harv. L. Rev. 72 (1977). Muiti-
ple taxation does indeed hinder interstate
commerce and has been often criticized by
the United States Supreme Court. See,

ScQer Northwest Airlines v. State of

Minnesota, 322 U.S. 292, 64 §.Ct. 950

reh'g denied, 323 U.S. 809, 65 S.Ct. 26. A

state tax is said to be fairly apportioned
if it adequately reflects the incidence of
the tax in the taxing state. Id.; Note,

The Supreme Court, 1976 Term, supra. For

example, a state sales tax applies to the

purchase of an object within a state.

-32-

That purchase happens in only one state.
It is therefore, a fairly apportioned tax.
Likewise, a severance tax applies to the
removal of minerals from one state.
Again, the removal of the minerals is an
event which happens in one state only. A
state mineral severance tax is also a
fairiy apportioned tax. Thus, the perti-
nent question in this case is whether the
incidence of the use tax occurs only in

this state.
The use tax as provided in NRS Chapter
372 is intended to complement the sales

tax. Compare NRS 372.105 with WNRS

372.185. See aiso, Nat. Geographic Soc.

v. Cal. Bd. of Equal., supra; Union Oil

Co. of Cal. Vv. State Board of

Equalization, 386 P.2d 496 (Ca. 1963),

appeal dismissed, 377 U.S. 404, 84 S.Ct.

1629 (1964). As noted above, a state

o33e
sales tax is assessed upon a purchase
which is made within the state. As a
complementary tax, a use tax is imposed
upon an out-of-state purchase by a state
resident when the object of the purchase
is used, stored or consumed within the
taxing state. NRS 372.185. The incidence
of taxation of the use tax is the
residency of the purchaser, the out-
of-state purchase, and the use, storage or
consumption of the purchased object within
the state. If these three incidents occur
in one state, that state may assess a use
tax on the entire purchase price. Id.
Under these circumstances, there is no
danger of multiple state taxation of the
same tax incidences. The use tax is a
fairly apportioned tax.

In the case at bar, Petitioner is a

Nevada resident. Petitioner purchased the

ee

~34-
aircraft out-of-state. Petitioner uses,
stores and consumes the aircraft within
Nevada. Under these circumstances, Nevada
is the only state which can assess a use

tax. Cf. Commonwealth Edison Co. v.

Montana, supra (Montana only state which

Northwest Airlines v. State of Minnesota,

could assess a mineral severance tax);
supra, (Minnesota only state which could
assess a recurring ad valorem tax). Fur-
thermore, the Petitioner has failed to ;

,
bring forth any evidence which would ,

indicate that it is subject to multiple

taxation. See Standard Pressed Steel Co.

v. Washington Dept. of Rev., 419 U.S. 560,

95 S.Ct. 706 (1975).

Therefore, based upon the record pre-

sented to this court, I find that the
assessed use tax is properly apportioned

and that the use tax passes federal con-

-35-
stitutional muster. I affirm the decision
below and further order Petitioner to pay
the assessed tax due Respondent.

DATED this 22nd day of June, 1984.

/s/ GRANT L. BOWEN
DISTRICT JUDGE

-36—
APPENDIX D
DECISION

Docket No. 11524. Account No. 204-751.
State of Nevada Department of Taxation.

In Re Great American Airways, Inc., on
Petition for Redetermination of a Defi-
ciency Determination.

This matter came on for hearing before
the Hearing Officer in the offices of the
Department situated in Carson City, Ne-
vada, on the 12th day of May, 1980.

Appearing for the taxpayer were Richard
G. Campbell, Esq., attorney; Mr. Ronald M.
Fune, President and Mr. Ken Damask, Direc-
tor of Finance. Representing the Depart-
ment were Mr. Gerald Rodrigue, Chief of
Audit; Mr. Robert Retrum, Supervising
Auditor and Ms. Josephine Matthews, Senior
Auditor.

An audit of the books and records of

eee rhlhleeeeeeeee ee

|

Great American Airways covering the period
July 1, 1979 through November 30, 1979 had
been conducted. As a result of the audit,
a Deficiency Determination in the total
amount of $128,520.00 was issued on Febru-
ary 1, 1980. The amount included tax of
$126,000 together with interest in the
amount of $2,520.00. A Petition for
Redetermination was timely filed on Febru-
ary 14, 1980 and the Petition stated:

"The Petitioner purchased the DC-9
airplane and took delivery in
Wichita, Kansas. The airplane com-
menced immediate interstate air
operation prior to its arrival in
Nevada. The airplane has never been
stored or used within the State of
Nevada except when it is engaged in
interstate air operations, pursuant
to authority issued by the Civil
Aeronautics Board.”

Mr. Campbell requested that the words
"Civil Aeronautics Board" be stricken from

the Petition and that the "Fédéral Avia-

tion Agency” be substituted therefor. The

-38—-
Hearing Officer concurred.

Mr. Campbell submitted as exhibits the
Articles of Incorporation of Great Ameri-
can Airways, Inc.; a copy of the operating
certificate issued by the Federal Aviation
Administration dated Septemner 26, 1979
and a copy of the purchase agreement
between the Petitioner and Trans World
Airlines Inc. for the procurement of a
Douglas DC-9-15 aircraft including in-
stalled engines.

FINDINGS OF FACT

l. Mr. Fune testified that the Peti-
tioner was a Nevada corporation incorpo-
rated on June 28, 1979 and had been issued
FAA "121 Commercial Operators Certificate"
as a charter operator for the Carson City
Nugget. Mr. Fune noted that they were not
permitted to charge individual passengers

but were limited to contracting with

CAS GY

-39—

casinos or entertainment groups in their
air operations. The Petitioner has but
one aircraft that was purchased from Trans
World Airlines for $3.6: million dollars
and that delivery took place in Wichita,
Kansas, on August 17, 1979. The aircraft
was flown to Kansas City, Kansas where a
maintenance contract with Trans World
Airlines was in effect and where certain
work was done on the aircraft.

2. The contract with the Carson City
Nugget was made prior to procurement of
the aircraft and was essential for the
financing of the purchase. The Federal
Aviation Authority officials took part in
a “proving" flight in mid September of
1979 where the aircraft was flown from
Kansas City, Kansas, to Reno, Nevada, and
from thence to Seattle for “touch and go”

landings then returning to Reno where the

-40-

aircraft remained overnight. After an
additional flight to Boise, Idaho on the
following day the aircraft returned to
Kansas City. After additional maintenance
work in Kansas City the aircraft was flown
to Reno, Nevada where additional crew
members were hired and qualified. Com-
mencing on the 26th of September, 1979 and
daily through the 30th of September of
1979 the Petitioner assisted Evergreen
International Airlines in conducting
charter flights for the Carson City Nug-
get. The contract with the Carson City
Nugget became effective October 1, 1979.

3. Subsequent to the commencement of
the contract operations with the Carson
City Nugget the Petitioner also entered
into contracts with the University of
Nevada Reno Athletic Department on Novem-

ber 19, 1979 and the MGM Grand Hotel in

wetted A cecal a»

oii} 0
Reno on November 25, 1979. These short
term contracts are still in force. The
contract with the Carson City Nugget is an
eight (8) year contract and guarantees
Petitioner 100 flying hours per month at a
set rate but with 15% escalation clauses.

4. All flights are made to locations
outside of the State of Nevada and, in
most instances, the aircraft remains
overnight at the out-of-state location.

5. The Petitioner contends that the
aircraft has been in interstate commerce
since the date of purchase in Wichita,
Kansas on August 17, 1979.

6. All major maintenance of the air-
craft is done in Kansas City, Kansas under
a contract with TWA. Minor maintenance is
accomplished in either Oakland, California
or Los Angeles, California. Maintenance of

the aircraft in Reno is limited to a

a4 2=
"daily walk-around" or an "A" or “"“B"
check. Such routine maintenance consists
of checking oil levels, tires, hydraulic
pressure and routine services. Such main-
tenance is also done whenever the aircraft
remains overnight at some other location.

7. Competitive airiines, not based in
Nevada, are not required to pay Nevada
sales or use taxes though operating under
similar contracts.

8. The aircraft is registered in the
State of Nevada according to official
Federal Aviation Administration records
and is, in fact, doing business in Nevada.

9. The aircraft is home based in Reno,
Nevada and parts for the aircraft are
shipped into Nevada and the use tax has
been paid on such parts.

10. Tax is imposed on tangible per-

sonal property used by Nevada businesses

=i 3—
and citizens.

ll. Use of the aircraft prior to
September 26, 1979 was for testing and to
insure that the aircraft and crew met FAA
standards. The first commercial flight
for which the Petitioner received compen-
sation was on behalf of Evergreen Interna-
tional Airlines on September 26, 1979
after the aircraft was located in Reno,
Nevada.

CONCLUSIONS OF LAW

l. NRS 372.075 defines storage as
including any keeping or retention in this

state for any purpose except sale in the

regular course of business or subsequently

for the purpose of transporting it outside
the state for use thereafter solely out-
side tne state of tangible personal prop-

erty purchased from a retailer.

2. NRS 372.080 states in part “storage

-44-
and use do not include the keeping, re-
taining or exercising any right or power
over tangible personal property for the
purpose of subsequently transporting it
outside of the state for use thereafter
solely outside the state . . ." (emphasis
added )

3. NRS 372.185 imposes an excise tax
on the storage, use or other consumption
in the state of tangible personal property
purchased from any retailer.

*_ NRS 372.265 states: "There are
exempted from the taxes imposed by this
chapter gross receipts from the sale of,
and the storage, use or other consumption
in this state of, tangible personal prop-
erty the gross receipts from the sale of
which, or the storage, use or other con-
sumption of which, this state is prohib-

ited from taxing under the constitutional

-45-
laws of the United States or under the
constitution of this state."

5. Attorney General's Opinion No. 285
of May 17, 1962 holds: “Tangible personal
property, for conduct of business opera-
tions by a Nevada airline company consti-
tuting interstate commerce, is not immune
or exempt from state non-discriminatory
storage and use excise tax, simply because
purchase and transfer of legal title
thereto was effected extra-state, if a
taxable moment or event in connection
therewith is shown to have occurred within
the state before the same again is regu-
larly placed in interstate commerce."

6. NRS 372.320 exempts from the taxes

the gross receipts from occasional sales

of tangible personal property and the
storage, use or other consumption in this

state of tangible personal property, the

aii

transfer of which to the purchaser is an

occasional sale.

7. NRS 372.055 defines a retailer as
every person making more than two retail
sales of tangible personal property during
any 12 month period.

DECISION

WHEREAS Petitioner indicated that
certain flight logs pertaining to the
initial operation of the DC-9 aircraft in
question and citations from the United
States Supreme Court and other state
supreme courts in similar instances could
be provided to the Hearing Officer, it was
determined that the Petitioner should be
Given until Tuesday, May 20, 1980 to
submit such information. Petitioner did,
in fact, submit the information indicated
on May 22, 1980 having been granted an

extension of time for submission by the

Hearing Officer.

WHEREAS, the Hearing officer having
heard the testimony and reviewed the
documents submitted by the Petitioner, the
following decision is rendered:

(1) Contract air operations did not
commence until after the aircraft was
situated in Nevada and the tax due is
non-discriminatory and the taxable inci-
dent does not fall within the exemption
cited in NRS 372.320.

(2) The “occasional” sale exemption
insofar as a purchaser is concerned ap-
plies only if the individual transferring
the property to the purchaser does not
meet the statutory definition of a re-
tailer. No evidence having been presented
that Trans World Airlines is not a re-
tailer as defined in Nevada statute

372.055, the transaction is determined not

To

to be an “occasional” sale.

Accordingly, the Petition for Redeter-
mination is denied and the findings of the
audit are affirmed and the tax, together
with applicable interest is now due and
payable. The taxpayer is reminded that
interest will continue to accrue until the
tax liability is extinguished.

No part of this decision shall become
final until the Tax Commission has an
opportunity to affirm, modify or reverse
this decision in its entirety or any part
thereof.

The taxpayer has an opportunity pursu-
ant to Rules 56 through 60 of the Regula-
tions of Practice and Procedure before the
Nevada Tax Commission to appeal all or any
part of this decision to the Tax Commis-
sion by filing with the Tax Commission a

notice of intent to appeal within fifteen

o49-

(15) days from the receipt of a copy of
this decision.

Dated at Carson City this 22nd day of
May, 1980.

FOR THE COMMISSION:

/s/ ROY E. NICKSON
Roy E. Nickson
Hearing Officer

-50-
APPENDIX E

NOTICE DENYING
ADMINISTRATIVE APPEAL

October 9, 1980
Certified Mail-828908

Richard G. Campbell, Esq.
P.O. Box 2610
Reno, NV 89505
Re: Appeal of Great American

Airways, Inc.

Account No. 204-751

Docket No. 11524
Dear Mr. Campbell:
At a regularly scheduled meeting of the
Nevada Tax Commission in Carson City on
October 7, 1980 the Commission denied the
appeal of Great American Airways, Inc. and
affirmed the Hearing Officer's decision
dated May 22, 1980 in the Matter of the
Petition for Redetermination of a Defi-

ciency Determination of Great American

Airways, Inc.

The motion was made by Commissioner

=-5l=
Mikulich, seconded by Commissioner Plath

and carried unanimously.

FOR THE COMMISSION

/s/ ROY E. NICKSON
Roy E. Nickson
Executive Director

a Dune
APPENDIX F

PERTINENT TEXT OF
ADDITIONAL PROVISIONS OF
NEVADA REVISED STATUTES

CHAPTER 372

Nevada statutes define the incidents of
use taxation as follows--

"Use" includes the exercise of any
right or power over tangible per-
sonal property incident to the
ownership of that property, except
that it does not include the sale of
that property in the regular course
of business.

NRS 372.100.

"Storage" includes any keeping or
retention in this state for any
purpose except sale in the regular
course of business or subsequent use
solely outside this state of tangi-
ble personal property purchased from
a retailer.

NRS 372.075.

"Storage" and “use” do not include
the keeping, retaining or exercising
any right or power over tangible
personal property for the purpose of
subsequently transporting it outside
the state for use thereafter solely
outside the state, or for the pur-
pose of being processed, fabricated
Or manufactured into, attached to,
or incorporated into, other tangible

@5 30

personal property to be transported
outside the state and thereafter
used solely outside the state.

NRS 372.080. Nevada statutes create

the following presumptions in favor of

taxation--

It is presumed that tangible per-
sonal property shipped or brought to
this state by the purchaser on or
after July 1, 1979, was purchased
from a retailer on or after July l,
1979, for storage, use or other
consumption in this state.

NRS 372.250.

1. On and after July 1, 1979, it
is presumed that tangible personal
property delivered outside this
state to a purchaser known by the
retailer to be a resident of this
state was purchased from a retailer
for storage, use or other consump-
tion in this state and stored, used
or otherwise consumed in this state.

2- This presumption may be con-
troverted by:

(a) A statement in writing,
signed by the purchaser or his
authorized representative, and re-
tained by the vendor, that the
property was purchased for use at a
designated point or points outside
this state.

(b) Other evidence satisfactory
to the department that the property
was not purchased for storage, use
or other consumption in this state.

~$4x
NRS 372.255.

There are exempted from the taxes
imposed by thlese statutes] the
gross receipts from the sale of, and
the storage, use or other consump-
tion in this state of, tangible
personal property the gross receipts
from the sale of which, or the stor-
age, use or other consumption of
which, this state is prohibited from
taxing under the Constitution or
laws of the United States or under
the constitution of this state.

NRS 372.265.

If approved by Nevada voters at the
general election on November 4, 1986, the

following paragraph will be added to NRS

372.185-

The tax is imposed with respect to
all property which was acquired out
of state in a transaction that would
have been a taxable sale if it had
occurred within this state.

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385018_1890%3A1. Public record. Not legal advice.