Appendix — Owner-Operator Independent Drivers Ass'n v. Urbach

APPENDIX A

Supreme Court, Appellate Division, First Department, New

York.

OWNER-OPERATOR INDEPENDENT DRIVERS

ASSOCIATION, et al., Plaintiffs- ©

Appellants,

V.

Michael H. URBACH, etc., Defendant-Respondent.

Dec. 7, 2000.

Association representing owners and operators of

commercial motor vehicles brought declaratory judgment

action to invalidate fuel use tax as violative of Commerce

Clause insofar as it was imposed on commercial vehicles

operated on New York Thruway. The Supreme Court, New

York County, Jane Solomon, J., granted defendant’s motion to

dismiss, 699 N.Y.S.2d 268, and association appealed. The

Supreme Court, Appellate Division, Rubin, J., held that tax did

not violate Commerce Clause.

Affirmed.

Deon J. Nossel, of counsel (Robert A. Forte, on the brief,

Eliot Spitzer, Attorney General of the State of New York,

attorney) for defendant- respondent.

JOSEPH P. SULLIVAN, P.J., ERNST H.

ROSENBERGER, ANGELA M. MAZZARELLI, ISRAEL

RUBIN and JOHN T. BUCKLEY, JJ.

RUBIN, J.

In this class action, plaintiffs seek to invalidate the fuel use

tax (Tax Law § 523) as violative of the Commerce Clause

(U.S. Const., art. I, § 8, cl. [3] ) insofar as the tax is imposed on

commercial vehicles operated on the New York Thruway.

2a

Plaintiffs contend that the tax, which is calculated on the

mileage driven on New York highways, constitutes an undue

burden on interstate commerce because it is not fairly related to

any service provided by the State. On this appeal from an

order dismissing the complaint, plaintiffs argue (a) that the

State provides no services in connection with the operation of

the New York Thruway, and (b) that such services as are

provided to commercial vehicles by the New York way

‘ Authority are fully paid for through the collection of tolls and

other revenues, no part of which are contributed by the State.

This Court concludes that the tax is not a user fee, but a

consumption tax that is uniformly applied to interstate and

intrastate activities. | Therefore, the order of dismissal is

affirmed.

Plaintiff Owner-Operator Independent Drivers Association

is a not-for-profit corporation with its principal place of

business in Missouri. Its members own and operate motor

carrier equipment. The business association comprises some

40,000 persons and entities, including residents of all 50 States

and Canada. Individual plaintiffs Raymond L. Kasicki and

Harry Kijowksi, residents of Ohio and New York, respectively,

operate commercial motor vehicles on New York State

highways. Defendant Michael H. Urbach is the former

Commissioner of the New York State Department of Taxation

and Finance, which is responsible for the collection of the

disputed tax.

Article 21-A of the Tax Law imposes “a tax on fuel use for

the privilege of operating any qualified motor vehicle upon the

public highways of this state” (Tax Law § 523{a]). The tax is

computed on the fuel “used by a carrier in its operations within

this state during each reporting period” (Tax Law § 523[b]). A

“qualified motor vehicle” is a commercial vehicle having a

gross weight exceeding 26,000 pounds or three or more axles

(Tax Law § 521[b][1] [i], [ii]). As to the amount of fuel

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actually consumed by operation of qualified vehicles within the

State, each “carrier” (Tax Law § 521{c]) is required to remit

payment, on a quarterly basis (Tax Law § 526[a], [b]) in an

amount equivalent to the fuel and sales taxes imposed on motor

fuel or diesel fuel, as applicable, purchased in this State, not to

exceed a maximum rate of 7% (Tax Law § 523[b]). Revenues

from the New York fuel tax are dedicated to the State’s

highway and bridge trust fund (Tax Law §§ 515; 528 {a]).

The obvious thrust of the statute is to tax fuel consumed

within New York borders as though it were fuel purchased in

New York State and, indeed, the law provides a credit for the

amount of State fuel and sales taxes paid on fuel actually

purchased here (Tax Law § 524). Finally, it is undisputed that

the tax complies with the International Fuel Tax Agreement,

pursuant to which each carrier pays all fuel use taxes imposed

by the various participating jurisdictions to a single base State,

which is responsible for properly allocating the receipts.

In dismissing the complaint, the IAS Court held that

plaintiffs failed to demonstrate that the fuel use tax subjects

similarly situated interstate and intrastate commercial interests

to differential treatment and, thus, does not meet the threshold

test for a Commerce Clause violation (182 Misc.2d 576,

578-579, 699 N.Y.S.2d 268, citing Matter of Tamagni v. Tax

Appeals Tribunal, 91 N.Y.2d 530, 539, 673 N.Y.S.2d 44, 695

N.E.2d 1125, cert. denied 525 U.S. 931, 119 S.Ct. 340, 142

L.Ed.2d 280). “Both interstate and intrastate drivers are taxed

based on in-State fuel usage and solely on such in-State usage;

there is no differential treatment of intrastate and interstate

commercial interests” (supra, at 579, 699 N.Y.S.2d 268).

Even assuming that plaintiffs were able to establish differential

treatment, the IAS Court continued (at 579, 699 N.Y.S.2d 268),

the challenge fails under Complete Auto Tr. v. Brady (430 U.S.

274, 97 S.Ct. 1076, 51 L.Ed.2d 326, reh. denied 430 U.S. 976,

97 S.Ct. 1669, 52 L.Ed.2d 371), which holds (at 279, 97 S.Ct.

4a

1076) that a tax is valid if it is “applied to an activity with a

substantial nexus with the taxing State, is fairly apportioned,

does not discriminate against interstate commerce, and is fairly

related to the services provided by the State.” As the IAS court

noted, plaintiffs concede that “ ‘there is almost a perfect

correlation between the use of the road and the amount of the

tax paid’ “ (182 Misc.2d 576, 699 N.Y.S.2d 268, supra, at 580,

699 N.Y.S.2d 268, quoting plaintiffs’ memorandum of law).

On appeal, plaintiffs argue that “[t]he fuel tax at issue is

obviously and inescapably a user fee or user tax” and that the

State has not met “its burden of showing that it provides

additional services to Thruway users equal to the 5-7.5 cents

per mile charged under the fuel use tax.” They conclude that

the tax “is not reasonably related to services or facilities

provided and is, therefore, an undue burden on commerce.”

The defect in this argument is that a carrier operating

exclusively within the borders of this State is subject to exactly

the same tax as a carrier engaged in the interstate shipment of

goods. That is, the local carrier is identically taxed on fuel

actually consumed in the course of operating its vehicles on the

New York Thruway. Thus, plaintiffs have not identified any

adverse effect on interstate commerce that requires judicial

scrutiny. As pointed out in General Motors Corp. v. Tracy,

519 U.S. 278, 299, 117 S.Ct. 811, 136 L.Ed.2d 761, the

fundamental objective of the Commerce Clause is “preserving

a national market for competition undisturbed by preferential

advantages conferred by a State upon its residents or resident

competitors.”

The parties vigorously dispute the role of discrimination as

an essential element in a violation of the Commerce Clause.

Defendant Department of Taxation relies upon the Court of

Appeals’ statement in Matter of Tamagni v. Tax Appeals

Tribunal, supra, at 539, 673 N.Y.S.2d 44, 695 N.E.2d 1125 that

5a

“the first step in analyzing any law subject to judicial

scrutiny under the negative Commerce Clause is to

determine whether it ‘regulates evenhandedly with only

“incidental” effects on interstate commerce, or

discriminates against interstate commerce’ * * *. As we

use the term here, ‘discrimination’ simply means

differential treatment of in-state and out-of-state economic

interests that benefits the former and burdens the latter”

({Oregon Waste Sys. v. Department of Envtl. Quality of

Ore., 511 U.S. 93], at 99, 114 S.Ct. 1345, 128 L.Ed.2d 13,

quoting Hughes v. Oklahoma, [441 U.S. 322], at 336, 99

S.Ct. 1727, 60 L.Ed.2d 250 (1979)). If there is no

differential treatment of identifiable, similarly situated

in-State and out-of-State interests, there is no dormant

Commerce Clause violation.

Plaintiffs, on the other hand, view this interpretation as

overly expansive, noting that it is not essential to allege

discrimination to state a valid claim. Therefore, they assert

that it was precipitous for the IAS Court to have summarily

dismissed the alleged violation of the Commerce Clause. In

support of their position, plaintiffs rely on the United States

Supreme Court’s decision in General Motors Corp. v. Tracy,

supra, at 298, n. 12, 117 S.Ct. 811, which states,

our cases have indicated that even nondiscriminatory state

legislation may be invalid under the dormant Commerce

Clause, when, in the words of the so-called Pike undue

burden test, “the burden imposed on [interstate] commerce

is clearly excessive in relation to the putative local

benefits,” Pike v. Bruce Church, Inc., 397 U.S. 137, 142,

90 S.Ct. 844, 25 L.Ed.2d 174 (1970). * * * [A] small

number of our cases have invalidated state laws under the

dormant Commerce Clause that appear to have been

genuinely nondiscriminatory, in the sense that they did not

impose disparate treatment on similarly situated in- state

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and out-of-state interests, where such laws undermined a

compelling need for national uniformity in regulation.

(e.g., Kassel v. Consolidated Freightways Corp., 450 U.S. 662,

10] S.Ct. 1309, 67 L.Ed.2d 580 [length of trucks]; Bibb v.

Navajo Freight Lines, 359 U.S. 520, 79 S.Ct. 962, 3 L.Ed.2d

1003 [size of truck mud flaps]; Southern Pac. Co. v. Arizona ex

rel, Sullivan, 325 U.S. 761, 65 S.Ct. 1515, 89 L.Ed. 1915

[length oftrains]). Plaintiffs have failed to allege how the need

for regulatory consistency is implicated in this case.

Therefore, while plaintiffs may have demonstrated that, in the

abstract, a Commerce Clause violation may be upheld without

a Showing of discrimination, they have not established that the

Pike undue burden test has any application to the facts of this

case. In the absence of demonstrable preference, it is

incumbent upon plaintiffs to identify some prohibited

interference with interstate commerce under the Pike undue

burden test to obviate the need to establish that their

commercial interests have received disparate treatment from

those of similarly situated intrastate operators.

That the Court of Appeals’ language in Tamagni might be

taken to be overly expansive in view of the Pike test merely

illustrates the caution stated by the Court in Matter of Staber v.

Fidler, 65 N.Y.2d 529, 535, 493 N.Y.S.2d 288, 482 N.E.2d

1204, quoting Dougherty v. Equitable Life Assur. Socy., 266

N.Y. 71, 88, 193 N.E. 897, “No opinion is an authority beyond

the point actually decided, and no judge can write freely if

every sentence is to be taken as a rule of law separate from its

association.” Tamagni (supra), involving the taxation of

income based upon residency in multiple States, entails no

national policy with regard to regulation and, thus, there was no

reason to for the Court to discuss a limited exception to the

general rule requiring a violation of the Commerce Clause to be

supported by a demonstration that a State has discriminated

against the economic interests of interstate operators.

Ta

What remains of plaintiffs’ position is the bald assertion

that the fuel use tax imposed by Tax Law § 523 is a user fee.

Because any user fee that fails to fairly reflect the value of the

service provided by the State that imposes it is, ipso facto, an

undue burden on interstate commerce, plaintiffs contend that a

violation of the Commerce Clause is asserted. Plaintiffs,

however, do not present convincing arguments to support their

contention that the disputed tax is a user fee.

Cases construing taxes imposed for the “privilege” of

conducting activities within the levying State normally involve

general revenue assessments, not user fees (e.g., Complete Auto

Tr. v. Brady, 430 U.S. 274, 97 S.Ct. 1076, 51 L.Ed.2d 326,

supra [privilege of doing business]; Commonwealth Edison

Co. v. Montana, 453 U.S. 609, 629, 101 S.Ct. 2946, 69 L.Ed.2d

884 [“substantial privilege of mining coal”); Colonial Pipeline

Co. v. Traigle, 421 U.S. 100, 95 S.Ct. 1538, 44 L.Ed.2d 1

[doing business]). Therefore, a tax levied merely “for the

privilege of operating any qualified motor vehicle upon the

public highways” (Tax Law § 523[a]) is not, by the plain

import of its language, a user fee. By contrast, the State

“highway use tax” is imposed “for the privilege of operating

any vehicular unit upon the public highways of this state and

for the purpose of recompensing the state for the public

expenditures incurred by reason of the operations of such

vehicular units on the public highways of this state” (Tax Law

§ 503[1)).

The plain language of the fuel use tax does not support

plaintiffs’ contention. Neither have plaintiffs demonstrated to

the satisfaction of this Court that the fuel use tax is “designed

and defended as a specific charge imposed by the State for the

use of state-owned or state-provided transportation or other

facilities and services” (Commonwealth Edison Co. v. Montana,

supra, at 621, 101 S.Ct. 2946) so as to place it beyond the

scope of the test set forth in Complete Auto Tr. v. Brady, supra.

8a

As the Commonwealth Court stated in a footnote (at 622, n. 12,

101 S.Ct. 2946), “One commentator has suggested that these

‘user’ charges ‘are not true revenue measures and ... the

considerations applicable to ordinary tax measures do not

apply’ “ (quoting P. Hartman, State Taxation of Interstate

Commerce 20, n. 72 [1953]). Plaintiffs herein allege only that

the calculation of the fuel use tax based upon mileage amassed

on the State’s highways and the ultimate disposition of funds

derived from the levy in the highway and bridge trust fund

together operate to render the measure a use tax. As plaintiffs

succinctly phrase it, “Since it is calculated on the use of State

highways, it is a use tax.”

This argument fails to accord appropriate significance to

the role of apportionment in assessing the propriety of a State

tax measure under the Commerce Clause. The function of

apportionment in avoiding unfavorable treatment of interstate

economic activity has been compared to that of the Pike undue

burden test. As stated in General Motors Corp. v. Tracy supra,

at 298, n. 12, 117 S.Ct. 811, “In the realm of taxation, the

requirement of apportionment plays a similar role by assuring

that interstate activities are not unjustly burdened by multistate

taxation. See generally Oklahoma Tax Comm'n v. Jefferson

Lines, Inc., 514 U.S. 175, 184-185, 115 S.Ct. 1331, 131

L.Ed.2d 261 (1995) (discussing ‘internal’ and ‘external’

consistency tests for apportionment of state taxes).” The

International Fuel Tax Agreement assures fairness in the

allocation of tax revenues by fixing each participant’s share of

the proceeds on the number of miles actually traveled through

the jurisdiction.

Plaintiffs nevertheless argue that the fuel use tax violates

the test set forth in Complete Auto Tr. v. Brady, supra, at 279,

97 S.Ct. 1076 because it is not “fairly related to the services

provided by the State” (see also, Commonwealth Edison Co. v.

Montana, supra, at 617, 101 S.Ct. 2946). It is plaintiffs’

9a

contention that, because the New York State Thruway

Authority is “self-supporting”, as stated in its 1997 Annual

Report, it needs no additional revenue for the operation of the

highway. Therefore, they contend, the State provides no

benefit with respect to the operation of commercial vehicles on

the roadway that would justify the tax under the Complete Auto

test. ;

Plaintiffs’ reading of the fourth prong of the Complete Auto

test is overly restrictive. Merely because the assessed taxes are

not necessary to support the use of the services or facilities

upon which they are levied does not require the conclusion that

the State confers no benefit upon plaintiffs. As the Court stated

in Oklahoma Tax Commn. v. Jefferson Lines, supra, 514 U.S.

at 199, 115 S.Ct. 1331:

The fair relation prong of Complete Auto requires no

‘detailed accounting of the services provided to the

taxpayer on account of the activity being taxed, nor,

indeed, is a State limited to offsetting the public costs

created by the taxed activity. Ifthe event is taxable, the

proceeds from the tax may ordinarily be used for purposes

unrelated to the taxable event.

To be sure, as noted in Commonwealth Edison Co. v.

Montana, supra, at 629, 101 S.Ct. 2946, “when the measure of

a tax bears no relationship to the taxpayers’ presence or

activities in a State, a court may properly conclude under the

fourth prong of the Complete Auto Transit test that the State is

imposing an undue burden on interstate commerce.” However,

_ in the same paragraph, the Court emphasized that, when the tax

is reasonably apportioned, the taxpayer will realize, in proper

proportion to the taxes it pays, “ ‘[the] only benefit to which the

taxpayer is constitutionally entitled ... [:] that derived from his

enjoyment of the privileges of living in an organized society,

established and safeguarded by the devotion of taxes to public

10a

purposes’ “ (quoting Carmichael v. Southern Coal & Coke Co.,

301 U.S. 495, 522, 57 S.Ct. 868, 81 L.Ed. 1245). Often cited

as a benefit bestowed by the taxing jurisdiction is the provision

of “police and fire protection” (supra, at 628, 57 S.Ct. 868).

It bears emphasis that police, fire, ambulance and paramedic

services are made available to plaintiffs either by various

localities within the vicinity of the highway or by State entities

other than the New York Thruway Authority. In view of the

concededly precise correlation between plaintiffs’ use of the

Thruway and the resultant tax imposed, the measure complies

with the fair relation test of Complete Auto Tr. v. Brady, supra,

at 279, 97 S.Ct. 1076.

Accordingly, the order and judgment (one paper) of the

Supreme Court, New York County (Jane Solomon, J.), entered

December 3, 1999, which granted defendant Tax

Commissioner’s motion to dismiss plaintiffs’ declaratory

judgment action and which adjudged and declared that Tax

Law § 523 does not violate the Commerce Clause, should be

affirmed, without costs.

Order and judgment (one paper), Supreme Court, New

York County (Jane Solomon, J.), entered December 3, 1999,

affirmed, without costs.

All concur.

lla

APPENDIX B

Supreme Court, New York County, New York.

OWNER-OPERATOR INDEPENDENT DRIVERS

ASSOCIATION et al., Plaintiffs,

Vv.

Michael H. URBACH, as Commissioner of New York State

Department of Taxation and

Finance, Defendant.

Nov. 10, 1999

Nonresident truckers and a trucking industry group sued to

challenge the constitutionality of the fuel use tax statute. On a

motion to dismiss, the Supreme Court, New York County, Jane

S. Solomon, J., held that the statute did not violate the negative

or dormant Commerce Clause as applied to nonresident

truckers using the state thruway.

Motion granted.

Paul D. Cullen, Sr., Washington, D.C., and Lord, Bissell &

Brook, New York City (Cary Samowitz of counsel), for

plaintiffs.

JANE S. SOLOMON, J.

This proposed class action challenges the constitutionality

of New York Tax Law § 523, which requires the collection of

a tax on fuel use on commercial vehicles based on their miles

driven on the Governor Thomas E. Dewey Thruway, also

known as the New York State Thruway (“Thruway”).

Defendant Michael H. Urbach, the former Commissioner of the

New York State Department of Taxation and Finance

(“Department”), moves to dismiss the proposed class action

12a

complaint for failure to state a cause of action (CPLR

3211{a][7] ), and for lack of subject matter jurisdiction due to

plaintiffs’ failure to exhaust administrative remedies (CPLR

3211 [aJf2] ).

FACTUAL BACKGROUND

Plaintiff Owner-Operator Independent Drivers Association

(“Association”) is a business association of persons and entities

who own and operate motor carrier equipment. The

Association, which was founded in 1973 and has over 40,000

members, is a not-for-profit corporation which is incorporated

and has its principal place of business in the State of Missouri.

The individual plaintiffs, Raymond L. Kasicki and Harry

Kijowski, reside in Ohio and New York, respectively. Both of

them operate tractor trailers on highways of the State of New

York.

The challenged statute was enacted by the Laws of 1994,

Chapter 170, § 8, effective January 1, 1996. The statute

provides a tax on fuel use “for the privilege of operating any

qualified motor vehicle upon the public highways of this state.”

Tax Law § 523(a). The fuel use tax (“FUT”) applies to

vehicles engaged in either intrastate or interstate commerce.

The FUT is only collected on fuel consumed while driving on

the public highways in New York. The operator of a motor

carrier purchasing fuel within the State is entitled to a credit or

refund for the tax paid for such fuel at the pump when the fuel

is consumed outside the State. Tax Law § 524. The operator

of a motor carrier which purchases fuel outside the State but

- consumes the fuel within the State is required to pay the FUT

to New York.

DISCUSSION

Since defendant moved to dismiss prior to answering, all

of plaintiffs’ allegations are presumed to be true. Weinbaum v.

l3a

Cuomo, 219 A.D.2d 554, 631 N.Y.S.2d 825 (Ist Dept.1995),

appeal dismissed 87 N.Y.2d 917, 641 N.Y.S.2d 595, 664

N.E.2d 506 (1996).

Plaintiffs assert that New York’s FUT violates article I,

section 8, clause 3 of the United States Constitution (the

“Commerce Clause”), which is referred to as the negative or

dormant Commerce Clause. The basis for this argument is that

plaintiffs have paid fuel use taxes of 30 cents per gallon! of fuel

consumed while traveling the Thruway, and have paid tolls to

the Thruway Authority--an independent agency that receives no

funds from the State for the construction, maintenance or

operation of the Thruway--for their use of the Thruway.

Plaintiffs’ position is that the tolls collected pay for all material

services provided to commercial vehicles operating on the

Thruway.’ Plaintiffs maintain that the Department's collection

of FUT on account of miles driven by commercial vehicles on

the Thruway is not fairly related to any services provided by the

State of New York in connection with interstate travel over the

Thruway, since the FUT collected is not used for the

maintenance or operation of the Thruway. Therefore, plaintiffs

assert, the collection of FUT on the basis of miles driven by

commercial vehicles on the Thruway is an undue burden on

interstate commerce.

' While defendant asserts that the FUT is actually 16 cents per

gallon, and that plaintiffs have actually included a Petroleum

Business Tax in their calculation, the amount of the FUT is not a

material factual issue.

? Plaintiffs’ assertion is based on the 1997 Annual Report of the

Thruway Authority, which states that the Authority is

“self-supporting from tolls and other sources” and tha “[t]he

Authority is solely responsible for its finances.” New York State

Thruway Authority 1997 Annual Report, at 16, 28.

l4a

“(T]he negative, or dormant, [Commerce] Clause

invalidates only State measures which ‘unjustifiably * * *

discriminate against or burden the interstate flow of articles of

commerce.’ “ Tamagni v. Tax Appeals Tribunal of State of

New York, 91 N.Y.2d 530, 539, 673 N.Y.S.2d 44, 695 N.E.2d

1125, cert. denied 525 U.S. 931, 119 S.Ct. 340, 142 L.Ed.2d

280 (1998), quoting Oregon Waste Sys. v. Department of Envtl.

Quality of State of Oregon, 511 U.S. 93, 98, 114 S.Ct. 1345,

128 L.Ed.2d 13 (1994). As the Court of Appeals stated in

Tamagni, a court’s first step in analyzing any law subject to

scrutiny under the negative Commerce Clause

“is to determine whether it ‘regulates evenhandedly with

only “incidental” effects on interstate commerce, or

discriminates against interstate commerce’ * * *. As we

use the term here, ‘discrimination’ simply means

differential treatment of in-state and out-of-state economic

interests that benefits the former and burdens the latter”

(id., at 99 [114 S.Ct. 1345], quoting Hughes v. Oklahoma,

supra, 441 U.S. [322], at 336 [99 S.Ct. 1727, 60 L.Ed.2d

250 (1979)}). If there is no differential treatment of

identifiable, similarly situated in-State and out-of-State

interests, there is no dormant Commerce Clause violation.

Tamagni v. Tax Appeals Tribunal of State, supra, 91 N.Y.2d, at

539, 673 N.Y.S.2d 44, 695 N.E.2d 1125. Put another way,

“the first step in the dormant Commerce Clause inquiry * * *

is to identify the interstate market that is being subjected to

discriminatory or unduly burdensome taxation.” Jd. at 540, 673

N.Y.S.2d 44, 695 N.E.2d 1125.

The tax at issue here does not operate to the disadvantage

of any identifiable interstate market. The tax applies in exactly

the same manner with respect to intrastate and interstate users

of New York’s roadways. Both interstate and intrastate drivers

are taxed based on in-state fuel usage and solely on such

15a

are taxed based on in-state fuel usage and solely on such

in-state usage; there is no differential treatment of intrastate

and interstate commercial interests. Additionally, fuel usage

on the Thruway is not treated differently than fuel usage on any

other New York State roadway. Accordingly, plaintiffs cannot

meet the threshold of demonstrating that two groups have been

treated differently so as to improperly burden interstate

commerce.

Even assuming, arguendo, that plaintiffs had met this

threshold inquiry, plaintiffs’ claim fails under Complete Auto

Transit, Inc. v. Brady, 430 U.S. 274, 97 S.Ct. 1076, 51 L.Ed.2d

326, rehg. denied 430 U.S. 976, 97 S.Ct. 1669, 52 L-Ed.2d 371

(1977) (“Complete Auto”). In Complete Auto, supra, the

Supreme Court set forth the test to determine whether a

particular tax violates the Commerce Clause. The Court

explained that a tax will be sustained against a Commerce

Clause challenge if the tax “is applied to an activity with a

substantial nexus with the taxing State, is fairly apportioned,

does not discriminate against interstate commerce, and is fairly

related to the services provided by the State.” Jd. at 279, 97

S.Ct. 1076. Here, plaintiffs’ challenge to Tax Law § 523 fails

under the fourth prong of the Complete Auto standard, since the

tax is “fairly related to the services provided by the State.”

The “fair relation” prong of the Complete Auto test

requires no detailed accounting of the services provided to

the taxpayer on account of the activity being taxed, nor,

indeed, is a State limited to offsetting the public costs

created by the taxed activity. If the event is taxable, the

proceeds of the tax may ordinarily be used for purposes

unrelated to the taxable event. Interstate commerce may

thus be made to pay its fair share of state expenses and “

‘contribute to the cost of providing all governmental

l6a

services, including those services from which it arguably

receives no direct “benefit.” ‘ “

Oklahoma Tax Commn. v. Jefferson Lines, Inc., 514 U.S. 175,

199-200, 115 S.Ct. 1331, 131 L.Ed.2d 261, rehg. denied 514

U.S. 1135, 115 S.Ct. 2018, 131 L.Ed.2d 1016 (1995), quoting

Goldberg v. Sweet, 488 U.S. 252, 267, 109 S.Ct. 582, 102

L.Ed.2d 607 (1989). In Oklahoma Tax Commun. v. Jefferson

Lines, Inc., supra, the Court upheld a tax on interstate bus ticket

sales, illustrating that

[t]he bus terminal may not catch fire during the sale, and

no robbery there may be foiled while the buyer is getting

his ticket, but police and fire protection, along with the

usual and usually forgotten advantages conferred by the

State’s maintenance of a civilized society, are justifications

enough for the imposition of a tax.

Oklahoma Tax Commn. v. Jefferson Lines, Inc., supra, 514

U.S., at 200, 115 S.Ct. 1331.

Here, too, plaintiffs may never need the services of the fire

or police departments, but these services are available if

needed. See, New York State Thruway Authority v. Dufel, 129

A.D.2d 44, 47, 516 N.Y.S.2d 981 (3d Dept.1987) (discussing

the joint efforts of the State and Thruway Authority to address

emergencies relating to operation of the Thruway and its

commercial traffic following collapse of Thruway bridge); see

also, Brooks v. Forsythe, 189 A.D.2d 26, 594.N.Y.S.2d 439 (3d

Dept.1993); Hutley v. N.Y.S. Thruway Authority, 139 Misc.2d

868, 529 N.Y.S.2d 258 (Ct.Cl.1988). Ata minimum, though,

plaintiffs have no doubt used local and access roads, which are

not funded by the Thruway Authority.’ Even assuming

> This court rejects plaintiffs’ assertion that whether commercial

vehicles derive any benefit from local police, fire and ambulance

services, and local roads and access roads not funded by the

17a

plaintiffs’ claim is true--i.e., that the full cost of the Thruway is

covered by the tolls imposed--the State provides other services

that may be paid for through the FUT.

Moreover, plaintiffs acknowledge that “there is almost a

perfect correlation between the use of the road and the amount

of the tax paid.” Plaintiffs’ Memorandum of Law in Opp., at

15. “[{W]hen the measure of a tax is reasonably related to the

taxpayer’s activities or presence in the State--from which it

derives some benefit * * *--the taxpayer will realize, in proper

proportion to the taxes it pays, * * * [the benefit] ‘of living in

an organized society, established and safeguarded by the

devotion of taxes to public purposes.’” Commonwealth Edison

Co. v. Montana, 453 U.S. 609, 628-629, 101 S.Ct. 2946, 69

L.Ed.2d 884, (1981), quoting Carmichael v. Southern Coal &

Coke Co., 301 U.S. 495, 522, 57 S.Ct. 868, 81 L.Ed. 1245

(1937). Therefore, to the extent that this Court need reach the

Complete Auto test, defendant has met its burden of showing

that the FUT imposed on the use of the Thruway is fairly

related to the services provided by the State. See, D.H. Holmes

Co. v. McNamara, 486 U.S. 24, 32, 108 S.Ct. 1619, 100

L.Ed.2d 21 (1988) (provision of police and fire protection,

together with other civic services, satisfied Complete Auto

test). Plaintiffs derive a substantial benefit from the State for

the use of its highway system; the tolls paid for the use of the

Thruway do not cover these additional benefits and expenses to

the State. Since the FUT is fairly related to these additional

benefits and services, it survives plaintiffs’ constitutional

challenge.

In view of the foregoing, this Court need not address the

issue of exhaustion of administrative remedies with respect to

a refund of the taxes paid.

Thruway, raises a factual issue that cannot be considered on a motion

to dismiss.

18a

The procedural posture of defendant’s motion is a motion

to dismiss the complaint. Plaintiffs assert that at this stage of

the proceeding, on a motion to dismiss, the only issue before

the Court is whether the Court has jurisdiction of the matter and

not whether or not the plaintiffs are entitled to a favorable

declaratory judgment. To the contrary, if no issue of fact is

raised by the pleadings, or if the facts are conceded, a proper

case is presented for judgment on the merits on defendant’s

motion to dismiss the complaint. Law Research Service, Inc.

v. Honeywell, Inc., 31 A.D.2d 900, 901, 298 N.Y.S.2d 1 (Ist

Dept.1969). | The proper relief here is a declaration in

defendants’ favor. See, Friedman v. Board of Educ. of East

Ramapo Cent. School Dist., 259 A.D.2d 464, 686 N.Y.S.2d 84

(2d Dept.1999).

Accordingly, it is

ORDERED that defendant’s motion to dismiss is granted;

and it is further

ADJUDGED AND DECLARED that Tax Law § 523 does

not violate the Commerce Clause.

19a

APPENDIX C

_ State of New York,

Court of Appeals

At a session of the Court,

held at Court of Appeals Hall

in the City of Albany on the

sixteenth day of October 2001

Present, HON. JUDITH S. KAYE, Chief Judge, presiding.

1-10 Mo. No. 892

Owner-Operator Independent

Drivers Association, et al.,

Appellants,

v.

Michael H. Urbach, as Commissioner

of the Department of Taxation and

Finance of the State of New York,

Respondent.

A motion for leave to appeal to the Court of Appeals in the

above cause having heretofore been made upon the part of the

appellants herein and papers having been submitted thereon and

due deliberation having been thereupon had, it is

ORDERED, that the said motion be and the same hereby

is denied.

Stuart M. Cohen

Clerk of the Court

20a

State of New York

Court of Appeals

Stuart M. Cohen Clerk’s Office

Clerk of the Court Albany, New York 12207-1095

DECISION October 16, 2001

1-10 Mo.No. 892

Owner-Operator Independent

Drivers Association, et al.,

Appellants,

v.

Michael H. Urbach, as Commissioner

of the Department of Taxation and

Finance of the State of New York,

Respondent.

2la

APPENDIX D

Article 21-A, § 523 of the New York Tax Law provides:

Fuel use tax. (a) Imposition. There is hereby imposed on and

after January first, nineteen hundred ninety-six a tax on fuel

use for the privilege of operating any qualified motor vehicle

upon the public highways of this state.

(b) Rate of tax. The tax imposed by this section shall be

at a composite rate determined by adding together (1) a fuel

tax component which shall be equivalent to the applicable

rate per gallon in effect under the taxes on motor fuel and diesel

motor fuel imposed by article twelve-A of this chapter and

(2) a sales tax component, which shall be equivalent to the rate

per gallon applicable to the receipts from the sale ofa gallon

of motor fuel or diesel motor fuel in effect under the sales and

compensating use taxes imposed by sections eleven hundred

five and eleven hundred ten of this chapter plus the highest rate

applicable to the receipts from the sale of a gallon of motor fuel

or diesel motor fuel in effect in any locality of this state

imposing a local sales and compensating use tax on the sale of

motor fuel and diesel motor fuel under the authority of

section twelve hundred ten of this chapter; provided, however,

that the total rate per gallon applicable to the receipts from

the sale of a gallon of such fuels imposed under paragraph two

of this subdivision shall not exceed seven percent. Such

total equivalent rate per gallon under paragraph two of this

subdivision shall be determined as provided in subdivision (d)

of section eleven hundred eleven of this chapter and the

schedules prescribed by the commissioner pursuant to such

subdivision, and shall be based on the average price per

gallon (including all federal and state and any local taxes

included in such price or imposed on the use or consumption of

such fuels upon which the state and local sales tax is

22a

computed but determined without the inclusion of any state and

local sales tax on receipts from sales of such fuels) paid by

the carrier during the reporting period for all motor fuel and

diesel motor fuel purchased for use in its operations either

within or without this state. The price for motor fuel and diesel

motor fuel purchased by such carrier shall be deemed to

be the prevailing price for motor fuel and diesel motor fuel, as

established by the commissioner each calendar quarter

pursuant to this section, applicable to the reporting period.

The commissioner shall for each calendar quarter establish a

prevailing price for motor fuel and diesel motor fuel based on

the prices being charged on any given day during the first

fifteen days of the previous calendar quarter at a minimum of

ten selected truck stops widely scattered throughout the state.

Such tax shall be computed by multiplying such composite rate

by the amount of motor fuel or diesel motor fuel, as the case

may be, used by a carrier in its operations within this state

during each reporting period. The amount of motor fuel and

diesel motor fuel used in the operations of any carrier within

this state shall be determined by dividing the number of miles

traveled in this state subject to tax under this section by the

average miles per gallon for the type of fuel. Where the records

of any carrier are inadequate or incomplete, the qualified motor

vehicles of a carrier filing returns shall be deemed to have

consumed, on the average, one gallon of diesel motor fuel for

every four miles traveled or one gallon of motor fuel for every

three miles traveled unless substantial evidence discloses that

a different amount was consumed; provided,however, that if

the commissioner enters into a cooperative agreementpursuant

to section five hundred twenty-eight of this article and such

agreement prescribes a different average miles per gallon

deemed to be consumed, the commissioner shall prescribe such

different average.

23a

Article 13-A, § 301-h, of the New York Tax Law provides in

relevant part:

Tax relating to carriers. (a)(1) Notwithstanding any other

provision of this chapter, there is hereby imposed a monthly

tax measured by the rate of the tax hereunder times the

number of gallons of motor fuel and diese] motor fuel imported

into this state in the fuel tanks of qualified motor vehicles

which (i) previously thereto, have not been included in the

measure of the tax imposed by section three hundred one-a of

this article and (ii) are consumed in this state in the operation

of such qualified motor vehicles. Such number of gailons

so imported shall be the positive difference between the

gallonage consumed by the carrier in this state in its

operations during the reporting period and the gallonage

purchased by the carrier in this state during the reporting

period, which gallonage has been included in the measure of

the tax imposed by such section three hundred onea of this

article. Each carrier shall be entitled to a credit, equal to the

tax under this article absorbed by such carrier with respect to

any excess of gallonage purchased in the state during the

reporting period over gallonage so consumed in this state

during such period, against the tax for which such carrier would

otherwise be liable for the eight succeeding calendar quarters

following the end of the reporting period for which such excess

was derived, or, if a claim for refund is filed on or before the

last day of the month immediately following the four-year

period commencing with the end of the reporting period for

which such excess was derived, the amount of such credit shall

be refunded. (2) The rate of the tax imposed by this section

shall be equal to the motor fuel and automotive-type diesel

motor fuel rate set by subdivision (e) of section three hundred

one-a plus the rate of the supplemental tax imposed by section

three hundred one-j of this article as such rates are specified

therein and as they may be adjusted as provided in

24a

suchprovisions. In addition, the tax surcharge imposed by

section three hundred-one-g of this article shall be imposed

with respect to the tax imposed by this section as if the tax

imposed hereunder were imposed by section three hundred-

one-a of this article. (3) The tax and tax surcharge shall be

upon the carrier, as defined for purposes of the tax imposed

by article twenty-one-A of this chapter, except that where the

carrier is not the owner of such qualified motor vehicle, the tax

shall be a joint and several liability upon both the carrier and

the owner. The term "qualified motor vehicle" shall mean such

term as defined for the purposes of the tax imposed by such

article twenty-one-A. The exemptions provided by section five

hundred twenty-five of such article twenty-one-A shall apply

to the tax imposed by this section.

**# * *

(c) Joint administration. The commissioner shall jointly

administer the taxes imposed by article twenty-one-A of this

chapter and the tax imposed by this section, including the

joint reporting and payment, assessment, collection,

determination and refund or credit of such taxes. For

purposes oof the joint administration of taxes, the

commissioner's functions under such article twenty-one-A

and any returns, forms, statements, documents or information

to be submitted to the commissioner under such article, any

books and records to be kept for purposes of the taxes

imposed by such article, any schedules of amounts to be

collected under such article, and the payment of taxes under

such article, shall apply to the tax imposed by this section and

shall be on a joint basis with respect to such tax imposed by this

section and the taxes imposed by such article.