Petition for Writ of Certiorari — Lynden Air Freight, Inc. v. Kamikawa

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In the

Supreme Court of Che United States

OCTOBER TERM, 1998

LYNDEN AIR FREIGHT, INC.,

Petitioner.

DIRECTOR OF TAXATION, STATE OF HAWAII,

Respondent.

Petition for a Writ of Certiorari to the

Supreme Court of the State of Hawaii

PETITION FOR A WRIT OF CERTIORARI

GREGG D. BARTON BRUCE J. ENNIS, JR.*

BOGLE & GATES, P.L.L.C. NORY MILLER

Bellevue Place JENNER & BLOCK

10500 NE 8th Street Twelfth Floor

Suite 1500 601 Thirteenth Street, N.W.

Bellevue, WA 98004-4398 Washington, D.C. 20005-3807

(425) 455-3940 (202) 639-6000

February 23, 1999 *Counsel of Record

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QUESTIONS PRESENTED

# Whether the preemption of state taxes on the sale

of air transportation and on gross receipts from air

transportation within the meaning of 49 U.S.C. § 401 16(b), or

its predecessor 49 U.S.C. § 1513(a), preempts a state tax on a

portion of the gross receipts of an air carrier from the sale of air

Cargo services?

2. Whether the definition of “interstate air

transportation” in 49 U.S.C. § 40102(a)(25), or its predecessor

49 U.S.C. § 1301(21), includes ground activity integral to the

air transportation service of an air carrier?

LIST OF PARTIES

Pursuant to Rule 14.1(b) and Rule 29.6, the following list

identifies all the parties to the proceeding before the Supreme

Court of Hawaii.

Lynden Air Freight, Inc., a wholly owned subsidiary corporation

of Lynden Incorporated, appellee below.

Lynden Incorporated has no non-wholly owned subsidiary

corporations.

Ray K. Kamikawa, Director of Taxation, State of Hawaii,

appellant below.

ili

TABLE OF CONTENTS

Page

GUBSTIONS PREGENIED 5... eee. i

ee IRI rt Ed clk. a iss bevin Sei eles 0 bs ee

ee tT ASE Gi a ee ee eS oes ee vi

a lay bok bv Wa aie wd ees 2

EES SI ORT SUARAD tec ig BE RE eR a 2

STATUTORY PROVISIONS INVOLVED ............ 2

Dieeeees GP IE CASE ieee ee ce ee 3

I Fert CN ky Sides ek sw v'e 8 o's 0s 3

NS ES eae 4

REASONS FOR GRANTING THE PETITION ........ 6

I. THIS COURT’S GUIDANCE IS NEEDED TO

ADDRESS THE SUBSTANTIAL

TRUNCATION OF THE FEDERAL STATE

TAX PREEMPTION PROVISION ADOPTED

Ne eek Sie dn ks ee 7

B. This Is Not An Isolated Error Of Law... 9

2. Other states; other taxes ........ 12

Il. THIS COURT SHOULD GRANT

CERTIORARI BECAUSE THE DECISION

BELOW IS INCONSISTENT WITH

CONGRESS’ UNDERSTANDING AND

POSES AND POSES A SIGNIFICANT

THREAT TO CONGRESS’ EXPRESS GOALS

(Lee SES wa ia a EER ARS ER ER eee 14

A. Hawaii’s Designation Of Sorting,

Marketing, Pickup And Delivery

Functions As Separate From Air Services

Conflicts With Congress’ Views And

Those Of Its Designated Agency .... 14

1. Air transportation services ... 15

2. Congress and its designated

agency considered the ground

activities at issue here integral to

the provision of air transportation

SEE ct ses 16

B. Hawaii’s Imposition Of Tax On Gross

Receipts Attributed To Ground-Based

Functions Integral To Providing Air

Transportation Undermines Congress’

Preemption Scheme

———————

ITI. THIS COURT SHOULD GRANT

CERTIORARI TO RESOLVE A LONG-

STANDING CONFLICT OVER THE SCOPE

OF THE STATUTORY DEFINITION OF

INTERSTATE AIR TRANSPORTATION ... 24

CONCLUSION

TABLE OF AUTHORITIES

CASES

Page

Air Polynesia, Inc. v. Director of Taxation, Docket

No. 2250 (Haw. Tax Appeal Court

MO WG LTE: eee eee aR ORE ies 1]

Air Polynesia, Inc. v. Freitas, 742 F.2d 546 (9th

Sat PE oe cee SSP LO EES COR EES 11

Airborne Freight Corp. v. New York Dep't of

Taxation, 527 N.Y.S.2d 107

(Ra. TA Se eS Seis eee AS a aves 9

Airline Car Rental, Inc. v. Shreveport Airport Auth.,

667 F. Supp. 293 (W.D. La. 1986) ......... 25

In re Aloha Airlines, 647 P.2d 263 (Haw. 1982) . 10

Aloha Airlines, Inc. v. Director of Taxation of

Hawaii, 464 U.S. 7 (1983) ........... passim

City and County of Denver v. Continental Air Lines,

Inc., 712 F. Supp. 834 (D. Colo. 1989) ..... 25

City of College Park v. Atlantic S.E. Airlines, Inc.,

391 S.E.2d 460 (Ga. Ct. App. 1990) ........ 8

City of Philadelphia v. C.A.B., 289 F.2d 770 (D.C.

nig 7 SERRA ee re tart cs woe

Vii

DHL Corp. v. C.A.B., 584 F.2d 914

PU SO ROU ik se one

Director of Taxation of Hawaii v. United Parcel

Service, Inc., 966 P.2d 648

A RO 8 ae ee oo ow $2

Evansville-Vanderburgh Airport Authority District et

al. v. Delta Airlines, Inc. et al.. 405 U.S. 707

EAP Mad Mek LUO Gs ere & oe, 13

Federal Express Corp. v. California Pub. Utils.

Comm'n, 936 F.2d 1075 Ree is ee 16, 25

Harper vy. Virginia Dep't of Taxation, 509 U.S. 86

REPURE NA Sener ees ioe eee as 7

Hill v. National Trans. Safety Bd., 886 F.2d 1275

CRUE, SONS) osc ies ot ee =

James B. Beam Distilling Co. v. Georgia, 501 U.S.

eS § Big a eRe rg ae i oe ea 7

Law Motor Freight, Inc. v. C.A.B., 364 F.2d 139 (Ist

Ce BNNs i eae ee 17, 18

Lehnhausen v. Lake Shore Auto Parts Co.. 410 U.S.

ob. ) RNA ee eV Ta oo a tata a ee 23

Newsweek, Inc. v. Florida Dep't of Revenue, 118 S.

ERE es horeci sks oeecnsbee.. 7

In re Panorama Air Tour, Inc., Docket No. 1931

Vill

(Haw. Tax Appeal Court Nov. 27, 1984) .... 11

Reich v. Collins, 513 U.S. 106 (1994) .......... 7

Salem Trans. Co. v. Port Auth., 611 F. Supp. 254

(SONY, W9GOS erence ee 9, 24-25

Travel Services, Inc. v. Government of the V.I.,

904 F.2d 186 (3d Cir. 1990) ............ 8

UPS v. Director of Taxation, Docket No. 2235 (Haw.

Tax Appeal Court Jan. 13, 1997) .......... 12

United States v. Petrykievicz, 809 F. Supp. 794 (W.D.

WER BE ok Rs es ee ee a ke 26

STATUTES AND LEGISLATIVE HISTORY

AF TES SoS GRE ois eee ete 16, 19, 21

SFA BG os St hee a ee passim

USL. 8 Oe Awe a ee passim

PUBL OSes: os are ne cee ee 27

AD 4.38 CS 3a ok vera FEC Ss 18

S943 0..6 taGM speek 2s ee passim

GSU SL.S 1SCe CAPSS 6 SO 16, 21

OUSC CTO ee eS: 17

WPTEG C2548 CASO 0 ek recess passim

Pe. 1: Wt ra, Le Be 5 oe eH ek 3

§2 Stat. 1029 (1938), codified as 49 U.S.C.

EER oS Ee nev eka re es eee

RI es NO IGE So eee eh ose. 12

Pee: Ce OC ee OE oo ce Ca ew 12

Cae es OE 2 ss SON ok so 3

PE SO EU ER AS ig pa co enc CARO oe 3

BEI ee. PUN PO a oa cc ee ee 12

Conon, CURE, Bs bah a es ee Shee ss 12

ween. Mev. COG6 SOZ.16.020 oo eb 12

H.R. Rep. No. 103-180, (1993), reprinted in 1994

Rene PE SCA cede cheesy 3, 8

S. Rep. N. 93-12 (1973), reprinted in 1973

SAE REE ieee hc eek wees passim

Hearings on H.R. 4082, H.R. 2695, H.R. 4214, H.R.

4182 and S.38 Before the Subcomm. on

Transportation and Aeronautics of the House

Comm. on Interstate and Foreign Commerce,

I ME OE by aie wae ek eon hes 20

REGULATIONS AND MISCELLANEOUS

M4CPER Bt WS 19, 26

MCRA. MMO 4 eee. 17

29 Fed. Reg 6276 (1964)...............005. 17

Ohio Op. Atty. Gen. No. 73-117 (Nov. 20, 1973) . 20

John Piper and Catherine A. Eggen, Gross Receipt

Taxes: General Principles, 1610 Tax

Management (BNA 1998) ...........0.000045. 13

No.

In the

Supreme Court of Che United States

OCTOBER TERM, 1998

LYNDEN AIR FREIGHT, INC.,

Petitioner,

DIRECTOR OF TAXATION, STATE OF HAWAII,

Respondent.

Petition for a Writ of Certiorari to the

Supreme Court of the State of Hawaii

PETITION FOR A WRIT OF CERTIORARI

Lynden Air Freight, Inc., respectfully petitions for a writ of

certiorari to review a judgment of the Supreme Court of

Hawaii, which held that a federal law which “expressly pre-

empts gross receipts taxes on the sale of air transportation,”

does not preempt Hawaii from taxing gross receipts from the

sale of air cargo transportation to the extent such gross receipts

can be attributed to the cost of activities that take place on the

ground.

‘Aloha Airlines v. Director of Taxation, 464 U.S. 7, 11 (1983).

OPINIONS BELOW

The Notice and Judgment on Appeal of the Supreme Court

of Hawaii is reprinted at Pet. App. la. The opinion of the

Supreme Court of Hawaii, reported as Director of Taxation of

Hawaii v. Lynden Air Freight, Inc., 968 P.2d 653 (Haw. 1998),

is reprinted at Pet. App. 2a. The opinion of the Tax Appeal

Court of Hawaii is reprinted at Pet. App. 18a.

JURISDICTION

The Supreme Court of Hawaii issued its opinion on

November 25, 1998, and a Notice and Judgment on Appeal on

December 23, 1998. The jurisdiction of this Court is properly

invoked pursuant to 28 U.S.C. § 1257(a).

STATUTORY PROVISIONS INVOLVED

This case involves the definition of air transportation as

originally enacted by the Civil Aeronautics Act of 1938, 49

U.S.C. § 1301(21), and the state tax preemption provision as

originally enacted by the Airport Development Acceleration Act

of 1973, 49 U.S.C. § 1513, and as both were recodified in 1994

as 49 U.S.C. §§ 40102(a)(25) and 40116(b), respectively. The

pertinent portions of these statutes are reprinted at Pet. App.

21a through 23a.

Pen aT a ee eee

STATEMENT OF THE CASE

Background. Hawaii imposes a general excise tax on gross

receipts of manufacturers and service businesses, Haw. Rev.

Stat. § 237, and on the gross receipts of public service

companies, including airlines and motor carriers, Haw. Rev.

Stat. § 239, to the extent Hawaii’s Director of Taxation

determines taxation is permitted by law. In Aloha Airlines, Inc.

v. Director of Taxation of Hawaii, 464 U.S. 7 (1983) (“Aloha

Airlines’), this Court held that Hawaii’s excise tax on airlines

was preempted by federal law because 49 U.S.C. § 1513

“expressly preempts gross receipts taxes on the sale of air

transportation or the carriage of persons traveling in air

commerce.” /d. at 11.* In the intervening years, the State’s

Director of Taxation has imposed the state’s excise taxes on

companies providing air cargo and helicopter services, based on

various narrowing interpretations of this Court’s Aloha Airlines

decision. See Pt. II.B.1.

Lynden Air Freight, Inc. (“Lynden”) sells interstate and

international air freight transportation services, from the

customers’ location to the freight’s destination. Pet. App. 4a.

Customers pay a single fee; one airway bill is used for the entire

journey, and the sale is trSeated as a single item in Lynden’s

invoice and in its internal books and records. Jd. at Sa; R.A.

202-06. Lynden hires airlines to transport the freight by air and

motor carriers to perform the attendant pickup and delivery.

Lynden, however, is responsible for, and retains control of, the

entire transportation of the freight, and itself maintains sorting

*Section 1513 was recodified as 49 U.S.C. § 40116 in 1994, see Pub. L.

103-272, 108 Stat. 745. The recodification was technical and not intended to

make any substantive changes. See H.R. Rep. No. 103-180 (1993), reprinted

in 1994 U.S.C.C.A.N. 818.

centers and offices near airports for handling and sorting

functions, public relations and marketing. Pet. App. 4a-Sa; R.A.

186, 202, 280. Some airports, such as Honolulu’s, are used as

a hub for shipment to and from other countries. Under federal

law, Lynden is an “air carrier.” See 49 U.S.C. § 40102(a)(2);

DHL Corp. v. C.A.B., 584 F.2d 914, 915 (9th Cir. 1978).

Believing that Hawaii could not legally impose excise tax

on its gross receipts from the sale of such services, Lynden did

not pay this tax. Pet. App. Sa.) On May 19, 1997, Hawaii’s

Director of Taxation assessed Lynden more than a half million

dollars for tax years 1987 through 1994. /d at Sa-6a. The tax

was determined by attributing a portion of Lynden’s gross

receipts from the sale of its air delivery services to those parts

of the service that were performed on the ground. /d. at Sa.

Specifically, the portion of Lynden’s receipts subjected to tax

was determined by the following formula:

Total Worldwide Hawaii Ground Costs |

Revenue from x |

Air Freight Sales Total Worldwide Costs’ |

Id. Forty percent of the Hawaii ground costs included were the

costs of the ancillary pickup and delivery of freight before and

after flight; 60 percent of the ground costs included were

sorting center costs, including labor for receiving, handling, and

sorting air freight; and administrative, office, public relations

and marketing expenses. R.A. 186, 192.

Proceedings below. Lynden complied with Hawaii’s

procedures for challenging the assessments. It paid the tax

*Total worldwide costs included not only worldwide ground costs, but

also the worldwide costs of hiring aircraft.

——— ae. nee eae ee r ee eee Toe ee eet

under protest and sought a refund in the Tax Appeal Court.

Pet. App. 7a. Lynden challenged the tax as preempted, but

agreed -- if these taxes were not preempted -- to accept the

specific amount assessed. R.A. 186. On January 28, 1998, the

Tax Appeal Court granted Lynden’s motion for summarv

judgment, finding that the revenues taxed were “derived from

the sale of ‘air transportation’” and that therefore the tax “is

preempted by 49 U.S.C. Section 40116.” Pet. App. 7a, 19a.

The Director of Taxation appealed the tax court’s decision

to the Supreme Court of Hawaii, which reversed. The court

concluded that the tax was not preempted because the tax was

imposed on receipts attributed to activities -- although part of

the air freight service Lynden provides -- that took place on the

ground. /d. at 8a. In so ruling, the Supreme Court of Hawaii

expressly relied on its decision a few weeks earlier, in Director

of Taxation of Hawaii v. United Parcel Service, Inc., 966 P.2d

648 (Haw. 1998) (“UPS”), upholding a parallel excise tax on

the “ground” portion of UPS’s gross receipts from the sale of

its air freight services. Pet. App. 8a. The court held that

Hawaii could tax these portions of air freight service receipts

because the handling, sorting, marketing, pickup and delivery

functions were not performed in an aircraft and, in the court’s

view, were therefore not “air transportation” within the meaning

of defined by 49 U.S.C. §§ 40102(a)(5), (25), and their

predecessors 49 U.S.C. §§ 1301(10), (21).* Pet. App. 4a n.2,

10a-15a. Although the court expressed concern because it

believed the taxes were “measured as a proportion of gross

receipts derived in part from the sale of ‘air transportation,’” id.

at 16a, the court erroneously concluded that this issue had not

been presented. /d.; but see Lynden Answ. Br. in No. 21434

‘Sections 1301(10) and (21) were recodified as 49 U.S.C. § 40102(a)(5S)

and (25) in 1994, without substantive change. See n.2, supra.

(Supreme Court of Hawaii), at 9 (expressly arguing that a state

tax measured as a proportion of gross receipts that includes

receipts from air transportation is preempted).°

REASONS FOR GRANTING THE PETITION

Certiorari should be granted for three reasons. First, the

decision below reflects a concerted and consistent effort to

substantially narrow this Court’s decision in Aloha Airlines, and

additional guidance from this Court is needed. Although

reasonably encompassed in this Court’s interpretation of the

governing law in Aloha Airlines, the precise questions at issue

-- whether federal law permits states (and localities) to

apportion gross receipts from the sale of air transportation for

tax purposes, and if so, whether tax may be imposed on gross

receipts allocated to any activity that occurs on the ground --

were not presented by the facts of that case and therefore were

not expressly addressed. They are squarely and cleanly

presented here.

Second, the questions are significant. If allowed to stand,

the decision below can be expected to have a widespread effect

on the air transportation industry and its customers, contrary to

Congress’ express goals. It will influence many states and

*The court appears to have misconstrued Lynden’s concession. Lynden

had conceded that if the State were permitted to tax the activities on which it

had imposed tax, and were permitted to measure that tax by attributing a

portion of Lynden’s gross receipts from air freight services, Lynden would not

challenge the specific calculations regarding the amount of the tax. R.A. 186.

Lynden did, however, consistently challenge the State’s ability to impose any

tax measured by such gross receipts, and its ability to impose taxes on the

handling, sorting, marketing, pickup and delivery functions that are a necessary

part of its, and all other air cargo companies’, air transportation services.

Answ. Br. at 8-19.

1 OU PN ge Pane EO ye ye a

localities, which used to impose taxes on air transportation

before Aloha Airlines, and other states and localities that would

welcome the revenues, to impose an identical tax, or a profusion

of different taxes, on an industry Congress intended to develop

free of such burdens. Third, the decision below highlights a

long-standing conflict with respect to the statutory definition of

“interstate air transportation,” 49 U.S.C. § 40102(a)(25), and

its predecessor 49 U.S.C. § 1301(21), which, because it is a

definition, affects the scope of many provisions of federal law.

The decision below provides an excellent vehicle for this

Court to clarify the scope of the state tax preemption provision

it addressed in Aloha Airlines. As this Court is well aware,

restrictions on state tax authority can require express

clarification following the Court’s initial interpretation of

governing law in order to secure compliance. See, e.g., James

B. Beam Distilling Co. v. Georgia, 501 U.S. 529 (1991);

Harper v. Virginia Dept of Taxation, 509 U.S. 86 (1993);

Reich v. Collins, 513 U.S. 106 (1994); Newsweek, Inc. v.

Florida Dep't of Revenue, 118 S. Ct. 904 (1998) . The decision

below also provides an opportunity for the Court to resolve the

conflict as to the meaning of the statutory definition of

“interstate air transportation,” which affects a range of federal

and state powers with respect to the air transportation industry.

I. THIS COURT’S GUIDANCE IS NEEDED TO

ADDRESS THE SUBSTANTIAL TRUNCATION OF

THE FEDERAL STATE TAX PREEMPTION

PROVISION ADOPTED BELOW.

A. Aloha Airlines

The decision below unreasonably narrowed this Court’s

interpretation of the federal state tax preemption provision.

Section 1513, and its successor provision, prohibit states and

localities from imposing a tax, “directly or indirectly,” on “the

sale of air transportation or on the gross receipts derived

therefrom... .” 49 U.S.C. §1513.° In Aloha Airlines, this

Court interpreted the scope of that provision. It found the

provision was intended by Congress to prevent a proliferation

of state and local taxes burdening interstate air transportation,

464 U.S. at 9, and that it preempted certain “state taxes,

including gross receipts taxes imposed on the sale of air

transportation.” /d. at 12 n.6. Further, this Court noted that

Congress had expressly declined to permit gross receipts taxes

on sales of air transportation, even if limited to receipts fairly

apportioned to the taxing state. /d. at 13 n.7. Thus, this Court

found that the Hawaii excise tax at issue in that case, a tax on

the Aloha and Hawaiian Airlines’ gross income, was preempted

and noted that its decision would likely invalidate a number of

other states’ taxes. /d. at 14 n.10.

Lower courts, including the Supreme Court of Hawaii,

have understood Aloha Airlines to mean that taxes on fofal

gross receipts from the sale of air transportation are preempted.

See, e.g., Pet. App. 16a, City of College Park v. Atlantic S.E.

Airlines, Inc., 391 S.E.2d 460 (Ga. Ct. App. 1990). And

several lower courts have distinguished, and upheld, taxes on

the gross receipts from services related to the air transportation

industry, when no part of the receipts is from the sale of air

transportation. See, e.g., Travel Services, Inc. v. Government

of the V1., 904 F.2d 186 (3d Cir. 1990) (upholding gross

“As recodified, the provision prohibits state and local taxes on, inter alia,

“the sale of air transportation, or the gross receipts from that air . .

transportation.” 49 U.S.C. §40116(b)(3)-(4). The phrase “directly or

indirectly” was removed only because it was considered surplusage. 1994

U.S.C.C.ALN. at 1089 (HLR. Rep. No. 103-180)

BS SREP RIOD ONE FOB Pe VENT es ee

Co oe a

receipts tax on travel agents’ commissions from airlines); Salem

Trans. Co. v. Port Auth., 611 F. Supp. 254 (S.D.N-Y. 1985)

(upholding gross receipts tax on limousine service for

permission to solicit business at airports).

The question this Court did not expressly address in Aloha

Airlines that Hawaii, among others, considered open after that

decision, is whether states and localities may tax some of the

gross receipts from the sale of air transportation, on the theory

that some aspects of the service provided occur on the ground.

See also Airborne Freight Corp. v. New York Dept of

Taxation, 527 N.Y.S.2d 107, 109 (App. Div. 1988) (declining

to decide whether state may tax portion of gross receipts

attributed to air freight company’s pickup and delivery because

state raised argument too late in the proceedings). This

question is squarely presented by the decision below, which

upheld a state tax on some of the gross receipts from the sale of

air transportation, to the extent those receipts are attributed to

activities performed on the ground.

Importantly, the resolution of the question by the court

below potentially subjects a substantial portion of the gross

receipts from both property and passenger air transportation to

state and local taxes. This Court’s guidance is urgently needed

to prevent a result inconsistent with the statutory provision and

with this Court’s interpretation of that provision.

B. This Is Not An Isolated Error of Law.

Although this Court does not undertake to correct every

misunderstanding of law, the decision below does not represent

an isolated mistake and will not have a limited effect. To the

contrary, it is part of a pattern by Hawaii’s Director of Taxation

to evade Congress’ prohibition of state taxes on gross receipts

from the sale of air transportation. If permitted to stand, the

decision will influence other states and localities to impose

similar taxes -- carving an enormous hole in Congress’ state and

local tax preemption scheme.

4 Hawaii

As this Court knows, Aloha Airlines itself was a Hawaii

case accepted for certiorari because the Supreme Court of

Hawaii had upheld a tax imposed on the gross receipts of

airlines, notwithstanding Congress’ express preemption of such

taxes. 464 U.S. at 12. The Hawaii court had upheld the tax on

the theory that the legislature, by deeming it a “property” tax,

had placed the tax on gross receipts beyond the preemptive

reach of the federal provision. Jn re Aloha Airlines, 647 P.2d

263, 274 (Haw. 1982). Even after this Court reversed, and

expressly found the tax preempted, 464 U.S. at 14 n.10, that tax

provision was not repealed or amended by the state legislature,

nor were regulations to limit its scope adopted by the Director

of Taxation.

Instead, the Director of Taxation has engaged in a fifteen-

year effort to carve loopholes out of Aloha Airlines, and has

continued to enforce the specific provision this Court found

preempted against air carriers under various theories. For

example, the year after this Court decided Aloha Airlines, the

Director of Taxation denied an air cargo carrier, UPS, refunds

of the taxes it had paid on its gross receipts from sales of air

freight transportation before the decision issued. See UPS, 966

P.2d at 650. Although this Court had held that the federal

provision preempted “state and local taxes on gross receipts

derived from air transportation or the carriage of persons in air

commerce,” Aloha Airlines, 464 U.S. at 14-15 (emphasis

added), and although the facts in Aloha Airlines involved both,

octets aula alll

ia aa de

i ee eee —_

id. at 10, the Director of Taxation apparently based its claim on

this Court’s more extensive discussion of the preemption

question with respect to airline passengers.’

In addition, the Director assessed gross receipts taxes on

air freight transportation against Air Polynesia (d/b/a/ DHL

Cargo). See Air Polynesia, Inc. v. Freitas, 742 F.2d 546 (9th

Cir. 1984) (explaining factual background but finding that the

Tax Injunction Act deprived lower federal courts of jurisdiction

over the question). Air Polynesia then successfully appealed the

Director’s assessments in state court. The Tax Appeal Court

held that the tax was preempted. See Air Polynesia, Inc. v.

Director of Taxation, Docket No. 2250 (Haw. Tax Appeal

Court May 24, 1985).

Meanwhile, Hawaii’s Director of Taxation also attempted

to impose tax under the same provision against an air tour

operator on the ground that inter-island sightseeing flights

through federal airways were not “travel” or “transportation”

within the meaning of the preemption provision. Jn re

Panorama Air Tour, Inc., Docket No. 1931 at 6-7 (Haw. Tax

Appeal Court Nov. 27, 1984). This attempted loophole was

rejected by the Tax Appeal Court. /d. at 8.

The Director’s current claim -- that Hawaii is permitted to

apportion gross receipts from the sale of air transportation and

tax the portion attributed to activities that occur on the ground

-- is simply the most recent in an unswerving assault on

Congress’ preemption of state and local taxes. The Director's

imposition of tax on apportioned gross receipts was twice found

The decision below similarly describes Aloha Airlines as holding that

it was improper for Hawaii to assess a tax on gross receipts derived from the

carriage of passengers. See Pet. App. 10a.

preempted by Hawaii’s Tax Appeal Court, see Pet. App. 18a;

UPS v. Director of Taxation, Docket No. 2235 (Haw. Tax

Appeal Court Jan. 13, 1997), but has now twice been upheld by

the Supreme Court of Hawaii. See Pet. App. 2a; UPS, 966 P.2d

at 339.

sa Other states; other taxes

If the decision below is permitted to stand, not only will

Hawaii, and possibly local jurisdictions within Hawaii, tax

apportioned gross receipts from the sale of air freight

transportation, but other states and localities can also be |

expected to follow. Further, they might well be emboldened to ;

intrude still further into the air transportation industry, reaching

passenger transportation as well. Interstate air transportation :

will be subjected to precisely the proliferation of state and local

taxes Congress sought, through preemption, to prevent as

“<nimical to the development of a national system.” S. Rep. No. :

93-12 (1973), reprinted in 1973 U.S.C.C.AN. 1434, 1455.

—

At the time Aloha Airlines was heard, at least 11 states in

addition to Hawaii had enacted gross receipts taxes on the sale .

of air transportation. See Amicus Br. of Alaska, et al., Aloha :

Airlines, Statutory Appendix; Aloha Airlines, 464 U.S. at 13

n.7, 14n.10.* Today, approximately sixty jurisdictions, state

and local, impose some type of gross receipts tax, but forgo

imposing the tax on air carriers, presumably in the (correct)

belief that such taxes are precluded by Section 1513 and its

* The eleven states were: Alaska, Anizona, Delaware, Indiana, Maryland,

Mississippi, New York, Ohio, Oklahoma, Washington, West Virginia.

Currently, at least five states impose some type of gross receipts or sales tax

on transportation. See Ariz. Rev. Stat. § 43-5062; Del. Code. Ann., tit. 30,

—§ 2301(d\(1), N.M. Stat. Ann. § 7-9-4 ; Okla. Stat. § 68-1354(C); Wash. Rev.

Code § 82.16.020.

successor provision. See John T. Piper & Catherine A. Eggen,

Gross Receipt Taxes: General Principles, Tax Management

§ 1610.03.A.2, § 1610.6101-05 (Worksheet 1) (BNA 1998).

The decision below, if not reversed, would be a green light

encouraging those jurisdictions, and others, to tax substantial

portions of air carriers’ gross receipts. Nothing in the reasoning

below limits its applicability geographically or jurisdictionally.

Any state or locality looking for revenues could feel free to tax

these receipts. Indeed, such taxes might be a particularly

attractive revenue source for the local, urban jurisdictions in

which many airports are located, as a source of needed funding

ultimately provided by shippers and travelers, many of whom

are located -- and vote -- elsewhere.

It is not unrealistic to expect these states and localities to

react in precisely this way, as it has happened before in closely

related circumstances. After this Court’s decision in Evansville-

Vanderburgh Airport Authority District et al. v. Delta Airlines,

Inc. et al., 405 U.S. 707 (1972) (upholding a New Hampshire

head tax on air travelers), state and local head taxes

proliferated. By the following year, at least 31 jurisdictions had

adopted such taxes and proposals were pending in many others,

a result Congress found “predictable.” 1973 U.S.C.C.A.N. at

1446, 1450 (S. Rep. No. 93-12). Indeed, it was this

proliferation that led Congress to preempt state and local taxes

on the sale of air transportation. Jd.

The apportionment theory, adopted below, would permit

taxation of substantial amounts of the gross receipts from sales

of air transportation. Not only air freight forwarders, but also

airlines, perform the pickup, delivery, handling, and sorting

functions for air packages and air freight on the ground. Under

the reasoning below, the costs of these activities by airlines

could also be used to apportion gross receipts from the sale of

air cargo transportation and subject them to tax.

The reasoning is also applicable to passenger travel. At the

very least, under the exact same theory, the cost of issuing

tickets and boarding passes and checking, handling, and sorting

baggage -- all functions that take place on the ground -- could

be used to apportion gross receipts from the sale of passenger

tickets and subject them to tax. Arguably, the reasoning could

reach further. Another portion of passenger ticket prices is

used to maintain and repair aircraft -- functions performed on

the ground. The cleaning crews perform their work on the

ground. The meals and drinks, although consumed in the air,

are prepared and packaged on the ground. Similarly, the staff

who load fuel perform their work on the ground.

Apportioning gross receipts based on where functions are

performed -- without regard to how integral the functions are

to the air transportation service sold -- subjects a substantial

proportion of air transportation receipts to the very state and

local taxes Congress intended to preempt.

fl. THIS COURT SHOULD GRANT CERTIORARI

BECAUSE THE DECISION BELOW IS

INCONSISTENT WITH CONGRESS’

UNDERSTANDING AND POSES A SIGNIFICANT

THREAT TO CONGRESS’ EXPRESS GOALS.

A. Hawaii’s Designation of Sorting, Marketing,

Pickup and Delivery Functions As Separate

From Air Services Conflicts With Congress’

Views and Those of Its Designated Agency.

Hawaii’s claim that it may permissibly subject gross

receipts from the sale of air freight services to state tax, to the

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extent the receipts can be attributed to activities that occur on

the ground, is based on the unexplained and incorrect premise

that these ground-based activities are separate services, divisible

from air services. That premise, however, is contrary to

common sense, business experience, Congress’ understanding,

and the expertise of the agency entrusted by Congress to

encourage the development of air transportation.

1. Air transportation services

No air delivery system operates without incidental ground

activity. Before a package is sent by air, it is picked up, sorted,

and delivered to the aircraft. These functions take place on the

ground. Similarly, before a passenger can be flown to a

destination, the passenger is sorted (issued a ticket and boarding

pass and sent by foot or internal subway to the proper gateway)

and delivered to the aircraft (by covered ramp, mobile lounge,

or bus). In addition, the passenger’s baggage is handled, sorted,

and delivered to the aircraft. These incidental ground activities

are not thought of by the air carrier or the customer as separate

services. They are simply part of what is required to transport

anything or anyone by air. No one would purchase the handling

and sorting of a package by an air carrier if the package was not

being sent by air. No one would contract with an air carrier to

pickup the package and take it to the aircraft, or, after the

aircraft landed, to deliver the package to its destination from the

aircraft, if the package were not being sent by air. Similarly,

passengers would not buy the service of being issued a ticket,

or having their baggage handled, if they were not undertaking

an air journey.

As the Ninth Circuit recognized with respect to the pickup

and delivery services of another air freight company: “The

trucking operations of [the company] are integral to its

operation as an air carrier. The trucking operations are not

some separate business venture; they are part and parcel of the

air delivery system.” Federal Express Corp. v. California Pub.

Utils. Comm’n, 936 F.2d 1075, 1078 (1991). Thus, Hawaii’s

apparent assumption that Lynden and others have simply

combined two different sets of services and offered them as a

package to customers has no basis and is plainly wrong.

2. Congress and its designated agency considered

the ground activities at issue here integral to the

provision of air transportation services.

In order to further its express goal of encouraging the

development of an adequate, efficient, and economical air

transportation system serving the air transportation needs of this

country, Congress delegated the Civil Aeronautics Board

(“C.A.B.”), and later the Secretary of Transportation, to carry

Out its air transportation policies. See Federal Express Corp.,

936 F.2d at 1079; 49 U.S.C. § 1302 (1988); 49 U.S.C. § 40101.

In particular, Congress wanted to encourage development of an

all-cargo air transportation system that would be responsive to

the present and future needs of shippers, commerce generally,

and national defense. See id. Congress specified that the all-

cargo air transportation system should be “an expedited” system

and “an integrated transportation system.” Jd. Air freight

transportation that takes a package or freight from the sender

to its final destination is therefore exactly the kind of an

expedited, integrated all-cargo air transportation system

Congress expressly specified. 936 F.2d at 1079.

In order to ensure that its air transportation policies were

implemented, Congress distinguished even among different

federal agencies to consign the regulatory responsibility for

ground pickup and delivery of air packages to the agency

Le ee CT ern heer emer

regulating air transportation, rather than to its sister agency

regulating motor transportation. Specific provisions removed

jurisdiction for such ground pickup and delivery functions from

the Interstate Commerce Commission (“ICC”), later the Surface

Transportation Board. See, e.g., 52 Stat. 1029 (1938), codified

as 49 U.S.C. § 303(b)(7a) (“Nothing in this chapter . . . shall be

construed to include . . . (7a) the transportation of persons or

property by motor vehicle when incidental to transportation by

aircraft. . . .”) (limiting jurisdiction of the ICC). A parallel

provision, originally enacted the same year -- 1938, granted

jurisdiction over such ground pickups and deliveries to the

agency regulating air transportation. See, e.g., 49 U.S.C.

§ 1373(a) (1988) (granting the authority to approve air carrier

tariffs for air transportation, including “services in connection

with such air transportation”).

The Civil Aeronautics Board, for decades the agency

charged with implementing Congress’ policies with respect to

the economic regulation of air transportation, understood that

its delegated powers included the economic regulation of

pickups and deliveries of air packages and air freight. Initially,

it enacted a regulation exerting regulatory authority over all

such pickups and deliveries to and from an airport, using a 25-

mile radius as a method for distinguishing bona fide pickups and

deliveries, but considering special circumstances that warranted

exceeding the rule of thumb measure. See, e.g., Law Motor

Freight, Inc. v. C.A.B., 364 F.2d 139, 140-41 (1st Cir. 1966);

29 Fed. Reg. 6276 (1964); 14 CFR. Pt. 222 (1980).

The C.A.B.’s conclusions, based on its expertise and

obligations to implement congressional policy, were that:

full development of air cargo transportation depends, in

large measure, upon efficient surface transportation;

effective customer-oriented pickup and delivery service can

best be guaranteed when it is under the control of the direct

air carrier or the air freight forwarder; this control can be

maintained by the operation of trucks directly by the air

carrier and the air freight forwarder or under contract with

local cartage agents; and a reasonable amount of freedom

for the direct air carriers and air freight forwarders to

establish pickup and delivery services and to test their

adequacy and economy is vital to prevent a stifling of the

potential of air cargo transportation.

Law Motor Freight, 364 F.2d at 141 (quoting the Preamble to

Part 222) (emphasis added). The C.A.B. determined to

consider proposed tariffs for extensions beyond the rule of

thumb measure “in light of whether the proposed service is truly

air cargo pickup and delivery... .” Jd. Thus, the C.A.B.

recognized that ground pickup and delivery were part of air

cargo transportation and that, to further Congress’ goals, these

needed to be regulated as air transportation.

When it chose to deregulate both air and motor

transportation, Congress removed federal regulation of air

cargo pickup and delivery altogether in favor of market

regulation. The power to review tariffs for air cargo pickup and

delivery by the agency charged with implementing Congress’ air

transportation policies was eliminated, but Congress retained a

provision expressly withdrawing authority from the agency

charged with implementing Congress’ motor transportation

policies. See 49 U.S.C. § 13506(a)(8)(B) (denying Secretary of

Transportation and Surface Transportation Board any authority

over “transportation of property . . . by motor vehicle as part of

a continuous movement which, prior or subsequent to such part

of the continuous movement, has been or will be transported by

an air carrier’). In this way, Congress implemented its policy of

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“relying on competitive market forces to decide the extent,

variety, quality, and price of services provided” as the best

method for developing an integrated air cargo transportation

system. 49 U.S.C. § 40101(b)(2).?

The decision below, by treating ground pickups and

deliveries -- as well as sorting, handling, marketing, etc. -- as

separate from air transportation and subjecting them to the

vagaries of state and local tax provisions, is not only

inconsistent with Congress’ and the Department of

Transportation’s long-standing view of air cargo service, but

also undermines Congress’ determination that the market should

be the regulator most likely to achieve its goal of an expedited,

integrated air cargo transportation system capable of serving

this nation’s needs. It cannot be gainsaid that taxation is a very

potent form of regulation.

B. Hawaii’s Imposition of Tax On Gross Receipts

Attributed to Ground-Based Functions Integral

to Providing Air Transportation Undermines

Congress’ Preemption Scheme.

Congress’ preemption scheme was intended to protect this

country’s air transportation system from the “inequitable, and

potentially chaotic burden of [state and local] taxation” on those

who use air transportation, because of “the chaos which such

local taxation works on the national air transportation system.”

1973 U.S.C.C.A.N. at 1446 (S. Rep. No. 93-12). Congress

explained that state and local tax “runs counter to the whole

concept of uniformity . . . and the maintenance of a national air

*The Department of Transportation continues to have and assert authority

to regulate ground pickups and deliveries in the United States by foreign air

carriers. 14 C.F.R. § 222.1-222.4.

transportation system.” Jd. at 1450."°

Indeed, Congress rejected a proposal to permit a tax similar

to the one upheld below when it considered, and originally

enacted, its state and local tax preemption provision. The

proposal was urged by the deputy tax commissioner of Ohio,

testifying at the House hearings that the then-proposed bill

should be amended to permit state taxes on gross receipts that

are “fairly apportioned to a State.”"' Such a tax would have had

virtually the same effect on the air transportation system as the

tax at issue here because most of the portion of the gross

receipts of air transportation that can be fairly apportioned to a

state is the portion attributed to the ground activities that take

place within that state. Congress, however, did not adopt the

proposal and enacted the provision preempting such a tax

instead. See Aloha Airlines, 464 U.S. at 14 n.7; Ohio Op. Atty.

Gen. No. 73-117 (Nov. 20, 1973).

The tax upheld below, and those sure to follow if the

decision is not reversed, present the very evils inherent in state

‘With respect to air cargo, for example, state and local taxes interfere

with adopting a uniform national pricing structure. If a regional or national air

transportation provider passes the taxes onto customers in the jurisdictions that

impose them, the provider must create different rate structures depending on

where each package starts and ends its journey. Packages from the same

customer would even be priced according to different rate structures if they

were headed to different destinations. If the regional or national air

transportation provider adopts uniform national rates anyway, customers in

Idaho and Delaware would wind up paying a portion of Hawaii’s tax. This is

exactly the type of chaos and inequity Congress enacted the preemption

provision to prevent.

‘Hearings on H.R. 4082, H.R. 2695, H.R. 4214, H.R. 4182 and S.38

Before the Subcomm. on Transportation and Aeronautics of the House Comm.

on Interstate and Foreign Commerce, 93d Cong. at 248-49 (1973).

a Sacer ae a

and local taxation of gross receipts from the sale of air

transportation services that led Congress to preempt it. A

central concern Congress had, with respect to state or local

taxes, was that there were no “safeguards to prevent undue or

discriminatory taxation.” 1973 U.S.C.C.A.N. at 1446.

Congress has long premised the development of a vibrant air

transportation system on, inter alia, preventing discrimination.

See, e.g., 49 U.S.C. § 1302(c) (adopting as a central policy, the

promotion of service by air carriers “without unjust

discrimination, undue preferences or advantages”); 49 U.S.C.

§ 40101(a)(4). With deregulation, it became even more

important to prevent state discrimination between air

transportation providers because that would distort the market

Congress is relying on to ensure the development of an efficient,

and responsive air transportation system. See 49 U.S.C.

§ 40101(a)(6). Congress’ express goals with respect to air

transportation recognize that the public interest is furthered by

“avoiding unreasonable industry concentration” and “excessive

market domination” by any one or group of air transportation

providers, and by “encouraging entry into air transportation

markets by new and existing air carriers and the continued

strengthening of small air carriers to ensure a more effective and

competitive airline industry.” § 40101(a)(10), (13).

State and local taxes, as Congress noted when it chose to

preempt them, pose significant threats to these goals. Hawaii’s

tax already provides an example. Hawaii has imposed its

“attributed to ground activity” gross receipts tax on petitioner

and on UPS. Hawaii has not, however, imposed this tax on any

airline even though several airlines, such as United and Delta,

provide identical services -- including door-to-door pickup and

delivery, sorting and handling of air freight and packages at a

ground facility, administration, and marketing. R.A. 186-87,

197-200, 207-08. Regardless of whether Hawaii chooses to

maintain this distinction in the future, the fact is that it -- and

every other state and local jurisdiction -- can do so, and can

impose differential taxation in many other ways as well. State

and local tax schemes, as Congress explained, threaten “undue

or discriminatory taxation.” Undue and discriminatory taxation

slovwy the development of air transportation and encourage

inefficient investment and usage. Taxes like Hawaii’s favor

certain providers over others, promote industry concentration,

and interfere with new entry -- undermining Congress’ express

goals with respect to preemption and the development of air

transportation generally.

Another concern that prompted Congress to preempt state

and local taxes is that a proliferation of taxes would directly

affect the cost of air transportation and that this added cost

could make air transportation “uneconomical” for some

potential customers “and thus inhibit the growth of the air

transportation system.” 1973 U.S.C.C.A.N. at 1451. Hawaii’s

imposition of the tax on a significant “portion” of gross receipts

from the sale of air transportation, rather than on all of the gross

receipts, provides no protection against the negative impact on

air transportation that Congress determined to avoid. The basis

on which the court below upheld Hawaii’s tax could be a basis

for every state and every locality with an airport to impose taxes

on substantial portions of the gross receipts collected from the

sale of air transportation. Very quickly, such taxes could place

air freight and air packages out of the reach of many customers.

If applied to passenger services as well, such taxes could have

the same effect on air travel.

In fact, by simply increasing their tax rates, state and

local jurisdictions could raise the cost of air transportation as

much by taxing a portion of such gross receipts as by taxing all

of them at a lower tax rate. For example, consider a state that

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wished to collect revenues of four percent of the gross receipts

from the sale of air transportation, but was permitted to collect

tax only on the gross receipts attributed to ground activities. If

the percentage of gross receipts that can be attributed to ground

activities is 25 percent, the state could nonetheless collect the

total revenues it desires by raising its tax rate on those gross

receipts to 16 percent.’

Congress also objected to any tax by any jurisdiction on the

sale of air transportation that was not being used for airport

development. Congress found it “inequitable” that a state or

local jurisdiction might impose a tax “to gain financial

windfalls,” i.e., raise revenues for the jurisdiction’s “general

fund.” 1973 U.S.C.C.AN. at 1446 (objecting to a Philadelphia

tax for that reason). The tax upheld below is precisely the type

of tax Congress found unacceptable: a tax on the sale of air

transportation to fill the state’s general coffers.

Thus, the decision below contravenes Congress’ statutory

provision and its express goals, with respect to air

transportation generally and state and local taxation specifically.

The tax it upheld undermines Congress’ express goals with

respect to preemption, competition, and the efficient

development of a responsive air transportation industry,

including expedited, integrated air cargo services, presenting the

very evils Congress acted to prevent. No useful purpose is

served by awaiting the “predictable” proliferation of other state

"7 e. assuming the total gross receipts from the sale of air transportation

in the state is $100 million, 4% of the entire $100 million generates the same

tax revenues as 16% of the $25 million of receipts attributed to ground

activities -- $4 million. Some limitation on a state or local jurisdiction’s power

is imposed by the equal protection clause, but it is well-settled that states enjoy

a considerable degree of latitude in making tax classifications. See, e.g.,

Lehnhausen v. Lake Shore Auto Parts Co., 410 U.S. 356, 359 (1973).

and local taxes, with the attendant damage they will cause,

before deciding the question squarely and cleanly presented by

the decision below. To the contrary, reviewing the decision

below will permit the Court to clarify the scope of Congress’

preemption provision and the scope of this Court’s

interpretation of that provision in Aloha Airlines in a significant

factual context, relevant not only to Hawaii but to hundreds of

state and local jurisdictions.

Il. THIS COURT SHOULD GRANT CERTIORARI TO

RESOLVE A LONGSTANDING CONFLICT OVER

THE SCOPE OF THE STATUTORY DEFINITION

OF INTERSTATE AIR TRANSPORTATION.

The court below interpreted the statutory definition of

“interstate air transportation” to include only carriage by

— aircraft, based on the initial part of the provision explaining that

“interstate air transportation’ means the transportation of

passengers or property by aircraft... .” 49 USC.

§ 40102(a)(25). At least one other court, and arguably more,

appear to have reached a similar conclusion with respect to the

meaning of the statutory definition of “interstate air

transportation.” See, e.g., Salem Trans. Co., 611 F. Supp. at

"The preemption provision before the court prohibits states and localities

from imposing a tax on the sale of “air transportation” or on the gross receipts

from such sales. 49 U.S.C. § 40116(b), see also 49 U.S.C. § 1513(a). “Air

transportation” is defined as “foreign air transportation, interstate air

transportation, or the transportation of mail by aircraft.” 49 U.S.C.

§ 40102(a\(S), see also 49 U.S.C. § 1301(10). Thus, the statutory definition

of “interstate air transportation” affects the scope of the preemption provision.

The court below relied on its reading of that statutory definition to conclude

that a gross receipts tax on the sale of air cargo transportation was not

precluded to the extent those receipts could be attributed to activities that took

place on the ground.

257: but see also City and County of Denver v. Continental Air

Lines, Inc., 712 F. Supp. 834 (D. Colo. 1989); Airline Car

Rental, Inc. v. Shreveport Airport Auth., 667 F. Supp. 293

(W.D. La. 1986).

In contrast, two federal courts of appeal have relied on

language that appears later in the statutory definition to

conclude that the scope of “interstate air transportation” is

much broader. That language adds: “when any part of the

transportation is by aircraft.” 49 U.S.C. § 40102(a)(25)

(emphasis added). The United States Court of Appeals for the

D.C. Circuit was the first court to interpret the substantively

identical predecessor provision, and undertook a detailed

analysis of its text and layout.'* The court concluded that the

later phrase modified “carriage by aircraft” such that

commercial transportation, any part of which was by aircraft, is

included in the definition of “interstate air transportation.” See,

e.g., City of Philadelphia v. C.A.B., 289 F.2d 770, 773-74

(D.C. Cir. 1961). The Tenth Circuit reached the same

conclusion. See Hill v. National Trans. Safety Bd., 886 F.2d

1275, 1280 n.6 (10th Cir. 1989) (noting that “goods, persons,

or mail traveling ‘partly by aircraft and partly by other forms of

transportation’ are within the scope of interstate, overseas, or

foreign air commerce or air transportation, see 49 U.S.C.

§ 1301”)."°

“The equivalent language in the earlier statute was: “whether such

commerce moves wholly by aircraft or partly by aircraft and partly by other

forms of transportation.” 49 U.S.C. § 1301(21).

'SSee also Federal Express Corp., 936 F.2d at 1079 n.1 (Singleton,

dissenting) (interpreting the statutory definition of air transportation “to

include goods carried in part by aircraft and in part by trucks” and relying on

that definition to conclude, contrary to the majority, that Congress did not

further preempt state regulation of goods carried exclusively by truck).

Furthermore, because the same language is used in the

statutory definitions of “interstate air commerce,” “foreign air

transportation,” and “foreign air commerce,” the same

interpretative issue also arises in cases where one of these

parallel definitions is at issue. See 49 U.S.C. § 40102(a)(22),

(23), (24); Hill v. National Transportation Safety Board, 886

F.2d at 1280 n.6. Thus, for example, a federal district court in

Seattle interpreted “foreign air commerce” -- consistently with

City of Philadelphia but inconsistently with the decision below

-- as “including commerce which moves wholly by aircraft or

partly by aircraft and partly by other forms of transportation

from any place outside the United States to a place in the

United States.” United States v. Petrykievicz, 809 F. Supp. 794,

799 (W.D. Wash. 1992).'°

The decision below squarely presents the question whether

Congress’ statutory definition of “interstate air transportation”

includes both air and land segments of a continuous, integrated

transportation service from origin to destination, or whether

that definition includes only that portion of the transportation

moved by aircraft.—That same interpretive question also

controis the scope of the statutory definitions of “interstate air

commerce,” “foreign air transportation,” and “foreign air

commerce.” The conflicting interpretations reached by different

courts is inconsistent with Congress’ goal of a uniform, national

'°The Department of Transportation also appears to view the term “air

transportation” as including any transportation part of which is by air, contrary

to the decision below. Thus, the agency explains that its regulations with

respect to foreign air carners apply to “all air transportation of property that

includes both air movement by a direct foreign air carrier and surface

transportation to or from any point within the United States.” 14 C.F.R.

§ 222.1 (emphasis added).

Pe ee ee ee Oe ee

policy with respect to air transportation.

This Court’s review is needed to resolve the conflict, which

affects a considerable range of state and federal responsibilities.

The cases cited above, for example, interpret these statutory

definitions not only in the context of tax preemption cases, but

also in a criminal case involving the carriage of explosives, a

challenge to a federal authorization to provide air

transportation, a challenge to state regulations imposed on air

cargo delivery trucks, and a challenge to a federal agency pilot

disciplinary decision. Many provisions rely on these statutory

definitions in defining the Department of Transportation’s

responsibilities and authority. See, e.g., 49 U.S.C. § 41712

(conferring authority on the Secretary of Transportation to

investigate and prevent unfair and deceptive practices and unfair

methods of competition in air transportation or the sale of air

transportation). Thus, the Court’s resolution of this question

would have a substantial legal and practical impact.