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The following opinion is presented on-line for informational use only and does not replace the official version. (Mich Dept of Attorney General Web Site - www.ag.state.mi.us)



Opinion No. 6331

January 2, 1986


US Const, art I, Sec. 8

US Const, Am XIV

Const 1963, art 1, Sec. 2

Const 1963, art 9, Sec. 3


Diesel Fuel Tax--discount for licensed commercial vehicles only as denial of equal protection of the laws or of uniformity of taxation

MCL 207.122; MSA 7.316(2), which provides a $.06 per gallon discount on the purchase or use of diesel fuel for licensed commercial motor vehicles only, does not violate the Equal Protection Clause of US Const, Am XIV, the Commerce Clause of US Const, art I, Sec. 8, the Equal Protection Clause of Const 1963, art 1, Sec. 2, or the Uniformity Clause of Const 1963, art 9, Sec. 3.

Honorable Harry A. DeMaso

State Senator

The Capitol

Lansing, Michigan 48909

You have requested my opinion on the following question:

Does the motor fuel tax act discriminate against private passenger car owners by levying a tax of $.15 per gallon for diesel fuel used in passenger cars while permitting motor carriers a $.06 per gallon discount on diesel fuel upon the purchase and display of a license?

The motor fuel tax act, MCL 207.122; MSA 7.316(2), imposes a specific tax upon the sale or use of diesel motor fuel in this state. Subsection (2) of MCL 207.122; MSA 7.316(2), provides that motor carriers licensed under the provisions of the Motor Carrier Fuel Tax Act, MCL 207.211 et seq; MSA 7.340(1) et seq, shall be entitled to a discount of $.06 per gallon from the tax imposed on diesel fuel purchases.

The Motor Carrier Fuel Tax Act, MCL 207.215; MSA 7.340(5), requires a person acting as a motor carrier in this state to be the holder of an unrevoked license issued by the Department of Treasury. Upon display of the license on the commercial motor vehicle, the purchaser is entitled to a discount from the seller of diesel fuel of $.06 per gallon from the diesel fuel tax. MCL 207.122; MSA 7.316(2).

The practical effect of the motor fuel tax act, therefore, is to separately classify diesel fuel passenger vehicle owners and levy a tax $.06 per gallon greater than that imposed upon motor carriers licensed under MCL 207.215; MSA 7.340(5). You inquire whether this disparity between rates constitutes illegal discrimination.

The power to tax is exclusively legislative. US v New Orleans, 98 US 381, 392; 25 L Ed 225 (1879); Spencer v Merchant, 125 US 345; 8 S Ct 921; 31 L Ed 763 (1888). The power to tax has been characterized as the strongest, most pervading of all the powers of government. Loan Association v Topeka, 87 US (20 Wall) 655; 22 L Ed 455 (1875). In Michigan, the power to tax is subject only to constitutional limitations. Harsha v Detroit, 261 Mich 586, 591; 246 NW 849 (1933). Accord: Saia Motor Freight Lines, Inc v Agerton, 275 So 2d 393 (La, 1973); Salt Lake City v Christensen, 34 Utah 38; 95 P 523 (1908). Four years after Harsha, in Hudson Motor Car Co v Detroit, 282 Mich 69, 79; 275 NW 770, 774 (1937), the court reiterated this axiom more forcefully:

'The power of the Legislature of this State is as omnipotent as that of the Parliament of England, save only as it is restrained by the Constitution of the United States and the Constitution of this State.' Citing Cooley, Constitutional Limitations, (8th ed), p 354.

Recently, the Michigan Supreme Court ruled in a case involving the corporate franchise tax that there is no discernible difference between the Equal Protection Clause of the Federal Constitution and the Equal Protection and Uniformity Clauses of the Michigan Constitution (US Const, Am XIV; Const 1963, art 1, Sec. 2, and art 9, Sec. 3). Accordingly, the rights provided under the Michigan Constitution are coextensive with those provided under the United States Constitution. Armco Steel Corp v Department of Treasury, 419 Mich 582, 591; 358 NW2d 839 (1984). Accord: Commonwealth v Life Assurance Co of Pennsylvania, 419 Pa 370; 214 A2d 209 (1965), (should be read in pari materia). In light of this decision, the historical treatment of taxing measures will be addressed from the federal perspective with appropriate reference to Michigan and other case authority.

The early position of the Court was that US Const, Am XIV, had no application to state revenue legislation. In Davidson v Board of Administrators of New Orleans, 96 US 97, 106; 24 L Ed 616, 620 (1878), Miller, J., writing for the Court, observed:

'[W]e have no provision in the Federal Constitution . . . which forbids unequal taxation by the States.'

The advent of some measure of protection came, however, twelve years later in the landmark decision of Bell's Gap Railroad Co v Pennsylvania, 134 US 232, 237; 10 S Ct 533, 535; 33 L Ed 892, 895 (1890). There, the Court observed that US Const, Am 14, was not intended to compel the states to adopt an iron rule of taxation. Clear and hostile discriminations against particular persons and classes, especially those that were of an unusual character, however, might be obnoxious to the constitutional prohibition. As such, the Court saw fit to pass on the cases on an ad hoc basis. For almost 50 years, Bell's Gap stood alone as the definitive case in this area of constitutional law:

'In almost the same degree as Chief Justice Marshall's more famous opinions, it [Bell's Gap] has been regarded as the authoritative interpretation of the constitution on the matter covered.' Sholley, 'Equal Protection in Tax Legislation', 24 Va L Rev 229, 232 (1938).

With this case standing in relief, it is now appropriate to trace the development of the legislative authority to classify and tax.

Classification of property for tax purposes is defined as putting property of a certain nature into one class and other property into a different class and then taxing them differently by prescribing a different tax rate as to each. Metal Form Corp v Leachman, 599 SW2d 922, 927 (Mo banc, 1980).

In Carmichael v Southern Coal & Coke Co, 301 US 495, 509; 57 S Ct 868, 872; 81 L Ed 1245, 1253 (1937), the Court had occasion to comment upon a taxing system that classified the subjects of an unemployment tax disparately:

'This Court has repeatedly held that inequalities which result from a singling out of one particular class for taxation or exemption infringe no constitutional limitation. Magoun v. Illinois Trust & Savings Bank, 170 U.S. 283, 293; American Sugar Refining Co. v. Louisiana, 179 U.S. 89, 94; Armour Packing Co. v. Lacy, 200 U.S. 226, 235; Brown-Forman Co. v. Kentucky, 217 U.S. 563, 573, Quong Wing v. Kirkendall, 223 U.S. 59, 62, 63; Armour & Co. v. Virginia, 246 U.S. 1, 6, Alaska Fish Co. v. Smith, 255 U.S. 44, 48, State Board of Tax Comm'rs v. Jackson, 283 U.S. 527, 537; Broad River Power Co. v. Query, 288 U.S. 178, 180; Fox v. Standard Oil Co., 294 U.S. 87, 97; Cincinnati Soap Co. v. United States, ante, p. 308; Great Atlantic & Pacific Tea Co. v. Grosjean, ante, p. 412.'

The Court added the caveat that the Legislature may make such classifications as long as there was a rational basis to support same. Accord: The Michigan Telephone Tax Cases, 185 F 634 (CC WD MI, 1911), aff'd sub nom, Citizen's Telephone Co v Fuller, 229 US 322; 33 S Ct 833; 57 L Ed 1206 (1913); Avis Rent-a-Car System, Inc v City of Romulus, 65 Mich App 119; 237 NW2d 209, aff'd, 400 Mich 337; 254 NW2d 555 (1977), (reasonable basis for a classification); State v Standard Oil Co, 61 OR 438; 123 P 40 (1912). In an earlier case, the Court noted that for purposes of US Const, Am XIV, a classification is not arbitrary and invalid if it is 'based upon some reasonable ground,--some difference which bears a just and proper relation to the attempted classification.' Connolly v Union Sewer Pipe Co, 184 US 540, 560; 22 S Ct 431, 440; 46 L Ed 679, 690 (1902).

When challenged, the statutory classifications must be presumed to rest on that reasonable basis if there is any conceivable state of facts which would support it. Fitzpatrick v Liquor Control Commission, 316 Mich 83, 94, 96; 25 NW2d 118, 122 (1946); Lane Construction Corp v Comptroller of Treasury, 228 Md 90; 178 A2d 904 (1962), (any imaginable factual basis); White Packing Co v Robertson, 89 F2d 775 (CA 4, 1937), (any conceivable state of facts); Switz v Kingsley, 37 NJ 566; 182 A2d 841 (1962), (any set of facts which reasonably can be conceived).

It has also been held that the state legislature is not required to state the grounds that are employed in making a classification. Haden v Watson, 270 Ala 277; 117 So 2d 694 (1960); Smith v Columbia County, 216 OR 662; 341 P2d 540 (1959).

In Madden v Kentucky, 309 US 83; 60 S Ct 406; 84 L Ed 590 (1940), the Court delineated the burden of proof in a case involving a constitutional challenge to a state tax classification. The presumption of constitutionality is overcome only by the most explicit showing that the classification is a hostile and oppressive discrimination against particular persons and classes. Lindsley v Natural Carbonic Gas, 220 US 61, 78-79; 31 S Ct 337, 340-341; 55 L Ed 369, 377 (1911), (essentially arbitrary); Walgreen Co v Gross Income Tax Division, 225 Ind 418; 75 NE2d 784 (1947), (palpably arbitrary); Burrows v Board of Assessors, 64 NY 2d 33; 473 NE2d 748 (1984), (palpably arbitrary).

In Lehnhausen v Lake Shore Auto Parts Co, 410 US 356, 359; 93 S Ct 1001; 35 L Ed 2d 351 (1973), reh den, 411 US 910; 93 S Ct 1523; 36 L Ed 2d 200 (1973), Douglas, J. added modern nomenclature by labeling the forbidden legislative action as 'invidious discrimination.' Williams v Vermont, 472 US ----; 105 S Ct 2465; 86 L Ed 2d 11 (1985).

Regarding its role, the Court noted in State Board of Tax Commissioners v Jackson, 283 US 527, 537, 538; 51 S Ct 540, 543; 75 L Ed 1248, 1256 (1931), that:

'It is not the function of this court in cases like the present to consider the propriety or justness of the tax, to seek for the motives or to criticize the public policy which prompted the adoption of the legislation.'

The Court observed that it must sustain the classification if there were substantial differences between the occupations separately classified. The Court went on to hold, however, that:

'Such differences need not be great. The past decisions of [this] court make this abundantly clear.' 283 US at 538.

In New York Rapid Transit Corp v City of New York, 303 US 573, 582; 58 S Ct 721, 726; 82 L Ed 1024, 1032 (1938), the Court stated flatly that 'the legislature is not required to make meticulous adjustments in an effort to avoid incidental hardships.' The Michigan Court of Appeals reiterated this concept in American Amusement Co, Inc v Department of Treasury, 91 Mich App 573, 577; 283 NW2d 803, 805 (1979), app dis, 446 US 931; 100 S Ct 2145; 64 L Ed 2d 783 (1980), by noting:

"[The Legislature] is not required to resort to close distinctions or to maintain a precise, scientific uniformity with reference to composition, use or value." Citing Lehnhausen, 410 US at 359-360.

Finally, harshness alone does not render a tax unconstitutional. C.F. Smith Co v Fitzgerald, 270 Mich 659, 671; 259 NW 352 (1935); Stockler v State Department of Treasury, 75 Mich App 640; 255 NW2d 718 (1977), lv den, 402 Mich 802 (1977).

Because each taxing statute must be assessed individually according to the subject matter of the tax and the aggrieved parties, whether there has been a proper classification in relation to the affected parties is the talisman of constitutionality.

In Alexander v Detroit, 392 Mich 30, 35-36; 219 NW2d 41, 43 (1974), Chief Justice T. M. Kavanaugh is credited with synthesizing the available authorities and laying down a two-prong test to determine whether a proper classification was enacted:

'(1) Are the enactment's classifications based on natural distinguishing characteristics and do they bear a reasonable relationship to the object of the legislation? Fox v Employment Security Commission, 379 Mich 579, 588; 153 NW2d 644, 647 (1967); Beauty Built Construction Corp v City of Warren, 375 Mich 229, 235; 134 NW2d 214, 218 (1965); Palmer Park Theatre Co v Highland Park, 362 Mich 326, 346; 106 NW2d 845, 855-856 (1961).

'(2) Are all persons of the same class included and affected alike or are immunities or privileges extended to an arbitrary or unreasonable class while denied to others of like kind? Fox v Employment Securities Commission, 379 Mich 579, 589; 153 NW2d 644, 647-648 (1967); Beauty Built Construction Corp v City or Warren, 375 Mich 229, 236; 134 NW2d 214, 218 (1965); Palmer Park Theatre Co v Highland Park, 362 Mich 326, 347-348; 106 NW2d 845, 855-856 (1961).'

Research reveals no Michigan appellate authority that has considered your precise question. It is useful, however, to survey analogous areas of the tax law and cases where legislative bases for classification have survived Equal Protection and Commerce Clause scrutiny.

In Ohio Oil Co v Conway, 281 US 146; 50 S Ct 310; 74 L Ed 775 (1930), petitioners leveled an Equal Protection challenge at a Louisiana statute taxing the extraction of petroleum products based on Baumè gravity. For the higher gravities, a correspondingly higher tax was levied. (1) The tax was upheld as not palpably arbitrary since all oils of the same gravity were treated alike.

Another permissible classification obtains from the case of Lake Shore Coach Lines, Inc v Secretary of State, 327 Mich 146; 41 NW2d 503 (1950). There, the court was called upon to determine whether a tax classification that charged diesel operated vehicles under municipal franchise $.01 per gallon less than similarly situated operators of nonmunicipal diesel vehicles was constitutional. In the face of Equal Protection, Commerce Clause, and Uniformity Clause (US Const, Am XIV; US Const, art I, Sec. 8; Const 1908, art 10, Sec. 4) attacks, the court sustained the classification. The court cited the fact that in all probability the holders of the municipal franchises use a large portion of their diesel fuel on the streets of the municipality, the repair and upkeep of which the state highway fund contributed very little.

Other bases for state statutory classifications which have imposed disparate taxes and been upheld include: fuel, Rocky Mountain Lines v Cochran, 140 Neb 378; 299 NW 596 (1941); 17 ALR2d 421, 448; mileage, Columbus & G Ry Co v Miller, 283 US 96; 51 S Ct 392; 75 L Ed 861 (1931); population, Opinion of the Justices, 249 Ala 511; 31 So2d 721 (1947); horsepower, Fisher Brothers v Brown, 111 Ohio 602; 146 NE 100 (1924); and weight, Carter v State Tax Commission, 98 Utah 96; 96 P2d 727 (1939); 126 ALR 1402 (r'vd on other grounds).

Not surprisingly, when the closer question of discrimination between trucks and passenger vehicles was at issue in the leading case of State v Black Hills Transportation Co, 71 SD 28, 34; 20 NW2d 683 (1945), reh den, 1946, the court did not hesitate in upholding the disparate treatment. In Black Hills, the court had before it a challenge to graduated licensing fees imposed by the State of South Dakota. Vehicles were classified into one of eight categories that exacted a fee from $15 up to $325 per year. Appellants were a bus line that paid the maximum licensing fee. Commenting upon differing licensing fees imposed upon each class of vehicle, the court reasoned:

'It is obvious that trucks and passenger cars may be differently classified and need not be treated alike for license or privilege tax purposes.' Black Hills Transportation Co, 20 NW2d 685.

In finding a reasonable basis for the distinction, the court focused on the differences between the ordinary uses to which each class of vehicles is put. Richmond Baking v Department of Treasury, 215 Ind 110; 18 NW2d 778 (1939); State v Zimmerman, 181 Wis 552; 196 NW 848 (1924), (tax on passenger carrying vehicles and trucks vis-a-vis ordinary automobiles).

In Park v City of Duluth, 134 Minn 296, 301; 159 NW 627, 629 (1916), the court had before it a challenge under Minn Const, art 9, Sec. 1, to a tax system which exacted a toll for the use of the public roads. The ordinance taxed trucks at a flat rate of $10.00. Passenger vehicles, on the other hand, were assessed $.50 per horsepower. At this latter rate, even the smallest engined passenger vehicles paid well over the $10.00 truck fee. The court had no trouble sustaining the tax, however, noting that:

'Business trucks and ordinary automobiles are unlike in their use. The use of the latter over greater area, and during a larger portion of the day, and with greater speed, might well appeal to the council as justifying a higher tax.'

The most recent example of such a challenge on Equal Protection grounds is found in Motor Club of Iowa v Department of Transportation, 265 NW2d 151 (Iowa, 1978). There, the court had before it a petition for a declaration that the motor vehicle registration code which classifies trucks and passenger vehicles differently is unconstitutional. I.C.A., Sec. 321.109. Again, the court sustained the classification reasoning that:

'The uses to which they [cars/trucks] ordinarily are put are different. . . . The difference in function justifies, although it does not require, a different classification for tax purposes.' Motor Club of Iowa, 265 NW2d 155.

To date, the reported appellate decisions that have considered the question of the legislative prerogative to classify trucks differently from passenger vehicles, for taxing purposes, have sustained the classification.

Because heavy trucks (over 26,000 gvw) account for approximately 98% of large truck diesel fuel use, that class of vehicles will be singled out for purposes of comparison and discussion. It is noted that the average mpg for this class of vehicles in 1977 was 4.88. Roberts and Green, Trends in Heavy Truck Energy Use and Efficiency, (ORNL 1981) p 6.

According to U.S. Department of Energy statistics, the average EPA miles-per-gallon (mpg) for diesel and gasoline burning domestically manufactured passenger vehicles for the year 1983 was 27.40. In contrast, the average EPA mpg for diesel burning motor carriers (over 26,000 gvw), the primary beneficiaries of the $.06 discount under MCL 207.122; MSA 7.316(2), is 5.91 (2). As such, diesel passenger vehicles burn an average of .036 gallons for each highway mile travelled, while diesel motor vehicle carriers burn an average of .169 gallons. Accordingly, diesel passenger vehicles pay a tax of $.54 to travel 100 miles. Diesel motor carriers would pay an average of $2.54 for each 100 miles. Taking into account the $.06 per gallon discount, they pay an average of $1.52.

When measured against the above delineation of law, such a classification is not a clear, hostile and oppressive discrimination against diesel powered passenger vehicles. Moreover, there does exist a 'conceivable state of facts' rationally underpinning the legislative classification.

Therefore, the Legislature might have reasonably reached this conclusion on the basis of differences between diesel burning motor carriers and passenger vehicles. What is important is the existence of differences that reasonably distinguish the two classes. In light of the foregoing discussion, it is clear that any attack upon MCL 207.122; MSA 7.316(2), under the Equal Protection Clauses, the Commerce Clause, or the Uniformity Clause would not be successful.

It is my opinion, therefore, that MCL 207.122; MSA 7.316(2), which grants a $.06 per gallon discount on diesel fuel used to operate certain trucks, is constitutional.

Frank J. Kelley

Attorney General

(1) '(7) a. On oil of 28 gravity and below, four (4) cents per barrel of 42 gallons.

'b. (1) On oil above 28 gravity and not above 31 gravity, four and one-fourth (4 1/4) cents per barrel of 42 gallons.

'b. (2) On oil above 31 gravity and not above 32 gravity, five (5) cents per barrel of 42 gallons.

'c. On oil above 32 gravity and not above 36 gravity, eight (8) cents per barrel of 42 gallons.

'd. On oil above 36 gravity and not above 43 gravity, ten (10) cents per barrel of 42 gallons.

'e. On oil above 43 gravity, eleven (11) cents per barrel of 42 gallons.' 281 US at 152-153, fn 2.

(2) The Highway Fuel Consumption Model Sixth Quarterly Report, January 30, 1982.


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