FROM SALES AND USE TAX AUDIT     )         Docket No. 2001-165


EXCISE DIVISION OF THE                    )











Ryan M. Tew, Senior Counsel and Secretary for Powder River Coal Company, (Petitioner).


William F. Russell, Assistant Attorney General, for the Department of Revenue (Department).




This matter was considered on legal briefs and a joint stipulation of facts by the State Board of Equalization (Board) consisting of Chairman Edmund J. Schmidt, Vice-Chairman Roberta A. Coates and Board Member Sylvia Lee Hackl. This appeal arises from a decision of the Department assessing Petitioner on underpayment of sales tax resulting from an audit for the period of February 1, 1996 to January 1, 1999. The Department assessed additional excise taxes to Powder River Coal Company as a result of an audit in the amount of $476,550.33 on August 25, 2001. Petitioner paid $211,529.47 of the original assessment and filed a Notice of Appeal with the Board on September 24, 2001, contesting the remainder of the assessment. On October 17, 2001, the Board issued its order setting dates for filing of Preliminary Statements. The Preliminary Statements were filed and on February 20, 2002, the parties filed a Joint Stipulation and Joint Motion to assign the matter to an expedited docket. The parties agreed the amount in dispute was $39,384.40 for taxes assessed on the amount of Leaking Underground Storage Tank taxes (LUST tax), and $6,074.42 assessed for the other alleged errors. The Board then issued a Notice of Intent to assign the appeal to an expedited docket, and set the date for filing a stipulation of facts for April 1, 2002. On March 25, 2002, the parties filed a Joint Stipulation of Facts and Joint Waiver of Right to a Contested Case Hearing. In that stipulation, Petitioner agreed to drop its appeal of the $6,074.42, leaving the only issue the taxes assessed on the LUST tax. The Board then ordered legal briefs to be filed.




Upon application of any person adversely affected, the Board is mandated to review final Department actions concerning state excise taxes, and "[h]old hearings after due notice in the manner and form provided in the Wyoming Administrative Procedure Act (Wyo. Stat. §§16-3-101 through 16-3-115) and its own rules and regulations of practice and procedure." Wyo. Stat. §39-11-102.1(c)(viii).


The Board is required to "[d]ecide all questions that may arise with reference to the construction of any statute affecting the assessment, levy and collection of taxes, in accordance with the rules, regulations, orders and instructions prescribed by the department." Wyo. Stat. §39-11-102.1(c)(iv). The rules of practice and procedure for appeals before the Board involving tax matters contemplate appeals from final administrative decisions of the Department. Rules, Chapter 2, § 3, Wyoming State Board of Equalization. The rules require appeals to be filed with the Board within thirty days of any final administrative decision. Rules, Chapter 2, § 5, Wyoming State Board of Equalization.





This is an appeal from an audit assessment by the Excise Tax Division of the Department. The assessment imposed sales tax on the amount of LUST taxes Petitioner paid when it purchased diesel fuel for use in the coal mines.


Petitioner contends that LUST tax is not subject to sales tax under Wyoming law.


The Department contends the LUST tax is not exempt from excise tax and is part of the sales price and thus subject to tax.


The Board finds that sales tax is not due on the LUST tax.





1.       The dispute arises as a result of an audit of Petitioner’s companies for the period February 1, 1996, through January 1, 1999. On August 25, 2001, the Department issued final assessments totaling four hundred seventy-six thousand five hundred fifty dollars and thirty-three cents ($476,550.33). On or about September 20, 2001, Petitioner remitted two hundred ninety-one thousand five hundred twenty-nine dollars and forty-seven cents ($291,529.47) and disputed the remaining one hundred eighty-five thousand twenty dollars and eight-six cents ($185,020.86). On December 21, 2001, the Department stipulated in its Preliminary Statement that, having resolved a majority of the issues, the amount remaining in dispute was forty-five thousand four hundred fifty-eight dollars and eighty-three cents ($45,458.83). Of that amount, thirty-nine thousand three hundred eighty-four dollars and forty-one cents ($39,384.41) related to LUST taxes. On February 20, 2002, Petitioner stipulated that it no longer wanted to pursue its appeal of Six Thousand Seventy-Four Dollars and Forty-Two Cents ($6,074.42). Therefore, the sole issue is whether the taxable value of diesel fuel for excise tax purposes does or does not properly include the amount charged for LUST taxes. [Joint Stipulation of Facts filed March 25, 2001].


2.       Petitioner purchased diesel fuel from Wyoming vendors and paid sales tax on the price charged for the diesel fuel. When Petitioner purchased the diesel fuel it paid an amount of one cent ($.01) per gallon for LUST tax pursuant to Wyoming Statute Section 39-17-204(b). Petitioner did not pay excise tax on the amount paid for the LUST taxes. [Joint Stipulation of Facts filed March 25, 2001].


3.       Petitioner filed its Notice of Appeal timely on September 24, 2001. [Joint Stipulation of Facts filed March 25, 2001].


4.       Any discussion above or Conclusion of Law below which includes a finding of fact may also be considered a Finding of Fact and is therefore incorporated herein by this reference.




5.       The letter of appeal by Petitioner was timely filed and the Board has jurisdiction to determine this matter. [Joint Stipulation of Facts filed March 25, 2001].


6.       The applicable rules provide in relevant part as follows:


          Chapter 2, § 20. Burden of Going Forward; Burden of Persuasion.


Except as specifically provided by law or in this section, the Petitioner shall have the burden of going forward and the ultimate burden of persuasion, which burden shall be met by a preponderance of the evidence. If Petitioner provides sufficient evidence to suggest the Department determination is incorrect, the burden shifts to the Department to defend its action. For all cases involving a claim for exemption, the Petitioner shall clearly establish the facts supporting an exemption. In proceedings involving the question of whether or not there is a taxable event under Wyoming law, the Petitioner shall have the burden of going forward and the Department shall have the ultimate burden of persuasion.


7.       The Petitioner has the burden of going forward and the Department has the ultimate burden of persuasion in this case.


8.       The applicable statute to determine if there is a taxable event is Wyoming Statute Section 39-15-103(a) Footnote

 All Statutory citations used in the Decision and Order reference Title 39, after recodificationwhich was effective March 6, 1998.

Close which provides in relevant part:



(a) Taxable event. The following shall apply:


(i)Except as provided by W.S. 39-15-105, there is levied an excise tax upon:


(A) The sales price of every retail sale of tangible personal property within the state;


9.       The legislature mandated the collection of a one-cent-per-gallon tax “on all diesel fuels” to fund a remediation program to clean up water pollution from underground storage tanks. See Wyo. Stat.§39-17-204(b) and Wyo. Stat. §35-11-1414 et seq. This one-cent tax is known as the LUST (“leaking underground storage tank”) tax.


10.     The dyed diesel fuel at issue in this case is subject to sales tax under Wyoming Statute Section 39-15-103(a), and the diesel fuels in this case are subject to the LUST tax under Wyoming Statute Section 39-17-204(b).


11.     Consumers are responsible for payment of the LUST tax whereas sellers (vendors) are responsible for collection and remittance of sales tax paid by the ultimate consumer. Wyoming Statute Section 39-17-203(c) imposes on the taxpayer the following responsibility:


(i) The taxes imposed on motor fuel shall be conclusively presumed to be a direct tax on the ultimate or retail consumer. When taxes are paid by any person other than the ultimate or retail consumer, the payment shall be considered as precollected and as an advance payment for the purpose of convenience and facility to the consumer, and shall thereafter be added to the price of the motor fuel and recovered from the ultimate or retail consumer, regardless of where or how the taxable fuel is ultimately consumed . . .


12.     That the one-cent-per-gallon LUST fee is indeed a tax can be ascertained from the plain language of Wyoming Statute Section 39-17-204(b) which specifies:


(b) In addition to the tax collected pursuant to subsection (a) of this section, there is levied and shall be collected a license tax of one cent ($.01) per gallon on all diesel fuel used, sold or distributed for sale or used in this state except for those fuels exempted in W.S. 39-17-205(b) . . .

(Emphasis added)


13.     According to the Department, Petitioner must pay sales tax on the LUST tax if the amount paid for the LUST tax is part of the sales price. The Department’s interpretation results in Petitioner paying a tax on a tax.


14.     “Sales price” is defined by Wyoming Statute Section 39-15-101(a)(viii) as:


[t]he consideration paid by the purchaser of tangible personal property excluding the actual trade-in value allowed on tangible personal property and manufacturer rebates for motor vehicles exchanged at the time of transaction, admissions or services which are subject to taxation as provided by this article and excluding any taxes imposed by the federal government or this article . . .


15.     The Department’s Rules define “consideration” as “recompense or payment which includes anything of value to the parties to a sale. Consideration is not limited to cash. Assumption of debt is a form of consideration.” Rules, Chapter 2, Section 3(e), Department of Revenue.


16.     The consideration is the amount the purchaser paid. Allied-Signal v. Board of Equalization, 813 P.2d 214, 220 (Wyo. 1991). However, this analysis needs to be extended to the amount the purchaser paid the vendor. The State of Wyoming, not the vendor, receives the LUST tax. The purchaser has the responsibility to pay the LUST tax, as opposed to sales and use tax where the vendor has the ultimate responsibility to pay the excise tax. Under the sales and use tax statutes the vendor is assigned the responsibility to collect the taxes and should the vendor fail to collect the taxes, the vendor must pay the sales and use tax anyway. The LUST tax is a direct tax on the ultimate consumer. Wyo. Stat. §39-17-203(b)(ii) and Wyo. Stat. §39-17-203(c)(i).


17.     The payment of the LUST tax by the purchaser does not extinguish a debt of the vendor; if it did, the payment of the tax would be consideration and thereby taxable. The LUST tax is a direct tax on the ultimate or retail consumer. Wyo. Stat. §39-17-203(b)(ii). The LUST tax is not a debt of the vendor: LUST tax is a debt of the purchaser to the State of Wyoming. Thus the LUST tax is not consideration to the vendor and is not taxable for sales tax purposes.


18.     The LUST tax is not a part of the consideration between the parties to a sale. The LUST tax is a separate payment owed by the purchaser to the State of Wyoming and, therefore, it is not part of the sales price.


19.     We are persuaded by the reasoning in Ross Jewelers v. State, 72 So.2d 402 (Alabama 1953), which held that federal retail excise tax should not be added to the price of articles in computing Alabama sales tax. Likewise, Standard Oil Co. of Indiana v. State Tax Commissioner of the State of North Dakota, 299 N.W. 2d 447 (1941) held that federal excise taxes upon sales of gasoline collected by the seller from the buyer for payment to the federal government did not constitute part of the “sales price.” Wyoming’s LUST tax only attaches at the instant there is a consummation of the sale and, therefore, is not part of the sales price. For this reason, sales tax should not be charged against the amount of the LUST tax paid to the state.


20.     The Department’s own rule convinces us the Petitioner has met its burden of going forward and its burden of persuasion that the LUST tax is not part of the sales price and therefore not taxable. Now we must decide if the Department has met its ultimate burden of persuasion.


21.     The Department argues the maxim of “expressio unius est exclusio alterius,” which means the expression of one thing is the exclusion of others, applies in interpreting the statutes to make LUST tax taxable. The Department argues that because Wyoming Statute Section 39-15-101(a)(vii) specifically excludes “taxes imposed by the federal government or this article,” LUST taxes are not specifically excluded and are thereby taxable. This argument, based solely upon a principle of statutory construction, is not adequate for the Department to carry its burden, particularly in light of the established rule that taxation statutes are to be strictly construed in favor of the taxpayer. Chevron U.S.A. Inc. v. State, 918 P.2d 980, 984 (Wyo. 1996).


22.     The Wyoming Supreme Court has long held that statutes concerning the same topic are to be construed together, that is, in pari materia. Gerstell v. Dept. of Revenue & Taxation, 789 P.2d 389, 394 (Wyo. 1989), Wyoming Dept. of Revenue & Taxation - Excise Tax Division v. First Wyoming Bank, N.A. Kemmerer, 718 P.2d 31, 34 (Wyo. 1986). Reading the fuel tax statutes in conjunction with the sales tax statutes, it is clear that both articles deal with the imposition of taxes. It is also clear that the LUST tax is, indeed, a tax imposed upon each gallon of diesel fuel sold. As noted above, the LUST tax is neither part of the consideration paid for the fuel nor a component of the sales contract agreed to between the parties; the LUST tax is calculated on the basis of the number of gallons of fuel purchased, and then is paid to the State of Wyoming. To permit the Department to calculate the amount of sales tax due by adding the one-cent-per-gallon LUST tax to the fuel price would be tantamount to taxing a tax.


23.     While not technically “double taxation” as that term has been defined, see In the Matter of the Appeal of Montex Exploration Company from a Decision by the Department of Revenue, 1999 WL 796864 (August 30, 1999), citing Corthell v. Board of Comm’rs of Albany County , 44 Wyo. 71, 8 P.2d 812, 815 (Wyo. 1932), such “tax upon a tax” ought not be favored, see KN Energy, Inc. v. City of Casper, 755 P.2d 207, 211 (Wyo. 1988), and cannot be what the legislature intended.


The Wyoming Supreme Court held: “Another general policy is recognized to avoid double taxation. ‘Although double taxation is not protected by the United States Constitution, double taxation is not favored, and all questions concerning a conflict between a municipality and state relating to taxation is resolved against dual taxation.’ 16 E. McQuillin, Municipal Corporations, supra, §44.23 at 82. (Footnotes omitted).” KN Energy, Inc. v. City of Casper, 755 P.2d 207, 211 (Wyo. 1988).


24.     This is different than double taxation because the Department is asking to tax a tax. In double taxation the same taxing entity, the State of Wyoming, places a tax on the same item for the same purposes, for the same taxing period. In this situation the Department wants to pyramid a tax on a tax. The requested procedure is similar to double taxation. The presumption should be against this taxation, and the statutes must be construed to permit it only where the legislative intent to do so is clear.


25.     The Department has not carried its burden of persuading us that the legislature intended such a result, and therefore, the Department’s efforts to impose tax upon the amount Petitioner paid in LUST taxes must be reversed.


26.     We believe the maxim of “noscitur a sociis” is the correct theory to interpret the intent of the legislature. This maxim means the words are known by its associates and the words are given meaning by those around them. The legislature excluded other taxes from sales and use tax. We believe the legislature intended to exclude LUST tax from taxation as it did other taxes. The legislature intended to prohibit charging a tax on a tax. Therefore, the Petitioner should not pay sales tax on the LUST tax.




          IT IS THEREFORE HEREBY ORDERED: The Assessment by the Department of tax in the amount of Thirty-Nine Thousand Three Hundred Eight Four Dollars and Forty-One Cents ($39,384.41) is hereby reversed.


Pursuant to Wyoming Statute Section 16-3-114 and Rule 12, Wyoming Rules of Appellate Procedure, any person aggrieved or adversely affected in fact by this decision may seek judicial review in the appropriate district court by filing a petition for review within 30 days of the date of this decision.


Dated this 8th day of November, 2002.




Edmund J. Schmidt, Chairman


Roberta A. Coates, Vice Chairman


Sylvia Lee Hackl, Member



Wendy Soto, Executive Secretary