Motor Vehicle Use Tax is Constitutional

Regency Transportation, Inc. v. Commissioner of Revenue

MA Supreme Judicial Court No. SJC-11873 (January 6, 2016) 

The Massachusetts Supreme Judicial Court has held that the motor vehicle use tax imposed on Regency Transportation, Inc.'s interstate fleet of vehicles did not violate the commerce clause of the United States Constitution. 

Regency operated a freight business and maintained its corporate headquarters in Massachusetts.  It had terminals, warehouses and maintenance facilities in Massachusetts and New Jersey.  Regency purchased vehicles from vendors in states that either had no sales tax or exempted vehicles engaged in interstate commerce from sales or use tax.  The vehicles were registered in New Jersey which had an exemption.  Massachusetts does not exempt vehicles engaged in interstate commerce from sales or use tax. 

Regency did not dispute that it used and stored its tractors and trailers in Massachusetts during the tax periods at issue, nor did it dispute that it did not pay sales or use tax to any other state on the purchase of the vehicles. 

The Commissioner of Revenue assessed a use tax on the full purchase price of each tractor and trailer in Regency's fleet relying on a rebuttable presumption that property brought into Massachusetts by a purchaser within six months of purchase was purchased for storage, use, or other consumption in Massachusetts.  G. L. c. 64I, § 8(f).   

Applying the four-prong test set forth in Complete Auto Transit, Inc. v. Brady, 430 U.S. 274 (1977), the Supreme Judicial Court determined that the motor vehicle use tax did not violate the commerce clause. 

The parties agreed that Regency’s activities in Massachusetts constituted a “substantial nexus” with the state, satisfying the first prong.

Next, the Court determined that the tax was fairly apportioned in that it was both internally and externally consistent.  For purposes of internal consistency, the Court was satisfied that any potential for multiple taxation was averted by the language of the statute and applicable regulation, which provided for a credit for taxes paid to other jurisdictions.  There were ample facts in the record to support a finding that Regency's tax liability reasonably reflected its in-state activity being taxed and thus was externally consistent. 

For the third prong of the Complete Auto test, Regency argued that the use tax, when divided by the miles actually driven by Regency vehicles in Massachusetts, was significantly greater for Regency than for other intrastate companies.  The Supreme Judicial Court rejected this argument pointing out that the use tax is not a tax on the use of the Commonwealth's roads, but rather on the privilege of using and storing the tractors and trailers in Massachusetts.    

Finally, the tax was fairly related to the services provided by the state.  Regency was incorporated and headquartered in Massachusetts.  The majority of its workforce was employed here.  It also used, stored, and maintained its vehicles in Massachusetts.  Given the nature and extent of Regency's activities in the Commonwealth, and the benefits it received based upon its presence here, the Court concluded that the tax was fairly related to Regency's activities in Massachusetts.