Hostar Marine Transport Systems, Inc. v. United States

United States Court of Appeals
For the First Circuit

No. 08-2535

HOSTAR MARINE TRANSPORT SYSTEMS, INC.,

Plaintiff, Appellant,

v.

UNITED STATES,
DEPARTMENT OF INTERNAL REVENUE SERVICE,

Defendant, Appellee.

APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS

[Hon. Douglas P. Woodlock, U.S. District Judge]

Before

Lynch, Chief Judge,
Torruella and Howard, Circuit Judges.

Timothy J. Burke, with whom Burke & Associates, was on brief
for appellant.
Bridget M. Rowan, Attorney, Tax Division, Department of
Justice, with whom John A. DiCicco, Acting Assistant Attorney
General, Kenneth L. Greene, Attorney, Tax Division, and of counsel
Michael K. Loucks, United States Attorney, were on brief for
appellee.

January 7, 2010
 TORRUELLA, Circuit Judge. This is an appeal from a

denial of a tax refund. The taxpayer, Hostar Marine Transportation

Systems, Inc. ("Hostar"), a manufacturer of hydraulic boat

trailers, seeks a refund of federal excise taxes in the amount of

$2,861.30 plus interest. The United States counterclaimed for

$195,773 plus interest on Hostar's as yet unpaid taxes.

The United States District Court for the District of

Massachusetts granted the United States' (1) motion to dismiss

Hostar's claim to have suffered a violation of due process,

(2) motion for summary judgment on Hostar's claim that it was

erroneously assessed the taxes, and (3) motion for summary judgment

on the United States' counterclaim. On appeal, Hostar challenges

each of the district court's rulings. After careful consideration,

we affirm those rulings.

I. Background

We outline the statutes, facts, and procedural history

relevant to the issues on appeal in this case.1 The issues on

appeal are whether Hostar's hydraulic boat trailers (1) qualify as

"semitrailers" or "truck trailers" for purposes of section 4051 of

the Internal Revenue Code ("I.R.C."); (2) qualify for the exclusion

1
For more information, see the decisions below: Hostar Marine
Transp. Sys., Inc. v. United States (Hostar I), No. 05-10111-DPW,
2005 U.S. Dist. LEXIS 10938 (D. Mass. May 26, 2005); Hostar Marine
Transp. Sys., Inc. v. United States (Hostar II), No. 06-10834-DPW,
2008 U.S. Dist. LEXIS 43800 (D. Mass. June 3, 2008); Hostar Marine
Transp. Sys., Inc. v. United States (Hostar III), No. 06-10834-DPW,
2008 U.S. Dist. LEXIS 82671 (D. Mass. Oct. 16, 2008).

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provided in section 4051(a)(3) of the I.R.C. concerning gross

vehicle weight ("GVW"); and (3) qualify for the exception provided

in 26 C.F.R. § 48.4061(a)-1(d)(2)(ii) concerning "[c]ertain

vehicles specially designed for offhighway transportation."

A. Statutes: I.R.C. § 4051 and 26 C.F.R. § 48.4061(a)-1

1. I.R.C. § 4051

Section 4051(a) of the I.R.C., concerning the imposition

of tax on heavy trucks and trailers sold at retail, imposes "on the

first retail sale . . . a tax of 12 percent of the amount for which

the [applicable truck trailer and semitrailer chassis and bodies

are] so sold." I.R.C. §§ 4051(a)(1)(C)-(D). One district court

has described the general purpose of this excise tax as follows:

to ensure that those entities which enjoy the
use of the public roads pay for their upkeep.
To put it differently, the tax forces those
entities that cause the most damage to the
public roads, and often benefit economically
the most from them, to pay for the
consequences of their use.

Worldwide Equip. v. United States, 546 F. Supp. 2d 459, 468 (E.D.

Ky. 2008).

2. Exclusion Concerning Gross Vehicle Weight

Section 4051 of the I.R.C. lists exclusions from this

tax. The exclusion at issue on appeal in this case is the

following: "The tax . . . shall not apply to truck trailer and

semitrailer chassis and bodies, suitable for use with a trailer or

semitrailer which has a [GVW] of 26,000 pounds or less (as

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determined under regulations prescribed by the Secretary [of the

Treasury])." I.R.C. § 4051(a)(3).

The GVW is defined in the Treasury Regulations.

According to these regulations:

For purposes of this section[,] the term
"gross vehicle weight" means the maximum total
weight of a loaded vehicle. Except as
otherwise provided . . ., such maximum total
weight shall be the [GVW] rating of the
article as specified by the manufacturer or
established by the seller of the completed
article, unless the [IRS] Commissioner finds
that such rating is unreasonable in light of
the facts and circumstances in a particular
case.

26 C.F.R. § 145.4051-1(e)(3).

3. Exception Concerning Offhighway Transportation

Beyond the explicit exclusions section 4051 of the I.R.C.

itself lists, the Treasury Regulations include certain limits and

exceptions to this excise tax. The exception at issue on appeal in

this case applies to "[c]ertain vehicles specially designed for

offhighway transportation." 26 C.F.R. § 48.4061(a)-1(d)(2)(ii).

That exception requires that the vehicle meet two criteria. The

vehicle must satisfy a design test, in that it must be "specially

designed for the primary function of transporting a particular type

of load other than over the public highway in connection with a

construction, manufacturing, processing, farming, mining, drilling,

timbering, or operation similar to any one of the foregoing

enumerated operations . . . ." Id. To qualify for the exception

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to this excise tax, the vehicle must also satisfy a use test, in

that, "by reason of such special design, the use of such vehicle to

transport such load over the public highways is substantially

limited or substantially impaired." Id.

B. Facts

Hostar reports that it manufactures four models of

hydraulic boat trailers (HPT, HST, HSTY, and HHT), three of which

(HPT, HST, and HHT) are capable of on-road use and one of which

(HSTY) is not.

1. Hostar's Competitors

Hostar states that it has competitors in the United

States and Canada that also manufacture hydraulic boat trailers.

Hostar alleges, however, that it is the only such manufacturer

whose trailers have been determined by the IRS not to qualify for

exemption pursuant to Treasury Regulations §§ 48.4061(a)-1(d)(2)(i)

and 48.4061(a)-1(d)(2)(ii). This alleged disparate treatment is

central to Hostar's claim to have suffered a violation of due

process.

2. Purpose of Hostar's Trailers

Hostar describes the purposes of hydraulic boat trailers

as being "to launch and retrieve boats from the water, to move

boats into and out of repair facilities and paint booths, to move

them about the boat yard, yacht club, marina or boat leadership,

and to set boats on keel blocking and boat stands for winter

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storage." Hostar claims that "[t]he main function or purpose of a

hydraulic trailer is not that of highway transporting." Rather,

Hostar asserts, "[t]he primary function of Hostar's Hydraulic Boat

Trailers is for use in boat yards and rarely on the highway due to

the cost and highly specialized nature of the equipment." Hostar

has provided affidavits from its customers that Hostar claims

"establish that Hostar's trailers are used in boatyards and rarely

on the highway."

3. Design of Hostar's Trailers

Hostar states that hydraulic boat trailers are

constructed with "stub axles," which attach a single wheel to the

trailer, as opposed to "through axles," which are more common,

attach two wheels to the trailer, and are used on highway transport

trailers. Hostar asserts that the design of the stub axle, which

features an "open-center," "enables the operations of ramp

launching, retrieving[,] and setting a boat on the ground, in a

repair facility or in a storage building" but renders these types

of axles vulnerable to "extraordinary wear and tear on the

highway."

Hostar reports that it does not build "lowboy" trailers.

Hostar states that almost all transporting of boats on highways is

accomplished on such trailers. In contrast to hydraulic boat

trailers, "lowboy" trailers have "through axles" (instead of "stub

axles"), a full bed or cross beams (as opposed to an open center

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design), no hydraulic components, are not submersible, and are

similar to trailers used for moving construction equipment.

4. Gross Vehicle Weight of Hostar's Trailers

At the time of sale (between 1994 and 1996), according to

Hostar's own documentation (through both the Vehicle Identification

Numbers and the Certificates of Origin), each of Hostar's fourteen

trailers at issue in this case had a GVW exceeding 26,000 pounds.

The trailers' GVWs thus precluded the exclusion from the tax

assessed pursuant to section 4051(a) of the I.R.C. at issue on

appeal in this case. See supra Part I(A)(2). On November 18,

1998, an unknown entity revised all of the Certificates of Origin

for these fourteen trailers to reflect lower GVWs. Eight of the

trailers then reflected GVWs below 26,000 pounds and the remaining

six reflected GVWs still in excess of 26,000 pounds.

C. Procedural History

1. IRS Assessment

Between January 7, 1994 and December 31, 1996, Hostar

sold the fourteen trailers at issue in this case. Between

April 1997 and October 1997, an IRS revenue agent audited Hostar.

On or about May 18, 2000, pursuant to section 4051(a) of the

I.R.C., the IRS assessed excise taxes against Hostar with respect

to the sale of the fourteen boat trailers and notified Hostar such

payments were due. See Hostar I, 2005 U.S. Dist. LEXIS 10938, at

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*2. In January and June 2001, the I.R.S. applied overpayment

credits to Hostar's tax assessments totaling $271.11. Id. at *3.

2. Hostar I

Hostar declined to pay the tax assessed against any of

its hydraulic boat trailers before submitting its first complaint

in this matter. On May 26, 2005, the U.S. District Court for the

District of Massachusetts granted the United States' motion to

dismiss (1) Hostar's request for a refund of $271.11 plus interest

and a declaration that the twelve percent excise tax assessed

against it pursuant to 26 U.S.C. § 4051(a) is exempted by I.R.S.

regulations and (2) Hostar's request for abatement of the tax

because of an alleged violation of due process. Id. at *1. The

district court determined that it had no jurisdiction over the

question of whether an excise tax was due until after Hostar paid

the tax. Id. at *4-5. The district court noted jurisdiction would

be conferred on the court if Hostar paid tax on a minimum of one

trailer for one quarter. Id. at *5 n.1. The district court

further determined that Hostar's allegation of suffering a

violation of due process was equally unavailing because Hostar had

named the wrong defendant and insufficiently pled a Bivens action.

Id. at *9-12. Finally, the district court noted that its decision

to grant the United States' motion to dismiss was further bolstered

by the fact that Hostar exceeded the statute of limitation in

filing its complaint. Id. at *15-16.

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 3. Hostar's 2005 Complaint

Hostar did not appeal the district court's decision in

Hostar I. Rather, on or about April 26, 2005, Hostar paid the IRS

the tax assessed on the sale of one boat trailer and filed a claim

for a refund of the paid sum. See Hostar II, 2008 U.S. Dist. LEXIS

43800, at *4.

On May 9, 2006, Hostar filed in the U.S. District Court

for the District of Massachusetts a complaint against the United

States. Asserting its rights under 26 U.S.C. § 7422(a) (providing

for civil actions for refunds concerning, inter alia, "internal

revenue tax alleged to have been erroneously or illegally assessed

or collected"), Hostar claimed that it had been erroneously

assessed the excise tax pursuant to section 4051(a) of the I.R.C.2

Hostar alleged two counts. In Count I, Hostar claimed that the tax

assessment was erroneous because, pursuant to Treasury Regulations

§§ 48.4061(a)-1(d)(2)(i) and 48.4061(a)-1(d)(2)(ii), its hydraulic

boat trailers were exempted from the tax. In Count II, Hostar

claimed that it suffered a violation of due process because the

United States, in an unjustifiable and discriminatory violation of

its duty of consistency, assessed the tax only against Hostar

despite knowing that some of Hostar's competitors in the United

2
Hostar's complaint stated that the portion of the I.R.C.
pursuant to which it has been assessed excise tax is "4061(a)." It
is clear from the complaint and Hostar's brief on appeal, however,
that Hostar meant to write "4051(a)." Section 4061 of the I.R.C.
was repealed in 1984.

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States and Canada also manufacture hydraulic boat trailers. Hostar

requested judgment against the United States in the amount of

$2,861.30 plus statutory interest and an abatement of the

assessment against it.

4. The Government's 2006 Answer and Counterclaim

By June 20, 2006, Hostar had still not paid the

outstanding tax the IRS assessed on Hostar's hydraulic boat

trailers in 2000. Including interest and penalties, the United

States calculated that Hostar then owed $122,664.76.

On July 17, 2006, the United States filed its answer,

which the United States amended on July 31, 2006 to include a

counterclaim. The United States demanded judgment dismissing

Hostar's action and granting to the United States its costs. The

United States stated that, despite the notices and demands it sent

Hostar, Hostar had refused or neglected to pay in full excise taxes

on its sale of hydraulic boat trailers assessed in 2000 for tax

periods between 1994 and 1996. The United States thus asserted a

counterclaim against Hostar demanding judgment in favor of the

United States in the amount of $195,773.71 plus interest and other

statutory additions accruing from and after June 26, 2006.

Contrary to the single trailer on which Hostar paid an excise tax

and for which it claimed a refund, the United States ultimately

asserted that fourteen trailers were at issue in this case.

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 5. The Government's 2007 Motion to Dismiss and
Hostar II

On May 18, 2007, the United States filed a motion to

dismiss, with prejudice, Count II of Hostar's complaint, concerning

the violation of due process Hostar alleged it suffered. The

United States provided three grounds for its requested dismissal.

First, the United States claimed that Hostar was precluded by

collateral estoppel from relitigating this issue because the same

cause of action was dismissed in a previous action between Hostar

and the United States. Hostar II, 2008 U.S. Dist. LEXIS 43800, at

*5; see also Hostar I, 2005 U.S. Dist. LEXIS 10938, at *16.

Second, the United States claimed that the district court lacked

jurisdiction over Count II because the United States had not waived

its sovereign immunity. Third, the United States claimed that

Hostar's allegation that it was entitled to relief from this tax

because other taxpayers had not paid their taxes failed to state a

claim as a matter of law, pursuant to Fed. R. Civ. P. 12(b)(6). On

June 3, 2008, the district court, concluding that Hostar had failed

to state a due process claim upon which relief can be granted,

dismissed Count II of Hostar's complaint. Hostar II, 2008 U.S.

Dist. LEXIS 43800, at *17. The district court noted that, unlike

in Hostar I, the court had jurisdiction in Hostar II because Hostar

had paid the tax assessed on one trailer. Id. at *5-6.

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 6. The Government's 2008 Motion for Summary
Judgment and Hostar III

On June 30, 2008, the United States filed a motion for

summary judgment on both Count I of Hostar's complaint, concerning

the tax Hostar alleged it was erroneously assessed, and also on the

United States' counterclaim. On October 16, 2008, the district

court, concluding that Hostar "failed to show that the IRS

wrongfully or incorrectly assessed the excise tax on Hostar boat

trailers for the period of March 31, 1994 to December 31, 1996,"

granted the United States' motion for summary judgment on both

Count I of Hostar's claim and also on the United States'

counterclaim. Hostar III, 2008 U.S. Dist. LEXIS 82671, at *23-24.

The following day the clerk entered judgment in favor of the United

States for $223,554.32 with post-judgment interest.

On December 2, 2008, Hostar timely filed a notice of

appeal to this court concerning the district court's final

judgments from June 3 (concerning dismissal) and October 17, 2008

(concerning summary judgment).

II. Discussion

A. Standard / Scope of Review

Our standard / scope of review is the same -- de novo --

for all issues on appeal in this case:

We review de novo the district court's grant
of a motion to dismiss under Fed. R. Civ. P.
12(b)(6), accepting as true all well-pleaded
facts in the complaint and drawing all
reasonable inferences in the plaintiffs'

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 favor. To survive a motion to dismiss, a
complaint must contain sufficient factual
matter, accepted as true, to state a claim to
relief that is plausible on its face.

We also review de novo the district court's
grant of summary judgment, drawing all
reasonable inferences in favor of the non-
moving party while ignoring conclusory
allegations, improbable inferences, and
unsupported speculation. For review of both
summary judgment and dismissal under Rule
12(b)(6), we may affirm on any basis apparent
in the record.

Sutliffe v. Epping Sch. Dist., 584 F.3d 314, 325 (1st Cir. 2009)

(internal citations and quotation marks omitted).

In tax refund suits, assessments by the IRS Commissioner

have "the support of a presumption of correctness." Welch v.

Helvering, 290 U.S. 111, 115 (1933). Thus, "taxpayers bear the

burden of proving that a tax deficiency assessment is erroneous."

Delaney v. Comm'r, 99 F.3d 20, 23 (1st Cir. 1996). We are also

mindful of "the principle that exemptions from taxation are to be

construed narrowly." Bingler v. Johnson, 394 U.S. 741, 751-52

(1969).

B. Solvency

Hostar contends that it is undisputed that Hostar would

go out of business if subjected to the excise tax. The United

States responds that, because only a relatively narrow subset of

Hostar's trailers is subject to excise taxes under section 4501 of

the I.R.C., Hostar's contention is "improper and belied by the

record." Hostar has offered no factual support for its contention,

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nor has it identified any case law that holds that the effect an

excise tax would have on a taxpayer should factor into whether the

taxpayer is subjected to the excise tax. We therefore consider

this issue waived. United States v. Bongiorno, 106 F.3d 1027, 1034

(1st Cir. 1997) ("We have steadfastly deemed waived issues raised

on appeal in a perfunctory manner, not accompanied by developed

argumentation.").

C. Hostar's Due Process Claim Based on Purported
"Disparate Treatment"

Hostar argues that the IRS has treated differently two

groups: Canadian manufacturers who are competitors and American

competitors. Hostar asserts that there is a general principle that

"the [IRS] has a duty to act consistently and cannot treat

similarly situated taxpayers disparately." See Int'l Bus. Machs.

Corp. v. United States (IBM), 343 F.2d 914 (Ct. Cl. 1965) and Sirbo

Holdings, Inc. v. Comm'r (Sirbo I), 476 F.2d 981 (2d Cir. 1973).

In other words, Hostar contends, "the United States is required to

treat all of the taxpayers in the same manner." Because similarly

situated manufacturers of boat trailers were not subject to the

section 4051 tax, Hostar argues that the district court erred when

it dismissed Hostar's claim that the United States improperly

discriminated against it in assessing the tax against Hostar.

When describing "similarly situated" manufacturers,

Hostar identifies both Canadian and domestic competitors that it

claims were not subjected to the disputed tax. As to Canadian

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competitors, we do not accept any argument that domestic and

foreign corporations are "similarly situated" and so there can be

no claims of discrimination in violation of the Due Process Clause.

As to American competitors, Hostar argues only arbitrary treatment,

purportedly in violation of the Due Process Clause. As support for

this argument, Hostar cites language from the Court of Claims'

decision in IBM and from Justice Frankfurter's concurrence in

United States v. Kaiser. See IBM, 343 F.2d at 920 ("Equality of

treatment is so dominant in our understanding of justice that

discretion, where it is allowed a role, must pay the strictest

heed."); United States v. Kaiser, 363 U.S. 299, 308 (1960)

(Frankfurter, J., concurring) ("The [IRS] Commissioner cannot tax

one and not tax another without some rational basis for the

difference. And so, assuming the correctness of the principle of

'equality,' it can be an independent ground of decision that the

Commissioner has been inconsistent, without much concern for

whether we should hold as an original matter that the position the

Commissioner now seeks to sustain is wrong."). We address that

claim. Hostar also cites two Tax Court memoranda to bolster its

claim, even though it acknowledges that these memoranda apply to

limitations on the IRS Commissioner's discretion in offering

settlement terms to taxpayers, not to the IRS Commissioner's

assessment of taxes. See Elghanian v. Comm'r, T.C. Memo. 2005-37,

2005 Tax Ct. Memo LEXIS 34, at *27-28 (U.S. Tax Ct. 2005) ("Tax

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laws must be applied as uniformly as possible. However, the [IRS]

Commissioner is not required to offer a settlement to one taxpayer

consistent with that offered to other similarly situated taxpayers,

absent proof that a taxpayer has been singled out for adverse

treatment based on impermissible considerations such as race or

religion, and absent contractual agreements to the contrary."

(internal citation omitted)); Stewart v. Comm'r, T.C. Memo. 2005-

212, 2005 Tax Ct. Memo LEXIS 212, at *8-9 (U.S. Tax Ct. 2005) ("Our

responsibility as a Court is to apply the law to the facts of the

case before us; how the Commissioner treated other taxpayers is

generally irrelevant in making that determination, absent proof

that a taxpayer has been singled out for adverse treatment based on

impermissible considerations such as race, religion, or other

arbitrary classification, and absent contractual agreements to the

contrary . . . ." (internal citations omitted)).

It has been said, as Hostar asserts, that the IRS has a

duty to act consistently toward similarly situated taxpayers.

Sirbo I, 476 F.2d at 987 ("[T]he Commissioner [of the IRS] has a

duty of consistency toward similarly situated taxpayers . . . .");

Bunce v. United States, 28 Fed. Cl. 500, 508 (1993) (observing that

the IRS has a "duty to treat similarly situated taxpayers

consistently").

However, even "accepting as true all well-pleaded facts"

in Hostar's complaint and "drawing all reasonable inferences in"

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Hostar's favor, Hostar's claimed suffering of a violation of due

process does not withstand our de novo review. The goal of

treating similarly situated taxpayers consistently is general, not

strict. The Tax Court's statement that tax laws must be applied as

uniformly "as possible" indicates that the tax laws do not need to

be strictly applied uniformly. Contrary to Hostar's assertion, the

courts, including the Second Circuit, the Tax Court, the Court of

Claims, and the Court of Federal Claims, have not, in fact,

prohibited the IRS from treating similarly situated taxpayers

disparately. We agree with these courts' reasoning, as described

below.

The Second Circuit declared as far back as 1975 that,

"[w]hile even-handed treatment should be the [IRS] Commissioner's

goal, perfection in the administration of such vast

responsibilities cannot be expected." Sirbo Holdings, Inc. v.

Comm'r (Sirbo II), 509 F.2d 1220, 1222 (2d Cir. 1975) (internal

citation omitted).

The Tax Court similarly declared around the same time

that:

It has long been the position of this Court
that our responsibility is to apply the law to
the facts of the case before us and determine
the tax liability of the parties before us;
how the Commissioner may have treated other
taxpayers has generally been considered
irrelevant in making that determination.

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Davis v. Comm'r, 65 T.C. 1014, 1022 (1976). Four years later, the

Tax Court noted this "well-established position of this Court,"

while observing that there could be exceptions: "It is conceivable,

however, that there may be situations where a taxpayer should be

accorded some relief if he were selected for audit on a

constitutionally impermissible criterion although such situations

are extremely rare." Penn-Field Indus., Inc. v. Comm'r, 74 T.C.

720, 722 (1980).

The Court of Claims also has determined that, despite the

likelihood that the IRS had taxed similarly situated individuals

differently, "[d]isparate treatment, however, is not a valid basis

for a tax refund. A failure of the IRS to assess deficiencies

against some taxpayers does not preclude an assessment against

other taxpayers." Ray v. United States, 25 Cl. Ct. 535, 541

(1992).

Finally, the Court of Federal Claims likewise has ruled

that:

The mere fact that another taxpayer has been
treated differently from the plaintiff does
not establish the plaintiff's entitlement.
The fact that all taxpayers or all areas of
the tax law cannot be dealt with by the
Internal Revenue Service with equal vigor and
that there thus may be some taxpayers who
avoid paying the tax cannot serve to release
all other taxpayers from the obligation. The
Commissioner's failure to assess deficiencies
against some taxpayers who owe additional tax
does not preclude the Commissioner from
assessing deficiencies against other taxpayers
who admittedly owe additional taxes on the

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 same type of income. A taxpayer cannot
premise its right to an exemption by showing
that others have been treated more generously,
leniently or even erroneously by the IRS. The
fact that there may be some taxpayers who have
avoided paying a tax does not relieve other
similarly situated taxpayers from paying their
taxes.

City of Galveston, Texas v. United States, 33 Fed. Cl. 685, 707-08

(1995).

Moreover, Hostar's reliance on IBM is misplaced. The IBM

ruling has been limited by subsequent courts to cases involving

private rulings, which were at issue in IBM but not in the instant

case. We agree with the Eleventh Circuit, for example, which

recognized that "courts have placed limits on the equality

principle" in cases similar to IBM, citing the example that

"taxpayers who have not requested or received private letter

rulings from the IRS will not succeed on a claim of discriminatory

treatment because other taxpayers have received private letter

rulings on the tax consequences of the same activities." Baker v.

United States, 748 F.2d 1465, 1469 n.9 (11th Cir. 1984).

Despite the goal of consistency in treatment, the IRS is

not prohibited from treating such taxpayers disparately. Rather

than being a strict, definitive requirement, the principle of

achieving parity in taxing similarly situated taxpayers is merely

aspirational. Dicta in a concurring Supreme Court opinion from

five decades ago, Kaiser, 363 U.S. at 308, which itself seemed to

hedge its position (by using the conditional language of "assuming"

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a principle to be true), is not sufficient to overcome this view.

Moreover, we believe that the IRS has good reason to retain this

flexibility. As the district court noted:

There are practical considerations which
counsel in favor of limiting litigation
regarding the general duty of consistency in
the enforcement of taxes. A broadly
enforceable duty could give rise to
distracting disputes not over whether a tax is
applicable, but rather over the management of
an administrative and enforcement agency.
Moreover, there is the prospect for
competitive mischief if, as here, a tax refund
plaintiff seeks broad discovery, on the
grounds of a disparate enforcement theory,
regarding its competitor's financial and
commercial information both from the IRS and
from a third party with whom it competes.

Hostar II, 2008 U.S. Dist. LEXIS 43800, at *16.

Hostar has not overcome what we find to be the IRS's

prerogative to tax it but not its competitors. Thus, we affirm the

district court's grant of the United States' motion to dismiss

Hostar's claim to have suffered a violation of due process.

D. Hostar's Erroneous Assessment Claim

Having established that the IRS's alleged differential

tax treatment of Hostar and its American competitors did not

constitute discrimination in violation of the Due Process Clause,

we now apply the law to the facts of the case before us to

determine whether the tax was properly assessed against Hostar. We

conclude that the tax was properly assessed against Hostar because

Hostar's hydraulic boat trailers (1) do qualify as "semitrailers"

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or "truck trailers" for purposes of section 4051 of the I.R.C.;

(2) do not qualify for the exclusion provided in section 4051(a)(3)

of the I.R.C. concerning GVW; and (3) do not qualify for the

exception provided in 26 C.F.R. § 48.4061(a)-1(d)(2)(ii) concerning

"[c]ertain vehicles specially designed for offhighway

transportation." Accordingly, we affirm the district court's grant

of the United States' motion for summary judgment on Hostar's

claimed exemption from the section 4051 tax excised and the

district court's grant of the United States' motion for summary

judgment on the United States' counterclaim.

1. I.R.C. § 4051 - Definitions of "Semitrailer"
and "Truck trailer"

Noting that the drafters of the I.R.C. could have but did

not define the terms "semitrailer" and "truck trailer," Hostar

argues that the district court erred in finding as a matter of law

that Hostar's boat trailers are semitrailers and truck trailers for

the purposes of section 4051 of the I.R.C.

In construing the terms of a statute, we accord the text

its plain and ordinary meaning. See In Re Pharm. Indus. Average

Wholesale Price Litig., 582 F.3d 156, 168 (1st Cir. 2009). Where

a phrase is not defined in a statute itself, we can look to the

dictionary for clarification of the plain meaning of the words.

Taing v. Napolitano, 567 F.3d 19, 25 (1st Cir. 2009).

"Semitrailer" is defined as "a freight trailer that when attached

is supported at its forward end by the fifth wheel device of the

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truck tractor,"3 and "truck trailer" is defined as "a nonautomotive

freight vehicle to be drawn by a motortruck." Webster's Third New

International Dictionary Unabridged 2065, 2454 (2002).4 We agree

with the district court's observation that "Hostar's trailers

attach to a motor vehicle and carry boats, which are a type of

freight." Hostar III, 2008 U.S. Dist. LEXIS 82671, at *10. As can

be seen in photographs found in the record, Hostar's boat trailers

are semitrailers because they are supported at their forward end by

the truck tractor. Hostar's citation to a Wikipedia entry on

"semitrailer," which does not list boat trailers, is not

inconsistent because the entry's illustrations are merely examples

and not exhaustive. Like the district court, we therefore find

that Hostar's hydraulic boat trailers are "semitrailers" and "truck

trailers" for the purposes of section 4051 of the I.R.C.

3
According to a deposition on October 31, 2007, from Dwight
Stimson, III, a Hostar executive, the "fifth wheel" here does not,
in fact, refer to a fifth wheel but rather the connection point on
the tow vehicle.
4
The same dictionary defines "trailer" as, most relevant to the
sense used in this case, "a nonautomotive highway or industrial-
plant vehicle designed to be hauled (as by a tractor, motortruck,
or passenger automobile)." Webster's Third New International
Dictionary Unabridged 2424. That dictionary also defines
"automotive" as "containing within itself the means of propulsion"
or "of, relating to, or concerned with vehicles or machines that
propel themselves (as automobiles, trucks, airplanes, motorboats)."
Id. at 148.

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 2. I.R.C. § 4051(a)(3) - Exclusion for Gross
Vehicle Weight

An unknown entity amended the recorded GVWs of the

fourteen trailers after Hostar sold the trailers and the IRS

conducted its audit of them. The district court found that there

was no demonstration of "a genuine issue of fact for trial as to

whether the trailers at issue were exempt from taxation" where

Hostar presented the revised GVW measurements for the majority of

its hydraulic boat trailers at issue in this case. Id. at *23.

On appeal, Hostar argues that "the District Court's

conclusion was unreasonable and improper fact finding in light of

the substantial facts which were in evidence which are contrary to

those found by the Court." Specifically, Hostar contends that the

district court erred not only in considering the fact that the

United States "could find nothing wrong with the second series of

[GVW] calculations" but also by choosing to ignore Hostar's "clear

statements."

Although we find no error with the amended GVWs, the

original GVW records still stand, meaning that none of Hostar's

fourteen hydraulic boat trailers at issue in this case are excluded

from the excise tax imposed by section 4051 of the I.R.C. As

discussed below, according to the Treasury Regulations, the

inconsistent records of the GVWs must be resolved in favor of the

original, higher weight, as specified by Hostar itself.

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 First, the Treasury Regulations provide that the GVW is

"specified by" Hostar, the "manufacturer or . . . seller of the"

hydraulic boat trailers at issue in this case, "unless the [IRS]

Commissioner finds that such rating is unreasonable in light of the

facts and circumstances in a particular case." See 26 C.F.R.

§ 145.4051-1(e)(3)(i). Second, the Treasury Regulations provide

that inconsistencies in GVW measurements should be resolved in

favor of the highest weight. Id. § 145.4051-1(e)(3)(iv) (Where

there are inconsistencies in GVW ratings, "the highest of such

ratings will be considered to be the seller's [GVW] rating

specified or established for purposes of the tax imposed by section

4051(a)(1)."); see also Merhow Indus. v. United States, 517 F.

Supp. 1221, 1227-28 (N.D. Ind. 1981).

We thus conclude that between the two sets of GVW ratings

-- the higher one from the time of the sale and the lower one from

after both the sale and the IRS audit -- the former set is properly

considered to be the GVWs at issue in this case.

3. 26 C.F.R. § 48.4061(a)-1(d)(2)(ii) -
Exception for "Certain vehicles specially
designed for offhighway transportation"

Hostar argues that the district court erred when it

concluded "that Hostar has failed to demonstrate a genuine issue of

fact as to whether its boat trailers qualify for the off-highway

transportation exception to the excise tax." Hostar III, 2008 U.S.

Dist. LEXIS 82671, at *20. Hostar maintains that its hydraulic

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boat trailers qualify under both parts of this exception,

concerning (a) special design and (b) substantially limited /

impaired use.

a. Special Design

Hostar's hydraulic boat trailers are not, as the Treasury

Regulations require to qualify for the off-highway transportation

exception, "specially designed for the primary function of

transporting a particular type of load other than over the public

highway in connection with a construction, manufacturing,

processing, farming, mining, drilling, timbering, or operation

similar to any one of the foregoing enumerated operations." See 26

C.F.R. § 48.4061(a)-1(d)(2)(ii).

We find that, as another circuit court has held, "[t]he

test for taxability under [§ 4051(a)(1)] is primary design, not

primary use . . . . Indeed a use test would be unworkable since

there would be no way of knowing how a given article would be used

by the consumer at the time of sale." Dillon Ranch Supply v.

United States, 652 F.2d 873, 881 (9th Cir. 1981). Accordingly, in

considering this prong of the off-highway transportation exception,

we must evaluate the design of Hostar's hydraulic boat trailers;

their use is irrelevant.

Hostar's trailers do exhibit some special design

features, but those features either are irrelevant to their on-

versus off-highway function or else support their on-highway

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function. Among other things, the trailers contain open-center

frames, hydraulic components, and stub axles. We find no evidence

in the record that the trailers are fitted with these special

design features because of the roads on which they are carried,

whether they are on- or off-highway, and not simply because of the

trailers' particular cargo, boats. Other features found on the

trailers emphatically point towards their special design for on-

highway transportation. For example, Hostar designed its hydraulic

boat trailers to be compliant with U.S. Department of

Transportation (DOT) regulations for highway use. According to the

2007 Stimson deposition, Hostar intentionally manufactured the

trailers at issue in this case to feature DOT-required braking

systems (brakes on all wheels), lighting systems (red stop tail and

turn lights at the rear of the frame as well as amber clearance

lights on the side of the frame), tires (radial tires capable of

being used on a highway), tire ratings, and wheel coverings (that

protect debris from flying up and damaging a boat bottom). The

trailers, despite their weights and loads, also can travel at

normal highway speeds.

Furthermore, there is evidence that Hostar's trailers are

designed for transporting boats on public highways, even if the

trailers can also transport boats on private roadways. Hostar's

own promotional literature, the significance of which Hostar

unpersuasively attempts to limit by calling it "puffing," describes

-26-
its hydraulic boat trailers as on/off-highway vehicles. For

example, one such brochure is entitled "Hostar Hydraulic Trailers

for Highway and Yard" and lists "Haulers" as the first type of

intended operation. The brochure goes on to note that Hostar's HPT

Series of trailers is "known for its highway tracking ability";

that its HST Series of trailers is "for . . . highway . . .

transporting"; and that its HHT Series of trailers are "highway

trailers for road tractors . . . [and the f]irst choice of

professional haulers." The brochure specifies that only one type

of Hostar trailer, the HSTY Series, is "for yard use only," and it

is that series of Hostar trailers that was not subject to excise

taxes pursuant to section 4051(a) of the I.R.C.

In addition to Hostar's advertising materials, the

company's own invoices emphasize the ability of the trailers to

function outside boatyards. Invoices for thirteen of the fourteen

trailers at issue in this case indicate the trailers' weight

capacities "over the road" as distinct from "in the yard," and the

fourteenth invoice only notes the capacity "over the road."

Where other courts have considered similar dual use

vehicles, they have also found the vehicles not to qualify for the

special design component of this exception. See Worldwide Equip.,

546 F. Supp. 2d at 464 (concluding that a Mack Trucks, Inc. RD888SX

coal hauler does not satisfy the off-highway vehicle exception's

"special design" test because its "ability to transport coal over

-27-
public roadways is as important to its role in the coal industry as

its sturdier design features which make it better suited for work

in the Appalachian coal fields").

Hostar claims that affidavits from its customers

establish that Hostar's trailers are "rarely" used on the highway.

See supra Part I(A)(2)(b). However, the use of Hostar's trailers

is irrelevant to determining whether the trailers satisfy the

special design prong of the off-highway transportation exception.

In any case, our analysis of those customer affidavits refute

Hostar's claim. In the affidavits, owners of Hostar's hydraulic

boat trailers were asked, inter alia, what percentage "of trailer

use has been and is in off-highway work." One respondent replied

"10%," two replied "80%," one replied "85%," and one replied "98%."

With the majority of responses indicating that the percentage of

trailer use that has been and is in on-highway work is between

fifteen and ninety percent, we do not agree that the affidavits

support Hostar's contention. Rather, we find that the affidavits

suggest that a significant amount of trailer use by most owners of

Hostar trailers has been and is in on-highway work. But even if

the use of Hostar's trailers was not so clearly in significant part

for on-highway use, the design of Hostar's trailers would remain,

in part, for such use and would be the determining factor for

whether the "special design" test is met.

-28-
 We find no evidence that Hostar's hydraulic boat trailers

are specially and primarily designed for off-highway use. We thus

find that Hostar's hydraulic boat trailers are not "specially

designed for the primary function of transporting a particular type

of load other than over the public highway in connection with a

construction, manufacturing, processing, farming, mining, drilling,

timbering, or operation similar to any one of the foregoing

enumerated operations." We therefore do not need to reach the

question of whether Hostar's trailers transport boats "in

connection with" any of the enumerated or similar operations.

b. Substantially Limited / Impaired Use

To satisfy the "substantially limited or substantially

impaired" prong of the off-highway transportation exception, the

use of a vehicle to transport loads over the public highways must

be so limited or impaired by reason of its special design. See 26

C.F.R. § 48.4061(a)-1(d)(2)(ii). As we found that Hostar's

hydraulic boat trailers fail to satisfy the special design required

in the first prong of the exception, it therefore follows that the

trailers cannot be "substantially limited or substantially

impaired" "by reason of such special design." See also Worldwide

Equip., 546 F. Supp. 2d at 468.

III. Conclusion

We are not persuaded that Hostar has met its burden of

proving that the IRS Commissioner's presumptively correct

-29-
assessment of the excise tax pursuant to section 4051 of the I.R.C.

was wrong. For the reasons stated above, then, we affirm the

district court's grant of (1) the United States' motion to dismiss

Hostar's due process claim, (2) the United States' motion for

summary judgment on Hostar's claimed exemption from the tax excised

pursuant to section 4051 of the I.R.C., and (3) the United States'

motion for summary judgment on the United States' counterclaim.

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