Court: Louisiana Court of Appeal; May 10, 2002; Louisiana; State Appellate Court
The appeal centers on the proper interpretation of the term "oil" in relation to a tax assessment by the Louisiana Department of Revenue and Taxation against Shell Pipeline Corporation. Following an audit, the Department assessed Shell over a million dollars in additional taxes for 1992-1994, arguing that "oil" encompassed all products derived from oil, while Shell contended it referred only to crude oil. The trial court granted Shell's motion for partial summary judgment, concluding that the term should not broadly include refined products, a decision the Department appealed. The initial appeal was dismissed due to procedural issues but was later reinstated by the Louisiana Supreme Court for merit consideration. The appellate court upheld the trial court's ruling, affirming that taxing statutes must be strictly construed against the taxing authority, and ordered the Department to cover the appeal costs. The trial court's reasoning, which supported Shell's narrow interpretation of "oil," was adopted by the appellate court.
Two primary issues are presented for the Court's resolution: the definition of "oil" under La.R.S. 47:1001 et seq. and the definition of "gross receipts." The statute mandates a 2% license tax on gross receipts for public utilities, which includes pipelines defined as entities transporting oil for hire. The State argues that "oil" encompasses both crude and refined petroleum products, referencing a broad definition of "petroleum" in related statutes. Conversely, Shell contends that "oil" should be narrowly defined to refer only to unrefined crude oil, noting that their tax records were audited without this broader interpretation being applied until recently. Shell further highlights that the legislature has amended definitions related to petroleum but has never expanded the term "oil," implying a deliberate choice.
The Court finds that while the term "oil" appears straightforward, its interpretation is ambiguous, allowing for reasonable arguments on both sides. Following the principle that tax statutes are to be construed strictly against the taxing authority, the Court rules in favor of Shell, determining that "oil" does not include refined products.
On the issue of "gross receipts," defined as total billings for services rendered within the state, Shell argues that "allowance oil" lost in transit should not be taxed since it is not received by customers. However, the Court understands that Shell's billing accounts for this loss, meaning they are only charging for oil actually received by customers. Consequently, the Court finds merit in the Department of Revenue's position and grants their Motion for Summary Judgment regarding gross receipts.
The Court's rulings: Shell's Motion for Partial Summary Judgment is granted regarding the definition of "oil," while the Department of Revenue's Motion for Summary Judgment on gross receipts is also granted.
