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Thank You and Keep Your Questions Coming
We want to thank all of you who responded to the first issue
of our e-newsletter. We received comments of
appreciation for the newsletter and, as requested, questions concerning your
operations. Kevin and Andy respond below
to two of the questions we received. Please keep your questions coming since
they will drive the newsletter. We want to focus primarily on your concerns and
not just on what we, as lawyers sitting in our offices, think is important.
To submit a question simply reply to this email.
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Washington Business and Occupation Taxes
By Andrew Schlegel
Andrew Schlegel  |
A: The Washington State Legislature enacted tax
package 2ESSB 6143 earlier this year, which expanded Washington State's ability
to collect Business and Occupation ("B&O") tax. Part of this bill removed the "physical
presence" requirement and enacted an "economic nexus" evaluation to determine
whether a business is subject to the Washington B&O tax.
However,
this new evaluation affects only those subject to the B&O Tax because of
service and royalty income, whether or not the business is located in
Washington. In order to be
subjected to the new "economic nexus" standard, a business must have income
from "apportionable activities" which include royalties, professional services
and other service related activities as defined by Washington law (WAC 458-20-19402).
According
to Washington law, "Trucking and Transportation" services are generally
classified under the Urban or Motor Transportation Public Utility Tax classification
(WAC 458-20-180 and WA Tax Classifications for Common Businesses). Because most trucking and transportation
services are outside of the scope of the new Washington legislation, the
evaluation has not changed for most motor carriers based outside of Washington .
Of
course, as with any law, the specific facts and circumstances of how and where
a motor carrier operates and which types of services it offers will determine
whether it is subject to this expanded B&O taxation from the State of
Washington.
With
that said, due to the current economic climate, states are reaching further
than they have in the past to gather tax revenue. Under current law, states are allowed to tax
interstate motor carriers if there is an "economic nexus" with that state - a
vague and all too often undefined term that allows states to collect taxes from
businesses with only a slight connection to their state. Recently, two states (Nebraska and
New Mexico) have begun attempts to collect taxes from carriers that traverse its
roads, but do no other business in the state.
The
American Trucking Association has pressed for Congressional intervention on
this issue. House Resolution 1083 would prohibit state taxation of an
out-of-state entity unless such entity has a physical presence in the taxing
state. However, there has been no action
on this Bill since February of 2010. Until such a bill is passed, it will be necessary for all motor carriers
to carefully evaluate what states they are subject to taxation in, or risk
increased taxes, penalties, interest, or even seizure of company property.
Andrew Schlegel - Email Andy
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Citations: Federal Law vs. State Law
By Kevin Anderson
Kevin Anderson  | Q: Is there any way that interstate motor carriers can combat states, such as California, that continually cite drivers referencing state law rather than federal law? Is there support for the proposition that, as interstate motor carriers, the citations received should be based on federal law rather than state law?
A: The trucking industry is heavily regulated at both the federal and state levels. While federal laws often "pre-empt" conflicting state laws, interstate motor carriers must not only abide by federal regulations, they must also abide by the laws of the state in which they are operating. The applicable regulation is 49 CFR 392.2, which states:
Every commercial motor vehicle must be operated in accordance with the laws, ordinances, and regulations of the jurisdiction in which it is being operated. However, if a regulation of the Federal Motor Carrier Safety Administration imposes a higher standard of care than that law, ordinance or regulation, the Federal Motor Carrier Safety Administration regulation must be complied with.
As you can see, when you are operating in a state you must abide by its local laws, ordinances, and regulations. However, if the FMCSA regulations impose a higher standard of care, then the motor carrier is held to that higher standard. Essentially the FMCSA sets the minimum requirements for regulations. The states may impose higher or more stringent requirements, but never lower.
It will be interesting to see how CSA 2010 influences the way states reference violations. Under the current form of CSA 2010, if a carrier or CMV driver is cited for a violation in a crash or roadside inspection report that is not listed in the Safety Measurement System (SMS) severity tables, then that violation will not count towards the carrier's or driver's SMS data. Because state laws are not listed in the SMS severity tables, it is likely that many more violations will be written referencing the applicable CFR (federal law) rather than a state law.Kevin Anderson - Email Kevin |
Tariffs and Bills of Lading Still Required
By John Anderson
John Anderson  |
This means that carriers must still have tariffs, although they
can go by another name, if they wish to spell out their terms of
service. These rules tariffs, if done properly, are a part of the shipping
contract. If a carrier has no rules tariff, or does but does not incorporate it
into the shipping contract properly, then the carrier is giving up its
opportunity to specify the terms under which it provides service. This means,
for example, that the carrier is forfeiting its right to elect the short nine (9)
month claim filing and two (2) year lawsuit filing time limitations which are
allowed but not automatic (again, contrary to what both many carriers and
shippers believe) and to limit its liability.
Similarly, bills of lading remain critically important,
especially these days when most shippers prepare the bill of lading. Regardless,
carriers should still have their own bill of lading set forth in their rules
tariff, which together govern all service provided. However, we are troubled by the
frequency with which we see bills of lading (both carrier and shipper prepared)
which refer to tariffs "lawfully filed" with the "Interstate Commerce
Commission" (neither of which exist). Other bills of lading refer to and
incorporate the NMFC even though the law now requires that the carrier
participate in that tariff (49 USC 13703). Many of these bills of lading also are the "short
form" version, which contains no terms or conditions. In these circumstances the carrier and
shipper both run a risk since the
shipment is transported on nothing more
than a slip of paper which specifies the origin and destination, commodity
description, and weight of the shipment. The agreed upon charge may or may not
appear on the bill of lading or some other document. Better, more detailed, contracts are required
to rent a DVD!
Carriers, shippers, and brokers all need to know not only what
their shipping documents provide, but also what the shipping documents applicable
to each specific shipment provide. Pull the documents out, read the fine print,
and then ask yourself "What will happen if ..." If you do not know or do not like
the answer, then changes are in order.
Bilateral transportation contracts can avoid many of
these issues, but are not suitable for every circumstance. Look for a discussion of contracts, as well as a
continuation of the discussion concerning tariffs and bills of lading, in
future newsletters.
John Anderson - Email John
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The information presented in this communication should not be construed to
be formal legal advice
nor the formation of a lawyer/client relationship.
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