The opinion of the court was delivered by: MADDEN
This matter is brought on by motions for summary judgment by both plaintiff and defendant, and based upon the pleadings and affidavits filed herein.
The Court finds no serious dispute of the facts of the case, which are as follows.
Plaintiff, Edward H. Ellis & Sons, Inc., hereinafter referred to as Ellis, is a corporation of New Jersey. On or about May 27, 1947, Ellis entered into a contract with The Texas Company, hereinafter referred to as Texas, providing that Ellis was to excavate, grade and do such other construction work as might be required to level and grade a large tract of land owned by Texas in Gloucester County, New Jersey, on which Texas proposed to construct a large refinery and storage plant for gasoline and oil. In furtherance of this contract with Texas, Ellis entered into an oral subcontract with one Ralph J. Krantz, hereinafter referred to as Krantz, also a citizen of New Jersey, under which Krantz agreed to furnish Ellis dump trucks with drivers to help do the leveling and grading work. Trucks furnished by Krantz to Ellis were used to move earth from a point in the tract belonging to Texas, where it was being excavated, to a point in the same tract, where it was needed to fill. The trucks received earth from the grading shovels and moved it distances ranging from approximately 300 feet to one mile. Some of the earth was moved by Ellis' other equipment, such as, bulldozers, carry-alls, etc., where the distances to move the earth was less. All of the operations took place within the confines of Texas' proposed plant.
Ellis' contract with Krantz provided that Ellis would pay Krantz at the rate of $ 3.50 per hour or $ 28 per day for trucks having a capacity of 4 cubic yards, and at the rate of $ 4.50 per hour or $ 36 per day for trucks having a capacity of 6 cubic yards. Under these rates Krantz supplied both trucks and drivers; the drivers being employees of Krantz. The drivers would be directed in their operations by Ellis or its subordinates. As stated by Krantz in his affidavit submitted by the Government: 'I had nothing to do with any of the construction activities carried on by Edward H. Ellis & Sons, Inc., other than furnishing of the men and trucks for their disposition.'
It is the amounts paid by Ellis to Krantz for the services hereinbefore set forth that form the basis of the tax, in the sum of $ 1,772.67, here in dispute. The statutory conditions precedent to bringing the action have all been complied with and the sole issue now is whether the taxes may be recovered by Ellis.
under which the Government seeks to maintain its position is in substance a tax imposed upon the amount paid- 'for the transportation * * * of property by rail, motor vehicle, water, or air from one point in the United States to another.' It is admitted that Krantz was a person in other respects engaged in the business of transporting property for hire so that the other provisions of the statute become immaterial.
The real question for consideration is, does the operation here under consideration constitute the transportation of property for hire from one point in the United States to another within the meaning of Congress? Since the original enactment of the provision in question has been in effect, Congress has amended the Internal Revenue Code on several occasions without changing the applicable provisions. It seems thereby Congress has given tacit recognition and sanction to the Treasury Regulations promulgated under the Internal Revenue Code and issued by the Commissioner regarding this Act. In those regulations, Treasury Regulations 113, 1943 Ed., Sec. 143.1, we find the following definitions:
'(d) Transportation- The term 'transportation' as used herein means the movement of property by a person engaged in the business of transporting property for hire, including interstate, intrastate, and intracity or other local movements, as well as towing, ferrying, switching, etc. In general it includes accessorial services furnished in connection with a transportation movement, such as loading, unloading, blocking and staking, elevation, transfer in transit, ventilation, refrigeration, icing, storage, demurrage, lighterage, trimming of cargo in vessels, wharfage, handling, feeding and watering live stock, and similar services and facilities.
'(e) Property- The term 'property' means any physical matter regardless of value over which the right of ownership or control may be exercised, including currency, documents, papers of all kinds, etc.'
In considering this statute we find the case of Ohio River Sand Co. v. United States, D.C.W.D. Ky., 60 F.Supp. 563, decided May 25, 1945. There the plaintiff corporation furnished a tug motorboat to an oil company for the purpose of towing empty or loaded barges at a daily rental which was payable regardless of whether the boat was used or not. Judge Miller said, in 60 F.Supp.at page 565:
'The compensation was not based upon mileage, number of trips made, number of barges towed, or the number of days or hours in any day that the towboat was actually in use. * * *
'The court is accordingly of the opinion that under the contract in question the plaintiff was not 'engaged in the business of transporting property for hire."
And in Williams v. United States, D.C. Ariz., 72 F.Supp. 300, decided March 17, 1947, it was held that the use of rented trucks was incidental to construction operations of contractor plaintiffs and not transportation of property within the meaning of the Act.
The case of Lyle v. United States, D.C.N.D. Ga., 76 F.Supp. 787, decided February 2, 1948, is on all fours with the case under consideration. There Lyle, the plaintiff engaged a subcontractor to use the trucks of the subcontractor to receive earth from the grading shovel and to move this earth from the shovel to the dump or fill, all operations being within the boundaries of the airport under construction by Lyle, and all such operations being part of and incidental to the leveling, grading and construction of the airport. The drivers of the trucks were employed and paid by the subcontractor. Lyle paid the subcontractor at the rate of $ 2.75 per truck, per hour for the use of the trucks and drivers. There the Court said, in 76 F.Supp.at page 788: ' * * * Neither the statute, nor the regulations issued pursuant thereto, either expressly or by fair implication, evidence any applicability to transactions of the kind now under consideration, but on the contrary, evidence intent to subject to tax liability payments made for transportation in the manner and by the means specified as the language employed is commonly understood in the light ...