Trucking businesses that go into New York from other states can once again thank small-business truckers for standing up to an unconstitutional registration and decal tax. On Sept. 21, the Owner-Operator Independent Drivers Association reached a landmark $44.4 million tax refund agreement with the State of New York.
In January 2016, OOIDA was victorious in establishing that the taxes imposed by New York’s Department of Taxation and Finance violated the Commerce Clause of the U.S. Constitution.
The Association had challenged the taxes as unconstitutional and discriminatory against out-of-state truckers who drive their trucks mostly in other states – in contrast to New York-based truckers who drive a disproportionately higher number of miles in New York. OOIDA established that the challenged taxes resulted in a higher per mile tax rate being imposed on out-of-state trucks, and therefore violated the Commerce Clause.
The state’s Supreme Court agreed with OOIDA, and declared the fees unconstitutional and invalid. The court also permanently enjoined the state from collecting them in the future.
“We fought against a number of similar taxes back in the 1980s and 1990s, and the states lost in every one of those cases,” said OOIDA President Jim Johnston. “Given that history, we were shocked that New York even thought they could get away with this blatantly unconstitutional tax. The amount for the New York HUT decal is $19, which may seem insignificant. But if other states were to do the same thing, it would be huge – collectively and in administrative costs.”
New York did not appeal the court’s rulings, and voluntarily agreed to negotiate with OOIDA in developing a class-wide refund program. Under the program, class members will receive a virtually complete tax refund, plus interest, subject to attorneys’ fees, based upon the state’s reapportionment of the taxes in conformity with constitutional criteria. Carriers are entitled to keep refunds for taxes paid exclusively by them, and for their own behalf. However, consistent with its prior tax refund cases, OOIDA will ask the court to require carriers who charged back any registration or decal payments to owner-operators, to pass through or reimburse the full amount of the tax refunds they receive for such tax payments to those owner-operators.
The tax refund program will become effective after class notice and final court approval. OOIDA will immediately notify members of additional information as it is received.
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