Before DUFFY, Chief Judge, and LINDLEY and SWAIM, Circuit Judges.
The plaintiff, Edward Hines Lumber Co., brought this action to recover from the United States of America the sum of $5,860.43, which the plaintiff contends was illegally assessed and collected from it as transportation tax under Section 3475 of the Internal Revenue Code of 1939, as amended. 56 Stat. 979 (1942), as amended, 26 U.S.C.A. § 3475.
Subsection (a) of Section 3475 provides:
"(a) Tax. There shall be imposed upon the amount paid within * * * the United States for transportation of property by rail, motor vehicle, water, or air from one point in the United States to another, a tax equal to 3 per centum of the amount so paid * * *. Such tax shall apply only to amounts paid to a person engaged in the business of transporting property for hire, including amounts paid to a freight forwarder, express company, or similar person * * *."
The parties stipulated the following facts: The plaintiff operates a lumber mill and plywood factory in Westfir, Oregon, and the logs for plaintiff's business are obtained from adjacent federal forest lands. Plaintiff purchases the timber from the United States at an agreed amount per thousand board feet. The logs are cut by plaintiff and then skidded to a logging road where they are delivered to trucks owned and operated by independent contractors. The logs are then hauled by the contractors over private roads, located partially on federal forest lands and not public highways, to the mill pond of the plaintiff. Title to the logs remains in the United States until the logs have been transported to the mill pond, sealed and paid for. The individual contractors who furnish the trucks, fuel and drivers pay all the expenses involved in hauling the logs and they are paid a flat rate per thousand board feet for their services. In all cases the truck drivers are either the owners of the trucks or employees of the truck owners. In those cases where the drivers are employees of the truck owners, the drivers' wages are paid by the truck owners and they remain under the direction and control of the truck owners, except that the plaintiff directs the drivers as to where to pick up their loads and the destination to which they are to be delivered.
On the pleadings and stipulated facts each party moved for a summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure, 28 U.S.C.A.
The trial court in its memorandum opinion ruled that under the undisputed facts of the case the movement of the logs did constitute transportation within the meaning of Section 3475 of the internal Revenue Code of 1939, as amended, and thereupon granted the motion of the Government for a summary judgment.
Plaintiff contends that the movement of these logs from the place where they were felled to plaintiff's mill did not constitute transportation within the meaning of Section 3475.
Treasury Regulations 113 (1943 ed.), Section 143.1(b), defined a person engaged in the business of transporting property for hire as including "a common carrier, contract carrier, local moving or drayage concern, freight forwarder, express company, or other person transporting property for hire wholly or in part by rail, motor vehicle, water, or air." Subsection (c) defined the term carrier as being coextensive with the term "person engaged in the business of transporting property for hire." Subsection (d) defined the term transportation as meaning "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. * * *."
To sustain its contentions in this case the plaintiff has cited decisions which involved movements of property by persons who were the employees of the party desiring the property moved or were subject to the absolute control and direction of the owners of the property, or cases which involved the movement of property entirely on the premises of the party for which the movement was made. The cases on which the plaintiff chiefly relies are: Masonite Corp. v. Fly, 5 Cir., 194 F.2d 257; Kerns v. United States, 4 Cir., 204 F.2d 813; and Castle Shannon Coal Corp. v. United States, D.C.W.D.Pa., 98 F.Supp. 163.
In the Masonite case, supra, plaintiff owned a large plant where it manufactured wall board and similar products out of wood pulp. Plaintiff maintained a large reserve supply of wood which was stacked in its yard. Plaintiff owned wood cars and a locomotive which was used to move the cars about in its yard and in the factory. The cars were first moved by the locomotive and placed in the yard near the stacks of wood. The wood was then taken from the stacks, loaded onto a truck, hauled to the wood cars and loaded into them and then the wood cars were moved by the locomotive to the factory where the wood was used in the manufacture of wall board. Trucks hauled the wood only a short distance and the entire movement was made on the premises of the plaintiff. The persons employed in the movement of the wood were persons who owned or had the use of a truck. The plaintiff paid the truckers $1.25 per unit to remove the wood from the stacks in the yard, load it on the truck, move it to the wood cars and load the wood onto the cars. The court there held, page 261, that the persons who made these movements of the wood were employees of the plaintiff and were not persons engaged in the business of transporting property for hire; that they were "employed to do a job of loading" in which they made only incidental use of a truck to move the wood the short distance required from the stack to the cars; and that the use of trucks in moving the wood this short distance was purely accessorial to the loading.
In the Kerns case, 204 F.2d 813, the taxpayer trucking company owned its own trucks which were operated by drivers hired and paid by the taxpayer. The trucks were rented with their drivers at a fixed price per hour to a stone company which operated a large stone quarry. The trucks were used only in the quarry to move the stone from place to place as it was being crushed and to rock piles where it was stacked for storage. The drivers of the trucks were subject to the absolute control and direction of the stone company as to every detail of the work performed by them. On the facts of that case we think the court correctly held that the operation there involved was not subject to the transportation tax.
The Castle Shannon case, 98 F.Supp. 163, involved the movement of waste material from the tipple of a coal mine to the mine dump. The movement there was made under a contract between the mine operator and a trucker, in which the trucker agreed to move the waste to the dump at a specified rate per hour for the service of each truck and driver regardless of the amount of work done. The contract also provided that the plaintiff's foreman would direct and supervise the movement. To sustain its position in Castle Shannon the court strongly relied on the case of Edward H. Ellis & Sons, Inc., v. United States, 3 Cir., 187 F.2d 698. In the Ellis case a general contractor contracted with the Texas Company to clear, level and grade a tract of land owned by the Texas Company on which it proposed to construct a large refinery and storage plant. The general contractor then contracted with one Krantz, who furnished the contractor trucks, with drivers, to move earth from points in the area where it was being excavated to other points within the same area where the earth was needed as fill. Krantz was admittedly in the trucking business and was within the statutory definition of a person ...