Wheeler Lumber Bridge & Supply Co. v. United States

Background

A corporate dealer sold lumber for public-bridge work to several counties in Iowa and Nebraska and agreed to deliver the lumber f.o.b. at designated points in each county. The seller shipped the lumber by rail, sent the bills of lading to the county clerk, and the county surrendered the bills, paid the carrier, accepted the lumber, deducted the freight from the f.o.b. price, and paid the seller the balance. Federal revenue laws imposed a tax on transportation services but exempted services rendered to a State and, by regulation, to its counties. The seller paid the tax under protest after the Collector assessed it and sought a refund; the Court of Claims certified the legal question to this Court.

Reasoning

The core question was whether the rail transportation was a service rendered to the county and therefore exempt. The Court focused on who arranged and used the transportation: the seller had the shipment made to complete the sale f.o.b. at destination and the sale did not occur until delivery. The Court concluded the transportation was preliminary and was the seller’s affair, not the county’s service. Therefore the exemption for State or county services did not apply, and the federal tax on the transportation stands.

Real world impact

Sellers who arrange and pay for shipping to deliver goods f.o.b. to public buyers cannot treat that transportation as a county service exempt from the federal transportation tax. Although counties paid carriers here, that payment did not change who the transportation served for tax purposes. This opinion answers the certified question for the Court of Claims so the lower court can proceed.