AVIS BUDGET GROUP, INC., and THE HERTZ CORPORATION, Plaintiffs-Appellants,
v. CITY OF NEWARK, CITY COUNCIL OF THE CITY OF NEWARK, MAYOR OF THE CITY OF
NEWARK, and DIRECTOR OF FINANCE OF THE CITY OF NEWARK,
Defendants-Respondents.
Case Information:
Docket/Court: A-3801-10T4, Superior Court of New Jersey,
Appellate Division
Date Issued: 08/01/2012 Argued March 13, 2012
Tax Type(s): Sales and Use Tax
On appeal from the Superior Court of New Jersey, Law Division, Essex County,
Docket No. L-6126-10.
John Longstreth (K & L Gates, LLP) of the District of Columbia bar,
admitted pro hac vice, argued the cause for appellants (Mark D. Marino and Mr.
Longstreth, of counsel and on the brief; Daniel A. Suckerman, on the brief).
Michael R. Griffinger argued the cause for respondents (GluckWalrath and
Gibbons, P.C., attorneys; Mr. Griffinger, Robert C. Brady, Fruqan Mouzon, Brian
P. McElroy, David A. Clark and Antonella Colella, on the brief).
OPINION
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE
DIVISION
APPROVED FOR PUBLICATION
Before Judges Carchman, Fisher and Baxter.
The opinion of the court was delivered by CARCHMAN, P.J.A.D.
This appeal requires us to consider the validity of Ordinance 6PFS-I 050510
(the Ordinance), enacted by defendant City of Newark (the City),
1 levying a tax on all car rental
transactions within the City's Second and Third Industrial Zones, the latter of
which encompasses parts of Newark Liberty International Airport (the Airport).
Plaintiffs Avis Budget Group (Avis) and Hertz Corporation (Hertz) challenge the
Ordinance, asserting that it violates the Anti-Head Tax Act (AHTA), 49
U.S.C.A. § 40116, as well as 42
U.S.C.A. § 1983 and the Commerce
Clause of the United States Constitution, Article I, Section 8, Clause 3.
We conclude that the Ordinance is not a discriminatory tax or otherwise in
violation of the AHTA or the dormant Commerce Clause. We determine that the
Ordinance is a valid exercise of municipal authority. Accordingly, we affirm.
I.
On July 28, 2009, the New Jersey Legislature enacted the New Jersey Economic
Stimulus Act of 2009,
N.J.S.A. 40:48H-1
to -9, which, among other things, granted authority to certain municipalities to
tax motor vehicle rental transactions taking place in designated industrial
zones, specifically, zones within which commercial airports are located.
N.J.S.A. 40:48H-2.
The stated purpose of the legislation and the tax was to finance the
redevelopment of certain municipalities.
N.J.S.A. 40:48H-1.
N.J.S.A. 40:48H-2,
the operative provision granting authority to tax, provides in relevant part:
a. A municipality having a population in excess of 100,000 and
within which is located a commercial airport which provides for a minimum of 10
regularly scheduled commercial airplane flights per day, or a municipality in
which any portion of such an airport is located, by ordinance, may impose a tax
on the rental of motor vehicles on such rental transactions that occur within a
designated industrial zone of the municipality. Such tax shall be imposed on the
person, corporation, or other legal entity that is permitted the use of a motor
vehicle that it does not own for a period of time that is less than one year, in
exchange for the payment of a fee, and shall be collected on behalf of the
municipality by the person collecting such rental fee, in accordance with such
procedures as shall be established in the ordinance imposing the
tax.
The local motor vehicle rental tax rate imposed under an
ordinance adopted pursuant to this section shall not exceed five percent of the
total amount of the fee charged for the rental of the motor vehicle, excluding
any taxes and surcharges.
The City, which has a population in excess of 100,000 and “within which [the
Airport] is located,” qualified under this provision. On April 27, 2010, the
City Council, pursuant to
N.J.S.A. 40:48H-2,
introduced an ordinance to tax car rental transactions. During a public meeting
to consider the proposed ordinance, council members informed the public that the
Ordinance was intended to tax “outsiders” at the Airport but not Newark
residents. Following the meeting, the Council passed the Ordinance, and the
Mayor signed it into law on May 7, 2010. It was published on May 14, 2010.
The Ordinance provides in relevant part:
10:22A-3. IMPOSITION OF MOTOR VEHICLE RENTAL TAX.
There
is hereby imposed on the person, corporation or other legal entity that is
permitted the use of a motor vehicle that it does not own for a period of time
that is less than one year, in exchange for the payment of a fee, a tax of five
(5%) percent on the fee charged for the rental of such motor vehicle, excluding
any taxes and surcharges, in respect of rental transactions that occur within
the industrial zone. This tax is in addition to any other taxes or surcharges.
10:22A-4. DESIGNATION OF INDUSTRIAL ZONE.
a. The City
hereby designates the following portion of the City as an “industrial zone” for
purposes of the motor vehicle rental tax authorized by the Act and this chapter,
such portion not exceeding, in the aggregate, fifty percent (50%) of the
territory of the City: All of the territory within the City which is, as of the
effective date of this ordinance, located [within] the “Second Industrial
District” and the “Third Industrial District[,]”[] as such areas are established
by Title XL, Chapter 2 of the Newark Municipal Code. The area so designated as
an industrial zone under this paragraph a. shall not be altered by any
subsequent revision of the City's zoning districts, but rather shall be amended
only by an ordinance expressly amending this ordinance in accordance with the
[A]ct. b. The City hereby determines that the industrial zone designated in
paragraph a. of this Section 10:22A-4 of the City constitutes an area having, or
intended to have, predominantly industrial, port, airport, and related uses.
The Third Industrial Zone encompasses parts of the Airport and the Port
Newark Marine Terminal. All of the ten rental car companies that are currently
affected by the Ordinance are located within the Third Industrial Zone.
Plaintiffs are two of the ten affected companies.
Plaintiffs challenged the validity of the Ordinance in the Law Division,
asserting that it violated State due process rights, was arbitrary, capricious
and unreasonable, and was contrary to the AHTA and the Commerce Clause. At the
hearing on the cross-motions for summary judgment, the parties focused on
whether the tax violated the AHTA. The City argued that the court could not
consider the issue since there was no private right of action to enforce the
AHTA. On the merits, it claimed that the Ordinance did not exclusively affect
Airport businesses because three rental car companies located in the Third
Industrial Zone were not located “at the Airport.” Plaintiffs countered that two
of the referenced “companies” were actually Avis parking lots where no rental
transactions occurred, and were unaffected by the tax, and the third, Action Car
Rental, was “at the Airport” because it serviced the Airport by shuttle bus from
an Airport hotel.
In a written opinion, Judge Michael R. Casale rejected the City's claim that
plaintiffs did not have a private right of action to enforce the AHTA, relying
on Interface Group, Inc. v. Massachusetts Port Authority,
816 F.2d 9, 16 (1st Cir. 1987) , and Northwest Airlines,
Inc. v. County of Kent,
955 F.2d 1054, 1058 (6th Cir.
1992), aff'd,
510
U.S. 355,
114
S. Ct. 855,
127
L. Ed. 2d 183 (1994) (deciding the questions presented on other grounds and
not reaching the issue of the implied right of action). He rejected contrary
decisions by the Seventh and Tenth Circuits in Southwest Air Ambulance, Inc. v.
City of Las Cruces,
268 F.3d 1162, 1169 (10th Cir.
2001) , and Miller Aviation v. Milwaukee County Board of Supervisors,
273 F.3d 722, 729 (7th Cir. 2001) . However, since
plaintiffs averred violations of 42
U.S.C.A. § 1983 in the complaint, the
trial court relied on Southwest, supra,
268 F.3d at
1176 , to conclude that plaintiffs were not precluded from either enforcing the
AHTA or challenging the Ordinance.
Turning to the merits, the judge addressed the issue of whether the Ordinance
violated the AHTA. Citing Burbank-Glendale-Pasadena Airport Authority v. City of
Burbank,
76 Cal. Rptr. 2d 297, 298 (Cal. App. 1998)
, the judge concluded that the Ordinance did not offend the AHTA:
Here, the tax is not on air commerce; it is on the fee paid for
renting a car. Second, the tax is paid by the customer, not the businesses.
Third, the tax is not imposed exclusively on airport businesses, but rather it
must be paid by any rental car facility that is open or will open in the
qualified zones. Finally, the tax is payable by anyone who rents a car in the
designated zones, not only air travelers[;] and air travelers who wish to avoid
the tax can travel outside of the industrial zones and rent a car elsewhere. The
tax at issue herein is very similar to the tax upheld by the California Court of
Appeals [in Burbank] and is the type of tax authorized by 4[9]
U.S.C.[A.] § 40116(e)(1).
The court neither found a violation of the AHTA, nor a violation of the
Commerce Clause. The judge held: (1) where Congress has legislated, as it did in
enacting the AHTA, courts need not determine whether state action authorized by
the statute has violated the Commerce Clause; and (2) the statements City
Council members made during the public meeting did not affect the Commerce
Clause analysis when the City enacted the Ordinance “in strict compliance with
... [
N.J.S.A. 40:48H-2].”
Finally, the judge determined that the City Council followed proper procedures
in enacting the Ordinance, and the Ordinance neither offended due process nor
was arbitrary, capricious or unreasonable. The court granted the City's motion
for summary judgment and dismissed plaintiffs' complaint. This appeal followed.
II.
The City reiterates its argument that even if the tax violates the AHTA,
dismissal must be affirmed because there is no private right of action to
enforce the AHTA. Plaintiffs counter that even if there is no private right of
action, an AHTA violation may be remedied under 42
U.S.C.A. § 1983.
That the AHTA permits a private right of action is no longer a viable
argument. The AHTA is within the regulatory purview of the Department of
Transportation under the direction of the Secretary of Transportation (the
Secretary).
See Northwest Airlines, Inc. v. Cnty. of Kent,
510
U.S. 355, 366-67,
114
S. Ct. 855, 863,
127
L. Ed. 2d 183, 195 (1994) (observing that the “Secretary of Transportation
is charged with administering ... the AHTA”); Township of Tinicum v. U.S. Dep't
of Transp.,
582 F.3d 482, 484 (3d Cir. 2009) (same);
Miller, supra,
273 F.3d at 729-30 (same); Southwest,
supra,
268 F.3d at 1169-70 (same). Because the AHTA
is encompassed in the Federal Aviation Act (FAA),
2 alleged violations of the AHTA are remedied through an
administrative process initiated by filing a complaint with the Secretary. 49
U.S.C.A. § 46101.
See also 14
C.F.R. 16.1 (providing that
the FAA will determine disputes under AHTA except for challenges to fees by air
carriers against airport proprietors). Determinations by the Secretary on
questions involving the AHTA may be appealed to a federal district court. 49
U.S.C.A. § 46110.
The First and Sixth Circuits have held that Congress intended to create a
private right of action in the former AHTA, 49
U.S.C.A. § 1513, based on
the fact that that statute lacked an administrative enforcement scheme.
Interface, supra,
816 F.2d at 16 ; Northwest
Airlines, supra,
955 F.2d at 1058 . The United
States Supreme Court subsequently granted certiorari in
Northwest
Airlines; although it did not consider whether the AHTA created private
rights of action, the Court disagreed with the First and Sixth Circuits'
construction of the AHTA when it observed that the AHTA was encompassed by the
FAA, which statute reflected an administrative enforcement scheme. Northwest
Airlines, supra,
510 U.S. at 366-67,
114 S. Ct. at 863,
127 L.
Ed. 2d at 195 .
The Seventh and Tenth Circuits went further in rejecting
Interface and
Northwest Airlines. These courts held that since the AHTA is included in
the FAA,
3 Congress intended for
public enforcement of the AHTA and did not create a private right of action.
Miller, supra,
273 F.3d at 729-31 ; Southwest,
supra,
268 F.3d at 1169-70 . Courts that have
considered the issue since the Supreme Court's decision in
Northwest
Airlines have followed
Southwest and
Miller.
See Air
Transp. Ass'n of Am. v. City of Los Angeles,
844 F.
Supp. 550, 555 (C.D. Cal. 1994) (concluding that AHTA lacks private right of
action); Susquehanna Area Reg'l Airport Auth. v. Middletown Area Sch. Dist.,
918
A.2d 813, 816 (Pa. Commw. Ct. 2007) (same).
Other courts have rejected the claim that the AHTA may be enforced in state
court under Section 1983 based on the premise that the FAA provides a
comprehensive remedial scheme for AHTA violations that is sufficient to
foreclose Section 1983 actions.
See, e.g., New England Legal Found. v.
Mass. Port Auth.,
883 F.2d 157, 176 (1st Cir. 1989)
; Air Transp. Ass'n of Am. v. Public Util. Comm'n,
833 F.2d 200, 207 (9th Cir. 1987), cert. denied,
487 U.S. 1236,
108 S. Ct.
2904,
101 L. Ed. 2d 936 (1988) ; Montauk-Caribbean
Airways, supra,
784 F.2d at 98 ; Air Transp. Ass'n,
supra,
844 F. Supp. at 559-60 . Even if a violation
of the AHTA could be remedied under 42
U.S.C.A. § 1983, a party would be
required to assert a violation of a federal right, not merely a federal law, “to
avail himself [or herself] of [Section] 1983.” Southwest, supra,
268 F.3d at 1173 . In
Southwest, the Tenth
Circuit held that the plaintiff airline could enforce the AHTA under Section
1983 because state and municipal taxation of airlines based on gross receipts, a
practice prohibited by the AHTA, would violate a federal right afforded to
airlines to be free of those taxes.
Id. at 1173-74.
Southwest does not support a finding that airport businesses have a
federal right under the AHTA. Airport businesses have no right to be totally
free from state or local taxes based on gross receipts, and they remain subject
to nonexclusive taxes. In sum, we will not apply
Southwest to car rental
companies at the Airport and find no basis for diverging from the overwhelming
authority holding that the AHTA may not be enforced in a suit under 42
U.S.C.A. § 1983.
The AHTA allows airport proprietors to levy reasonable rental, landing and
service fees from airline carriers for using airport facilities. Challenges to
the reasonableness of fees or charges must be brought before the Secretary.
See Miller, supra,
273 F.3d at 725-26, 731
(noting that there is no private right of action in the AHTA to challenge the
fees Milwaukee County charged an airport hangar owner); Southwest, supra,
268 F.3d at 1170 (holding that there is no private
right of action to challenge local ordinance that set fees at airport); Air
Transp. Ass'n, supra,
844 F. Supp. at 555
(concluding that the Secretary has discretion to remedy unreasonable fees).
4 There is no private right of
enforcement under the AHTA.
III.
Plaintiffs next argue that the Ordinance violates the AHTA by imposing a tax
on rental car companies at the Airport. Even though there is no private cause of
action, we will address the merits and review the trial court's grant of summary
judgment to defendants. We first identify the standard of review.
Our review of the grant or denial of summary judgment is de novo, using the
same legal standard as the trial court. Dugan Constr. Co. v. N.J. Tpk. Auth.,
398 N.J. Super. 229, 238 (App. Div.), certif. denied,
196 N.J. 346 (2008) ; Prudential Prop. & Cas.
Ins. Co. v. Boylan,
307 N.J. Super. 162, 167 (App.
Div.), certif. denied,
154 N.J. 608 (1998) . Summary
judgment is proper if, viewing the evidence in the light most favorable to the
nonmoving party, no genuine issue of material fact is disputed. Brill v.
Guardian Life Ins. Co. of Am.,
142 N.J. 520, 540
(1995); R. 4:46-2(c) . The trial court's factual findings are binding on appeal
when supported by adequate, substantial and credible evidence in the record.
Rova Farms Resort, Inc. v. Investors Ins. Co. of Am.,
65 N.J. 474, 484 (1974) . Conversely, the trial court's
conclusions of law “and the legal consequences that flow from established facts
are not entitled to any special deference.” Manalapan Realty, L.P. v. Twp. Comm.
of Manalapan,
140 N.J. 366, 378 (1995) .
Under the Supremacy Clause, federal law is “the supreme Law of the Land[.]”
U.S. Const. art. VI, cl. 2. State laws that “'interfere with, or are
contrary to the laws of [C]ongress, made in pursuance of the [C]onstitution[,]'
are invalid.” Vail v. Pan Am Corp.,
260 N.J. Super.
292, 297 (App. Div. 1992) (quoting Wisconsin Pub. Intervenor v. Mortier,
501 U.S. 597, 604,
111 S.
Ct. 2476, 2481,
115 L. Ed. 2d 532, 542 (1991) ). The
“focus of analysis is on the intent of Congress.” Miranda v. Fridman,
276 N.J. Super. 20, 25 (App. Div.), certif. denied,
138 N.J. 271 (1994) . Congressional intent may be
express or implied.
Ibid.
To determine if a conflict exists between state and federal law, a court must
consider “'the relationship between [the] ... laws as they are interpreted and
applied, not merely as they are written.'” R.F. v Abbott Labs.,
162 N.J. 596, 618 (2000) (quoting Jones v. Rath Packing
Co.,
430 U.S. 519, 526,
97 S. Ct. 1305, 1310,
51 L.
Ed. 2d 604, 614 (1977) ).
Congress amended 49
U.S.C.A. § 40116(d), when it enacted the Federal
Aviation Administration Authorization Act of 1994 (FAAA),
Pub. L. No.
103-305, 108
Stat. 1569 (1994), to include the following prohibition:
(2) (A) A State, political subdivision of a State, or authority
acting for a State or political subdivision may not do any of the following acts
because those acts unreasonably burden and discriminate against interstate
commerce:
.... (iv) levy or collect a tax, fee, or charge, first
taking effect after August 23, 1994, exclusively upon any business located at a
commercial service airport or operating as a permittee of such an airport other
than a tax, fee, or charge wholly utilized for airport or aeronautical purposes.
[49 U.S.C.A. § 40116(d).]
In the nearly twenty years since the enactment of this amendment, “43 States
and the District of Columbia” have levied taxes on airport car rental companies
by applying
non-exclusive taxes to “all similar entities within that
taxing jurisdiction.” 157
Cong. Rec. H45, 2199 (daily ed. March 31, 2011)
(statements of Rep. Greg Cohen and Rep. Sam Graves).
5
In 2009, the Legislature enacted
N.J.S.A. 40:48H-2,
which authorized qualifying municipalities to levy a tax on car rental
transactions that “occur within a designated industrial zone of the
municipality.”
Ibid. The Legislature intended for
N.J.S.A. 40:48H-2
to apply to “the City of Elizabeth and the City of Newark,” the two
municipalities in which sections of the Airport are located. Assembly
Appropriations Committee Statement to Assembly Bill No. 4048 (June 11, 2009).
The legislative history provides that car rental companies at the Airport
generated $132.7 million in revenue in the first nine months of the fiscal year
2009.
Ibid.
We review the Ordinance against this background. In determining whether a
statute violates the AHTA, the Supreme Court has looked to the statute's purpose
and effect.
See Aloha Airlines v. Dir. of Taxation,
464
U.S. 7, 13-14,
104
S. Ct. 291, 295,
78
L. Ed. 2d 10, 16 (1983) (“The manner in which the [Hawaii] ... [L]egislature
has described ... [the statute] cannot mask the fact that the purpose and effect
of [it] are to impose a levy upon the gross receipts of airlines.”).
See
also Complete Auto Transit, Inc. v. Brady,
430
U.S. 274, 279,
97
S. Ct. 1076, 1079 ,
51
L. Ed. 2d 326, 331 (1977) (noting that, in determining whether a tax
violates the Commerce Clause, the Court considers the tax statute's “practical
effect,” not its formal language).
Burbank provides assistance in our consideration of the issues before
us. In
Burbank, the court considered whether a local parking tax levied
pursuant to a city ordinance was precluded by the AHTA. Burbank, supra,
76 Cal. Rptr. 2d at 298 . The tax affected customers at
fifteen parking lots in the City of Burbank; however, three lots were within two
miles of the airport, and ninety percent of the tax revenues derived from
parking lots “at or near the airport.”
Ibid. The court concluded that the
tax was not precluded by the AHTA, most notably 49
U.S.C.A. §
40116(d)(2)(A)(iv). The court said:
First, the TPT [tax] is not a tax on air commerce. It is a tax on
the fee paid for short-term parking. The AHTA does not apply to taxes on airport
ground transportation services, such as parking facilities. Second, because the
TPT is paid by the customer, not the parking lot operator, it is analogous to
the “sales or use taxes” expressly permitted by the AHTA. Third, the TPT is not
imposed exclusively upon airport businesses, because it is collected by all
qualified parking lots in the City.
[Burbank, supra, 76 Cal. Rptr. 2d at 300
(citations omitted).]
Susquehanna, a more recent Pennsylvania decision, also upheld a
parking tax under the AHTA, for many of the same reasons provided in
Burbank:
[P]arking patrons, not airport businesses, bear the burden of this
tax; a tax on parking transactions is not a head tax. The incidence of the tax
is the parking fee transaction, and the measure of the tax is on the transaction
fee itself. Further, it is undisputed here that non-airport parking transactions
are subject to the parking tax, and there is no exclusivity sub
judice.
[Susquehanna, supra, 918 A.2d at 816
.]
As in both
Burbank and
Susquehanna, here, the tax is not
“wholly utilized for airport or aeronautical purposes” under 49
U.S.C.A.
§ 40116(d)(2)(A)(iv). We must determine whether the City has imposed the tax
“exclusively upon any business [that is] located at [the Airport]” or is
“operating as a permittee of [the Airport][.]” 49
U.S.C.A. §
40116(d)(2)(A)(iv).
Judge Casale, relying on
Burbank, held that the Ordinance did not
violate the AHTA because it levied a tax “on the fee paid for renting a car” and
“not on air commerce.” In finding that the AHTA did not apply to ground
transportation, the
Burbank court cited Alamo Rent-A-Car, Inc. v. Palm
Springs,
955 F.2d 30 (9th Cir. 1992) , which
analyzed the former AHTA, 49
U.S.C.A. § 1513, which statute applied only
to air transportation by aircraft.
Id. at 31.
See also Salem
Transp. Co. v. Port Auth. of N.Y. & N.J.,
611 F.
Supp. 254, 257 (S.D.N.Y. 1985) (rejecting claim by ground transportation
provider that a fee violated 49
U.S.C.A. § 1513). Two years after
Alamo was decided, Congress amended the FAA to prohibit taxes exclusively
levied on
any business located at a commercial service airport. 49
U.S.C.A. § 40116(d)(2)(A)(vi). The current statute does not distinguish
between air and ground transportation.
The Law Division held that the Ordinance levied a tax not on a “business” at
the Airport, but on a consumer. The trial court reasoned that the tax was
permissible under the AHTA as “the type of [sales] tax” allowed by 49
U.S.C.A. § 40116(e)(1). This is consistent with the reasoning in
Susquehanna, where the court upheld a parking tax on parking transactions
at or near the airport because the “measure of the tax [was] on the transaction
fee” and was not a head tax.
Supra, 918
A.2d at 817.
A state may levy “sales or use taxes on the sale of goods or services” that
do not violate subsection (d) of the AHTA. 49
U.S.C.A. § 40116(e)(1).
When subsection (e) is read in conjunction with subsection (d), the AHTA states
that a state or municipality is prohibited from levying any “sales or use taxes”
exclusively upon any business located at a commercial service airport. 49
U.S.C.A. § 40116(d)-(e). The relevant inquiry is whether there is a
meaningful distinction between the terms “consumer” and “business” under these
provisions.
We conclude that the AHTA's prohibition against taxes levied upon a business
does not extend to consumers. To be sure, Congress expressly precluded taxes
levied on consumers traveling in air commerce under 49
U.S.C.A. §
40116(b), but did not do so under 49
U.S.C.A. § 40116(d)(2)(A)(iv),
notwithstanding Congress' awareness that businesses, including airlines, could
pass on the taxes imposed on them to air travelers.
See Niagara Frontier
Transp. Auth. v. E. Airlines, Inc.,
658 F. Supp.
247, 251 (W.D.N.Y. 1987) (stating that “Congress was aware that if the tax ...
were assessed to the airline, it would, in all probability, be passed on to the
airline passengers”).
In
Susquehanna, the court explained:
The difference then between a business privilege tax and a
transaction tax is not just the stated subject of the tax, but how the tax is
measured. A business privilege tax is a tax imposed on all of the gross receipts
from all of the businesses' activities anywhere, so long as the base of
operations within the political subdivision contributes to those activities
because the privilege of doing business is “far more than the sum of
transactions ... performed within the territorial limits of the taxing entity.”
A transaction tax, however, is imposed on the receipts from the designated
transactions that are actually performed within the taxing entity, because its
subject is only the transaction and not the privilege of engaging in a business
that allows the transaction to be consummated.
[Supra, 918 A.2d at 818 (quoting Airpark Int'l I v.
Interboro Sch. Dist., 735
A.2d 646, 647 (Pa. 1999) ).]
The statute provides that levying exclusive taxes on businesses located at an
airport is one of those acts that “unreasonably burden and discriminate against
interstate commerce[.]” 49
U.S.C.A. § 40116(d)(2)(A). Congress determined
that, like airlines, airport businesses are engaged in interstate commerce. This
is because airport businesses, like airlines, service air travelers and not
in-state users.
See Denver v. Cont'l Air Lines, Inc.,
712 F. Supp. 834, 840 (D. Colo. 1989) (observing 49
U.S.C.A. § 1513 was intended to prohibit “the imposition of such local
taxes, fees, and charges that would be passed on to the flying public”). As the
Seventh Circuit noted in dicta in Indianapolis Airport Authority v. American
Airlines, Inc.,
733 F.2d 1262 (7th Cir. 1984) ,
customers of car rental companies located at airports are air travelers, and the
“rental fees” that are imposed upon those companies by airport proprietors are
similar to head taxes on air travelers:
The parking lot is used by emplaning passengers and by people
picking up deplaning passengers. The car rental agencies are used by emplaning
and deplaning passengers, and likewise the food stands and newsstands. This
means that when the airport charges a rental fee to concessionaires it is as if
it were charging a landing fee to the airlines or imposing a head tax on the
passengers.
[Id. at 1267-68.]
See also Southerland v. St. Croix Taxicab Ass'n,
315 F.2d 364, 369 (3d Cir. 1963) (finding that the
airline passengers' prearranged transportation was part of the “interstate
journey,” and thus, an exclusive franchise granted to a taxicab company by the
Virgin Islands Territory to transport people to and from the airport was an
unreasonable burden on interstate commerce); Charter Limousine, Inc. v. Dade
Cnty. Bd. of Cnty. Comm'rs,
678 F.2d 586, 589 (5th
Cir. 1982) (following
Southerland).
Although the express language of the AHTA makes clear that a consumer is not
a “business,” the statute prohibits taxes upon consumers because such taxes
constitute taxes upon businesses located at airports. Here, car rental operators
have an obligation under the Ordinance to collect the tax, and the failure to do
so subjects them to penalties; consumers do not bear the whole obligation to
remit the tax. The Ordinance has been carefully drafted to not violate any
limitations imposed by the AHTA.
The trial court held that the tax was non-exclusive because it was similar to
the parking tax upheld in
Burbank. There, the tax applied to every
parking lot in the City of Burbank, except for exempt lots used for medical
facilities, and metered and monthly parking.
Supra, 76
Cal. Rptr.
2d at 298. Here, rental car companies in the City are not subject to the tax
unless they are located in either the Second or Third Industrial Zone, both of
which districts extended well beyond the boundaries of the Airport. In fact, the
record indicates that the industrial zones at issue together comprise over forty
percent of the area of the City, and the Airport occupies only a portion of the
Third Industrial Zone.
The AHTA does not define the term “exclusively.” As such, it is unclear
whether, in order to be deemed non-exclusive, a tax must apply to all, or only
some, of the like-kind businesses not located at an airport. The holding in
Susquehanna suggests that, unlike the tax in
Burbank, a sales tax
is non-exclusive if it affects any non-airport transactions and need not affect
every like-kind business within the taxing jurisdiction. Susquehanna, supra,
918 A.2d at 817 . The AHTA prevents the imposition of
taxes exclusively on airport businesses, but it does not preclude taxes that
disproportionately affect the airport businesses. A tax is non-exclusive
if it affects at least one business that is not located at an airport.
While all of the car rental companies affected by the tax here are located in
the Third Industrial Zone, either at or near the Airport, and they all service
the Airport in some capacity, they also provide car rental services for and
store rental cars to be used by customers at locations other than the Airport.
Significantly, the AHTA does not prohibit a tax on businesses
near an
airport.
Here, the Ordinance does not apply only to the rental transactions that occur
at the Airport, even though all of the affected businesses are in the Third
Industrial Zone. As the trial judge noted:
[T]he tax is payable to anyone who rents a car in the designated
zones, not only air travelers[;] and air travelers who wish to avoid the tax can
travel outside of the industrial zones and rent a car elsewhere.
We give little weight to the statements City Council members made at the
public hearing on adopting the Ordinance. We look to the adopted Ordinance first
rather than to the political process that may have generated it. Political
rhetoric will not overcome the language of the Ordinance. We recognize that the
State retains the power to impose a sales tax upon transactions near an airport,
which power will not be abridged absent clear and manifest congressional intent
in the AHTA to bar sales taxes imposed on a “consumer” of airport car rental
businesses under the circumstances presented here.
IV.
Finally, we address the argument that the Ordinance violates the Commerce
Clause. We reject this claim.
Plaintiffs have failed to address the threshold question in the dormant
Commerce Clause analysis, which is whether Congress has exercised its plenary
power under the Commerce Clause in the field at issue.
See Western &
S. Life Ins. Co. v. State Bd. of Equalization,
451
U.S. 648, 652-53,
101
S. Ct. 2070, 2075,
68
L. Ed. 2d 514, 520 (1981) .
See also National Fed'n of Indep. Bus. v.
Sebelius, 567 U.S. _______ , _______ S. Ct. _______ ,
183 L. Ed. 2d 450 (2012) (slip op. at 17-18)
(recognizing that Congress has broad authority under the Commerce Clause, not
confined to the regulation of commerce among the states, and extending to
activities that have a substantial effect on interstate commerce, including
activities that do so only when aggregated with similar activities of others).
Congress may authorize a state to engage in regulation that would otherwise
violate the dormant Commerce Clause by manifesting its “'unambiguous intent'” in
a federal statute to approve of the violation. Southwest, supra,
268 F.3d at 1177 (quoting Wyoming v. Oklahoma,
502
U.S. 437, 458,
112
S. Ct. 789, 802,
117
L. Ed. 2d 1, 24-25 (1992) ). When Congress authorizes a state to act, courts
may not review the state taxes or other regulations for violations of the
dormant Commerce Clause. Merrion v. Jicarilla Apache Tribe,
455
U.S. 130, 154,
102
S. Ct. 894, 910 ,
71
L. Ed. 2d 21, 40 (1982) .
In the AHTA, Congress expressly permitted states to tax airport businesses in
the manner provided in subsection (e).
See Burbank, supra,
76 Cal. Rptr. 2d at 301 (finding that the tax fell
within subsection (e) and was therefore “expressly permitted by the AHTA” and
did not violate the Commerce Clause).
We agree that the tax enabled by the Ordinance falls within the scope of
congressional authorization provided in the AHTA. Dormant Commerce Clause review
is therefore precluded.
See Hughes v. Oklahoma,
441 U.S. 322, 336,
99 S.
Ct. 1727, 1736,
60 L. Ed. 2d 250, 262 (1979)
(stating the analysis).
For the sake of completeness, we recognize that even if Congress had not
granted the City express permission in the AHTA, under a traditional dormant
Commerce Clause analysis, a tax that affects interstate commerce will be
sustained if it passes scrutiny under the test articulated in
Complete
Auto. Our Court has followed the
Complete Auto test, noting that
[t]he [Complete Auto] test will sustain a state tax using a
formula apportionment method “[(1)] when the tax is applied to an activity with
a substantial nexus with the taxing State, [(2)] is fairly apportioned, [(3)]
does not discriminate against interstate commerce, and [(4)] is fairly related
to the services provided by the State.”
[Whirlpool Props., Inc. v. Dir., Div. of Taxation, 208
N.J. 141, 163 (2011) (quoting Complete Auto, supra, 430 U.S. at 279, 97 S.
Ct. at 1079, 51 L. Ed. 2d at 331) .]
Here, the Ordinance applies to car rental activity that has a substantial
nexus to the City because the rental car agencies and the Airport are located in
the City, and customers “drive over City streets” to pick up and return the
rented car. Burbank, supra, Cal. Rptr. at 1225-26 . The tax is fairly
apportioned because the rental car transaction occurs within the City, and the
tax does not discriminate against interstate commerce because every person in
the City must pay the tax if a car is rented from either the Second or Third
Industrial Zone. Lastly, the tax would likely be reasonably related to the
services provided by the City because, as we have previously noted, customers
drive on the City's streets using the cars they have rented, and additionally,
their rights under the rental car contracts are protected by New Jersey law.
See Commonwealth Edison Co. v. Montana,
453
U.S. 609, 624-26,
101
S. Ct. 2946, 2957-58,
69
L. Ed. 2d 884, 899-900 (1981) (stating that where a general revenue tax does
not discriminate against interstate commerce and is apportioned to activities
occurring within the State, the tax is valid if reasonably related to the
benefits afforded by the State).
The Ordinance does not violate the Commerce Clause.
Affirmed.
1
Additional defendants include the City Council of the City of Newark,
Mayor of the City of Newark and Director of Finance of the City of Newark.
2
Congress enacted the FAA in 1958. Federal Aviation Act of 1958 (FAA),
Pub. L. No. 85-726, 72
Stat. 731 (1958). In 1994, Congress
restructured the FAA through the Federal Aviation Authorization Act (FAAA).
Pub. L. No. 103-305, 108
Stat. 1569 (1994).
3
The First Circuit also found that Congress did not intend to create
private rights of action within the FAA. Bonano v. E. Caribbean Airline Corp.,
365 F.3d 81, 84-86 (1st Cir. 2004) .
Bonano
is consistent with holdings of the Second, Third, Ninth and Tenth Circuits that
the FAA does not contain private rights of action. Schmeling v. NORDAM,
97 F.3d 1336, 1344 (10th Cir. 1996) ; G.S. Rasmussen
& Assoc., Inc. v. Kalitta Flying Serv., Inc.,
958 F.2d 896, 901-02 (9th Cir. 1992), cert. denied,
508 U.S. 959,
113 S. Ct.
2927,
124 L. Ed. 2d 678 (1993) ; Montauk-Caribbean
Airways, Inc. v. Hope,
784 F.2d 91, 97 (2d Cir.),
cert. denied,
479 U.S. 872,
107 S. Ct. 248,
93 L. Ed.
2d 172 (1986) ; Wolf v. Trans World Airlines, Inc.,
544 F.2d 134, 137-38 (3d Cir. 1976), cert. denied,
430 U.S. 915,
97 S. Ct.
1327,
51 L. Ed. 2d 593 (1977) .
See also
Enyeart v. Minnesota, 408 F. Supp. 2d 797, 806-07 (D. Minn. 2006), aff'd, 218
Fed. Appx. 560 (8th Cir. 2007) (dismissing a complaint on the grounds that there
is no private right of action in the FAA).
4
We do recognize limitations to the AHTA that are relevant here. AHTA
does not grant either the Secretary or federal courts exclusive jurisdiction to
decide the validity of a local tax ordinance, and state courts retain the
ability to hear issues of state tax administration.
See 28
U.S.C.A. § 1341 (providing that federal district courts “shall not
enjoin, suspend or restrain the assessment, levy or collection of any tax under
State law” where a speedy and efficient remedy may be had in state courts).
5
Some members of Congress have viewed such a tax as exploiting a
“loophole” in the AHTA, thereby violating the spirit of the Act. During the
March 31, 2011 debate on the FAA Reauthorization and Reform Act of 2011,
Representatives Graves and Cohen proposed an amendment to the AHTA that, were it
adopted by Congress, would prohibit all but general sales taxes on car rental
companies at commercial airports.
Ibid. See also H.R. Rep. No. 112-45
(2011). Despite this effort, Congress did not amend the AHTA to proscribe
non-exclusive taxes when it passed
H.R. 658 as the FAA Modernization and
Reform Act of 2012,
Pub. L. No. 112-95, 126
Stat. 11, 87 (2012).
