An Alabama administrative law judge has ruled that motor vehicles that are used, stored, or consumed in the state but are purchased and domiciled outside of the state are still subject to the state’s use tax.

The Administrative Law Division of Alabama’s Department of Revenue (ADR) has affirmed the state’s assessment of Clayton, AL-based Boyd Brothers Transportation (BBT), which challenged the levy, for use tax on commercial trucks and trailers purchased outside the state (S. 04-203). The judge determined that BBT was liable for use tax and interest of $916,167.

The state’s use tax is applicable to motor vehicles purchased at retail that are subsequently used, stored, or consumed in Alabama. The carrier purchased approximately 740 heavy trucks and less than 500 trailers tax-free outside of Alabama during the assessment period.

But BBT conceded that its tractors and trailers were used in Alabama during the audit period.

BBT argued that it was exempt from the tax because its truck and trailers were domiciled outside of Alabama. “There is no requirement, statutory or otherwise, that the property must be domiciled or based in Alabama,” responded Chief Administrative Law Judge Bill Thompson.

Thompson referenced an earlier challenge, Glenn McClendon Trucking Co., Inc. v. State of Alabama (S. 01-206), in which McClendon argued its trucks were exempt from the use tax because they were purchased for use outside of Alabama and were subsequently used outside of Alabama before entering the state. This argument was rejected because ADR determined that McClendon had purchased the trucks intending to use them in the state.

The McClendon case was referenced in BBT’s challenge. BBT argued that its tractors and trailers were not purchased for use in the state. Thompson responded, “The fact that (BBT) also intended to use the tractors and trailers in other states does not remove or exclude the use of the vehicles in Alabama from the scope of the use tax.”