Did South Carolina PLR 93-3 require a petroleum-hauling coordinator that leased trucks and used independent drivers to apportion income as a motor carrier?

Plain-English summary

South Carolina PLR 93-3 treated APC as a motor carrier and required it to apportion income using the historical ratio of vehicle miles driven in South Carolina to total vehicle miles everywhere. APC did not own the trucks or employ the drivers; its members owned the trucks and hauled petroleum as independent contractors. But APC leased the vehicles, solicited business, coordinated deliveries, maintained liability insurance, handled customer billing, and paid contractors a set delivery fee.

The Department relied on state motor-carrier definitions, APC's Public Service Commission and Interstate Commerce Commission certificates, and authority explaining that a common carrier need not own the means of transportation. The independent contractors' separate obligation to use the same motor-carrier formula did not change APC's obligation.

Common questions

Q: Did APC's lack of truck ownership prevent motor-carrier status? No.

Q: Could APC use the general gross-receipts method instead? No. The ruling required the industry-specific vehicle-mile method.

Q: Did the contractors' own apportionment change the result? No. Both APC and the contractors were treated as motor carriers subject to the statute.

Citations and references

• S.C. Code Ann. § 12-7-640 (1976) — historical motor-carrier mileage formula
• S.C. Code Ann. § 12-7-1190 (1976) — historical general gross-receipts method discussed
• S.C. Code Ann. §§ 12-7-1120 and 12-7-1130 — historical allocation provisions
• S.C. Code Ann. §§ 58-23-10 and 58-23-1110 — motor-carrier definitions

Subject

Apportionment of Income – Motor Carrier

Source

• Landing page: https://dor.sc.gov/advisory-opinion-search
• Original PDF: https://dor.sc.gov/sites/dor/files/policies/PLR93-3.pdf

Original ruling text

SC PRIVATE LETTER RULING #93-3

TO:

APC

TAX MANAGER:

John P. McCormack

SUBJECT:

Apportionment of Income – Motor Carrier
(Income Tax)

DATE:

June 3, 1993

REFERENCES:

S.C. Code Ann. Section 12-7-1120 (Supp. 1992)
S.C. Code Ann. Section 12-7-1130 (1976)
S.C. Code Ann. Section 12-7-640 (1976)
S.C. Code Ann. Section 12-7-1190 (1976)
S.C. Code Ann. Section 58-23-10 (1976)
S.C. Code Ann. Section 58-23-1110 (Supp. 1992)
S.C. Code Ann. Section 12-31-10 (Supp. 1992)

AUTHORITY:

S.C. Code Ann. Section 12-4-320 (Supp. 1992)
SC Revenue Procedure #87-3

SCOPE:

A Private Letter Ruling is a temporary document issued to a taxpayer,
upon request, and it applies only to the specific facts or circumstances
related in the request
Private Letter Rulings have no prescedential value and are not intended
for general distribution.

Question:
Is APC required to apportion its income for South Carolina income tax purposes in accordance
with Code Section 12-7-640 (vehicle miles driven within South Carolina to total miles driven)?
Facts:
APC is licensed as a motor carrier by the South Carolina Public Service Commission and the
Interstate Commerce Commission.

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APC does not own any trucks used to transport petroleum products. All the hauling is done by its
membership, who acts as independent contractors in hauling the petroleum. However, APC
leases the trucks from its membership – the independent contractors.
APC solicits business, coordinates deliveries of the petroleum maintains the liability insurance
on the vehicles, and handles all the billing for the hauling. APC pays the independent contractor
a set fee for making the deliveries.
For many years APC apportioned its income using the mileage method set forth in Code Section
12-7-640. After a recent audit, APC agreed to apportion its income based on the gross receipts
method under Code Section 12-7-1190.
After further consideration, APC now requests a private letter ruling to address which
apportionment method APC should use in filing its South Carolina corporate income tax returns.
Discussion:
South Carolina, like most other states, requires corporations that operate in several states to
determine their South Carolina taxable income by allocating certain income and apportioning the
remaining income based on specific ratios.
Code Sections 12-7-1120 and 12-7-1130 allocate certain interest, dividend, rental, and other
income. In other words, if income is allocated to South Carolina, then that income is fully
taxable in this State. If the income is allocated to another state, then no portion of that income
will be taxed by South Carolina.
Once the income provided for in these sections is allocated, the remaining income of the
corporation is apportioned using various ratios, depending on the type of business. With respect
to the two apportionment methods in question, Code Section 12-7-640 applies to motor carriers
and Code Section 12-7-1190 applies to corporation whose “principle profits and income…are
derived from sources other than manufacturing, producing, collecting, buying, assembling,
processing or selling, distributing or dealing in tangible personal property…”.
Code Section 12-7-640 requires certain industries to apportion their income based on ratios
“unique” to their industries. With respect to motor carriers that section reads, in part:
(2) Motor carriers of property and passengers. – Motor carriers of property shall apportion
their net apportionable income to South Carolina by the use of the ratio of vehicle miles
within South Carolina to total vehicle miles everywhere.
The income tax statute, however, does not provide a definition of the term “motor carriers”.
One of the primary rules of statutory construction is that words used in a statute should be taken
in their ordinary and popular meaning, unless there is something in the statute which requires a
different interpretation. Hughes v. Edwards, 265 S.C. 529, 220 S.E. 2d 231, Investors Premium
Corp. v. South Carolina Tax Commission, 260 S.C. 13, 193 S.E. 2d 642. Also, where the terms

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of a statute are clear and unambiguous and leave no room for construction, they must be applied
according to their literal meaning. Mitchell v. Mitchell, 266 S.C. 196, 222 S.E. 2d 217; Green v.
Zimmerman, 269 S.C. 535, 238 S.E. 2d 323.
In this case, the ordinary and popular meaning of the term “motor carrier” is consistent with the
definition established by the State and federal agencies that regulate intrastate and interstate
commerce through their enforcement of various statutory provisions. These agencies are the
South Carolina Public Service Commission and the Interstate Commerce Commission.
Chapter 23 of Title 58 concerns various statutory provision affecting motor vehicle carriers and
the regulation of these carriers by the Public Service Commission. Code Section 58-23-10(4)
defines “motor vehicle carriers” to mean:
…every corporation or person, their lessees, trustees or receivers, owning, controlling,
operating or managing any motor propelled vehicle, not usually operated on or over rails,
used in the business of transporting persons or property for compensation over any
improved public highway in this State.
Article 11 of the chapter concerns the rights and duties of the Public Service Commission. Code
Section 58-23-1110(5), which is found in Article 11, defines the term “motor carrier” to mean:
…every corporation or person, their lessees, trustees, or receivers, owning, controlling,
operating, or managing any motor propelled vehicle used in transporting persons or
property for compensation over any improved public highway in this State, whether or not
for compensation, as defined by Section 58-23-30 and includes, but is not limited to, motor
vehicle carriers as defined in [Section} 58-23-10 and private carriers;
Based on the above, the Public Service Commission has issued to APC Certificate Number 224.
This is a certificate of public convenience and necessity for carriers as defined in Code Section
58-23-10(4), as cited above.
APC operated under a similar certificate issued to a “common carrier by motor vehicle” by the
Interstate Commerce Commission (Certificate Number MC 106119). See 49 USCA 303.
Also, 13 Am Jur 2d, Carriers, Section 7 provides some guidance, and reads in part:
To constitute a common carrier, it is not essential that the person or corporation
undertaking such service own the means of transportation. Hence, one whose business is
for hire to take goods form the custody of their owner, assume entire possession and
control of them, transport them from place to place, and deliver them at a point of
destination to consignees or agents there authorized to receive them, is a common carrier,
although he contracts with others to transport the goods in vehicles of which they are the
owners, and the movements of which he himself does not manage or control

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Therefore, APC is a motor carrier.
Also, the fact that the independent contractor must apportion his income based on the same
apportionment formula as does APC does not change the statutory requirements APC must
follow under Code Section 12-7-640. Both APC and the independent contractors are motor
carriers and must apportion their income in accordance with Code Section 12-7-640.
Conclusion:
Associated Petroleum Carriers (APC) is a motor carrier and is required to apportion its income
for South Carolina income tax purposes in accordance with Code Section 12-7-640 (vehicle
miles driven within South Carolina to total miles driven).

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