Dave Gustafson & Co. v. State

Supreme Court of South Dakota · Contracts

Contractstax refunduse fuel taxstatutory interpretationUse Fuel Tax Actpublic highwaysinterstate right-of-wayinitial highway construction

Facts

Plaintiff was a highway contractor that paid $31,845.24 under the Use Fuel Tax Act for motor fuel used in constructing interstate highways. The state had acquired the interstate right-of-ways before construction began, but those right-of-ways were not opened for public travel during construction. The dispute concerned fuel used in the initial construction of highways within those interstate right-of-ways. A statute allowed recovery of fuel taxes illegally or erroneously collected by suit against the state.

Issue

Whether fuel used in the initial construction of interstate highways on right-of-ways acquired by the state but not opened to public travel during construction was fuel used to propel vehicles on "public highways" within the meaning of the Use Fuel Tax Act, entitling the contractor to a refund.

Rule

Under the Use Fuel Tax Act, tax is imposed only when fuel is used in an internal combustion engine to propel motor vehicles on the public highways. A "public highway" is a way or place generally open to the use of the public as a matter of right for vehicular travel, including an existing public highway temporarily closed for construction, reconstruction, maintenance, or repair, but not a mere right-of-way not yet opened to public travel.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

Frontier GradeWorks, a road contractor in Rapid City, used diesel-powered scrapers and haul trucks to build the first lanes of a new beltway on land the state had already condemned. During the entire project, no member of the public had any legal right to drive on the route, and barricades kept all ordinary traffic out.

Is the diesel fuel subject to the use fuel tax for this project?

Explanation. The majority held that the use fuel tax applies only when fuel is used to propel motor vehicles on public highways. A public highway must be generally open to the public as a matter of right for vehicular travel. Mere state acquisition of a right-of-way does not make it a public highway if it has never been opened to public travel. Therefore, fuel used in initial construction on the unopened corridor is not taxed under the use fuel tax statute.