RESPONDENT: MARCHI C. McCARTNEY, DIRECTOR, ) TRANSPORTATION DIVISION ) OKLAHOMA CORPORATION COMMISSION ) CAUSE NO. TD

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1 F ILE APR BEFORE THE CORPORATION COMMISSION OF OKLAHOMA APPLICANT: TERRY BOMHAK COURT CLERKS OFFICE - OKC CORPORATION COMMISSION OF OKLAHOMA RESPONDENT: MARCHI C. McCARTNEY, DIRECTOR, ) TRANSPORTATION DIVISION ) OKLAHOMA CORPORATION COMMISSION ) CAUSE NO. TD RELIEF SOUGHT: WAIVER OF INTEREST and/or PENALTY REVIEW OF DECISION BY TRANSPORTATION DIVISION: Nature and/or Amount of Tax or Fee HEARING: September 14, 2011, in Courtroom B 2101 North Lincoln Boulevard, Oklahoma City, OK Before Maribeth D. Snapp, Administrative Law Judge APPEARANCES: Jeffrey P. Southwick, Deputy General Counsel for Transportation Division, Oklahoma Corporation Commission Terry Bomhak, Pro Se REPORT OF THE ADMINISTRATIVE LAW JUDGE Terry Bomhak, an interstate motor carrier, filed the above styled cause on August 18, 2011 to request a review of the Transportation Division's determination regarding the amount of tax, penalty and interest due for fuel taxes on diesel pursuant to the International Fuel Tax Agreement ("IFTA") and fees due for the Interstate Registration Plan ("IRP"). Mr. Bomhak also requested a waiver of the interest and penalty associated with any fuel taxes found to be due. Procedural History 1. On August 13, 2010, the Transportation Division of the Oklahoma Corporation Commission ("Transportation Division") sent a letter to Terry Bomhak to advise Mr. Bomhak that an audit would be conducted of the records supporting the applications for registration and/or fuel tax reports submitted by his company. The audit of the IFTA records would be of the records for the 1st quarter 2007 through the 4th quarter The audit of the IRP records would be of the 2' quarter of license years , and (Exhibit 5) 2. On January 24, 2011, the Transportation Division sent a second letter to Terry Bomhak, advising Mr. Bomhak of the continued need to review the records of Mr. Bomhak. This letter advised Mr. Bomhak that if the Transportation Division were unable to audit the records of the company, an IFTA and IRP assessment could be made based upon the penalty provisions of the IFTA and IRP. (Exhibit 1) 3. On April 15, 2011, the Transportation Division sent Mr. Bomhak 4 letters. The first letter indicated that the audit of the IFTA records resulted in a total of $68, in Tax due, interest and

2 Cause No. TD Report ofadministrative Law Judge Page 2 of 5 penalty. The second letter indicated Mr. Bomhak owed $ for the 2008 IRP year. The third letter indicated an amount of $ was due for the 2009 IRP year and the forth letter indicated an amount of $ was due for the 2010 IRP year. (Exhibit 2) 4. On August 18, 2011, Terry Bomhak filed the above styled Cause, indicating that although the fuel receipts from 2006 to 2010 were unavailable, the tax was properly paid on fuel and the quarterly reports were correctly filed. Therefore, Mr. Bomhak disagreed with the fines identified by the Transportation Division and requested a review of the findings and waiver of any penalty and interest. 5. On September 14, 2011, a hearing was held before the Administrative Law Judge ("AU") and after hearing the evidence, the ALJ took the cause under advisement. Summary of Evidence 6. Terry Bomhak, testified that he has 11 trucks and hauls cattle using cattle trailers and rock/dirt using belly dump trucks. He has been in the trucking business for 25 years and hauls cattle in all central states and up to the Canadian border. Mr. Bomhak indicated this was the first time in 20 years that his company had been audited and he was unaware that fuel receipts needed to be kept longer than 6 months or a year, which was his practice prior to the audit. The quarterly reports are completed by Crawford & Phillips, their insurance company, based on the fuel receipts provided by Terry Bomhak. Once the reports are completed, Crawford & Phillips returns the information used to complete the quarterly report to Mr. Bomhak. 7. Mr. Bomhak indicated that with regard to the IFTA audit, he did not have fuel receipts for the time periods audited, but all fuel taxes were paid on the fuel at the time it was purchased. He stated he didn't even know how to purchase fuel without paying tax on it at the time of purchase. Fuel that was purchased while traveling was purchased using a credit card and although he had the checks where the credit card was paid, the credit card company was unable to provide detail of the charges that were more than one year old, so he was unable to provide information regarding locations where fuel was purchased or the amount of gallons purchased at the location. 8. The company has two fuel tanks on site that have been there since 2008 or The fuel tanks are above ground, hold 1,000 and 2,000 gallons of fuel and are replenished about once a week. 9. According to Mr. Bomhak, the company tries to purchase fuel in each state that it travels, so it pays fuel tax in each state at the time of purchase. 10. Mr. Bomhak acknowledged that it was in July 2011 when he wrote a letter to the Transportation Division, to protest the assessment of the IFTA related fuel tax, penalty and interest, and the fees associated with the IRP audits; despite the April 15, 2011, letters from the Transportation Division indicating that any protest should be in writing and received by the Transportation Division within 30 days after April 15, In any event, Mr. Bomhak was unable to provide the information requested during the audits and was unable to provide any other documentation by which the auditor could verify the quarterly report information.

3 Cause No. TD Report ofadministrative Law Judge Page 3 of David Nicholson, IRP/IFTA Audit Administrator with the Transportation Division, testified that he has 28 years of auditing experience. He indicated that as a member of the IRP and IFTA compacts, the Oklahoma Corporation Commission is required to audit 3% of Oklahoma registrants each year. The audits are a random sampling of carriers and each year about 100 carriers are selected for audit. The audit period is standard and although the Corporation Commission could audit up to 16 quarters, the Commission normally audits 12 quarters of information. 12. When there are no records to audit, both the IRP and IFTA compacts have rules that must be followed by the Commission. When there are no records to support where the tax was paid, the IFTA rules require that no credit be given for any fuel tax actually paid so the amount of credit toward the fuel tax owed becomes zero and the calculation of the fuel consumed must be based upon 4 miles per gallon, regardless of the size of the vehicle. Mr. Nicholson explained that there are 7 basic items the auditor is looking for to verify fuel tax was paid in conformance with IFTA regulations: the date of the trip, the beginning and ending odometer reading for the trip, the truck's identification number, routes of travel, miles by jurisdiction related to the total miles for the trip, the origin of the trip and the destination of the trip. He testified that the auditor might have been able to calculate the fuel tax purchases and the jurisdictional miles for each trip if trip logs had been provided, but NO records were provided to the auditor by Terry Bomhak. Mr. Nicholson stated that although the Department of Transportation only requires that trip logs be maintained for 6 months, pursuant to the record keeping requirements of the IFTA and IRP, trip logs must be kept for 3 years if they are to be used for documentation of mileage and fuel tax. 13. Mr. Nicholson stated that the Commission has the option of waiving the IFTA penalty and the Oklahoma portion of the interest associated with the fuel tax, but has no discretion to waive the interest owed to other jurisdictions. Based upon the mileage set forth in the quarterly reports, the total fuel tax due to all jurisdictions is $49, The penalty assessed to Terry Bomhak, which is 10% of the total fuel tax calculated to be due to all jurisdictions, is $4, The interest on the total amount of fuel tax due, which is calculated at 1% per month, is $14, through May 31, The Oklahoma portion of the total fuel tax due $33,814.43, upon which the Oklahoma portion of the interest due is $9, as calculated through May 31, Exhibits 2 and IFTA is based upon a calendar year and according to Mr. Nicholson, reminders of the records that need to be maintained are provided to the carriers each year as a part of the annual registration notice. 15. As explained by Mr. Nicholson, compliance with IRP requires an annual application to be filed and motor carriers are notified 2 months prior to the expiration of the 12 month period associated with their IRP fiscal year that they need to file their IRP application and that there is a responsibility to maintain certain records and documents to remain in compliance with the IRP. Since fiscal years are staggered for all participants in IRP, this reminder helps carriers recall the need to file the necessary paperwork. When there are no records to substantiate the amount of registration fees allocated to other states based upon the reported mileage, the entire amount of mileage is allocated to Oklahoma as the base state and the amount of the IRP fee is recalculated using the fee plan of Oklahoma. This resulted in a finding that additional IRP fees are due to Oklahoma in the amount of $ for 2008, $ for 2009, and $ for 2010.

4 Cause No. TD Report ofadministrative Law Judge Page 4 of 5 Findings of Fact and Conclusions of Law 16. The Oklahoma Corporation Commission participates in the administration of the IRP and IFTA compacts and therefore has the responsibility to conduct IRP and IFTA audits each year on a sampling of the motor carriers registered in Oklahoma, and apply the rules of the IRP and IFTA. 17. Although it is logical to conclude that fuel taxes were paid at the time fuel was purchased, Mr. Bomhak has no records that provide documentation of the information set forth in the quarterly reports filed by his company and there is no way to confirm that a proportionate share of fuel tax was paid to each jurisdiction within which the company operated during the time frame audited by the Commission. There are no fuel receipts, no trip sheets and no log books to review. Accordingly, the Commission is obligated to follow the rules of the IFTA and assess an amount of fuel tax that is based upon the mileage for each jurisdiction as set forth in the quarterly reports. The amount of fuel upon which fuel tax is assessed must be calculated as if the trucks achieved only 4 miles per gallon. Based upon the audit by the Transportation Division, the total fuel tax due is $49, for all jurisdictions. IFTA rules do not permit any credit to be given for fuel tax that might have been paid at the time of purchase, when there are no records to support the quarterly reports. The mileage set forth in the quarterly reports is however used to calculate the amount due to each respective state jurisdiction. Accordingly, based upon the mileage in the quarterly reports, $33, is due to Oklahoma for fuel tax. The total amount of interest due on the fuel tax is $14,600.74, of which $9, is due to Oklahoma for interest. The amount of penalty calculated on the unpaid fuel tax is $ , which is 10% of the total fuel tax due. 18. The Commission has the option of waiving the penalty due on the fuel tax in the amount of $4, The next highest jurisdictional mileage after Oklahoma is Texas, with about 1/4 the amount of fuel tax due to Texas as is due to Oklahoma. Texas assesses 7 cents fuel tax per gallon of diesel more than is assessed by Oklahoma. With the purchase of fuel for the two above ground storage tanks, and the 7 cents per gallon of fuel tax difference between Texas and Oklahoma, the AU finds it is logical to believe that the majority of the fuel purchased by Terry Bomhak was actually purchased in Oklahoma when it was an option. Because there was no indication that fuel was purchased illegally, the AU finds that fuel tax was paid to Oklahoma at the time of the purchase. Since the penalty would be retained by Oklahoma as the base state and pursuant to the requirements of the IFTA Mr. Bomhak will be paying Oklahoma $33, for fuel tax, in addition to any fuel tax paid to Oklahoma at the time of the fuel purchase, it is appropriate to waive the penalty. Likewise, since fuel tax was paid at the time of purchase in Oklahoma, the AU finds it would be appropriate to waive the interest due to Oklahoma on the amount of fuel consumption calculated using 4 miles per gallon, which is $9, through May 31, There is additional fuel attributed to Oklahoma above that purchased, because the calculation using the reduced mileage causes more gallons of fuel to appear to have been consumed than the actual fuel consumption. 19. After waiving the penalty and the amount of interest due to Oklahoma, the AU finds that Terry Bomhak should pay interest to the other jurisdictions in full as required by IFTA. The amount of interest due to other jurisdictions was $4, as of May 31, 2011, and will need to be updated by the Transportation Division at the time the outstanding fuel tax is actually paid. Oklahoma is required to remit the interest payable to the other jurisdictions and the Commission has no discretion with regard to waiver of the interest due to the other jurisdictions.

5 Cause No. TD Report ofadministrative Law Judge Page 5 of With regard to IFTA audits, R1410 of Article XIV of the IFTA Articles of Agreement, provides that an applicant may appeal an audit finding by making a written request for a hearing within 30 days after the service of notice of the original finding. If the hearing is not requested within 30 days, the original finding is final. 21. With regard to IRP audits, those are conducted to verify the authenticity of the registrant's reported distances derived from operational records and registrations. The appeal time for a carrier to the audit findings of the Commission is set forth in Section 1035 of Article X of the IRP and requires the carrier to file a written appeal with the base state within 30 days of notification of the audit results. Pursuant to Section 1050 of Article X of the IRP, the findings of an audit shall be final if the carrier does not file its appeal within the 30-day period after the audit results are provided. Accordingly, Terry Bomhak owes IRP fees in the amount of $ for 2008, $ for 2009, and $ for Terry Bombak did not file a written appeal with the Commission to the IFTA and IRP audits within 30 days of April 15, Therefore, pursuant to Section R1410 of Article XIV of IFTA and Section 1050 of Article X of the IRP the results of the IFTA and IRP audits became final and the Commission lacks discretion to revise the audit results. Recommendation 23. The Administrative Law Judge respectfully recommends the Commission find that Terry Bomhak should pay $49, for fuel tax pursuant to the Commission's IFTA audit for the 1st quarter 2007 through the 4th quarter Additionally, the ALJ recommends the Commission waive the calculated IFTA penalty and the interest due to Oklahoma, leaving Terry Bomhak to owe interest to other jurisdictions. This amount of interest was $ as of May 31, 2011, and will need to be updated by the Transportation Division at the time the fuel tax is actually paid, to reflect the actual amount of interest due to other jurisdictions. 24. The Administrative Law Judge further recommends that the Commission find Terry Bomhak should pay the amount of IRP fees due in the amount of $ for 2008, $ for 2009, and $ for Respectfully submitted this 09 day of April, Jff APP Administrative Law Judge