Source: https://caselaw.findlaw.com/us-supreme-court/306/167.html
Timestamp: 2019-04-22 13:04:01+00:00

Document:
[306 U.S. 167, 168] Mr. Harry H. McElroy, of San Francisco, Cal., for appellant.
[306 U.S. 167, 170] Mr. H. H. Linney, of San Francisco, Cal., for appellees.
The California Use Tax Act of 19351 is assailed as violative of the commerce clause and the Fourteenth Amendment, U.S.C.A.Const. art. 1, 8, cl. 3; amend. 14, when imposed upon tangible personal property, bought outside of the state by the Southern Pacific Company, an interstate railroad, and installed on importation, or kept available for use, as a part of its transportation facilities.
The principle of the use tax as applied to property brought into the state after its retail purchase for intrastate use has been upheld in Henneford v. Silas Mason Co.,10 against the charge that it was a tax upon the operations of interstate commerce or a tax upon a foreign [306 U.S. 167, 172] sale, violative of the Fourteenth Amendment. Under the Washington statute, there considered, discrimination against interstate commerce, arising from a second exaction for use after a foreign tax on sale, could not exist as provision was made for a credit against the local tax of any such foreign levy. No such problem arises here by evidence, finding or assignment of error11 even though the California Act does not have this provision. It will be time enough to resolve that argument 'when a taxpayer paying in the state of origin is compelled to pay again in the state of destination.' 12 A discrimination against goods of out-of-state origin on the face of the sales and use acts is suggested because the local retailer may absorb the sales tax while the consumer of an imported article must pay the use tax. 13 But this is not a discrimination in the law. California's exaction for the distribution of tangible personal property is the same, whether purchased within or without her borders or whether paid by the retailer or consumer. There is an equal charge against what is used, whatever its source. In this case we have a distinctly different application of a use tax. The tax is not sought from personal property used in transactions entirely disassociated from any agency connected with interstate transportation, as builders' supplies for local work in the Silas Mason Case, but from tangible personalty purchased out of the state for immediate or subsequent installation in an interstate railway facility.
Appellant selects from this line the Helson Case25 as determinative of the contention that a tax on use of supplies or equipment is a tax on the commerce. A state tax of three cents per gallon was imposed on all gasoline 'sold at wholesale.' This phrase was defined to include gasoline bought out of the state and used within the state. There was no definition of the word use or used. The taxpayers operated an interstate ferry, purchased gasoline in Ohio and used that portion sought to be taxed in propelling their craft in the territorial waters of Kentucky. That court considered the tax on the consumption of the fas the same as a tax on the operation of the ferry [306 U.S. 167, 176] boat and therefore invalid under the rule discussed in the preceding paragraph.
The principle illustrated by the Helson Case forbids a tax upon commerce or consumption in commerce. The Wallace Case, and precedents analogous to it, permit state taxation of events preliminary to interstate commerce. The validity of any application of a taxing act depends upon a classification of the facts in the light of these theories. In the present case some of the articles were ordered out of the state under specification suitable only for utilization in the transportation facilities and installed [306 U.S. 167, 177] immediately on arrival at the California destination. If articles so handled are deemed to have reached the end of their interstate transit upon 'use or storage,' no further inquiry is necessary as to the rest of the articles which are subjected to a rentention, by comparison, farther removed from interstate commerce. We think there was a taxable moment when the former had reached the end of their interstate transportation and had not begun to be consumed in interstate operation. At that moment, the tax on storage and use-retention and exercise of a right of ownership, respectively-was effective. The interstate movement was complete. The interstate consumption had not begun. Champlain Realty Co. v. Brattleboro 30 and Carson Petroleum Co. v. Vial31 are therefore inapplicable. Bacon v. Illinois,32 where taxation of grain during stoppage in transit was validated, presents a closer analogy. 'Practical continuity' does not always make an act a part of interstate commerce. 33 This conclusion does not give preponderance to the language of the state act over its effect on commerce. State taxes upon national commerce or its incidents do not depend for their validity upon a choice of words but upon the choice of the thing taxed. It is true, the increased cost to the interstate operator from a tax on installation is the same as from a tax on consumption or operation. This is not significant. 34 The prohibited burden upon commerce between the states is created by state interference with that commerce, a matter distinct from the expense of doing [306 U.S. 167, 178] business. A discrimination against it, or a tax on its operations as such, is an interference. A tax on property or upon a taxable event in the state, apart from operation, does not interfere. This is a practical adjustment of the right of the state to revenue from the instrumentalities of commerce and the obligation of the state to leave the regulation of interstate and foreign commerce to the Congress.
This Court pointed out that the corporation had a license to engage exclusively in interstate business. 41 The language just quoted shows that this Court interpreted the transactions in Missouri as merely a part of the interstate commerce and the tax on the franchise an interference therewith because a tax directly upon it. 42 '... nothing was done in Missouri except in furtherance of transportation.' 43 It was this conclusion of the Court on the factual situation which brought about the Ozark decision. Where there is also intrastate activity, an apportioned state franchise tax on foreign corporations doing an interstate business is upheld. 44 A franchise tax on an exclusively interstate business is a direct burden; proportioned to an intermingled business, it is valid. 45 Since the incidence of the California tax as here interpreted is upon events outside of interstate commerce, the Ozark opinion is not applicable. There the Missouri tax was upon activities found wholly interstate.
The facts stated in the opinion just announced leave nothing of substance to support its conclusion that the California tax is not upon the operation-maintenance and use-of appellant's railroad for interstate transportation. Discussion can neither obscure nor more plainly disclose the truth that the tax in question directly burdens commerce among the States. Concededly, that is repugnant to the commerce clause as, from the beginning, it has been construed by this Court.
[ Footnote 1 ] Cal.Stats.1935, ch. 361, p. 1297.
[ Footnote 2 ] Sec. 266, Jud.Code, 28 U.S.C.A. 380.
[ Footnote 3 ] As the bill was filed July 10, 1936, there was jurisdiction. 50 Stat. 738, 28 U.S.C.A. 41(1, 1a).
[ Footnote 4 ] Southern Pac. Co. v. Corbett, D.C., 20 F.Supp. 940.
[ Footnote 5 ] Id., D.C., 23 F.Supp. 193.
[ Footnote 6 ] Sec. 266, Jud.Code, 28 U.S.C.A. 380.
[ Footnote 7 ] Cal.Stats.1933, ch. 1020, p. 2599, as amended, Cal.Stats.1935, chs. 351, 355, 357, pp. 1225, 1252, 1256.
[ Footnote 8 ] California Use Tax Act, supra, Section 3.
[ Footnote 9 ] Id., Sections 2, 3.
[ Footnote 10 ] 300 U.S. 577 , 57 S.Ct. 524. Cf. Felt & Tarrant Mfg. Co. v. Gallagher, 306 U.S. 62 , 59 S.Ct. 376, 83 L.Ed. --, decided this day.
[ Footnote 11 ] People of State of New York v. Kleinert, 268 U.S. 646, 651 , 45 S. Ct. 618, 619.
[ Footnote 12 ] Henneford v. Silas Mason Co., 300 U.S. 577, 587 , 57 S.Ct. 524, 529.
[ Footnote 13 ] National Ice & Cold Storage Co. v. Pacific Fruit Express Co., Cal. Sup., 79 P.2d 380.
[ Footnote 14 ] Cf. Ozark Pipe Line Corp. v. Monier, 266 U.S. 555 , 45 S.Ct. 184.
[ Footnote 15 ] Western Union Telegraph Company v. Texas, 105 U.S. 460 .
[ Footnote 16 ] Case of the State Freight Tax, 15 Wall. 232.
[ Footnote 17 ] Robbins v. Shelby County Taxing District, 120 U.S. 489, 496 , 497 S., 7 S.Ct. 592; Brennan v. Titusville, 153 U.S. 289 , 14 S.Ct. 829.
[ Footnote 18 ] Leloup v. Port of Mobile, 127 U.S. 640 , 8 S.Ct. 1380.
[ Footnote 19 ] See the discussion in Gwin, White & Prince, Inc. v. Henneford, 305 U.S. 434 , 59 S.Ct. 325, decided January 3, 1939.
[ Footnote 20 ] Philadelphia & S. Mail Steamship Co. v. Pennsylvania, 122 U.S. 326, 336 , 7 S.Ct. 1118, 1119.
[ Footnote 21 ] Fisher's Blend Station v. Tax Comm., 297 U.S. 650 , 56 S.Ct. 608.
[ Footnote 22 ] Adams Mfg. Co. v. Storen, 304 U.S. 307, 311 , 58 S.Ct. 913, 915, 117 A.L.R. 429.
[ Footnote 23 ] For comparison with sovereign immunity rule and reason for variation, see James v. Dravo Contracting Co., 302 U.S. 134, 157 , 158 S., 58 S.Ct. 208, 219, 114 A.L.R. 318.
[ Footnote 24 ] Western Life Stock v. Bureau of Revenue, 303 U.S. 250, 256 , 58 S. Ct. 546, 549, 115 A.L.R. 944, and cases cited. Coverdale v. Arkansas-Louisiana Pipe Line Co., 303 U.S. 604, 612 , 58 S.Ct. 736, 740; Ficklen v. Shelby County Taxing District, 145 U.S. 1 , 12 S.Ct. 810; and American Mfg. Co. v. St. Louis, 250 U.S. 459 , 39 S. Ct. 522, as explained in Gwin, White & Prince, Inc. v. Henneford, supra, and Adams Mfg. Co. v. Storen, supra, page 312, 58 S.Ct. page 916.
[ Footnote 25 ] Helson & Randolph v. Kentucky, 279 U.S. 245 , 49 S.Ct. 279; see also Bingaman v. Golden Eagle Lines, 297 U.S. 626 , 56 S.Ct. 624.
[ Footnote 26 ] Coverdale v. Pipe Line Co., 303 U.S. 604, 609 , 58 S.Ct. 736, 738.
[ Footnote 27 ] Nashville, C. & St. L. Ry. Co. v. Wallace, 288 U.S. 249 , 53 S.Ct. 345, 349, 87 A.L.R. 1191.
[ Footnote 28 ] Id., pages 265, 266, 53 S.Ct. page 349; see Edelman v. Boeing Air Transport, 289 U.S. 249, 252 , 53 S.Ct. 591, 592; Gregg Dyeing Co. v. Query, 286 U.S. 472, 479 , 52 S.Ct. 631, 634, 84 A.L.R. 831.
[ Footnote 29 ] Id., page 267, 53 S.Ct. page 349.
[ Footnote 30 ] 260 U.S. 366 , 43 S.Ct. 146, 25 A.L.R. 1195.
[ Footnote 31 ] 279 U.S. 95 , 49 S.Ct. 292.
[ Footnote 32 ] 227 U.S. 504 , 33 S.Ct. 299.
[ Footnote 33 ] Oliver Iron Mining Co. v. Lord, 262 U.S. 172 , 43 S.Ct. 526; Hope Natural Gas Co. v. Hall, 274 U.S. 284 , 47 S.Ct. 639; Utah Power & L. Co. v. Pfost, 286 U.S. 165 , 52 S.Ct. 548.
[ Footnote 34 ] Western Live Stock v. Bureau of Revenue, 303 U.S. 250, 254 , 58 S. Ct. 546, 548, 115 A.L.R. 944, and cases cited.
[ Footnote 35 ] Cf. Henneford v. Silas Mason Co., 300 U.S. 577, 583 , 57 S.Ct. 524, 527.
[ Footnote 36 ] 294 U.S. 384 , 55 S.Ct. 477.
[ Footnote 37 ] 302 U.S. 90 , 58 S.Ct. 72.
[ Footnote 38 ] 266 U.S. 555 , 45 S.Ct. 184.
[ Footnote 39 ] Under the commerce clause the regulatory power of the Congress is customarily exercised on transactions taken place within the state on the principle that such acts are an essential part of interstate commerce. See Currin v. Wallace, 306 U.S. 1 , 59 S.Ct. 379, 83 L.Ed. --, decided this day, and cases cited. Cf. Townsend v. Yeomans, 301 U.S. 441 , 57 S.Ct. 842.
[ Footnote 40 ] 266 U.S. 555, 565 , 45 S.Ct. 184, 186.
[ Footnote 41 ] Id., page 567, 45 S.Ct. page 187.
[ Footnote 42 ] Anglo-Chilean Corp. v. Alabama, 288 U.S. 218, 224 , 53 S.Ct. 373, 374; Id., minority, page 236, 53 S.Ct. page 379; Virginia v. Imperial Coal Co., 293 U.S. 15, 20 , 55 S.Ct. 12, 14.
[ Footnote 43 ] Southern Natural Gas Corp. v. Alabama, 301 U.S. 148, 155 , 57 S.Ct. 696, 699.
[ Footnote 44 ] Id., page 156, 57 S.Ct. page 699.
[ Footnote 45 ] See also Atlantic Lumber Co. v. Com'r, 298 U.S. 553, 556 , 56 S.Ct. 887, 888.
[ Footnote 46 ] James v. Dravo Contracting Company, 302 U.S. 134 , 58 S.Ct. 208, 114 A.L.R. 318; Connecticut Gen. Life Ins. Co. v. Johnson, 303 U.S. 77 , 58 S.Ct. 436; Frick v. Pennsylvania, 268 U.S. 473 , 45 S.Ct. 603, 42 A.L.R. 316; Great Atlantic & Pacific Tea Company v. Grosjean, 301 U.S. 412 , 57 S.Ct. 772, 112 A.L.R. 293; International Paper Co. v. Massachusetts, 246 U.S. 135 , 38 S.Ct. 292, Ann.Cas.1918C, 617.
[ Footnote 47 ] Henneford v. Silas Mason Co., 300 U.S. 577, 578 , 57 S.Ct. 524.

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