Source: http://supreme.nolo.com/us/329/69/case.html
Timestamp: 2019-04-24 06:01:22+00:00

Document:
1. A judgment of the Supreme Court of California reversing, without directions, a judgment for the plaintiff in a suit for a refund of a tax unconstitutionally levied on an export under the California Retail Sales Tax Act, the case having been tried on the pleadings and stipulated facts and the State Supreme Court having passed on the issues which control the litigation, held reviewable here as a "final judgment" within the meaning of Judicial Code § 237, 28 U.S.C. § 344(a). P. 329 U. S. 72.
a shipper's export declaration, and did not collect, nor attempt to collect, any sales tax from the purchaser. Held that a tax levied upon appellant pursuant to the California Retail Sales Tax Act and measured by the gross receipts from the transaction was an impost upon an export, within the meaning of Art. I, § 10, Cl. 2 of the Federal Constitution, and therefore unconstitutional. Pp. 329 U. S. 71-72, 329 U. S. 75.
3. The fact that the provision of the Federal Constitution that no State shall, without the consent of Congress, lay "any" tax on imports or exports specifies but a single exception -- "except what may be absolutely necessary for executing it's inspection Laws" -- indicates that no other qualification of the absolute prohibition was intended. P. 329 U. S. 76.
4. The constitutional prohibition against "any" state tax on imports or exports is not to be read as a prohibition against any "discriminatory" state tax. P. 329 U. S. 76.
5. The commerce clause and the import-export clause of the Constitution, though complementary, serve different ends, and the limitations of the former are not to be read into the latter. P. 329 U. S. 76.
6. The constitutional prohibition of "any" state tax on exports is not to be read as containing an implied qualification. Pp. 329 U. S. 76-77.
7. The process of exportation commenced not later than when the oil was delivered into the vessel of the foreign purchaser. P. 329 U. S. 83.
8. The construction of a state tax law by the highest court of the State is binding here, but is not determinative of whether the tax denies the taxpayer a federal right. P. 329 U. S. 84.
9. Whether a state tax denies a federal right depends not upon the State's characterization of the tax, but upon its operation and effect. P. 329 U. S. 84.
10. The incident which gave rise to the accrual of the state tax in this case -- viz., the delivery of the oil into the vessel of the foreign purchaser -- was a step in the export process. P. 329 U. S. 84.
11. The constitutional prohibition of state taxes on exports involves more than a mere exemption from taxes laid specifically upon the exported goods themselves. P. 329 U. S. 85.
27 Cal.2d 150, 163 P.2d 1, reversed.
Appellant brought suit in a state court for a refund of an allegedly unconstitutional state tax. A judgment for the appellant was reversed by the state supreme court. 27 Cal.2d 150, 136 P.2d 1. Appellant appealed to this Court. Reversed, p. 329 U. S. 86.
This case is here on appeal from the Supreme Court of California, which sustained a California tax against the claim that it was repugnant to Article I, Section 10, Clause 2 of the Constitution of the United States. Judicial Code § 237, 28 U.S.C. §§ 344(a), 861a.
by the gross receipts from the transaction. The tax was paid under protest, a claim for refund was filed asserting that the levy of the tax violated the provisions of Article I, Section 10, Clause 2 of the Constitution of the United States, and this suit was brought to obtain a refund. The California Supreme Court, one justice dissenting, first allowed a recovery on that ground. 155 P.2d 1. After a rehearing, it reversed its position and held the tax constitutional, two justices dissenting. 27 Cal.2d 150, 163 P.2d 1.
I. We are met at the outset with the question whether the judgment of the California Supreme Court is a "final judgment" within the meaning of the Judicial Code § 237, 28 U.S.C. § 344(a). The case was tried on the pleadings and stipulated facts, a jury having been waived. The trial court found for appellant. The Supreme Court ordered that the judgment "be and the same is hereby reversed." The argument is that, under California law, where a judgment has been reversed without directions, there is a new trial; that, on a new trial, appellant might amend its complaint and produce other evidence, and that, if a new trial were had, new or different findings of fact might be made. See Erlin v. National Union Fire Ins. Co., 7 Cal.2d 547, 61 P.2d 756.
The designation given the judgment by state practice is not controlling. Department of Banking, Nebraska v. Pink, 317 U. S. 264, 317 U. S. 268. The question is whether it can be said that "there is nothing more to be decided" (Clark v. Williard, 292 U. S. 112, 292 U. S. 118), that there has been "an effective determination of the litigation." Market Street R. Co. v. Railroad Commission, 324 U. S. 548, 324 U. S. 551; see Radio Station W.O.W. v. Johnson, 326 U. S. 120, 326 U. S. 123-124. That question will be resolved not only by an examination of the entire record (Clark v. Williard, supra), but, where necessary, by resort to the local law to determine what effect the judgment has under the state rules of practice. Brady v.
Terminal Railroad Assn. of St. Louis, 302 U.S. 688; Brady v. Southern R. Co., 319 U.S. 777. See Boskey, Finality of State Court Judgments under the Federal Judicial Code, 43 Col.L.Rev. 1002, 1005.
decided. The jurisdictional objection is thus without merit. See Gulf Refining Co. v. United States, 269 U. S. 125, 269 U. S. 136.
"No State shall, without the Consent of the Congress, lay any Imposts or Duties on Imports or Exports, except what may be absolutely necessary for executing it's inspection Laws: and the net Produce of all Duties and Imposts laid by any State on Imports or Exports shall be for the Use of the Treasury of the United States, and all such Laws shall be subject to the Revision and Controul of the Congress."
"for then it would have been placed in the hands of an instrumentality whose sole purpose is to export goods, thus indelibly characterizing the process as a part of exportation."
27 Cal.2d at 153, 163 P.2d at 3. The court, in reaching the conclusion that the tax was constitutional, rested in part on our recent decisions (particularly McGoldrick v. Berwind-White Coal Mining Co., 309 U. S. 33; Department of Treasury v. Wood Preserving Corp., 313 U. S. 62; International Harvester Co. v. Department of Treasury, 322 U. S. 340) which sustained the levy of certain state taxes against the claim that they violated the Commerce Clause. Article 1, § 8, Cl. 3. The court concluded that, if this had been an interstate transaction, it would have been subject to the tax. It saw no greater limitation on the power of the States under Article I, Section 10, Clause 2, than this Court has found to exist under the Commerce Clause.
We do not pursue the inquiry as to the validity of the tax under the Commerce Clause. For we are of the view that, whatever might be the result of that inquiry, the tax is unconstitutional under Article I, Section 10, Clause 2.
"to reconcile competing constitutional demands that commerce between the states shall not be unduly impeded by state action and that the power to lay taxes for the support of state government shall not be unduly curtailed."
303 U. S. 250, 303 U. S. 254-255, and cases cited; McGoldrick v. Berwind-White Coal Mining Co., supra), and by invalidating those which discriminate against interstate commerce, which impose a levy for the privilege of doing it, which place an undue burden on it. Adams Mfg. Co. v. Storen, 304 U. S. 307; Gwin, White & Prince, Inc. v. Henneford, 305 U. S. 434; Best & Co. v. Maxwell, 311 U. S. 454; Nippert v. Richmond, 327 U. S. 416.
It seems clear that we cannot write any such qualifications into the Import-Export Clause. It prohibits every State from laying "any" tax on imports or exports without the consent of Congress. Only one exception is created -- "except what may be absolutely necessary for executing its inspection Laws." The fact of a single exception suggests that no other qualification of the absolute prohibition was intended. It would entail a substantial revision of the Import-Export Clause to substitute for the prohibition against "any" tax a prohibition against "any discriminatory" tax. As we shall see, the question as to what is exportation is somewhat entwined with the question as to what is interstate commerce. But the two clauses, though complementary, serve different ends. And the limitations of one cannot be read into the other.
"it would be dangerous in the extreme to infer from extrinsic circumstances that a case for which the words of an instrument expressly provide shall be exempted from its operation."
instrument, that no word was unnecessarily used, or needlessly added. The many discussions which have taken place upon the construction of the Constitution have proved the correctness of this proposition, and shown the high talent, the caution, and the foresight of the illustrious men who framed it. Every word appears to have been weighed with the utmost deliberation, and its force and effect to have been fully understood. No word in the instrument therefore can be rejected as superfluous or unmeaning. . . ."
We cannot therefore read the prohibition against "any" tax on exports as containing an implied qualification.
The questions remain whether we have here an export within the meaning of the constitutional provision and, if so, whether this tax was a prohibited impost upon it.
where a general tax is laid on all property alike, it cannot be construed as a duty on exports when falling upon goods not then intended for exportation though they should happen to be exported afterwards."
". . . goods do not cease to be part of the general mass of property in the state, subject, as such, to its jurisdiction, and to taxation in the usual way, until they have been shipped, or entered with a common carrier for transportation, to another state, or have been started upon such transportation in a continuous route or journey."
Page 116 U. S. 527.
"They were not in course of exportation; they might never be exported; whether they would be or not would depend altogether on the will of the manufacturer."
articles, and does not mean that articles exported are relieved from the prior ordinary burdens of taxation which rest upon all property similarly situated. The exemption attaches to the export, and not to the article before its exportation."
P. 192 U. S. 427.
"The rise in rates for insurance as immediately affects exporting as an increase in freight rates, and the taxation of policies insuring cargoes during their transit to foreign ports is as much a burden on exporting as if it were laid on the charter parties, the bills of lading, or the goods themselves. Such taxation does not deal with preliminaries, or with distinct or separable subjects; the tax falls upon the exporting process."
"The very act that passed the title and that would have incurred the tax had the transaction been domestic committed the goods to the carrier that was to take them across the sea, for the purpose of export and with the direction to the foreign port upon the goods. The expected and accomplished effect of the act was to start them for that port. The fact that further acts were to be done before the goods would get to sea does not matter, so long as they were only the regular steps to the contemplated result."
The circumstance that title was in the New York commission house and that it might change its mind and retain the goods for its own use was dismissed by the statement that "Theoretical possibilities may be left out of account." Page 262 U. S. 70. The Court concluded that, if exportation was put at a later point, exports would not receive "the liberal protection that hitherto they have received." P. 262 U. S. 70.
and documents embraced in that process. . . . Only on that construction can the constitutional safeguard be maintained."
"in the hands of the purchaser to do with as it liked, and there was nothing that in any way committed it to sending the oil to Louisiana except its own wishes."
"Dramatic circumstances, such as a great universal stream of grain from the purchase to a market elsewhere, may affect the legal conclusion by showing the manifest certainty of the destination and exhibiting grounds of policy that are absent here."
from the vendor's tanks located at the dock. That delivery marked the commencement of the movement of the oil abroad. It is true, as the Supreme Court of California observed, that, at the time of the delivery, the vessel was in California waters, and was not bound for its destination until it started to move from the port. But, when the oil was pumped into the hold of the vessel, it passed into the control of a foreign purchaser, and there was nothing equivocal in the transaction which created even a probability that the oil would be diverted to domestic use. It would not be clearer that the oil had started upon its export journey had it been delivered to a common carrier at an inland point. The means of shipment are unimportant, so long as the certainty of the foreign destination is plain.
It seems clear under the decisions which we have reviewed involving Article I, Section 9, Clause 5 of the Constitution that the commencement of the export would occur no later than the delivery of the oil into the vessel. As the meaning of "export" is the same under that Clause and the Import-Export Clause (see Brown v. Maryland, supra, p. 25 U. S. 445; Turpin v. Burgess, supra, p. 117 U. S. 506), the same result follows here.
by the gross receipts from sales; that it is not laid upon the consumer and does not become a tax on the sale or because of the sale. 27 Cal.2d at 152, 163 P.2d at 2.
That construction, being a matter of state law, is binding on us. But it is not determinative of the question whether the tax deprives the taxpayer of a federal right. That issue turns not on the characterization which the state has given the tax, but on its operation and effect. See St. Louis Southwestern R. Co. v. Arkansas, 235 U. S. 350, 235 U. S. 362; Kansas City, Ft. S. & M. R. Co. v. Botkin, 240 U. S. 227, 240 U. S. 231.
Appellee concedes that the prohibition of the Import-Export Clause would be violated if the goods were taxed as exports or because of their exportation, or if the process of exportation were itself taxed. We perceive, however, no difference in substance between any tax so labeled and the present tax. The California Supreme Court conceded that the delivery of the oil "resulted in the passage of title and the completion of the sale, and the taxable incident." 27 Cal.2d at 153, 163 P.2d at 2, 3. The incident which gave rise to the accrual of the tax was a step in the export process.
extends to it. So a tax on the occupation of an importer is, in like manner, a tax on importation. It must add to the price of the article, and be paid by the consumer or by the importer himself in like manner as a direct duty on the article itself would be made. This the State has not a right to do, because it is prohibited by the constitution."
"The States are forbidden to lay a duty on exports, and the United States are forbidden to lay a tax or duty on articles exported from any State. There is some diversity in language, but none is perceivable in the act which is prohibited. The United States have the same right to tax occupations which is possessed by the States. Now suppose the United States should require every exporter to take out a license, for which he should pay such tax as Congress might think proper to impose; would government be permitted to shield itself from the just censure to which this attempt to evade the prohibitions of the constitution would expose it by saying that this was a tax on the person, not on the article, and that the legislature had a right to tax occupations?"
"If it meant no more than that, the obstructions to exportation which it was the purpose to prevent could readily be set up by legislation nominally conforming to the constitutional restriction, but in effect overriding it."
And see Anglo-Chilean Nitrate Sales Corp. v. Alabama, 288 U. S. 218.
We conclude that the tax which California has exacted from appellant is an impost upon an export within the meaning of Article I, Section 10, Clause 2, and is therefore unconstitutional.
In California, a valid stipulation is binding upon the parties. McGuire v. Baird, 9 Cal.2d 353, 70 P.2d 915; Webster v. Webster, 216 Cal. 485, 14 P.2d 522; see 23 Cal.Juris. 826. It is available at a second trial unless in terms otherwise limited, Nathan v. Dierssen, 146 Cal. 63, 79 P. 739; Crenshaw v. Smith, 74 Cal.App.2d 255, 168 P.2d 752; see Le Barron v. City of Harvard, 129 Neb. 460, 262 N.W. 26, and will be controlling at the second trial unless the trial court relieves a party from the stipulation. First National Bank of San Pedro v. Stansbury, 118 Cal.App. 80, 5 P.2d 13. Relief from a stipulation may be granted in the sound discretion of the trial court in cases where the facts stipulated have changed, there is fraud, mistake of fact, or other special circumstance rendering it unjust to enforce the stipulation. Sacre v. Chalupnik, 188 Cal. 386, 205 P. 449; Back v. Farnsworth, 25 Cal.App.2d 212, 77 P.2d 295; Sinnock v. Young, 61 Cal.App.2d 130, 142 P.2d 85; see 161 A.L.R. 1163. In the present case, there is no intimation in the record or briefs of fraud, excusable neglect, or other ground for relief. Indeed, the parties both accept the stipulation as accurate and complete.
See 2 Farrand, The Records of the Federal Convention (1911), pp. 307, 359-362, 442.
See particularly Madison's statement, 3 Eilliot's Debates,2d Ed., p. 483. And see The Federalist No. 42.
See 2 Farrand, op cit. supra, note 2 pp. 305-308, 358-363, 441-442.
"the legislature could not be trusted with such a power. It might ruin the Country. It might be exercised partially, raising one and depressing another part of it."
See 2 Farrand, op cit. supra, note 2 p. 307. Or as stated by Sherman, "A power to tax exports would shipwreck the whole." Id., p. 308.
This was suggested by Langdon. See 2 Farrand, op. cit. supra, note 2 p. 361.
See 2 Farrand, op. cit. supra, note 2 p. 442.
See Carson Petroleum Co. v. Vial, 279 U. S. 95.
Richfield Oil Corporation, while doing business in California, sold oil extracted from California soil. Its purchaser bought the oil to transport and use abroad. California, like many other states, raises a large proportion of its revenue by a generally applied tax on sales.* The Court holds that application of the California sales tax to this transaction is a "tax on exports," and therefore violates Article 1, Section 10, Clause 2 of the Federal Constitution. I cannot agree.
"with regard to any transaction we have to fix a point at which, in view of the purpose of the Constitution, the export must be said to begin. As elsewhere in the law, there will be other points very near to it on the other side, so that, if the necessity of fixing one definitely is not remembered, any determination may seem arbitrary."
similarly situated." Every transaction held by this Court to have occurred after, rather than before, exportation began makes an encroachment not only on the power of states to tax, but, as the Court points out, the Federal Government's area of taxation is also narrowed. The result of such holding is all the more serious because, unlike the consequences of holding a state tax invalid under the Commerce Clause, the prohibitions against taxing exports are, with a minor exception, permanent, absolute, and unqualified. After today's ruling, Congress itself can neither tax nor permit states to tax sales like the one here proscribed. To classify sales transactions as having occurred after exportation began therefore results in creating an island of constitutional tax immunity for a substantial proportion of the profitable business of the nation. Such a result not only grants tax immunity to many profitable businesses which share governmental protections from payment of their fair part of taxes; it also throws an unfair part of the tax burden on others. Since we cannot assume that the framers of the Constitution looked with favor on such consequences, we should, before classifying a transaction in such a way as to render a tax on it unconstitutional, give it the most careful factual scrutiny. We should not invalidate such a tax unless satisfied beyond doubt that it falls squarely and wholly within the area marked by the Constitution for tax exemption.
tax would have been. The tax was not even levied on an exporter or an exporter's agent or broker. Richfield was neither. Its sale of local California goods was negotiated and completed wholly in California. This purely intrastate sale transaction cannot properly be held to have lost its intrastate pre-exportation status by reason of the fact that the parties did not intend "title to pass" until the oil was delivered at the purchaser's ship. For formal "passage of title" is not an adequate criterion for measuring a state's constitutional power to tax sales made within the state. Private parties are free to decide, so far as their own interests are concerned, when legal title shall be considered to "pass." But a state surely is not required by the Constitution to forbear from taxing that part of a sales transaction which precedes the particular moment the parties have arbitrarily selected for a conceptual transfer of title. Nor need a state withhold the exercise of its power to tax sales until an article is delivered or paid for. That delivery, perhaps the last step in executing this agreement to sell, happened to border on the imaginary line where the actual exporter took possession does not justify us in concluding that therefore the whole sales transaction occurred after exportation. Constitutional interpretations which make serious inroads into the power of both the States and the Federal Government to tax sales made by local businesses should not turn on fine legal concepts of when title passed or delivery occurred in relation to the beginning of exportation.
thereafter transported through ports en route to foreign destinations. It was not intended to bestow a bounty of blanket tax immunity upon all those who engaged in the production, processing, purchase, or sale of goods shipped abroad. There was no broad purpose of encouraging foreign commerce by making all these preliminary steps tax-free. The motivation of this tax and its economic consequences plainly are not those which the writers of the Constitution condemned. This was no tax on goods from an inland state which came through California in transit after severance, processing, and sale had been completed. Nor was it a disguised tax on a product of California soil or manufacture imposed solely because the oil was intended for a foreign destination. The tax was nothing more than an effort of California to defray a part of the state's expenses by a uniform sales tax on all those businesses, including Richfield, which enjoyed California's natural resources, the labor of its people, and the services and protection of its government.
True, the tax would impose a burden on export commerce to the extent that it increased the export price of Richfield oil. But if a tax on export sales be unconstitutional for imposing such a burden, so is a property tax or a severance tax applied to Richfield's oil anywhere from well to consumer. For all these types of taxes would likely be reflected in the price of Richfield's oil. But the history and the evolution of the constitutional prohibition against taxation of exports manifest that there was no intention to subsidize either export businesses or foreign purchasers by any such broad immunity from state and federal taxation.
shipment for ultimate use in foreign countries. No persuasive evidence has been produced to indicate that those who wrote the Constitution thought in such terms or that they would have handicapped the state and federal taxing power in such a way. And no other sufficiently cogent reasons have been advanced to require a present interpretation which so disarranges, confuses, and handicaps the sales taxes of all the states.
* In 1945, California's total revenue was $676,828,000. It collected $242,757,000 from its sales tax. California State Finances in 1945, 1 State Finances: 1945, Dept. of Commerce, Bureau of the Census (1946) 33.

References: § 237
 § 344
 § 10
 § 237
 § 237
 § 344
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v.

 v. 
 v. 
 v. 
 v. 
 v. 
 § 8
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v.