Source: https://supreme.justia.com/cases/federal/us/410/623/
Timestamp: 2019-04-26 06:32:14+00:00

Document:
The Illinois use tax was applied to appellant's aviation fuel stored in the State and loaded aboard its aircraft there and consumed in interstate flights, the tax authorities having revised their previous "burn off" interpretation of a statutory exemption for temporary storage. Under the "burn off" interpretation, only fuel consumed in flight over Illinois was used to measure the tax imposed for storage before loading, but under the reinterpretation, all fuel loaded was deemed to measure the tax on the "use" of storage or withdrawal from storage. The Illinois Supreme Court upheld the statute against appellant's contention that the tax, as reinterpreted, impermissibly burdened interstate commerce.
1. The statute as authoritatively construed by the State's highest court to tax storage, and not consumption, does not place an unconstitutional burden on interstate commerce. Edelman v. Boeing Air Transport, Inc., 289 U. S. 249; Nashville, Chattanooga & St. Louis R. Co. v. Wallace, 288 U. S. 249. Cases allowing the taxation of storage of fuel before loading have not outlived their usefulness. Pp. 410 U. S. 626-630.
49 Ill.2d 45, 273 N.E.2d 585, vacated and remanded.
BLACKMUN, J., delivered the opinion of the Court, in which BURGER, C.J., and BRENNAN, MARSHALL, POWELL, and REHNQUIST, JJ., joined. DOUGLAS, J., filed a dissenting opinion, in which STEWART and WHITE, JJ., joined, post, p. 410 U. S. 632. WHITE, J., filed a dissenting opinion, post, p. 410 U. S. 639.
United Air Lines, Inc., challenged the constitutionality of the Illinois general revenue use tax as applied to aviation fuel stored in Illinois and then loaded aboard aircraft there and consumed in interstate flights. The Supreme Court of Illinois upheld the state tax as currently applied, concluding that it did not impose an unconstitutional burden on interstate commerce. 49 Ill.2d 45, 273 N.E.2d 585 (1971). We noted probable jurisdiction. 405 U.S. 986 (1972). We now affirm that holding, but we vacate the judgment and remand the case for consideration of an issue under state law.
is delivered by common carrier and is held for periods ranging from two to 12 days in ground storage facilities maintained in Illinois by United. [Footnote 2] Fuel for both interstate and intrastate operations is delivered in the same manner. [Footnote 3] United voluntarily has paid the tax on fuel consumed in purely intrastate operations. Only the tax as applied to fuel used in interstate flights is in issue.
"temporary storage ends, and a taxable use occurs, when the fuel is taken out of storage facilities and is placed into the tank of the airplane, railroad engine or truck."
Thus, as the Illinois court described it, "all fuel loaded on United's planes at the two airports was deemed to measure the tax." 49 Ill.2d at 49, 273 N.E.2d at 587.
United's suit attacked the new interpretation on both state and federal grounds. All justices of the Supreme Court of Illinois agreed that the new interpretation did not run afoul of the Federal Constitution, but the justices disagreed over the applicability and validity of the "burn off" alternative discussed in the several opinions. 49 Ill.2d at 553, 56, 57-59, 273 N.E.2d at 587-589, 591-592.
application of the Illinois tax to all fuel stored in Illinois and loaded aboard United's aircraft for in-flight consumption.
In Edelman, the Court accepted the State's determination that the taxable event was withdrawal from storage, rather than consumption. 289 U.S. at 289 U. S. 251. The airline in Edelman contended, id. at 289 U. S. 252, that the state tax was invalid under Helson v. Kentucky, 279 U. S. 245 (1929). In Helson, the Court held that a Kentucky tax on the use of gasoline within the State fell too directly on interstate commerce when it was imposed on fuel loaded in Illinois but consumed in the course of an interstate ferry's trip through Kentucky. In Edelman, the Court distinguished Helson because storage, rather than consumption, was the taxable event. See Southern Pacific Co. v. Gallagher, 306 U. S. 167 (1939).
The Supreme Court of Illinois characterized the taxable "use" under the Illinois statute as either storage or withdrawal from storage. United argued in the state court that the temporary storage provision constituted a legislative waiver of the right to tax storage prior to loading. The Illinois court rejected this contention, noting that United stored fuel at the airport for general use.
"Under the circumstances, the 'storage' becomes something more than a 'temporary storage' for safekeeping prior to its use solely outside of Illinois. Such storage, under the plain words of the statute, does not qualify under the temporary storage exemption, and, as the authorities already discussed reveal, either the storage itself or the withdrawal therefrom are uses which may be taxed without offending the commerce clause of the Federal constitution."
This Court usually has deferred to the interpretation placed on a state tax statute by the highest court of the State. Scripto, Inc. v. Carson, 362 U. S. 207, 362 U. S. 210 (1960); General Trading Co. v. State Tax Comm'n, 322 U. S. 335, 322 U. S. 337 (1944). See Evco v. Jones, 409 U. S. 91 (1972). As in Edelman, we see no reason to ignore, or to disagree with, the state court's determination that the taxable event is storage, rather than consumption.
We hold that Edelman and Nashville support the conclusion of the Supreme Court of Illinois that this tax, as applied to all fuel withdrawn from storage for consumption in an interstate vehicle, does not place an unconstitutional burden on interstate commerce. Further, we decline to hold that Edelman has outlived its usefulness. [Footnote 6] We must concede that, for a long time, this area of state tax law has been cloudy and complicated, primarily because the varied nature of interstate activities makes line drawing difficult. This Court has established some precedents, however, and Edelman and Nashville remain useful guidelines.
necessity of considering the federal question. Beecher v. Alabama, 389 U. S. 35, 389 U. S. 37 n. 3 (1967); see C. Wright, Federal Courts § 107, p. 488 (2d ed.1970). Since the other justices of the Illinois court divided three to two on the state law issue, the votes of the two who felt bound by Helson could be determinative of the state issue. Under these circumstances, we proceed to consider the validity of the "burn off" rule in the light of Helson, as United has urged us to do. See Perkins v. Benguet Mining Co., 342 U. S. 437, 342 U. S. 441-443 (1952).
The facts in Helson are different from the facts here. In Helson, the operators of the interstate ferry boat purchased and took delivery of fuel in Illinois. The office, the place of business, and the situs of all the taxpayer's property were in Illinois. The boat crossed the Ohio River into Kentucky on regular runs, and Kentucky sought to impose a tax on the use of gasoline consumed in Kentucky. The Court invalidated the tax "computed and imposed upon the use of the gasoline thus consumed." 279 U.S. at 279 U. S. 248.
The use of a method of tax measurement that is intimately related to interstate commerce is not automatically unconstitutional. Tolls on the use of facilities that aid interstate commerce have been upheld even when measured by passengers or by mileage traveled on the highways of a State. Evansville-Vanderburgh Airport Authority District v. Delta Airlines, 405 U. S. 707 (1972); Interstate Busses Corp. v. Blodgett, 276 U. S. 245 (1928). Upon the facts before us, [Footnote 9] we see no constitutional barrier to the use of the "burn off" rule by Illinois to measure the tax imposed for storage before loading.
Since we now determine that the federal compulsion felt by two justices of the Illinois court is not warranted, we remand the case to avoid the risk of "an affirmance of a decision which might have been decided differently if the court below had felt free, under our decisions, to do so." Perkins v. Benguet Mining Co., 342 U.S. at 342 U. S. 443. We, of course, express no opinion on the construction of the temporary storage provision under state law.
Turbine (jet) fuel for use at O'Hare is shipped by common carrier pipeline from the supplier's Indiana terminals to a 15 million gallon storage facility at Des Plaines, Illinois. App. 168-169. Normally, three deliveries are made each month to this facility. App. 129. Smaller quantities of fuel are transferred by pipeline to facilities maintained by United at O'Hare.
Turbine fuel for use at Midway and aviation gasoline for both airports is transported from Indiana by common carrier tank truck to airport storage facilities. App. 159.
The parties have stipulated that the period of storage ranges from two to 12 days. App. 38. The Des Plaines storage facilities are not owned by United; it and another airline jointly lease the facilities. United shares in the cost of repairs, the risk of loss, and the employment of a managing agent. App. 132, 168.
App. 173-174. United uses fuel from the storage facilities for its intrastate training flights and for the intrastate leg of flights that stop at both Chicago and Moline, Illinois. 49 Ill.2d 45, 47-48, 273 N.E.2d 585, 586. United also engages in interstate charter flights. App. 37 n. 6.
"(d) the temporary storage, in this State, of tangible personal property which is acquired outside this State and which, subsequent to being brought into this State and stored here temporarily, is used solely outside this State or physically attached to or incorporated into other tangible personal property that is used solely outside this State."
"To put it another way, the legislature has stated that the temporary storage and the withdrawal therefrom are not taxable uses if the property in question is to be used solely outside the State. It is clear that, if United was to withdraw its fuel from storage at Des Plaines and the airports and transport it outside the State for use elsewhere, as, for example, at an airport in nearby Wisconsin, the exemption would apply, and neither the storage, nor the withdrawal, nor the transportation of the fuel outside the State would be uses subject to the tax."
49 Ill.2d at 55, 273 N.E.2d at 590. Under this view, all the fuel is "used" and subject to Illinois tax when it is temporarily stored or withdrawn from storage. The taxable event is nullified, however, if the fuel is transported from the State for consumption elsewhere.
Although this use of a subsequent event to define the effect of a prior event may appear somewhat unusual, the result may be said to be compelled, since fuel in transit may not be constitutionally taxed. See Michigan-Wisconsin Pipe Line Co. v. Calvert, 347 U. S. 157 (1954). A similar exemption for gasoline "exported or sold for exportation from the State" was present in the Wyoming statute challenged in Edelman v. Boeing Air Transport, 289 U. S. 249, 289 U. S. 250 (1933).
Amici have urged reconsideration of Edelman, arguing that it represents "a high-water mark in the Court's search in the early thirties for formulas that would assist states in finding additional sources of revenue." Brief for American Airlines et al. 13.
Although this is a general state tax, rather than a toll on commerce, this Court has recognized that interstate commerce can be "required to pay a nondiscriminatory share of the tax burden." Braniff Airways v. Nebraska State Board of Equalization, 347 U. S. 590, 347 U. S. 598 (1954). In Helson v. Kentucky, 279 U. S. 245 (1929), in contrast, the ferry boat was asked to bear more than its "nondiscriminatory share" when it was taxed only for passing through Kentucky waters.
Those justices of the Illinois court who relied on Helson did not consider, apparently, any interpretation of Helson that would prevent multistate taxation. They suggested that an adoption of the "burn off" rule would allow taxation by every State over which United's planes fly. 49 Ill.2d at 51, 273 N.E.2d at 588.
United successfully calculated and paid the state tax under the "burn off" interpretation for eight years. App. 41. No suggestion has been made that the recordkeeping procedures were an intolerable burden on commerce, or that special equipment must be installed to measure fuel consumption.
protective device this Court has used to keep the national channels of commerce open against hostile state legislation has been the constitutional ban on state taxation levied on interstate activities. In 1873, in Case of State Freight Tax, 15 Wall. 232, we held unconstitutional a state tax "so far as it applies to articles . . . taken up in the State and carried out of it. . . ." Id. at 82 U. S. 282. While there are ways in which interstate commerce can be required to pay its way, we have not until today abandoned the basic principle that a State may not tax interstate activities. That is what is done here, for the Illinois tax is levied on filling the fuel tanks of airplanes taking off for interstate or foreign journeys. If Illinois can tax that segment of the interstate activity, there is no reason why she may not tax the takeoff itself. The filling of fuel tanks to make an interstate or foreign journey is as indispensable a part and parcel of the interstate or foreign journey as using the runways for that purpose.
and is placed into the tank of the airplane, railroad engine or truck. At this point, the fuel is converted into its ultimate use, and, therefore, a taxable use occurs in Illinois."
The Supreme Court of Illinois upheld that construction and application of the use tax against the claim that it violates the Commerce Clause, saying that United's storage becomes something more than temporary storage for safekeeping "prior to its use solely outside of Illinois." 49 Ill.2d 45, 55, 273 N.E.2d 585, 590.
"[T]he temporary storage, in this State, of tangible personal property which is acquired outside this State and which, subsequent to being brought into this State and stored here temporarily, is used solely outside this State."
law and the Illinois court's interpretation thereof, it is the "consumption" wholly without the State that makes the exception operable. Conversely, I read the Illinois opinion to mean that, as a matter of state law, it is at least partial consumption within the State that brings the tax on all the fuel into play. That is so even if only a small portion of the fuel is consumed within the State, while the remainder is consumed out of State during an interstate or foreign flight. The inescapable conclusion from the state court's interpretation of this state law is that the act of loading the fuel into the fuel tanks of the interstate aircraft solely for use as the motive power is the taxable event.
If that event were used to tax fuel used on an intrastate flight, no problem under the Commerce Clause would arise. But loading is part of the interstate activity when planes prepare for an interstate journey, just as loading is a part of the shipment of goods by rail or water interstate (Puget Sound Stevedoring Co. v. Tax Comm'n, 302 U. S. 90, 302 U. S. 92-94; Joseph v. Carter & Weekes Stevedoring Co., 330 U. S. 422, 330 U. S. 427, 330 U. S. 433-434) and just as local pickups of parcels and local delivery of parcels in interstate movement are not permissible grounds "for a state license, privilege or occupation tax." Railway Express Agency v. Virginia, 347 U. S. 359, 347 U. S. 368.
In Richfield Oil Corp. v. State Board, 329 U. S. 69, we held invalid a state sales tax levied on the delivery of fuel oil into a ship for overseas carriage. We said "[t]he incident which gave rise to the accrual of the tax was a step in the export process." Id. at 329 U. S. 84. A like result was reached in Michigan-Wisconsin Pipe Line Co. v. Calvert, 347 U. S. 157, where a State sought to impose a severance tax on the transfer of gas from a refinery pipeline to an interstate pipeline. We noted that the "taxable incidence" was the taking of gas from a local plant "for the purpose of immediate interstate transmission."
Id. at 347 U. S. 161. We therefore held it unconstitutional, since it was a tax "on the exit of the gas from the State." Id. at 347 U. S. 167.
The present tax is analogous to the tax on the privilege of carrying on an exclusively interstate business which we struck down in Spector Motor Service v. O'Connor, 340 U. S. 602, 340 U. S. 608. A tax upon an integral part of interstate commerce is a tax that no State, by reason of the Commerce Clause, is empowered to impose, unless authorized by Congress. Id. at 340 U. S. 608.
The fuel in United's planes propels the interstate flights; because it is the source of the motive power, it is essential to the interstate journey. It is, therefore, indisputably a part and parcel of the interstate movement. McCarroll v. Dixie Greyhound Lines, 309 U. S. 176, involved an Arkansas statute which prohibited any truck or automobile from entering the State with more than 20 gallons of gasoline in its tank unless an excise tax were paid on the gasoline. The Court held the tax unconstitutional because it imposed a tax on "gasoline to be immediately transported over the roads of Arkansas for consumption beyond." Id. at 309 U. S. 180 (emphasis added). Similarly, Illinois imposes its tax on all of the fuel loaded into airplane tanks, whether or not that fuel is consumed out of State. In Helson v. Kentucky, 279 U. S. 245, on which the Illinois Supreme Court relied in disapproving the earlier construction of the statute, a ferry boat operated between Illinois and Kentucky, having its office in Illinois and buying all its fuel there. Kentucky sought to tax that portion of the fuel used in Kentucky. This Court invalidated the tax, saying it was "exacted as the price of the privilege of using an instrumentality of interstate commerce." Id. at 279 U. S. 252. If that tax is invalid, it follows a fortiori that Illinois may not tax the movement of airplanes from Illinois to California, from Illinois to Europe, or from Illinois to any other out-of-state point.
"which are aimed at or discriminate against [interstate] commerce or impose a levy for the privilege of doing it, or tax interstate transportation or communication or their gross earnings, or levy an exaction on merchandise in the course of its interstate journey"
are within the ban, since they may "so readily be made the instrument of impeding or destroying interstate commerce." 309 U.S. at 309 U. S. 48.
Sales within the State, however, are taxable, though the goods have reached the market by interstate channels. Magnano Co. v. Hamilton, 292 U. S. 40, 292 U. S. 43; McGoldrick v. Berwind-White Co., supra, at 309 U. S. 58. The sales tax in Berwind-White was on the "transfer of title or possession, or both," id. at 309 U. S. 43. And we sustained the tax because of "a local activity" which we described as "delivery of goods within the state upon their purchase for consumption," id. at 309 U. S. 58. As a consequence, an out-of-state buyer who purchases goods in New York City and takes them with him pays the tax, while if he has them shipped to him, he pays no sales tax.
confirmation and shipment into the State may not be. Nippert v. Richmond, 327 U. S. 416, 327 U. S. 422; West Point Grocery Co. v. Opelika, 354 U. S. 390. In Dunbar-Stanley Studio v. Alabama, 393 U. S. 537, a tax was sustained on out-of-state photographers, since their activities were not soliciting orders for an out-of-state house, but taking photographs within the State.
The use tax came into being to complement the sales tax, i.e., to fill in gaps where the States could not constitutionally tax interstate arrivals or departures. See Henneford v. Silas Mason Co., 300 U. S. 577, 300 U. S. 581. Thus, goods may be taxed at the end of their interstate journey, where the tax does not discriminate against interstate commerce. Id. at 300 U. S. 582-583; Felt & Tarrant Co. v. Gallagher, 306 U. S. 62 (use tax on storage, use, or other consumption); Southern Pacific Co. v. Gallagher, 306 U. S. 167 (storage and use). Use taxes imposed on storage or withdrawal from storage have consistently been sustained. Eastern Air Transport v. Tax Comm'n, 285 U. S. 147; Gregg Dyeing Co. v. Query, 286 U. S. 472; Nashville, Chattanooga & St. Louis R. Co. v. Wallace, 288 U. S. 249; McGoldrick v. Berwind-White Co., supra, at 409 U. S. 49.
"a direct imposition on that very freedom of commercial flow which, for more than a hundred and fifty years, has been the ward of the Commerce Clause."
Id. at 329 U. S. 256.
interstate planes." The tax was "applied to the stored gasoline as it is withdrawn from the storage tanks at the airport and placed in the planes." Ibid. "It is at the time of withdrawal alone that use' is measured for the purposes of the tax." Id. at 289 U. S. 252. (Italics added.) At that time, the gasoline was not irrevocably committed to interstate commerce, for it might be diverted to planes on intrastate journeys.
By contrast, the taxable event on which Illinois levies her tax is not storage for future use, or withdrawal from storage, but only loading in the tanks of planes preparing for interstate or foreign journeys. It is, therefore, inescapably a tax on the actual motive power for an interstate or foreign journey. Taxing the fuel loaded in a plane destined for an interstate or foreign journey is, in other words, taxing the privilege of using a facility in commerce, because the motive power [Footnote 2/3] represented by the fuel has become part and parcel of the facility. The decision today marks a break with our constitutional tradition, which, absent an Act of Congress, has led this Court consistently to hold that the free flow of interstate commerce is a ward of the Commerce Clause. Without that free flow of commerce, we would not have the great common market we enjoy today.
Ill.Rev.Stat., c. 120, § 439.1 et seq.
Edelman was distinguished in Southern Pacific Co. v. Gallagher, 306 U. S. 167, as involving a tax "upon events prior to the commerce," id. at 306 U. S. 176, the Court going on to say: "The principle illustrated by the Helson case forbids a tax upon commerce or consumption in commerce." Ibid.
The Illinois statute in question, Ill.Rev.Stat., c. 120, § 439.3 (1971), taxes the use of tangible personal property in Illinois, and "use" is defined as being the "exercise . . .
of any right or power over tangible personal property incident to the ownership of that property. . . ." Id., § 439.2. The Illinois Supreme Court held that, as applied in this case, the statute taxed either the storage or the withdrawal therefrom of aviation fuel. But the statute itself goes on to exempt from tax property temporarily stored in the State, withdrawn from storage, loaded on transportation facilities and transported for use solely outside the State. Id., § 439.3(d). For the tax to apply, the property must not only be stored and subsequently withdrawn, but must also be further used or consumed in the State. It is this actual use or consumption in the State after storage and withdrawal that triggers the tax. Thus, it was enough here to invoke the tax that the fuel was temporarily stored, withdrawn, loaded on interstate aircraft, and then partially used within the State. But Helson v. Kentucky, 279 U. S. 245 (1929), forbids taxing the use of gasoline consumed within the State on an interstate trip. And as for that portion of the fuel withdrawn from storage, loaded on an aircraft and consumed in another State, the exemption in the statute would seemingly cover it; but if the exemption itself is not to apply, Helson, a fortiori, bars the tax. Moreover, under the Due Process Clause of the Fourteenth Amendment, Illinois has no jurisdiction to tax the use of property occurring in another State. Norfolk & W. R. Co. v. Missouri State Tax Comm'n, 390 U. S. 317, 390 U. S. 324-325 (1968), and cases there cited.

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