Source: https://supreme.justia.com/cases/federal/us/262/506/
Timestamp: 2019-04-22 06:03:23+00:00

Document:
1. A state occupation tax, levied on all wholesale dealers in oil and measured by a percent of the gross amount of their respective sales made within the state, is not invalid as a burden on interstate commerce when applied to local sales in the original packages of oil previously shipped into the state and stored by the dealer as part of his stock in trade. P. 262 U. S. 508.
2. As regards immunity from state taxation, the distinction between imports and articles in original packages in interstate commerce is that, in the one case, the immunity attaches to the import itself before sale, while, in the other, it depends on whether the tax regulates or burdens interstate commerce. P. 262 U. S. 509.
Woodrufl v. Parham, 8 Wall. 123, followed. Standard Oil Co. v. Graves, 249 U. S. 389; Ascren v. Continental Oil Co., 252 U. S. 444; Bowman v. Continental Oil Co., 256 U. S. 642, and Texas Co. v. Brown, 258 U. S. 466, qualified.
of oil sold in the packages in which it had been originally shipped into the state.
This is an appeal from a decree of a United States district court under § 238, Judicial Code, in a case in which a law of Texas is claimed to be in contravention of the Constitution of the United States. The law in question is Article 7377 of the Revised Civil Statutes of Texas, approved May 16, 1907. Acts Tex.1907, p. 479. It provides that every individual, firm, or corporation, foreign or domestic, engaging as a wholesale dealer in coal oil or other oils refined from petroleum shall make a quarterly report to the state comptroller showing the gross amount, collected and uncollected, from any and all sales made within the state during the quarter next preceding, and that an occupation tax shall be paid by such dealer equal to 2 percent of the gross amount of such sales, collected or uncollected.
(1) Those from the sale of oil which, when sold, was not in Texas.
(2) Those from sales of oil to be delivered from Texas out of the state.
(3) Those arising from the sale of oil shipped into Texas and afterwards sold from the storerooms in unbroken original packages.
(4) Those from sales in Texas from broken packages.
The receipts from the first two classes amounted to $643,622.40, and the state authorities made no effort to tax them. The receipts from (4) amounted in the period named to $16,549.84, and appellants do not deny their liability for the tax thereon. The sales made under (3) of unbroken packages after their arrival in Texas and after storage in the warerooms or warehouse of appellants amounted to $217,179.10, and the tax on this, amounting to $4,674.58, is the subject of the contest here.
The question we have to decide is whether oil transported by appellants from New York or elsewhere outside of Texas to their warerooms or warehouse in Texas, there held for sales in Texas in original packages of transportation, and subsequently sold and delivered in Texas in such original packages, may be made the basis of an occupation tax upon appellants when the state tax applies to all wholesale dealers in oil engaged in making sales and delivery in Texas.
as property or upon its sale in the state, if the state law levied the same tax on all oil or all sales of it, without regard to origin, would be neither a regulation nor a burden of the interstate commerce of which this oil had been the subject.
This has been established so far as property taxes on the merchandise are concerned by a formidable line of authorities. Brown v. Houston, 114 U. S. 622; Coe v. Errol, 116 U. S. 517; Pittsburg Coal Co. v. Bates, 156 U. S. 577; Diamond Match Co. v. Ontonagon, 188 U. S. 82; American Steel & Wire Co. v. Speed, 192 U. S. 500, 192 U. S. 520; General Oil Co. v. Crain, 209 U. S. 211; Bacon v. Illinois, 227 U. S. 504.
"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 its inspection laws."
a license or occupation tax on the importer in Brown v. Maryland, 12 Wheat. 419, as against a personal property tax on a stock of wines of a wine dealer to the extent to which the stock included imported wines in the original packages. Low v. Austin, 13 Wall. 29, and as against an occupation tax on an auctioneer measured by his commissions on the sales of such imports, Cook v. Pennsylvania, 97 U. S. 566. When, however, the article imported is sold or is taken from the original package and exposed for sale, the immunity is gone. Waring v. Mobile, 8 Wall. 110; May v. New Orleans, 178 U. S. 496.
cases subsequent to Brown v. Maryland show that the analogy between imports and articles in original packages in interstate commerce in respect of immunity from taxation fails. The distinction is that the immunity attaches to the import itself before sale, while the immunity in case of an article because of its relation to interstate commerce depends on the question whether the tax challenged regulates or burdens interstate commerce.
brought in from, or transported to, foreign countries. The Court (p. 75 U. S. 140) further held that such a tax which did not discriminate against the sales of goods from other states, but was imposed upon sales of all merchandise, whether its origin was in Alabama or in any other state, was not "an attempt to fetter commerce among the states."
At the close of the opinion in Brown v. Maryland, Chief Justice Marshall made the remark "that we suppose the principles laid down in this case apply equally to importations from a sister state." This was pronounced in Woodruff v. Parham not to be a judicial decision of the question, but an obiter dictum.
While the opinion by Mr. Justice Miller in Woodruff v. Parham is chiefly devoted to showing that exports are limited to goods sent out of the country, the decision on the interstate commerce phase of the issue was most fully considered. The adverse view was pressed with all the learning and force of argument of John A. Campbell, formerly a Justice of this Court.
Immediately following Woodruff v. Parham is Hinson v. Lott, 8 Wall. 148, in which was at issue the validity of a provision of the Alabama law that, before it should be lawful for a dealer introducing spirituous liquors into the state to offer the same for sale, he must pay 50 cents a gallon thereon. The provision was sustained as not being an attempt to burden interstate commerce because, by another section of the same law, every distiller of the state was required to pay fifty cents a gallon on all liquor made by him, and the two sections were complementary in order "to make the tax equal on all liquors sold in the state."
vessel bound to a foreign port was held while awaiting sale to be subject to taxation by the state as property in Louisiana.
The case of Woodruff v. Parham has never been overruled, but has often been approved and followed, as the cases above cited show. As an authority, it controls the case before us, and shows conclusively that the tax in question is valid.
"But the goods not having been brought from abroad, they were not imported in the legal sense, and were subject to state taxation after they had reached their destination and whilst held in the state for sale,"
cases announced has never since been questioned. It has become the basis of taxing power exerted for years by all the states of the Union."
upon the basis of equal competition. Mr. Justice White, in his opinion in the American Steel & Wire Co. v. Speed, thus distinguished Leisy v. Hardin from the case then before the Court. The obstruction to interstate commerce in Leisy v. Hardin was like that in Schollenberger v. Pennsylvania, 171 U. S. 1, 171 U. S. 12, in Railroad Co. v. Husen, 95 U. S. 465, 95 U. S. 469, in Minnesota v. Barber, 136 U. S. 313, in Brimmer v. Rebman, 138 U. S. 78, in Scott v. Donald, 165 U. S. 58, 165 U. S. 97, in Vance v. Vandercook, No. 1, 170 U. S. 438, and in American Express Co. v. Iowa, 196 U. S. 133.
commerce includes the purchase quite as much as it does the transportation. American Express Co. v. Iowa, 196 U. S. 133, 196 U. S. 143."
But this language has no relevancy to show that a tax without discrimination on goods after the transportation ceases is a burden on interstate commerce, a proposition negatived in the American Steel & Wire Co. case it cites, or that a different rule should apply to an ad valorem property tax from that in case of a tax on sales.
Many of the sales by the appellants were made by them before the oil to fulfill the sales was sent to Texas. These were properly treated by the state authorities as exempt from state taxation. They were in effect contracts for the sale and delivery of the oil across state lines. The soliciting of orders for such sales is equally exempt. Such transactions are interstate commerce in its essence, and any state tax upon it is a regulation of it and a burden upon it. Robbins v. Shelby County Taxing District, 120 U. S. 489; Asher v. Texas, 128 U. S. 129; Stoutenburgh v. Hennick, 129 U. S. 141, 129 U. S. 147; Caldwell v. North Carolina, 187 U. S. 622; Rearick v. Pennsylvania, 203 U. S. 507; Brennan v. Titusville, 153 U. S. 289; Dozier v. Alabama, 218 U. S. 124; Crenshaw v. Arkansas, 227 U. S. 389; Stewart v. Michigan, 232 U. S. 665; Western Oil Co. v. Lipscomb, 244 U. S. 346.
So too, a tax upon the gross receipts from interstate transportation or transmission, whether receipts from intrastate transportation or transmission are equally taxed or not, is an unlawful tax because a direct burden upon interstate commerce. Case of State Weight Tax, 15 Wall. 232, 82 U. S. 276-277; Fargo v. Michigan, 121 U. S. 230, 121 U. S. 244; Philadelphia & So. Steamship Co. v. Pennsylvania, 122 U. S. 326, 122 U. S. 336; Leloup v. Port of Mobile, 127 U. S. 640, 127 U. S. 648; McCall v. California, 136 U. S. 104, 136 U. S. 109; Galveston, Harrisburg & San Antonio Ry. Co. v. Texas, 210 U. S. 217, 210 U. S. 227; Crew Levick Co. v. Pennsylvania, 245 U. S. 292.
A state tax upon merchandise brought in from another state or upon its sales, whether in original packages or not, after it has reached its destination and is in a state of rest is lawful only when the tax is not discriminating in its incidence against the merchandise because of its origin in another state. This distinction is illustrated in the difference between those cases which uphold the validity of a tax upon peddlers engaged in selling merchandise from out of the state which they carry with them, like those of Machine Co. v. Gage, 100 U. S. 676; Ement v. Missouri, 156 U. S. 296; Baccus v. Louisiana, 232 U. S. 334, and Wagner v. Covington, 251 U. S. 95, on the one hand, and that of Welton v. Missouri, 91 U. S. 275, in which a peddler's tax was held bad because it was levied only on goods from other states, on the other. Ward v. Maryland, 12 Wall. 418, 79 U. S. 429; Guy v. Baltimore, 100 U. S. 434, 100 U. S. 442-443; Tierman v. Rinker, 102 U. S. 123; Webber v. Virginia, 103 U. S. 344, 103 U. S. 350, and Walling v. Michigan, 116 U. S. 446, are other instances showing the invalidity of state tax laws discriminating against merchandise brought in from other states.
Appellants' chief argument to sustain their contention that a sale of merchandise in the original package made after it is brought into the state from another state is exempt from state taxation is based upon the language of the opinions in certain recent cases in this Court. They are Standard Oil Co. v. Graves, 249 U. S. 389; Askren v. Continental Oil Co., 252 U. S. 444, Bowman v. Continental Oil Co., 256 U. S. 642, and Texas Co. v. Brown, 258 U. S. 466.
"In this case, the amended complaint alleges that the oils were shipped into Washington from California. They are brought there for sale. This right of sale as to such importations is protected . . . by the federal Constitution, certainly while the same are in the original receptacles or retainers in which they are brought into the state."
"We reach the conclusion that the statute imposing these excessive inspection fees in the manner stated upon all sales of oils brought into the state in interstate commerce necessarily imposes a direct burden upon such commerce, and is therefore violative of . . . the federal Constitution."
There is nothing in the statement of the case to show the details of the importations of oil, and nothing to indicate how much, if any, of the oil imported had been ordered before shipment into the state, or how much sold after importation. The remark of the Court as to original receptacles or retainers therefore is not shown to have been necessary to the conclusion.
The case of Askren v. Continental Oil Co. involved the validity of a law, called an inspection law, imposing a license tax upon those selling gasoline in the state, and an excise tax of 2 cents a gallon on the sale or use of it. The inspectors' duties were to see to the execution of the act and the excess of receipts after payment of their salaries and expenses went into the road fund of the state. The case was decided on the averments of the bill, which described complainant's business of two kinds: first that of selling oil to customers in tanks, and also in barrels and packages containing not less than two 5-gallon cans, without breaking them, and second of selling gasoline from such tanks and cans in quantities desired by the purchaser. There was nothing to show whether the first kind of business was done on orders lodged before importation or after.
"As to the gasoline brought into the state in the tank cars, or in the original packages, and so sold, we are unable to discover any difference in plan of importation and sale between the instant case and that before us in Standard Oil Co. v. Graves, 249 U. S. 389, in which we held that a tax, which was in effect a privilege tax, as is the one under consideration, providing for a levy of fees in excess of the cost of inspection, amounted to a direct burden on interstate commerce. In that case, we reaffirmed what had been often adjudicated heretofore in this Court -- that the direct and necessary effect of such legislation was to impose a burden upon interstate commerce; that, under the federal Constitution, the importer of such products from another state into his own state for sale in the original packages had a right to sell the same in such packages without being taxed for the privilege by taxation of the sort here involved."
If the orders for such sales in original packages were given before importation, the conclusion reached by the court that they were protected against an excise or license tax is in accord with all of the cases already cited, though the fact that they were delivered in the original packages would not give them any additional immunity. It should be noted that, in this opinion, the case of Wagner v. Covington, 251 U. S. 95, is quoted approvingly and followed, although in that case a tax was upheld on merchandise brought in from Ohio by the seller and sold there in the original packages. In the absence of specification as to when ordered, we cannot be sure that the case was wrongly decided, but only that the language used contained implications which cannot be sustained.
"upon sales of gasoline brought from without the state into the State of New Mexico and there sold and delivered to customers in the original packages, whether tank cars, barrels, or other packages, and in the same form and condition as when received by the plaintiff in that state."
If this covered gasoline that was ordered by the purchaser before importation, it was right. If it covered gasoline, whether in original packages or not, which was sold after it reached its destination, then it is not in accord with the law as we understand it to be under the authorities we have cited. There is nothing in the case as disclosed either in the statements of facts in the Askren or the Bowman case to show what the fact was in this regard.
"Appellant insists that Standard Oil Co. v. Graves, 249 U. S. 389, is inconsistent with the imposition of inspection fees on a revenue basis upon goods brought from another state, however held or disposed of in Georgia. That decision, however, extended the exemption from such fees of goods brought from state to state no further than 'while the same are in the original receptacles or containers in which they are brought into the state' (pp. 249 U. S. 394-395), and so it was interpreted in Askren v. Continental Oil Co., 252 U. S. 444, 252 U. S. 449."
Upon full consideration and after a reargument, we cannot think this extension of the exemption referred to, if intended to apply to oil sold after arrival in the state, to be justified either in reason or in previous authority, and, to this extent, the opinions in the cases cited are qualified.
The cases all involved the validity of statutes providing for excessive inspection fees and the question of saving the statute as an excise law applicable to part of the sales of the oil was an incidental one. The facts upon which the line between taxable and nontaxable sales could be correctly drawn do not appear fully in any of the cases, or to have been discussed by counsel. This is what has led to a confusion as to the real distinctions, and to observations in the opinions which, unless much restricted in their application, constitute a departure from theretofore established principles.
"The merchant of Chicago who buys his goods in New York and sells at wholesale in the original packages may have his millions employed in trade for half a lifetime and escape all state, county, and city taxes, for all that he is worth is invested in goods which he claims to be protected as imports from New York. Neither the state nor the city which protects his life and property can make him contribute a dollar to support its government, improve its thoroughfares, or educate its children. The merchant in a town in Massachusetts who deals only in wholesale, if he purchases in New York, is exempt from taxation. If his neighbor purchase in Boston, he must pay all the taxes which Massachusetts levies with equal justice on the property of all its citizens."
This argument is as strong today as when it was written, and it would be a source of confusion and injustice if, through too broad expressions in a few opinions, a different conclusion from that to which it should carry us were to obtain.
I am unable to concur in all said to support the conclusion adopted by the Court. To me, the result seems out of harmony with the theory upon which recent opinions proceed. There is unfortunate confusion concerning the general subject, and certainly some pronouncement that can abide is desirable.
for purposes of taxation, we will hold interstate commerce ends when an original package reaches the consignee and comes to rest within a state, although intended for sale there in unbroken form. It may be said that the effect on interstate commerce is not substantial and too remote notwithstanding the rather clear logic of Brown v. Maryland, 12 Wheat. 419, to the contrary and the much discussed theory respecting freedom of interstate commerce from interference by the states, announced and developed long after Woodruff v. Parham, (1868) 8 Wall. 123. Logic and taxation are not always the best of friends.

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