Document: 373 U.S. 64 83 S.Ct. 1201 10 L.Ed.2d 202 HALLIBURTON OIL WELL CEMENTING COMPANY, Appellant,v.James S. REILY, Collector of Revenue, State Louisiana. No. 24. Reargued Dec. 3, 1962. Decided May 13, 1963. Rehearing Denied June 17, See 374 858, 1861. Benjamin B. Taylor, Jr., Baton Rouge, La., for appellant. Chapman L. Sanford, appellee. Mr. Chief Justice WARREN delivered the opinion Court. 1 The sole issue before us is whether Louisiana use tax, as applied to appellant, discriminates against interstate commerce in violation Commerce Clause Constitution. 2 sales and taxes follow basic pattern approved by this Court Henneford v. Silas Mason Co., 300 577, 57 524, 81 L.Ed. 814. Revised Statutes, Tit. 47, § 302, LSA, provides imposition a tax '(a)t rate two per centum (2%) price each item or article tangible personal property when sold at retail state * *.'1 It imposes another cost prices same not but used *.'2 This latter commonly known be reduced amount any similar paid on different State. La.Rev.Stat.Ann. 47:305. As noted Supreme below Mason, purpose such sales-use scheme make all consumed subject uniform burden irrespective it acquired within State, making from without rate. appellant admits validity scheme. contends, however, that case has departed norm equality greater solely because uses brought out-of-state. difference admitted 3 facts were stipulated parties. engaged business servicing oil wells number producing States, including Its requires specialized equipment well cementing trucks electrical logging trucks. These their are generally available market, manufactured its principal place Duncan, Oklahoma. raw materials semifinished finished articles necessary manufacture these units open market assembled employees. completed tested Duncan then assigned specific field camps maintained assignment permanent unless better unit can made camp. None held sale third 4 Between January 1, 1952, 31, 1955, shipped new In returns filed years, calculated upon value manufacturing units. did include calculations labor shop overhead attributable assembling factor would have been taxed had rather than stipulation stated: 5 'If Halliburton purchased materials, operated shops, incurred Labor Shop Overhead expenses location Louisiana, there due Use Tax outside Louisiana; no Overhead.' 6 Nevertheless, September appellee, assessed deficiency $36,238.43 taxes, interest, was required language section statute which levies 2% 'cost price' item, being defined an earlier actual deductions account 'labor service cost, other whatsoever.' 47:301(3). 7 Also during period, 14 Spartan Tool Service Company Houston, Texas. regularly after deciding liquidate business. transferred On one occasion, airplane Western Newspaper Union New York, company selling airplanes. plane No declared subsequent transfer items acquisitions they taxed. occasioned fact applies only isolated those involved. $4,404.22 since goods imported out-of-state contains equivalent distinction between sales. 8 under protest action District Nineteenth refund pursuant 47:1576, alleging unequal discrimination commerce. found assessment discriminatory. appeal, reversed, holding unreasonable distinctions classifications drawn statute, incidental discrepancy 241 La. 67, 127 So.2d 502. appeal Court, we probable jurisdiction. 368 809, 82 60, 19. first argued October Term 1961. We subsequently ordered reargued. 369 835, 865, 841. I. 9 long line cases attacking taxation unduly burdening stated Best & Co. Maxwell, 311 454, 455—456, 61 334, 335, 85 275: 'In our duty determine attack, whatever name may be, will practical operation work commerce.' concern with actuality operation, dominant theme running through cases, extends every aspect operations. Thus, Nippert Richmond, 327 416, 66 586, 90 760, City Richmond placed fixed fee earnings itinerant solicitors city. face, ordinance in-state distributors doing means solicitors. noted, very distributor makes his of, dependence on, more likely. 'the local trade, taken conjunction inherent character application classes commerce, speaking, impossible.' 432, 594. concluded 'discriminatory favor merchant one.' 431, 593. Considered isolation, discriminatory; intended apply primarily Louisiana.3 If stood alone, invalid. However, proper analysis must take whole into account.' Galveston, H. S.A.R. Texas, 210 217, 227, 28 638, 640, 52 1031; Gregg Dyeing Query, 286 472, 479—480, 631, 634, 76 1232. supra, compared solicitation merchants finding U.S., 456. Memphis Steam Laundry Cleaner, Inc., Stone, 342 389, 394—395, 72 424, 427, 96 436; cf. Phillips Chemical Dumas School District, 361 376, 80 474, 384. When 814, reached considered Washington context part, 'compensating tax' complement tax. So considered, concluded: 'Equality runs sections statute. who buying exempt privilege enjoyment except extent he somewhere.' 'upon activity incident,' another, sum reckoning closed.' acquisition 'is balanced equal where strictly local.' 583—584, 527. 11 conclusion inescapable: treatment taxpayers similarly situated condition precedent valid 12 inequality manufacturer-users admitted. Although same, appellant's base increased inclusion product's overhead. characterized incidental. purposes competition flow measured dollars cents, legal abstractions.4 'incidental discrepancy'—the dispute—amounts $1,547,109.70. risen some States 4%.5 resulting clearly substantial. 13 But even accepting this, comparison way frame equality. 'The if sold.' basis comparison, manufacturer-user footing respect retailer competitor buys own. excludes consideration, explanation, taxpayer most manufacturer-user. Legislature concerned over break obtains, surely special arrangements care loophole—unless, course, discriminate. conclude, therefore, record manufacturer-users. And discloses discriminatory effects, could ignored showing adequate justification. While question accident statutory drafting, does strike significant segment economic carries effects type proscribed many previous cases. manufactures specially adapted expensive; limited custom production, necessarily factor. Activity often forefront development methods yet reach standardization acceptance mass production. impose additional operations, disparate incentive locate tend 'to neutralize advantages belonging origin.' Baldwin G.A.F. Seelig, 294 511, 527, 55 497, 502, 79 1032. Disapproval result implicit dealing merchant,' also encourages operator become resident order compete terms.6 structures adopted unlikely affirming here, widespread. single assembly plant multistate activities decreased sent residence. At best, encourage operations largest worst, fractionalization discontinuance. Clearly, approval 'invite multiplication preferential trade areas destructive Clause.' Dean Milk Madison, 340 349, 356, 71 295, 299, 95 329.7 15 light considerations see reason depart strict rule conclude 16 A disposition follows matter course. baldly Court: exemption provisions effect whatsoever transaction state.' sale, concludes, therefore treated 'as if' retail. indicate, involve second-hand users. users wish dispose situated. Whatever Legislature's reasons granting market,8 attempt justify show how defeated extending transactions.9 departs 17 Thirty-five statutes. juncture, according parties, adopt constructions presented decision case. Those few issues appear rejected position accord here. Both Ohio North Dakota administrative regulations excluded ground might violate Clause.10 Chicago Bridge Iron Johnson, 19 Cal.2d 162, 119 P.2d 945, California upheld manufacturer-user,expressly pointing out base, competitor. parties able find passing directly either question. Bay Towing Dredging 265 Ala. 282, 743, Alabama instate extended avoid 18 judgment reversed remanded further proceedings inconsistent opinion. Reversed remanded. 20 BRENNAN, concurring. 21 I fully concur insofar treats seems clear exempts purchase which, bought in, eventually incur my Brother CLARK finds assured credit already me wholly fortuitous. prior avert casual purchaser Louisiana's so effective. abroad smaller amount, incurs liability escaped identical exempted justification suggested, think none beyond mere possibility convenience. 22 agree that, circumstances case, constitutionally impermissible. not, think, ensure absolute taxpayers. For sustained constitutionality compensating system, though likely ultimately heavier counterpart, taxpayer. Such disparity result, identical, seller somewhat likelier absorb part salestax customer pay. Warren Schlesinger, Sales Taxes: Interstate Pays Way, 38 Col.L.Rev. 49, 70—74 (1938). intimated, 587, obliged imposes. Note, 51 Harv.L.Rev. 130, 132—133 (1937). Constitution mandate sales, assuredly forbid States. Discrimination rates imposed here while full there. 23 follow, nor do read Court's holding, today's option practice Ohio, Dakota, California, pp. 74—75, exclude That offset purchasers, thereby deter domestic consumers seeking evade purchasing state. recognized alternative levy end.' 582, 526; Hartman, Taxation (1953), 162 163. Thus chooses equipment, come rest value. Since use-tax fail inevitability CLARK's prediction 'this deprive millions tax.' holds cannot now does; use' rates. Nothing view prescribes particular manner obey 24 CLARK, whom BLACK joins, dissenting. 25 strikes down assemblers nates move products therein. permits assembler product lower exacted residents damage structure revealed amici curiae briefs Thomas Jordan, rents barges others They built shipyards Jordan claims brings barge went barge, product. fabricates steel plates ships them should components plates. Sperry Rand Corporation, subsidiary Remington Rand, office furniture customers. wood, metal, lacquers, etc., going furniture. Humble Oil Refining fabricate, certain erected Humble's refinery Rouge structures. American Can machinery machines. And, finally, Rosson-Richards Processing wire wraps coats iron pipe transports laid gas pipelines. pipe. 26 predicated proposition pays entering like parts thereof. end test persons alike. Royster Guano Virginia, 253 412, 415, 40 560, 561, 989 (1920). said protection denied operates alike fallacy ignores incidence Act. moment becomes matters what happens subsequently. attaches form time. true both plates, furniture, structures, machinery, wrapped pipes just moved levied. thus given Likewise nuts bolts put together truck pay transaction. Again, Halliburton, property. law described 584, 527 (1937): 27 'When up, stranger afar burdens consequence ownership dweller gates. incident, closed. Equality exists chattel subjected carried Washington. origin received destination. situation borne owner look taxable event. require trace bolts, ultimate form—a truck—if wished Halliburton. This, impossible standpoint enforceable. addition, changes Nuts former became truck. 29 believe tax.1 Every sizable having facilities own requirements buy fabricated Louisiana—just Humble, amici—and bring use. Instead paying will, interpretation, lesser various 30 Act specifically Property exempted. allowed result. 'property involved herein state,' 91, taxing authorities unequivocally represented credits claimed proven. promise State's face value.2 31 these, affirm. Emphasis added. fact, consideration led trial court Henneford, D.C., F.Supp. 958, 962, rev'd bills former, $50 license laundry soliciting picking up Mississippi laundries $8 latter, determinative $1 $250 solicitor. Michigan, Pennsylvania, 4% taxes. P—H 1963 Fed.Tax Serv. 13,299. collected p. 392, n. 7, 426. Madison passed requiring milk pasteurization plants five mile radius ease problem health inspection. insuring standards, locational requirement dissent saw restriction: 'As matter, far shows, easily comply whenever wants to. Therefore, Dean's preference pasteurize Illinois, ordinance, keeps Madison.' 357, S.Ct., 299. 'personal preference' essence national unrestricted market. If, striking justifications Oklahoma, multipasteurization free disappear eyes. Justification system presumed clause itself. appellee argues originally imported, whereas assurance ever burden. maintains taxation. supported appellee's position, carefully considered. shown providing deduction sale; evidence irrelevant; above-quoted statement leaves little room modification. issue, difficult calculating enforcing transaction, extension satisfy Clause. overhead, approach factors recorded books. CCH Rep., Cir. 18, Mar. 1954, 60371.70; Commission, Rules Nos. 113. Moreover, 581, 526, Washington, recognizing latent inequality, manufacturer-user: presupposes everywhere user time himself, title elsewhere.' appraisal 526: plan embodied neither hidden uncertain. readily perceived. One sellers helped terms dealers states corresponding Another effect, least tendency, likelihood drain revenues state, buyers longer tempted orders effort escape payment sales.' My BRENNAN 47:305 situations. interpreting Act, collector brief 'for state' insure perfect *' demonstrated construing applications, Fontenot S.E.W. Corp., 232 1011, 638 (1957), BRENNAN'S anticipation future applications Cf. Monamotor 292 86, 95—96, 54 575, 578, 78 1141 (1934).

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