Court Opinion

ID: 3893515
Source: CourtListenerOpinion
Date Created: 2016-07-06 09:24:32.682512+00
Date Added: 2024-06-11T08:41:40.912791
License: Public Domain

Complainant, a Tennessee corporation engaged in the business of distributing gasoline and other petroleum products, with its principal place of business at Dyersburg, Tennessee, seeks by its bill herein to recover $25,510.51 gasoline tax paid by it under protest. The chancellor granted the relief sought and defendant has appealed to this court and assigned errors.
                       DISSENTING OPINION.
The first question presented for determination is the liability of complainant for the seven cent tax on gasoline *Page 686 
sold by it to E.R. Moody and Thomas Browder.
Section 1140 of the Code of Tennessee as amended by Chapter 130, Public Acts 1933, is as follows:
"Gasoline or distillate not previously the subject of an original sale in this State, stored in this State for export to points outside the State, shall not be included in the measure of the tax liability of any distributor or dealer; provided that such gasoline or distillate is stored in a separate tank marked `export tank'; Provided that a bond is executed by the distributor or dealer that in the opinion of the Commissioner of Finance and Taxation adequately protects the State against loss of tax in case said gasoline or distillate is not subsequently exported outside the State; Provided that gasoline or distillate stored for export longer than a period of sixty days must be included in the measure of the tax liability of the distributor or dealer so storing such gasoline or distillate."
Gasoline or distillate stored in conformity with the provisions of the above statute "for export . . . outside the state" is specifically excluded from the measure of the tax. TexasCompany v. McCanless, Commissioner, 177 Tenn. 238,148 S.W.2d 360. Admittedly, the gasoline sold Moody and Browder was from complainant's export tank and was intended by both complainant and the two purchasers for export outside the State of Tennessee.
Within the sixty-day period fixed by the statute, complainant sold gasoline, tax free, to Moody and Browder and delivered the same from its export tank into trucks of the purchasers, with the understanding that the gasoline sold Moody would be transported by him to Cottonwood Point, Missouri, to be sold there, and that the gasoline sold to Browder would be transported by him *Page 687 
to his bulk station in Kentucky and sold there. The evidence shows, without contradiction, that Moody and Browder did, in fact, transport the gasoline by the trucks into which it had been loaded at complainant's export tank, to the respective points in Missouri and Kentucky and then sold after the payment of the gasoline tax imposed by the respective states.
The contention of the state, in brief, is that Code 1140, as amended, should be construed to exempt sales only when exported by the storer in railroad tank cars, common carrier by truck, or by the storer's own tank trucks. The language of Code, sec. 1140, as amended, is not, in my opinion, susceptible of such construction. There is nothing in the statute that can properly be construed as requiring that the gasoline sold from out of the export tank be transported out of the state in any particular manner, or by vehicle of any particular character or ownership. It is competent, under the statute, for the storer to consummate a sale of gasoline at the export tank for export outside the state by the purchaser. In such case, the purchaser can make his own choice of the method of transportation. The fact that he elects to transport the gasoline in his own trucks is immaterial. What the statute requires is that the gasoline be exported to points outside the state within sixty days in order that it shall not be included in the measure of the tax. Under the statute, the storer is required to give a bond to protect the state against loss of tax in case the gasoline is not exported outside the state.
It seems clear to me that if gasoline sold from the export tank be transported by the purchaser, by any method whatsoever, from the export tank to a point outside the state, there is full compliance with the requirements of the statute. The ownership of the vehicle *Page 688 
in which the transportation is had is immaterial and of no importance.
The basis of defendant's contention that gasoline cannot be sold tax free to a purchaser for export outside the state in trucks belonging to the purchaser, is that such method of transportation opens the door to fraud, in that the purchaser might not transport the gasoline outside the state, or that he might transport the gasoline out of the state and then bring it back into this state for sale here. The same opportunity for fraud can be imagined regardless of the ownership of the vehicle used in the transportation of the gasoline. It is not claimed that Moody and Browder practiced such fraud or that anybody else has. If, however, such fraud could be perpetrated, it would not warrant the court in amending the statute by reading into it a provision that exporting of the gasoline outside the state had to be by means of a common carrier, or by vehicles owned by the storer.
Counsel for defendant lean heavily on the case of Superior OilCo. v. Mississippi, 280 U.S. 390, 50 S.Ct., 169, 74 L.Ed., 504. The question in that case was whether or not the gasoline on which the tax was claimed was moving in interstate commerce. The case is not in point with the case at bar. Here the question of complainant's liability for the tax depends for its solution upon the construction of Code, sec. 1140, as amended. Other cases relied on by defendant are inapplicable for the same reason.
The legislature doubtless understood the advantage to Tennessee in building up a commerce in gasoline in the state, and realized that if gasoline exported from Tennessee to points outside the state to be taxed both in Tennessee and in the state in which it was received and finally distributed to consumers that it would be impossible *Page 689 
to have any gasoline distributing business in Tennessee at all. Therefore it was enacted that the storer of gasoline should not be taxed on such gasoline as was sold for export and actually exported.
It is my opinion that complainant is not liable for the tax on the gasoline sold Moody and Browder and that the decree of the chancellor should be affirmed.
                       UNANIMOUS OPINION.
Sales of gasoline to Obion County Board of Education. The chancellor found that material facts with reference to these sales to be as follows:
"Complainant on learning that the Obion County Board of Education was seeking means by which it might purchase tax free gasoline for the use of its school busses and other purposes incident thereto, contacted the Superintendent of Education and an arrangement was made whereby complainant leased to the said Obion County Board of Education a 12,000 gallon storage tank, being one of four located at its bulk plant at Union City, Tennessee, for $1.00 and other considerations. Complainant agreed to procure gasoline for the said Board of Education at cost plus freight, storing same in the leased tank, and to deliver it on the orders of the Superintendent of Education at a charge of two cents per gallon for such delivery. On receipt of an order from said Board of Education complainant would order a car of gasoline from the Shell Petroleum Corporation to be shipped to Obion County Board of Education, and the gasoline would then be shipped by the Shell Petroleum Corporation from its Wood River Refinery in the State of Illinois, consigned to Obion County Board of Education and invoiced `sold to' Tennessee Oil Corporation, Dyersburg, Tennessee, and `shipped to' Obion County Board of Education. *Page 690 
Said gasoline when received was stored in the leased tank.
"The complainant insisted on payment for the gasoline so shipped immediately after each car was unloaded and it billed the Obion County Board of Education for the market cost of the gasoline, freight, and delivery charges, and these amounts were paid by the said Board of Education to the complainant. The Shell Petroleum Corporation charged the gasoline to the account of the complainant and complainant paid said corporation as billed.
"It appears that no gasoline was placed in said leased tank except that shipped to the said Board of Education, and that no gasoline was sold therefrom or was delivered therefrom except that delivered as directed by the Superintendent of Education, and duplicate receipts were taken when the gasoline was delivered, one going to the office of the complainant and one to the Superintendent of Education. The proof further shows that none of said gasoline contained in said leased tank was ever inventoried as stock of the complainant company."
There was never any question on the part of the parties to the transaction that the gasoline was to be tax free and was to be brought from outside the state in interstate commerce.
The state insists that the arrangement made was in violation of a regulation promulgated by the Department of Finance and Taxation on April 16, 1931, and that because of such regulation complainant is liable for the gasoline tax on the gasoline delivered to the Obion County Board of Education. This regulation is as follows:
"Arrangements entered into between counties or cities and Distributors or Dealers in gasoline, and substitutes therefor whereunder Distributor or Dealer loans, or rents *Page 691 
storage facilities adjoining, adjacent to or communicating with commercial storage used by said Distributor or Dealer, or whereunder commercial delivery facilities are made available, for a fixed consideration or a consideration included in brokerage or price of gasoline, to counties or cities by Distributor or Dealer or whereunder commercial unloading facilities are made available for, or without consideration, to counties or cities by Distributor or Dealer do not constitute a substantial compliance with regulations relating to handling of gasoline and substitutes therefor in interstate commerce, and gasoline, and substitutes therefor, so handled must be included in measure of the tax levied under Chapter 58, Public Acts of 1923 and Acts amendatory."
The chancellor found and decreed that, "The failure to observe said departmental regulation cannot operate to make complainant liable for the tax on said gasoline while it was moving in interstate commerce, and when it came to rest it was the property of Obion County Board of Education."
Counsel for the state concede that gasoline shipped in interstate commerce directly to a county or city and used by such governmental unit for governmental purposes is exempt from the gasoline tax. State ex rel. v. Southern Oil Service,174 Tenn. 232, 124 S.W.2d 704; State v. Hamilton County,176 Tenn. 519, 144 S.W.2d 749. But, it is insisted the gasoline must be shipped to the governmental unit and controlled by it. The determinative question is: To whom does the gasoline belong when it comes to rest in the State of Tennessee? If it belongs to the governmental unit, it is exempt from taxation. The fact that the gasoline here in question was delivered into a tank leased from complainant rather than into a tank owned by the County Board of Education is immaterial. The delivery made passed title to *Page 692 
the County Board of Education and complainant's connection thereafter with the gasoline was merely that of agent of the Board to make deliveries as directed by the Board.
The state seeks to impose a tax on the gasoline in question, not under any right or power conferred by statute, but under the departmental regulation set out above. It has long been the rule in this state that municipal property is not taxable unless expressly made so by statute. Smith v. City of Nashville,88 Tenn. 464, 12 S.W. 924, 7 L.R.A., 469; State ex rel. v. Cityof Jackson, 172 Tenn. 119, at page 124, 110 S.W.2d 323, and other like cases. The Obion County Board of Education cannot be indirectly taxed by the Department of Finance and Taxation through regulations. Furthermore, it is difficult to see how this regulation could deprive the gasoline in question of its interstate character.
Without further elaboration, suffice it to say that the chancellor did not err in holding complainant not liable for the tax on gasoline purchased and delivered to the Obion County Board of Education.
A majority of the court is of the opinion that complainant is liable for the tax on the gasoline sold Moody and Browder. The result is that the decree of the chancellor is reversed as to the tax on the Moody and Browder gasoline and affirmed as to the tax on the gasoline purchased by the Obion County Board of Education. The costs of the cause will be paid one-half, each, by complainant and defendant.