Court Opinion

ID: 9884730
Source: CourtListenerOpinion
Date Created: 2023-10-06 03:10:02.8777+00
Date Added: 2024-06-11T07:48:40.395332
License: Public Domain

Mr. Justice; Schabee;r, dissenting: Section 2 of the act, which is quoted in the court’s opinion, makes it clear that the issue here is whether this tax is forbidden by the commerce clause of the Federal constitution or by Federal statute. That issue is not determined by deciding simply that Mississippi’s activities constitute a “business in interstate commerce.” The court’s treatment of the case leaves out of account the fact that the validity of similar taxes has often been decided in terms of their economic effect and their tendency to impose undue burdens upon interstate transactions. See Powell, More Ado About Gross Receipts Taxes, 60 Harv. L. Rev. 501, 710; Barrett, State Taxation of Interstate Commerce, 4 Vand. L. Rev. 496. There are, I think, significant characteristics of this tax and of the transactions before us which have been overlooked. This tax cannot discriminate against interstate commerce, for it applies to all sales of gas for use or consumption. Nor does this tax give rise to any possibility of multiple taxation, for the taxable event is the sale “for use or consumption and not for resale.” The transaction which gives rise to tax liability is thus the transaction which terminates all commerce, interstate and intrastate. Under its contracts with its industrial customers Mississippi has undertaken to maintain equipment in Illinois. It owns and services equipment inside the plants of its industrial customers for the purpose of carrying out these contracts. The purchaser pays only for what is delivered at its local plant in Illinois; all of the risks of loss in transit are borne by Mississippi. Mississippi holds a franchise from the State of Illinois to engage in business in Illinois. The tax here involved is not measured by gross receipts upon all of Mississippi’s sales of gas in Illinois, but only by receipts from those sales which are for use or consumption and which thus eliminate the gas as a future subject of commerce. In its sales to industrial consumers which are here involved, Mississippi competes directly with public utilities which are unquestionably subject to the tax when they sell gas'to their customers. Instead of discriminating against interstate commerce, the present tax does no more than to impose upon Mississippi’s transactions the identical burden which is borne by competing sellers of the same commodity within the State. If Mississippi’s sales to industrial customers cannot be reached by the tax, I see nothing which would prevent other utilities in Illinois from purchasing gas outside the State, bringing it within the State, and selling it for use or consumption here, free of the tax. The cases on which the court relies are not, in my opinion, controlling. The tax invalidated in Michigan-Wisconsin Pipe Line Co. v. Calvert, 347 U.S. 157, was one imposed by the State of origin upon the “taking” of gas into a pipeline for immediate interstate transmission. Apart from other differences, taxes by the State of origin have not been treated as equivalent to those imposed by the State of destination since their effect is different. (See, e.g., McGoldrick v. Berwind-White Coal Mining Co. 309 U.S. 388; Gwin, White & Prince v. Henneford, 305 U.S. 434; Freeman v. Hewit, 329 U.S. 249.) Panhandle Eastern Pipe Line Co. v. Public Service Com. 332 U.S. 507, dealt with regulation, not taxation, and the actual holding in that case sustained the power of the State to regulate the direct sales in interstate commerce which were there involved. Under the commerce clause the limits upon State power to regulate are not necessarily identical with those upon State power to tax; but so far as the regulation cases are at all relevant, they argue in favor of State power rather than against it. The tax here imposed is in material respects identical with that which was sustained in East Ohio Gas Co. v. Tax Commission, 283 U. S. 465. (See also Southern Natural Gas Co. v. Alabama, 301 U.S. 148; Memphis Natural Gas Co. v. Beeler, 315 U.S. 649.) Prior to the Past Ohio decision, the Supreme Court had already taken the position with regard to State regulatory powers that unlike sales of gas to utilities for resale, direct sales for consumption were within the area of State control. (Public Utilities Com. v. Landon, 249 U.S. 236; Pennsylvania Gas Co. v. Public Service Com. 252 U.S. 23; cf. Missouri v. Kansas Gas Co. 265 U.S. 298.) So far as the past Ohio decision may be thought to rest on such “mechanical” considerations as reduction in pressure, it is now of doubtful authority. (See Illinois Natural Gas Co. v. Central Illinois Public Service Co. 314 U.S. 498, 504-506; Panhandle Eastern Pipe Line Co. v. Public Service Com. 332 U.S. 507, 512-513; but cf. Federal Power Com. v. East Ohio Gas Co. 338 U.S. 464, 469-473.) But subsequent cases have not rejected the “wholesale-retail” criterion for determining the permissible reach of State power. The theory employed in the East Ohio opinion to sustain the tax was that interstate commerce ended when distribution to the consumer began, the same theory which had been employed to sustain State regulation in the Landon case. As the majority opinion here notes, subsequent pronouncements of the Supreme Court have reverted to the different standard employed in Pennsylvania Gas Co. v. Public Service Com. 252 U.S. 23, 30-31, and the present view seems to be that these direct sales are interstate commerce, and that the State’s power to control them rests on the fact that these sales are “essentially local” in character. (Panhandle Eastern Pipe Line Co. v. Public Service Com. 332 U.S. 507, 523-524; Panhandle Eastern Pipe Line Co. v. Michigan Public Service Com. 341 U.S. 329; Illinois Natural Gas Co. v. Central Illinois Public Service Co. 314 U.S. 498, 504-506.) More significant than this change in theory, perhaps, is the fact that whether sales of this kind have been regarded as interstate or intrastate, State power to regulate them has been sustained. I do not think, therefore, that subsequent decisions justify disregarding the East Ohio holding. Last year this court held that Mississippi’s direct sales were not subject to regulation by the State. (Mississippi River Fuel Corp. v. Illinois Commerce Com. 1 Ill. 2d 509.) The result of that decision was to give the appellee a favored economic position as against competing local utilities. Today the court creates a similar result by holding these same sales immune to taxation. I do not believe that the commerce clause requires that interstate commerce be given more than equal treatment. The decree below should be reversed. Mr. Justice Hershey concurs in the foregoing dissenting opinion.