District of Columbia v. Smoot Sand & Gravel Corp., 10519.

• Decision Date: 24 July 1950
• Docket Number: No. 10519.,10519.
• Citation: 87 US App. DC 248,184 F.2d 987
• Parties: DISTRICT OF COLUMBIA v. SMOOT SAND & GRAVEL CORP.
• Court: U.S. Court of Appeals — District of Columbia Circuit

87 US App. DC 248, 184 F.2d 987 (1950)

DISTRICT OF COLUMBIA v. SMOOT SAND & GRAVEL CORP.

No. 10519.

United States Court of Appeals District of Columbia Circuit.

Argued April 13, 1950.

Decided July 24, 1950.

Mr. George C. Updegraff, Assistant Corporation Counsel, D. C., with whom Messrs. Vernon E. West, Corporation Counsel, D. C., and Chester H. Gray, Principal Assistant Corporation Counsel, D. C., were on the brief, for petitioner.

Mr. David R. Shelton, Washington, D. C., for respondent.

Before PROCTOR, BAZELON, and FAHY, Circuit Judges.

FAHY, Circuit Judge.

The principal question presented is whether under statutes applicable in the District of Columbia tugs, scows and launches owned by the respondent Delaware corporation and employed to a substantial degree in its business in the District may be subjected to the personal property tax of the District on an apportionment basis.

The problem is before us a second time, now on petition of the District to review a decision of the Board of Tax Appeals holding in substance that the vessels may not be taxed on an apportionment basis because of the absence of statutory authority so to do. Accordingly taxes and penalties collected for a number of years were ordered to be refunded to respondent. This was done notwithstanding our previous decision that these properties could constitutionally be taxed by the District upon a fair apportionment of value though not at full value. Smoot Sand & Gravel Corp. v. District of Columbia, 1949, 84 U.S.App.D.C. 367, 174 F.2d 505. We had remanded the cause to the Board of Tax Appeals for further proceedings not inconsistent with the opinion. In those proceedings the District took the position we had decided the properties could be taxed on an apportionment basis and contends now the Board disregarded our mandate to that effect. The Board thought we had held no more than that such a tax would be constitutional. It construed our earlier decision in Queen City Brewing Co. v. District of Columbia, 1943, 77 U.S.App. D.C. 213, 134 F.2d 44, as foreclosing such a tax in the absence of a statute which authorized and defined a method of apportionment.

The case need not turn on whether or not our mandate in Smoot Sand & Gravel Corp. v. District of Columbia, supra, has been obeyed. The substantive questions are fairly presented. Our mandate on the previous decision is not to be construed as having directed an apportioned tax if that is illegal in the District. On the other hand, if such a tax is permitted by existing statutes the present petition is well taken.

I. The Vessels Have a Taxable Situs in the District of Columbia.

In our prior decision we stated the facts as follows:

"The property consists of tugs, scows and launches. They are used for the transportation of sand and gravel from deposits in Virginia and Maryland to storage places in the District of Columbia and thereafter to points of delivery on the Potomac River and the Chesapeake Bay in Maryland and Virginia. They come into the District from the places of deposit on an average of once a day but spend more time out of the District than in the District. The scows were not licensed or enrolled anywhere. The other vessels were licensed and enrolled at the port of Alexandria, Virginia.

"Petitioner corporation is domiciled in Delaware. Its commercial office is in the District of Columbia. Its business is production and sale. Its production occurs in Virginia and Maryland. Its commercial transactions center in the District. Its deliveries are made in the District, in Maryland, and in Virginia. Its tugs and scows are used exclusively in interstate commerce." 84 U.S.App.D.C. at pages 367, 368, 174 F.2d at pages 505, 506.

It also appears that no personal property tax is levied on the property in Delaware, that such tax has not been paid in Maryland, but that taxes are levied on the equipment in Virginia on the basis of an assessment of approximately 30% of its value.

It should be added that respondent, for purposes of income tax deductions, has apportioned 75% of the depreciation on its machinery and equipment, including the vessels here involved, to the District, and also has apportioned 75% of its income from its sand and gravel business (sales and services) as derived from District of Columbia sources.

The principal statute relied upon by the District reads as follows:

"On all tangible personal property, assessed at a fair cash value (over and above the exemptions provided in section 47 — 1208), including vessels, ships, boats, tools, implements, horses, and other animals, carriages, wagons, and other vehicles, there shall be paid to the collector of taxes of the District of Columbia the rate of tax provided by law." 47 D.C.Code § 1207 (1940).

This provision expressly includes vessels, ships and boats. They may not be excluded merely because their domiciliary situs is not in the District. It is no longer open to doubt that the tax situs of personal property is not necessarily limited to the domicile of the owner. Pullman's Palace Car Company v. Pennsylvania, 1890, 141 U.S. 18, 11 S.Ct. 876, 35 L.Ed. 613, see, also, Union Refrigerator Transit Co. v. Kentucky, 1905, 199 U.S. 194, 26 S.Ct. 36, 50 L.Ed. 150, 4 Ann.Cas. 493; American Refrigerator Transit Co. v. Hall, 1898, 174 U.S. 70, 19 S.Ct. 599, 43 L.Ed. 899. It is a question of the nature and extent of the use of the property within the state asserting the authority to tax. By virtue of their extensive, habitual and continuous use in business in the District of Columbia we think these properties have a tax situs here. They are in a tax sense more or less permanently located in the District though not always here in the same permanent sense as real estate.

In Johnson Oil Refining Co. v. Oklahoma, 1933, 290 U.S. 158, 54 S.Ct. 152, 78 L.Ed. 238, "the validity of property taxes laid in Pawnee County, Oklahoma, under the state statute, upon the entire fleet of appellant's tank cars" was challenged under the due process clause of the Fourteenth Amendment on the ground that the cars did not have their situs within the State "and hence that the state had no jurisdiction to tax them." The Supreme Court of the United States said:

"The basis of the jurisdiction is the habitual employment of the property within the state. By virtue of that employment the property should bear its fair share of the burdens of taxation to which other property within the state is subject. * * *" 290 U.S. at page 162, 54 S.Ct. at page 154.

In the earlier case of Pullman's Palace Car Company v. Pennsylvania, supra, upholding a State tax on pullman cars used in interstate commerce, the facts sufficiently appear from the following portion of the opinion:

"* * * The cars were continuously and permanently employed in going to and fro upon certain routes of travel. If they had never passed beyond the limits of Pennsylvania, it could not be doubted that the state could tax them, like other property, within its borders, notwithstanding they were employed in interstate commerce. The fact that, instead of stopping at the state boundary, they cross that boundary in going out and coming back, cannot affect the power of the state to levy a tax upon them. * * *" 141 U.S. at page 26, 11 S.Ct. at page 879, 35 L.Ed. 613.

In the Pullman opinion a factual and, it may be argued, a legal distinction was suggested between railroad cars and land vehicles, on the one hand, and, on the other, ships or vessels engaged in interstate commerce but having a home port. Any distinction of this character affecting the tax situs of the vessels here involved has been removed by Ott v. Mississippi Barge Line Co., 1948, 336 U.S. 169, 172-174, 69 S.Ct. 432, 93 L.Ed. 585.

In Reeves, Commissioner v. Island Fuel & Transportation Co., 313 Ky. 400, 230 S.W.2d 924, 927, the disputed tax had been levied in Kentucky on barges and towboats owned by a Maine corporation. Its principal place of business was in West Virginia. It also had extensive installations in Ohio. It maintained mooring facilities in a county of Kentucky "which are used when the exigencies of navigation require." It made calls at Kentucky ports and habitually operated its boats and barges along a regular route between Huntington, West Virginia and Cincinnati, Ohio, of which route 94.6% was in Kentucky. The company contended that the vessels were only transiently present in Kentucky, with no termini or regular port of call or destination in that State, that they were not permanently situated in Kentucky and therefore had no taxable situs there. The Court of Appeals of Kentucky, in rejecting this position, said in part:

"* * * The idea of permanency, with respect to personal property, seems generally to be, that for such property to acquire a taxable situs, it must have a more or less permanent location as distinguished from a transient or temporary one. However, permanency in the sense that it must be fixed like real property is not essential to the establishment of a taxable situs for personal property. It seems to be sufficient, when in the ordinary course of business, that property is present and being used and employed with a consistent continuity and not spasmodically * * *."

* * * * * *

"It now appears that courts generally adhere to the rule that property sent into a state by a nonresident, to be used or employed permanently there, must bear its fair share of the burden of taxation, although no one unit of such property is ever more than temporarily located within the taxing state. * * *"

In Union Tank Car Co. v. McKnight, 7 Cir., 1936, 84 F.2d 421, 423, it is squarely held that the State could tax on an apportionment basis rolling stock belonging to a foreign corporation but habitually found in the State. The State court had approved a method of taxation "on the basis of daily average of cars within the state". See, also, People v. Wilson Car Lines, Inc., 1938, 369 Ill. 294, 16 N.E.2d 752.

Under the foregoing...