214 S.E.2d 349 (Ga. 1975), 29171, Wages v. Michelin Tire Corp.

Docket Nº:29171.
Citation:214 S.E.2d 349, 233 Ga. 712
Opinion Judge:GUNTER, Justice.
Attorney:[233 Ga. 723] Jordan & Jordan, Hill R. Jordan, Stark, Stark & Henderson, Lawrenceville, for appellants. Jones, Bird & Howell, Earle B. May, Jr., Edward R. Kane, Atlanta, Webb, Fowler & Tanner, W. Howard Fowler, Lawrenceville, for appellee.
Case Date:February 04, 1975
Court:Supreme Court of Georgia

Page 349

214 S.E.2d 349 (Ga. 1975)

233 Ga. 712

W. L. WAGES et al.



No. 29171.

Supreme Court of Georgia.

February 4, 1975

Rehearing Denied Feb. 18, 1975.

Certiorari Granted June 23, 1975. See 95 S.Ct. 2652.

[233 Ga. 723] Jordan & Jordan, Hill R. Jordan, Stark, Stark & Henderson, Lawrenceville, for appellants.

Jones, Bird & Howell, Earle B. May, Jr., Edward R. Kane, Atlanta, Webb, Fowler & Tanner, W. Howard Fowler, Lawrenceville, for appellee.

Syllabus Opinion by the Court

GUNTER, Justice.

This appeal involves a complicated federal constitutional question. Gwinnett County, Georgia assessed an ad valorem tax against Michelin's inventory [233 Ga. 713] held in its warehouse on January 1, 1972, and January 1, 1973. Michelin contended that the imposition of the tax by the county violated Art. I, Sec. 10, Clause 2 of the Federal Constitution, which states in part: '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

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. . ..' Code § 1-135. The trial court agreed with Michelin, declared the assessments void, and permanently enjoined the county's tax commissioner from collecting the tax. The appellants have come here seeking reversal.

Michelin Tire Corporation is a New York corporation qualified to do business in Georgia. It is an importer and wholesaler of automobile and truck tires and tubes. It operates a distribution warehouse in Gwinnett County, Georgia, and the inventory at the warehouse consists primarily of tires and tubes imported from foreign countries, although on both tax dates in question some domestic tubes were stored at the warehouse. Michelin pays a four percent import duty on all of its imports.

Imported tires and tubes are shipped to the warehouse by two methods of transportation. Some are delivered in over-the-road trailers, and the trailers are packed and sealed at the foreign factory and are delivered by common carrier directly to the warehouse. The remainder are transported in sea vans, which are basically over-the-road trailers with removable wheels. The vans are packed and sealed at the foreign factory; they are hauled to a port where the wheels are removed; they are transported by ship to a port of entry, where they are loaded off the ship and wheels are replaced; and they are transported to the warehouse. The vans usually arrive at the warehouse within a week of arrival at the port of entry. Michelin does not own any of the trailers of vans, and there is no intermediate distribution point on any of the shipments.

Imported tires are packed into the vans and trailers in bulk, without any packaging or bundling. Each tire is distinguishable by a serial number. Upon arrival at the warehouse, each trailer or van load is unloaded and sorted so that the individual shipments are no longer separate [233 Ga. 714] identifiable units. The tires are stacked on wooden pallets and stored in the warehouse, segregated by size and style, awaiting sale to retail dealers. The individual tires are not treated or altered in any manner.

Imported tubes are individually packaged in small boxes, and the boxes are transported in corrugated cartons measuring sixteen inches by twenty inches by twenty-four inches. The shipments of tubes are sorted upon arrival at the warehouse and cease to be separately identifiable units. The cartons of tubes are stored, segregated by size, in an area of the warehouse called the 'full case' area. When it becomes necessary to open a carton, it is removed to an area called the 'shelf area,' where the individually boxed tubes are placed on shelves and held available for sale in small quantities. Michelin concedes that the tubes in the shelf area are taxable.

Domestic tubes are similarly packaged and similarly handled at the warehouse. Unopened cartons are stored in the full case area but apart from the foreign cartons. Open cartons are removed to the shelf area.

All the tires and tubes in the Gwinnett warehouse are sold to franchised Michelin dealers in six southeastern states. There are 250 to 300 such dealers who submit their orders, and Michelin makes delivery by common carrier or on a customer pickup basis. The orders vary in size and may be filled from any shipment from the manufacturer and from any pallet or carton, depending upon the size and styles ordered. No tires are sold directly to retail customers.

This case involves a question of first impression in Georgia, and we have examined in detail the pertinent cases of the Supreme Court of the United States as well as some of the leading cases from other states on the subject. A summary of these cases follows.

Brown v. Maryland, 12 Wheat. 419, 25 U.S. 419, 6 L.Ed. 678 (1827). This case, to this date, dominates every discussion of state taxation of imports. Maryland had a statute requiring all importers of goods by 'bale or package' and all wholesalers of such imported goods to take out a license

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and pay a $50 fee. Brown was indicted for selling dry goods in the package in which they were imported without having a license. Chief Justice [233 Ga. 715] Marshall held that the license fee imposed on importers was equivalent to a tax on the imports. He then turned to the question of how to determine when imports lose their character as such and become taxable by the states. Maryland argued that goods ceased to be imports as soon as they enter this country, but Chief Justice Marshall rejected that argument and found the Maryland statute unconstitutional. He set the following tentative guidelines: The constitutional prohibition on the states to lay a duty on imports, a prohibition which a vast majority of them must feel an interest in preserving, may certainly come in conflict with their acknowledged power to tax persons and property within their territory. The power, and the restriction on it, though quite distinguishable, when they do not approach each other, may yet, when the intervening colors between white and black, approach so nearly, as to perplex the understanding, as colors perplex the vision in marking the distinction between them. Yet the distinction exists, and must be marked as the cases arise. Till they do arise, it might be premature to state any rule as being universal in its application. It is sufficient for the present to say, generally, that when the importer has so acted upon, the thing imported, that it has become incorporated and mixed up with the mass of property in the country, it has, perhaps, lost its distinctive character as an import, and has become subject to the taxing power of the state; but while remaining the property of the importer, in his warehouse, in the original form or package in which it was imported, a tax upon it is too plainly a duty on imports, to escape the prohibition in the Constitution . . . This indictment is against the importer, for selling a package of dry goods in the form in which it was imported, without a license. This state of things is changed if he sells them, or otherwise mixes them with the general property of the state, by breaking up his packages, and traveling with them as an itinerant peddler. In the first case, the tax intercepts the import, as an import, in its way to become incorporated with the general mass of properly, and denies it the privilege of becoming so incorporated until it shall have contributed to the revenue of the state. It denies to the importer the right of using the privilege [233 Ga. 716] which he has purchased from the United States, until he shall have also purchased it from the state. In the last cases, the tax finds the article already incorporated with the mass of property, by the act of the importer.' P. 441.

This language has become the basis of the 'original package doctrine' under which, in case after case, the power of the states to tax imports has been said to turn on whether the importer has physically altered the packaging of imported goods.

Low v. Austin, 13 Wall. 29, 80 U.S. 29, 20 L.Ed. 517 (1871). California imposed an ad valorem tax on French champagne stored by the importer, pending sale, in a warehouse in the original cases in which it was imported. The court unanimously held the tax unconstitutional, saying: 'The goods imported do not lose their character as imports, and become incorporated into the mass of property of the state, until they have passed from the control of the importer or been broken up by him from their original cases.'

May & Co. v. New Orleans, 178 U.S. 496, 20 S.Ct. 976, 44 L.Ed. 1165 (1900). May was an importer of dry goods sold in part on order and in part out of stock. The imported goods were always packaged by the foreign manufacturer in small parcels, and the parcels were packed for shipment in cartons, crates or bales. In making sales to customers, May never broke open the small parcels but sometimes broke the shipping packages in order to sell in smaller quantities. New Orleans imposed a property tax on those items held for resale and no longer in the shipping packages. The question in the case was whether the 'original package' for constitutional purposes was the

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shipping package or the individual wrapper. The importer argued for the individual wrapper, and the city argued for the shipping package. A majority of the court (5-4) accepted the city's position and held the tax constitutional. The majority found the shipping packages to be the 'original packages' within the meaning of Brown v. Maryland, supra.

Gulf Fisheries Company v. MacInerney, 276 U.S. 124, 48 S.Ct. 227, 72 L.Ed. 495 (1928). This case involved the taxability of raw fish landed on U.S. shores in fishing boats. The court...

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