337 U.S. 662 (1949), 287, Interstate Oil Pipe Line Co. v. Stone

Docket Nº:No. 287
Citation:337 U.S. 662, 69 S.Ct. 1264, 93 L.Ed. 1613
Party Name:Interstate Oil Pipe Line Co. v. Stone
Case Date:June 20, 1949
Court:United States Supreme Court

Page 662

337 U.S. 662 (1949)

69 S.Ct. 1264, 93 L.Ed. 1613

Interstate Oil Pipe Line Co.



No. 287

United States Supreme Court

June 20, 1949

Argued January 13, 1949


Appellant owns and operates pipelines used to transport oil from lease tanks to railroad loading racks in Mississippi. Delivery of the oil to appellant by the owner is accompanied by instructions for shipping it interstate. The oil is pumped from the loading racks into railroad tank cars; and, if no tank cars are available, it is stored, but never longer than a week. In the bills of lading, which covered only the rail shipment, the owner is designated as shipper and appellant as his agent, and the out-of-State destination is indicated. Mississippi levied against appellant a tax measured by appellant's receipts from the transportation of the oil from the lease tanks to the loading racks.

Held: the tax did not violate the Commerce Clause of the Federal Constitution. Pp. 663-665, 668.

203 Miss. 715, 35 So.2d 73, affirmed.

A state tax levied against a pipeline company was sustained by the State Supreme Court against a claim of invalidity under the Federal Constitution. 203 Miss. 715, 35 So.2d 73. On appeal to this Court, affirmed, p. 668.

Page 663

RUTLEDGE, J., lead opinion

MR. JUSTICE RUTLEDGE announced the judgment of the Court and the following opinion, in which MR. JUSTICE BLACK, MR. JUSTICE DOUGLAS and MR. JUSTICE MURPHY join.

This appeal questions the power of Mississippi, as affected by the commerce clause, to impose a tax measured by gross receipts from the operation of a pipeline wholly within the state.

Appellant is a Delaware corporation which has qualified to do business in Mississippi as a foreign corporation. It owns and operates pipelines which are used to transport oil from lease tanks in various oil fields in Mississippi to loading racks adjacent to railroads elsewhere in the state.1 From these racks, the oil is pumped into railroad tank cars for shipment outside the state. If there are no tank cars available, the oil is stored in tanks near the racks. But such delays in loading are usually of [69 S.Ct. 1265] short duration, and never exceed a week according to appellant's uncontradicted statement. When delivered to appellant, the oil is accompanied by shipping orders from the producer or owner directing that the oil be transported to out-of-state destinations. There are no refineries in Mississippi. There is no through bill of lading from the point of origin at the fields to the destination outside the state. Appellant ships the oil by rail as agent of the owner on bills of lading showing the owner as shipper,

Page 664

the appellant as agent of the shipper, and indicating the destination specified in the shipping orders issue to appellant. Appellant is paid by the producer at the rate per barrel specific in its tariff2 from the gathering point to the rack, and is paid an additional charge for loading the oil in the tank cars.

The chairman of the Mississippi State Tax Commission, appellee, levied a tax against appellant for the years 1944, 1945, and the first half of 1946, in the sum of $20,296.36, measured by appellant's receipts for transporting oil from the lease tanks to the railroad loading platforms, pursuant to the following sections of the Mississippi Code, Miss.Code, 1942, Ann., tit. 40, c. 3, §§ 10105, 10109 (Supp. 1948), which provide:

10105. . . . There is hereby levied and shall be collected annual privilege taxes, measured by the amount or volume of business done, against the persons, on account of the business activities, and in the amounts to be determined by the application of rates against values, or gross income, or gross proceeds of sales, as the case may be, as follows [see sections following]:

10109. . . . Upon every person engaging or continuing within this state in the business of operating a pipeline for transporting for compensation or hire from one point to another in this state oil or natural gas or artificial gas through pipes or conduits in this state, there is likewise hereby levied and shall be collected a tax, on account of the business engaged in, equal to two percent of the gross income of the business. . . .

* * * *

Page 665

There shall be excepted from the gross income used in determining the measure of the tax imposed in this section so much thereof as is derived from the business conducted in commerce between this state and other states of the United States, or between this state and foreign countries which the state of Mississippi is prohibited from taxing under the constitution of the United States of America. . . .3

The State Tax Commission sustained the assessment. The trial court dismissed a declaration seeking review of the Commission's action. The Supreme Court of Mississippi affirmed that judgment, overruling appellant's contention that, because the tax was levied on the privilege of conducting an interstate business and measured by gross receipts therefrom, the tax could not be imposed without offending the commerce clause of the Federal Constitution. 203 Miss. 715, 35 So.2d 73.

The state supreme Court held that the operation of these pipelines between points within the state was intrastate, rather than interstate, commerce, and that the tax was therefore

merely on the privilege of operating a pipeline wholly within this State as a local activity . . . a tax on the privilege of doing an intrastate business, and measured by a percent of gross income as a matter of convenience.

203 Miss. at 715, 35 So.2d at 81.

[69 S.Ct. 1266] Appellant contends that operation of the pipelines between points in Mississippi was, in fact, interstate commerce, and that the tax was construed by the Supreme Court of Mississippi to be a tax on the privilege of operating

Page 666

the pipelines. From these premises, together with the major premise that no state can tax the privilege of engaging in interstate commerce, appellant concludes that the tax may not constitutionally be imposed.

We do not pause to consider whether the business of operating the intrastate pipelines is interstate commerce, for, even if we assume that it is, Mississippi has power to impose the tax involved in this case. Further, we do not find it necessary to dispute that the Supreme Court of Mississippi construed the statute as imposing a tax on the privilege of operating a pipeline wholly within the state, and not a tax solely upon the "local activities of `maintaining, keeping in repair, and otherwise in manning the facilities'" situated in Mississippi, Memphis Gas Co. v. Stone, 335 U.S. 80, 92-93, or upon the gross receipts themselves, Central Greyhound Lines v. Mealey, 334 U.S. 653. While we are, of course, bound by the construction given a state statute by the highest court of the State,4 we are concerned with the practical operation of challenged state tax statutes, not with their descriptive labels.5

The statute is not invalidated by the commerce clause of the Federal Constitution merely because, unlike the statute attacked in Memphis Gas Co. v. Stone, supra, it imposes a "direct" tax on the "privilege" of engaging in interstate commerce.6 Any notions to the contrary should not have survived Maine v. Grand Trunk R. Co., 142 U.S. 217, which flatly rules the case at bar. That case sustained a state statute which imposed upon an interstate railroad corporation "an annual excise tax

Page 667

[measured by apportioned gross receipts], for the privilege of exercising its franchises in this State."7 The Grand Trunk decision has been approved by this Court as recently as the other controlling case of Central Greyhound Lines v. Mealey, supra, at 658, 663, in which the Court permitted New York to impose a tax on the gross receipts from the operation of an interstate bus line, provided that tax was apportioned according to mileage traveled within the state. The Mealey case is not distinguished by saying that it involved only a tax on gross receipts, and not a tax on interstate commerce itself, for gross receipts taxes have long been regarded as "direct" in cases which are supposed to support the proposition that "direct" taxes on interstate commerce are invalid under the commerce clause.8

Since all the activities upon which the tax is imposed are carried on in Mississippi, [69 S.Ct. 1267] there is no due process objection

Page 668

to the tax.9 The tax does not discriminate against interstate commerce in favor of competing intrastate commerce of like character.10 The nature of the subject of taxation makes apportionment unnecessary; there is no attempt to tax interstate activity carried on outside Mississippi's borders. No other state can repeat the tax.11 For these reasons, the commerce clause does not invalidate this tax.

The judgment is


BURTON, J., concurring

MR. JUSTICE BURTON, concurring.

I join in the judgment of affirmance announced by the Court but do not join in the opinion rendered in support of it.

I concur in the judgment solely on the ground that the tax imposed by the Mississippi was a tax on the privilege of operating a pipeline for transporting oil in Mississippi in intrastate commerce and that, as such, it was a valid tax. The Supreme Court of Mississippi, in the case below, 203 Miss. 715, 35 So.2d 73, held that this tax had been authorized by a statute of that State, Miss.Code Ann. §§ 10105, 10109 (1942), and, for the reasons stated by that court, I believe that neither the statute nor the application of the tax in the present instance violated the Constitution of the United States.

Page 669

On that basis, there is no issue here as to the validity of a tax upon the privilege of transporting...

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