James B. Beam Distilling Co. v. Department of Revenue

• Decision Date: 01 March 1963
• Citation: 367 S.W.2d 267
• Parties: JAMES B. BEAM DISTILLING COMPANY, Appellant, v. DEPARTMENT OF REVENUE, Appellee.
• Court: United States State Supreme Court — District of Kentucky

Page 267

367 S.W.2d 267

JAMES B. BEAM DISTILLING COMPANY, Appellant, v. DEPARTMENT OF REVENUE, Appellee.

Court of Appeals of Kentucky.

March 1, 1963.

Rehearing Denied May 24, 1963.

Millard Cox, Louisville, for appellant.

William S. Riley, Paul D. Ross, Hal O. Williams, Dept. of Revenue, Frankfort, for appellee.

STEWART, Chief Justice.

This is an appeal by James B. Beam Distilling Company from a judgment of the Franklin Circuit Court upholding a ruling of the Kentucky Tax Commission, which denied appellant's claim for a refund of taxes on distilled liquors. The sum of $5107.09 was paid to the Department of Revenue between September 1, 1959, and April 1, 1960, under the provisions of KRS 243.680(2), which reads:

'(a) No person shall ship or transport or cause to be shipped or transported into the state any distilled spirits from points without the state without first obtaining a permit from the department and paying a tax of ten cents on each proof gallon contained in the shipment.

'(b) No railroad company or express company shall receive for shipment or ship into this state any package or receptacle containing distilled spirits unless a copy of the permit, showing that payment of required taxes has been made, accompanies the shipment.

'(c) The permit shall be in the form prescribed by the department, and all shipments into state shall be governed by the regulations promulgated by the department.'

Appellant's position is this statute is unconstitutional because it conflicts with article 1, section 10, clause 2 of the Constitution of the United States, which reads:

'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 it's inspection Laws; and the net Produce of all Duties and Imposts, laid by any State on Imports or Exports, shall be for the Use of the Treasury of the United States; and all such Laws shall be subject to the Revision and Controul of the Congress.'

Appellant is the sole distributor in the United States of a brand of Scotch whisky called 'Gilbey's Spey Royal.' The whisky is produced in Scotland, received by appellant at its Kentucky plant at Clermont in Nelson County by direct shipment from Scotland, and then sold by it to its customers in the domestic markets throughout this country. The record shows, which is is not disputed, that this whisky is an import; that it has been brought in from another country; and that the tax was collected while the whisky remained in unbroken packages in the hands of the original importer and prior to resale or use by the importer.

Before appellant can bring this whisky into Kentucky, it must obtain a permit pursuant to KRS 243.680(2)(c); and, as a condition precedent to the issuance of the permit, it must pay a tax of 10cents per proof gallon on the whisky to be imported.

Since the case of Brown v. Maryland, 12 Wheat. 419, 25 U.S. 419, 6 L.Ed. 678, the United States Supreme Court has held that the above-quoted constitutional provision, known as the 'import-export clause,' protects goods imported for sale while they are in their original packages and have not been sold or used by the importer. 'Use' by the importer of such goods does not include their storage preparatory to sale. Storage does not cause the goods to lose their character as imports. This is true even if the goods, such as the liquor in the case at bar, will only be sold for delivery in Kentucky. See State ex rel. Morton Co. v. Board of Review, City of Milwaukee, et al., 15 Wis.2d 330, 112 N.W.2d 914.

Even though the tax is denominated as something else, such as an occupational tax (Brown v. Maryland, supra), an excise tax (Richfield Oil Corporation v. State Board of Equalization, 329 U.S. 69, 67 S.Ct. 156, 91 L.Ed. 80), or an ad valorem tax (Hooven & Allison v. Evatt, 324 U.S. 652, 65 S.Ct. 870, 89 L.Ed. 1252), if, in fact, it is a tax on imports, as that term is interpreted by the Supreme Court of the United States, the levy is invalid. The tax in the case at bar is an occupational or license tax in form, but appellant maintains it is nevertheless a tax on imports in fact.

Appellee argues that the Twentyfirst Amendment to the Constitution of the United States has changed the rule regarding a state's right to tax imports. Section 2 of this amendment reads: 'The transportation or imporation into any State or Territory, or possession of the United States for delivery or use therein of intoxicating liquors, in violation of the laws thereof, is hereby prohibited.' This point has been dealt with by courts of other jurisdictions.

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