Colonial Pipeline Company v. Traigle 8212 1595

• Decision Date: 28 April 1975
• Docket Number: No. 73,73
• Citation: 421 U.S. 100,44 L.Ed.2d 1,95 S.Ct. 1538
• Parties: COLONIAL PIPELINE COMPANY, Appellant, v. Joseph N. TRAIGLE, Collector of Revenue. —1595
• Court: U.S. Supreme Court

421 U.S. 100

95 S.Ct. 1538

44 L.Ed.2d 1

COLONIAL PIPELINE COMPANY, Appellant,

v Joseph N. TRAIGLE, Collector of Revenue.

No. 73—1595.

Argued Jan. 13, 1975.

Decided April 28, 1975.

Syllabus

Louisiana's fairly apportioned and nondiscriminatory corporation franchise tax upon the 'incident' of the 'qualification to carry on or do business in this state or the actual doing of business within this state in a corporate form' held not to violate the Commerce Clause as applied to appellant, an interstate carrier of liquefied petroleum products incorporated in Delaware with its principal place of business in Atlanta, Ga., which does no intrastate business in petroleum products in Louisiana but has employees there to inspect and maintain its pipeline, pumping stations, and related facilities in that State. '(T)he decisive issue turns on the operating incidence of the tax,' General Motors Corp. v. Washington, 377 U.S. 436, 441, 84 S.Ct. 1564, 1568, 12 L.Ed.2d 430 and '(t)he simple but controlling question is whether the state has given anything for which it can ask return,' Wisconsin v. J. C. Penney Co., 311 U.S. 435, 444, 61 S.Ct. 246, 250, 85 L.Ed. 267. Because appellant, as a foreign corporation qualified to carry on, and carrying on, its business in Louisiana in corporate form, gained benefits and protections from that State of value and importance to its business, it can be required through the franchise tax to pay its just share. Memphis Gas Co. v. Stone, 335 U.S. 80, 68 S.Ct. 1475, 92 L.Ed. 1832. Pp. 108-114.

289 So.2d 93, affirmed.

R. Gordon Kean, Jr., Baton Rouge, La., for appellant.

Whit M. Cook, II, Baton Rouge, La., for appellee, pro hac vice, by special leave of Court.

Mr. Justice BRENNAN delivered the opinion of the Court.

We have once again a case that presents 'the perennial problem of the validity of a state tax for the privilege of carrying on, within a state, certain activities' related to a corporation's operation of an interstate business. Memphis Gas Co. v. Stone, 335 U.S. 80, 85, 68 S.Ct. 1475, 1477, 92 L.Ed. 1832 (1948).¹ The issue is whether Louisiana, consistent with the Commerce Clause, Art. I, § 8, cl. 3, may impose a fairly apportioned and nondiscriminatory corporation franchise tax on appellant, Colonial Pipeline Co., a corporation engaged exclusively in interstate business, upon the 'incident' of its 'qualification to carry on or do business in this state or the actual doing of business within this state in a corporate form.' No question is raised as to the reasonableness of the apportionment of appellant's capital deemed to have been employed in Louisiana, and it is not claimed that the tax is discriminatory. The Supreme Court of Louisiana sustained the validity of the tax. 289 So.2d 93 (1974). We noted probable jurisdiction, 417 U.S. 966, 94 S.Ct. 3169, 41 L.Ed.2d 1137 (1974). We affirm.

I

Appellant is a Delaware corporation with its principal place of business in Atlanta, Ga. It is a common carrier of liquefied petroleum products and owns and operates a pipeline system extending from Houston, Tex., to the New York City area. This 3,400-mile pipeline links the oil refining complexes of Texas and Louisiana with the population centers of the Southeast and Northeast. Appellant daily delivers more than one million gallons of petroleum products to 14 States and the District of Columbia. Approximately 258 miles of the pipeline are located in Louisiana. Over this distance within Louisiana, appellant owns and operates several pumping stations which keep the petroleum products flowing at a sustained rate, and various tank storage facilities used to inject or withdraw petroleum products into or from the line. A work force of 25 to 30 employees—mechanics, electricians, and other workers—inspect and maintain the line within the State. During the tax years in question, 1970 and 1971, appellant maintained no administrative offices or personnel in Louisiana, although it had once maintained a division office in Baton Rouge. Appellant does no intrastate business in petroleum products in Louisiana.

On May 9, 1962, appellant voluntarily qualified to do business in Louisiana, although it could have carried on its interstate business without doing so. La.Rev.Stat.Ann. § 12:302 H. (1969); see n. 8, infra. Thereupon, the Collector of Revenue imposed the Louisiana franchise tax on appellant's activities in the State during 1962. At that time La.Rev.Stat.Ann. § 47:601, the Louisiana Franchise Tax Act, expressly provided: 'The tax levied herein is due and payable for the privilege of carrying on or doing business, the exercising of its charter or the continuance of its charter within this state, or owning or using any part or all of its capital or plant in this state.'² (Emphasis supplied.)

Appellant paid the tax and sued for a refund. The Louisiana Court of Appeal, First Circuit, held that, in that form, § 601 was unconstitutional as applied to appellant because, being imposed directly upon 'the privilege of carrying on or doing (interstate) business,' it violated the Commerce Clause, Art. I, § 8, cl. 3. Colonial Pipeline Co. v. Mouton, La.App., 228 So.2d 718 (1969). The Supreme Court of Louisiana refused review. 255 La. 474, 231 So.2d 393 (1970). ³

Following this decision, the Louisiana Legislature amended La.Rev.Stat.Ann. § 47:601 by Act 325 of 1970. The amendment excised from § 601 the words: 'The tax levied herein is due and payable for the privilege of carrying on or doing business,' and substituted: 'The qualification to carry on or do business in this state or the actual doing of business within this state in a corporate form,' as one of three 'alternative incidents' upon which the tax might be imposed. The other two 'incidents'—the exercise of the corporate charter in the State, and the employment there of its capital, plant, or other property— were carried forward from the earlier version of the statute.⁴ See n. 2, supra.

The Collector of Revenue then renewed his efforts to impose a tax on appellant, this time for doing business 'in a corporate form' during 1970 and 1971. Again, appellant paid the tax and sued for a refund. The Louisiana District Court and the Court of Appeal, First Circuit, concluded that the 1970 amendment made no substan- tive change in § 601, which it construed as still imposing the tax directly upon the privilege of carrying on or doing an interstate business, and held that amended § 601 was therefore unconstitutional as applied to appellant. 275 So.2d 834 (1973).

The Supreme Court of Louisiana reversed. The court recognized that '(t)he pertinent Constitutional question is whether, as applied to a corporation whose exclusive business carried on within the State is interstate, this statute violates the Commerce Clause of the United States Constitution.' 289 So.2d, at 97. But the court attached controlling significance to the omission from the amended statute of the 'primary operating incident (of the former version), i.e., 'the privilege of carrying on or doing business," id., at 96, and the substitution for that incident of doing business in the corporate form. The court held: 'The thrust of the (amended) statute is to tax not the interstate business done in Louisiana by a foreign corporation, but the doing of business in Louisiana in a corporate form, including 'each and every act, power, right, privilege or immunity exercised or enjoyed in this state, as an incident to or by virtue of the powers and privileges acquired by the nature of such organizations . . .." Id., at 97. Accordingly, the court concluded that amended § 601 applied the franchise tax to foreign corporations doing only an interstate business in Louisiana not as a tax upon 'the general privilege of doing interstate business but simply (as a tax upon) the corporation's privilege of enjoying in a corporate capacity the ownership or use of its capital, plant or other property in this state, the corporation's privilege of exercising and continuing its corporate character in the State of Louisiana, and the corporation's use of its corporate form to do business in the State.' Id., at 100. Upon that premise, the court validated the levy as a constitutional exaction for privileges enjoyed by corporations in Louisiana and for benefits furnished by the State to enterprises carrying on business, interstate or local, in the corporate form, whether as domestic or foreign corporations. The court reasoned:

'The corporation, including the foreign corporation doing only interstate business in Louisiana, enjoys under our laws many privileges separate and apart from simply doing business, such for instance as the legal status to sue and be sued in the Courts of our State, continuity of business without interruption by death or dissolution, transfer of property interests by the disposition of shares of stock, advantages of business controlled and managed by corporate directors, and the general absence of individual liability, among others.

'The fact that the corporate form of doing business is inextricably interwoven in a foreign corporation's doing interstate business in the State, does not in our view detract from the fact that the local incident taxed is the form of doing business rather than the business done by that corporation. And it is our view that the local incident is real and sufficiently distinguishable, so that taxation thereof does not, under the controlling decisions of the United States Supreme Court, violate the Commerce Clause.

'The statute does not discriminate between foreign and local corporations, being applicable, as it is, to both. Nor do we believe that the State's exercise of its power by this taxing statute is out of proportion to Colonial's activities within the state and their consequent enjoyment of the opportunities and protection which the state has afforded them.

'Furthermore we believe that the State has given something for which it can ask return. The return, tax levy in this...