Billings Transfer Corp. v. Davidson County, 28

• Decision Date: 10 December 1969
• Docket Number: No. 28,28
• Citation: 276 N.C. 19,170 S.E.2d 873
• Parties: BILLINGS TRANSFER CORPORATION, Inc. v. COUNTY OF DAVIDSON.
• Court: North Carolina Supreme Court

Page 873

170 S.E.2d 873

276 N.C. 19

BILLINGS TRANSFER CORPORATION, Inc. v. COUNTY OF DAVIDSON.

No. 28.

Supreme Court of North Carolina.

Dec. 10, 1969.

Frank P. Holton, Jr., Lexington, for plaintiff appellant.

DeLapp, Ward & Hedrick, by S. A. DeLapp and Charles W. Mauze, Lexington, for defendant appellee.

Burney & Burney and George H. Sperry, Wilmington, for North Carolina Motor Carriers Ass'n, Inc., amicus curiae.

John T. Morrisey, Sr., Raleigh, General Counsel, North Carolina Ass'n of County Com'rs, amicus curiae.

HUSKINS, Justice.

The assessment, listing and collection of ad valorem taxes on tangible personal property in North Carolina is regulated by G.S. § 105--281 and Artilce 18 of the Machinery Act, G.S. § 105--302 Et seq.

G.S. § 105--281 provides that all property, real and personal, Within the jurisdiction of the State, not especially exempted, shall be subject to taxation. G.S. § 105--302(a) provides that all tangible personal property shall be listed in the township in which its owner has his residence, and '(t) he residence of a corporation * * * domestic or foreign, shall be the place of its principal office in this State * * *.' Thus, with certain exceptions enumerated in G.S. § 105--302(b) and (d) which have no pertinence here, the Legislature has fixed the tax situs of a corporation's tangible personal property subject to North Carolina's taxing jurisdiction at the place of its principal office in North Carolina. In re Pilot Freight Carriers, 263 N.C. 345, 139 S.E.2d 633. Since plaintiff's principal office is in Davidson County, plaintiff must list all its tangible personal property for ad valorem taxes in that county unless such property or a part thereof has a tax situs elsewhere and thus is not within the taxing jurisdiction of this State. Plaintiff contends that a portion of its rolling stock is taxable in other states and inclusion of that portion in its tax assessment by Davidson County casts an undue burden on interstate commerce, denies plaintiff the equal protection of the laws, and deprives plaintiff of its property without due process of law. We now examine the validity of these contentions.

The usual ad valorem property tax is an annual levy on a predetermined percentage of the market value of the property. Such tax may be levied by the proper taxing authority upon personal property of an individual or corporation engaged in interstate commerce the same as upon any other property so long as the effect of such taxation does not place interstate commerce at a competitive disadvantage with intrastate commerce. McGoldrick v. Berwind-White Co., 309 U.S. 33, 60 S.Ct. 388, 84 L.Ed. 565. Interstate commerce can be required to pay its nondiscriminatory share of taxes which each state may impose on property within its borders. Western Live Stock v. Bureau of Revenue, 303 U.S. 250, 58 S.Ct. 546, 82 L.Ed. 823, 115 A.L.R. 944; Michigan-Wisconsin Pipeline Co. v. Calvert, 347 U.S. 157, 74 S.Ct. 396, 98 L.Ed. 583.

The test of whether a tax law violates due process is 'whether the taxing power exerted by the state bears fiscal relation to protection, opportunities and benefits given by the state. The 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, 61 S.Ct. 246, 85 L.Ed. 267, 130 A.L.R. 1229 (1940). '(N)o state may tax anything not within her jurisdiction without violating the Fourteenth Amendment.' Farmers Loan & Trust Co. v. Minnesota, 280 U.S. 204, 50 S.Ct. 98, 74 L.Ed. 371, 65 A.L.R. 1000 (1930).

Plaintiff's evidence is sufficient to survive the motion for nonsuit if, taken in its light most favorable to plaintiff, it shows that a defined portion of plaintiff's rolling stock had acquired a nonomiciliary tax situs for ad valorem tax purposes. In that event, Davidson County, North Carolina, may tax only that portion which has not acquired a tax situs elsewhere. Hence, the controlling question is whether any portion of plaintiff's tangible personal property had acquired a nondomiciliary tax situs for 1963 and 1964.

We first examine federal decisions dealing with state taxation of property used in interstate commerce.

Early federal decisions permitted the domiciliary state of the owner to tax the entire value of his personal property regardless of its actual presence in the taxing state. Hays v. Pacific Mail S.S. Co., 58 U.S. (17 How.) 596, 15 L.Ed. 254 (1855); Cream of Wheat Co. v. Grand Forks County, 253 U.S. 325, 40 S.Ct. 558, 64 L.Ed. 931 (1920). Thus, a steamship operating between Alabama and Louisiana was taxable only by New York which was the domiciliary state of its owner. Morgan v. Parham, 83 U.S. (16 Wall.) 471, 21 L.Ed. 303 (1873). Such ships could not be taxed in other states at whose ports they temporarily called to deliver or receive passengers or freight. The ships were not in any proper sense 'abiding within the limits' of the nondomiciliary state and had no continuous presence or actual situs there. Therefore, it was held that they could be taxed only at their regular situs--their home port, the domicile of their owners. Hays v. Pacific Mail S.S. Co., supra; City of St. Louis v. Wiggins Ferry Co., 78 U.S. (11 Wall.) 423, 20 L.Ed. 192 (1870); Wiggins Ferry Co. v. City of East St. Louis, 107 U.S. 365, 2 S.Ct. 257, 27 L.Ed. 419 (1882); Gloucester Ferry Co. v. Pennsylvania, 114 U.S. 196, 5 S.Ct. 826, 29 L.Ed. 158 (1885).

In Old Dominion S.S. Co v. Virginia, 198 U.S. 299, 25 S.Ct. 686, 49 L.Ed. 1059 (1905), the plaintiff was a Delaware corporation engaged in the transportation of passengers and freight between New York, Norfolk, and other ports in Virginia. Several of its vessels, though engaged in interstate commerce, were employed wholly within the limits of Virginia. These vessels received freight and passengers destined for New York and other points outside Virginia, and transported same from shallow water loading areas to deep water at Norfolk and Old Point Comfort where the passengers and freight were transferred to the larger oceangoing vessels. The court held that since the vessels in question never left the territorial waters of Virginia, they had acquired an 'actual situs' in that state and were subject to the ad valorem tax which Virginia had levied upon them. The artificial situs created by home port or registry of a vessel determined jurisdiction to tax only in the absence of an actual situs; and actual situs was made to turn on the Uninterrupted presence of the property within the taxing jurisdiction.

In Pullman's Palace Car Co. v. Pennsylvania, 141 U.S. 18, 11 S.Ct. 876, 35

L.Ed. 613 (1891), plaintiff, an Illinois corporation, was engaged in running railroad cars into through, and out of Pennsylvania, having at all times a large number of such cars within the State of Pennsylvania. Plaintiff was taxed in Pennsylvania by taking as the basis of assessment such proportion of its capital stock as the number of miles of railroad over which plaintiff's cars were run within Pennsylvania bore to the whole number of miles over which its cars were run in all states. The Supreme Court of Pennsylvania sustained the tax, and plaintiff appealed to the Supreme Court of the United States. That Court upheld the tax and distinguished the earlier vessel cases on the ground that, in those cases, 'no continuous presence or actual situs' had been acquired in the taxing jurisdiction; whereas, here, the railroad cars 'were continuously and permanently employed in going to and fro upon certain routes of travel.'

In American Refrigerator Transit Co. v. Hall, 174 U.S. 70, 19 S.Ct. 599, 43 L.Ed. 899 (1899), plaintiff, an Illinois corporation, was in the business of furnishing refrigerator cars for the transportation of perishable products over the various railroads in the United States. The cars were run indiscriminately over the lines of any railroad over which shippers or the railroad desired to route them. Plaintiff had no office or place of business within the State of Colorado, and its cars were never run in said state in fixed numbers or at regular times. On the average, however, forty cars per year were used within that state. It was held that Colorado could impose upon plaintiff's movable personal property the same tax imposed upon similar property used in like manner by its own citizens and that such tax 'may be fixed by an appraisement and valuation of the average amount of the property Thus habitually used and employed.' (Emphasis ours.)

In Union Refrigerator Transit Co. v. Kentucky, 199 U.S. 194, 26 S.Ct. 36, 50 L.Ed. 150 (1905), plaintiff owned 2,000 railroad cars which it rented to shippers who used them for the carriage of freight in the United States, Canada, and Mexico over the various railroads. Plaintiff, a Kentucky corporation, contended that the correct method of ascertaining the number of cars which should be assessed for taxation in Kentucky was to ascertain and list such a proportion of its cars as were shown to be used in the State of Kentucky during the fiscal year. Using a system of averages, the trial court found that sixty-seven cars for the year 1900 were subject to assessment in Kentucky and that the cars other than those mentioned were not liable to assessment. The Court of Appeals of Kentucky reversed and held the company was liable for taxation upon its entire 2,000 cars. Upon appeal to the United States Supreme Court it was held on due process grounds that plaintiff's tangible personal property Permanently located in other states and employed there in the prosecution of plaintiff's business was not subject to taxation in Kentucky. Hence, Kentucky's attempt to impose a tax upon plaintiff's Entire fleet of rolling stock was invalidated.

In New York Central & H.R.R. Co. v. Miller, 202 U.S. 584, 26 S.Ct. 714, 50 L.Ed. 1155 (1906), decided only one year after the Union Refrigerator case, plaintiff was a New York corporation with interstate as...