Bowman v. Continental Oil Co, 695

• Decision Date: 06 June 1921
• Docket Number: No. 695,695
• Parties: BOWMAN, Atty. Gen. of New Mexico, et al. v. CONTINENTAL OIL CO
• Court: U.S. Supreme Court

256 U.S. 642

41 S.Ct. 606

65 L.Ed. 1139

BOWMAN, Atty. Gen. of New Mexico, et al.

v CONTINENTAL OIL CO.

No. 695.

Argued April 11, 1921.

Decided June 6, 1921.

Mr. Harry S. Bowman, Atty. Gen., of Santa Fe, N. M., for appellants.

Messrs. Charles R. Brock, of Denver, Colo., and E. R. Wright, of Santa Fe, N. M., for appellee.

Mr. Justice PITNEY delivered the opinion of the Court.

This suit was brought by the Continental Oil Company against the Attorney General and certain other officials of the state of New Mexico to restrain the enforcement against the company, a distributor of and dealer in gasoline and other petroleum products in that state, of the provisions of an act of the Legislature (Laws New Mexico 1919, c. 93, p. 182) imposing an excise tax of 2 cents for each gallon of gasoline sold or used, and an annual license tax of $50 for each distributing station or place of business. The case was here before under the name of Askren, Atty. Gen., v. Continental Oil Co., 252 U. S. 444, 40 Sup. Ct. 355, 64 L. Ed. 654, on review of an order of the District Court (three judges sitting) granting a temporary injunction. It is now here for review of the final decree; and, Mr. Askren's term as Attorney General having expired, Mr. Bowman, his successor in office, has been substituted as a party in his stead.

On the former appeal it appeared upon the face of the bill that plaintiff (appellee) purchases gasoline in various states other than New Mexico and ships it into that state, there to be sold and delivered; that it carries on business in two ways: First, gasoline is brought in from other states either in tank cars, in barrels, or in packages containing not less that two five-gallon cans, and sold and delivered to customers in the original packages, in the same form and condition as when received by plaintiff in the state of New Mexico, as to which we held plaintiff is engaged in interstate commerce and not liable to pay to the state a license tax for purchasing, shipping, and selling gasoline in that manner; secondly, a part of plaintiff's business consists of selling gasoline from the tank cars, barrels, and packages in quantities to suit purchasers, and we held that business of this kind is properly taxable by the laws of the state, although the gasoline is brought into the state in interstate commerce; that the mere fact that it was produced in another state does not show a discrimination against the products of such state; and that sales from broken packages in quantities to suit purchasers are a subject of taxation within the legitimate power of the state. But these latter sales were little emphasized in the bill, which stressed the sales in original packages; and, since from its averments it was impossible to determine whether the sales from broken packages were of substantial importance, we did not at that stage of the case go into the question whether the act was separable, but reserved it for the final hearing, while affirming the order for a temporary injunction.

Upon the going down of the mandate, plaintiff amended its bill by averring that in addition to carrying on the business of buying and selling gasoline and other petroleum products, it is using gasoline at each of its distributing stations within the state of New Mexico (37 in number) in the operation of its automobile tank wagons and otherwise; that under the terms of the act it is prohibited from using this gasoline except upon the payment of the excise tax of 2 cents per gallon therefor; that this is a property tax, void under section 1 of article 8 of the state Constitution because not levied in proportion to the value of the gasoline; and that the imposition of the tax denies to plaintiff the equal protection of the laws and amounts to a taking of its property without due process of law, in contravention of the Fourteenth Amendment, and further is in violation of the commerce clause of the Constitution of the United States.

Defendants answered, alleging that plaintiff's sales in tank cars or other unbroken packages are insignificant as compared with its sales made after original packages have been broken; denying that the act exacts of the plaintiff payment of a license tax for the privilege of shipping or selling gasoline in interstate commerce, or of an excise tax on the gasoline sold in such commerce; averring that the state of New Mexico and its officers charged with enforcement of the law do not construe the act as affecting interstate commerce, and have no purpose or intention to enforce it so as to do so, or otherwise than so far as intrastate commerce is concerned; and averring that any gasoline used by plaintiffs at its distributing stations is no longer in interstate commerce, but has become commingled with the general mass of property in the state, and a tax upon its use is not void under the state Constitution or a violation of the commerce clause (Const. art. 1, § 8), or the Fourteenth Amendment.

The case came on for final hearing upon stipulated facts as to the course of plaintiff's business, from which it appeared that during the years 1918 and 1919 and the first seven months of 1920 its sales of gasoline in bulk or from broken packages constituted about 94.5 per cent. of its aggregate business, and sales in original barrels, packages, or tank cars without breaking the packages about 5.5 per cent., in addition to which the company consumed in the conduct of its own business gasoline equal to about 8 per cent. of its total sales. It was further stipulated that this represents the ordinary course of business of the company, but that future percentages will depend upon the demands of customers.

The trial court, after referring to our decision in 252 U. S., proceeded to pass upon the question whether the statute is separable and capable of being sustained so far as it imposes a tax upon domestic business legitimately taxable. Reciting the language of the act, and reading it as including every distributor of gasoline, whether selling at retail or in original packages, as imposing an excise tax upon all gasoline, whether sold in one way or the other, and as making no exemption from either the license or the excise tax for persons selling gasoline or for gasoline sold in original packages, the court declared that it could not read an exemption into it without giving it a meaning the Legislature might never have intended, and held the act not separable, but void as to both interstate and domestic business. Having reached this conclusion, the court...