Colonial Pipeline Co. v. Agerton

• Decision Date: 14 January 1974
• Docket Number: No. 53552,53552
• Citation: 289 So.2d 93
• Parties: COLONIAL PIPELINE COMPANY, Plaintiff-Respondent, v. E. Lee AGERTON, Collector of Revenue, Defendant-Relator.
• Court: Louisiana Supreme Court

Page 93

289 So.2d 93

COLONIAL PIPELINE COMPANY, Plaintiff-Respondent, v. E. Lee AGERTON, Collector of Revenue, Defendant-Relator.

No. 53552.

Supreme Court of Louisiana.

Jan. 14, 1974.

Rehearing Denied Feb. 15, 1974.

White M. Cook, II, Baton Rouge, for defendant-relator.

R. Gordon Kean, Jr., John V. Parker, Sanders, Miller, Downing & Kean, Baton Rouge, Charles A. Graham, Atlanta, Ga., for plaintiff-respondent.

CALOGERO, Justice.

We granted this writ, 279 So.2d 201 (La.1973) upon the application of the Louisiana Collector of Revenue, who complains of an adverse decision of the 19th Judicial District Court, affirmed by the First Circuit Court of Appeal, holding that R.S. 47:601 as amended by Act No. 325 of 1970 is unconstitutional as a violation of the Commerce Clause of the United States Constitution. ¹

R.S. 47:601 imposed a corporation franchise tax which the Collector levied on plaintiff-relator, Colonial Pipeline Company, for the years 1970 and 1971. Colonial paid the taxes under protest, then instituted this action for recovery.

The legal issue involved in the matter presently before us is more readily understood by reviewing Colonial's disputes with the Collector of Revenue starting in 1963.

Colonial Pipeline Company is a common carrier of liquefied petroleum products. Its chief physical asset is a pipeline system stretching from Houston, Texas to the outskirts of New York City, a total of some 3,400 miles. Through this line, Colonial pumps approximately one million gallons of petroleum products per day. Of the total pipeline mileage owned by Colonial, approximately 258 are located in the State of Louisiana (in 1963 there were 217 miles of pipeline located in Louisiana.). Over this distance, there are several booster pumping stations which keep the products flowing at a sustained rate, and at various collection points (chiefly Lake Charles and Baton Rouge) there are tank storage facilities. To maintain and help operate this line, Colonial keeps approximately 25--30 employees in the State. These consist of various classifications of mechanics, electricians, and other workers whose chief duties are to inspect the line and perform maintenance chores. There were no administrative offices or personnel in the State during 1970 and 1971, although prior to this time, including the year 1963, Colonial had maintained a Division office in Baton Rouge.

In its operation in Louisiana, Colonial has apparently done no intrastate shipping of petroleum products. Loads or batches are picked up outside the state and deposited within the state, and picked up within the state for transportation elsewhere. There are apparently no facilities in the state, except for those in Lake Charles and Baton Rouge, for injecting or withdrawing products into or from the line.

On May 9, 1962, Colonial, a Delaware corporation with principle offices in Atlanta, Georgia, qualified to do business in Louisiana and has remained qualified since that time.

In 1963 the Collector imposed the Louisiana franchise tax (R.S. 47:601, the latest amendment thereof in 1963 being by Act 437 of 1958) on Colonial's activities for the year 1962. Colonial paid the tax, then successfully prosecuted a lawsuit for a refund. The Court of Appeal in that first lawsuit affirmed a district court judgment favorable to Colonial, ² holding that Colonial was engaged in interstate commerce, and that the Collector's interpretation of R.S. 47:601 which authorized the imposition of the tax was unconstitutional as a violation of the Commerce Clause of the United States Constitution. This Court refused to grant writs. ³

Following that 1969 decision the Louisiana Legislature by Act 325 of 1970 amended R.S. 47:601 in an apparent effort to cure any Constitutional deficiency in the statute and to facilitate the legal imposition of Louisiana's corporation franchise tax upon corporations such as Colonial.

There followed a renewed effort to impose the tax, this time under the amended statute.

Prior to the 1970 amendment the statute had read as follows:

R.S. 47:601. Imposition of tax

Every domestic corporation And every foreign corporation, exercising its charter, authorized to do or doing business in this state, or owning or using any part or all of its capital or plant in this state, subject to compliance with all other provisions of law, except as otherwise provided for in this chapter, Shall pay a tax at the rate of one dollar and 50/100 ($1.50) for each one thousand dollars ($1,000.00), or major fraction thereof on the amount of its capital stock, surplus, undivided profits, and borrowed capital, determined as hereinafter provided; the minimum tax shall not be less than ten dollars ($10.00) in any case. The tax livied 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. (Emphasis added)

The amendment by Act 325 of 1970 changed the statute to provide as follows:

R.S. 47:601 Imposition of tax

Every domestic corporation And every foreign corporation, exercising its charter, or qualified to do business or actually doing business in this state, or owning or using any part or all of its capital, plant or any other property in this state, subject to compliance with all other provisions of law, except as otherwise provided for in this Chapter Shall pay an annual tax at the rate of $1.50 for each $1,000.00, or major fraction thereof on the amount of its capital stock, surplus, undivided profits, and borrowed capital, determined as hereinafter provided; the minimum tax shall not be less than $10.00 per year in any case. The tax levied herein is due and payable on any one or all of the following alternative incidents:

(1) The qualification to carry on or do business in this state or the actual doing of business within this state in a corporate form. The term 'doing business' as used herein shall mean and include 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 as well as, the buying, selling or procuring of services of property.

(2) The exercising of a corporation's charter or the continuance of its charter within this state.

(3) The owning or using any part of all of its capital plant or other property in this state in a corporate capacity.

It being the purpose of this section to reguire the payment of this tax to the State of Louisiana by domestic corporations for the right granted by the laws of this state to exist as such an organization, And by both domestic and foreign corporations for the enjoyment, under the protection of the laws of this state, of the powers, rights, privileges and immunities derived by reason of the corporate form of existence and operation. The tax hereby imposed shall be in addition to all other taxes levied by any other statute.

As used herein the term 'domestic corporation' shall mean and include all corporations, joint stock companies or associations, or other business organizations organized under the laws of this state which have privileges, powers, rights or immunities not possessed by individuals or partnerships. The term 'foreign corporation' shall mean and include all such business organizations as hereinbefore described in this paragraph which are organized under the laws of any other state, territory or district, or foreign country. (Emphasis added)

The Court of Appeal, holding as it did in the earlier opinion that the statute (prior to the 1970 amendment) as applied to Colonial's activities within the State violated the commerce clause of the United States Constitution, rested the decision essentially upon its construction that the statute imposed a tax simply upon the privilege of doing business in the State of Louisiana. And, of course, State franchise or excise taxes imposed on a corporation for the privilege of doing exclusively interstate business, as a general rule, are invalid.

Colonial argues, and the Court of Appeal in the case presently before us held, that the 1970 amendment to R.S. 47:601 did not change the operating incidents of the franchise tax, that the statute before and after the amendment in this respect is essentially the same.

We disagree. The amended statute omits the primary operating incident, i.e., 'the privilege of carrying on or doing business.' And, of course, it was the taxing of the privilege of carrying on or doing business which the Court of Appeal in its earlier decision held was the Exclusive thrust of the statute. Additionally the amendment specifies three alternative incidents, one of which, 'the doing of business within this state in a corporate form,' was not clearly incorporated in the prior statute.

Even if we assume, however, that there has been no essential change in the statute we would still be inclined to hold as we do, notwithstanding the earlier decision of the Court of Appeal to the contrary.

This Court's refusal in 1969 to grant writs upon application by the State in that earlier case, while normally persuasive, does not carry the same weight as a precedent as it would, had that case been decided by this Court after the granting of a writ. See State v. Theard, 212 La. 1022, 34 So.2d 248 (1948); State v. Ardoin, 197 La. 877, 2 So.2d 633 (1941). This Court is not bound by its refusal of writs, to adopt law expressed in appellate court opinions. Garlington v. Kingslev, handed down this day. 289 So.2d 88 (La.1973).

The statute as amended in 1970 imposes a corporation franchise tax upon, pertinently, every foreign corporation (and every domestic corporation as well) exercising its charter, authorized to do or doing business, or owning or using any part or all of its capital or plant, in the State of Louisiana. The tax is due and payable on any one or all of...