Com. v. Shell Oil Co.

• Decision Date: 05 September 1969
• Parties: COMMONWEALTH of Virginia v. SHELL OIL COMPANY. (2 cases.)
• Court: Virginia Supreme Court

Page 434

169 S.E.2d 434

210 Va. 163

COMMONWEALTH of Virginia v. SHELL OIL COMPANY. (2 cases.)

Supreme Court of Appeals of Virginia.

Sept. 5, 1969.

D. Gardiner Tyler, A. R. Woodroof, Asst. Attys. Gen. (Robert Y. Button, Atty. Gen., on brief), for plaintiff in error.

Joseph C. Carter, Jr. Richmond, (H. Brice Graves, Lee F. Davis, Jr., Hunton, Williams, Gay, Powell & Gibson, Richmond, on brief), for defendant in error.

Before EGGLESTON, C.J., and BUCHANAN, SNEAD, I'ANSON, CARRICO and GORDON, JJ.

SNEAD, Justice.

Under the provisions of Code, §§ 58--1130, 58--1131 and 58--1134 Shell Oil Company, appellee, filed on August 31, 1961, in the Circuit Court of the City of Richmond a petition for the refund of taxes amounting to the sum of $41,695.96 allegedly erroneously collected from it by the Commonwealth of Virginia on the sale within this State of 'Shell 640 Kerosene', a jet fuel, to Capital Airlines, Incorporated (later merged into United Airlines). (Record No. 6985.) Thereafter, Shell filed a similar petition seeking a recovery of $37,494.72 for taxes it paid to the Commonwealth on 'Shell 640 Kerosene' sold Piedmont Aviation, Incorporated. (Record No. 6986.) The two cases presented the same issues and the trial court heard them together without the intervention of a jury. By orders entered November 30, 1967, Shell was awarded a judgment against the Commonwealth for $34,835.68 in Record No. 6985 and a judgment for $37,032.96 in Record No. 6986. To these judgments we granted the Commonwealth writs of error.

The Commonwealth has assigned eight errors which are identical in each case. Among those assigned are that the trial court erred in assuming jurisdiction of the cases under Code, § 58--1130 and in finding that the fuel was not taxable.

The record discloses that Shell is a refiner and producer of motor fuel and petroleum products and is a duly licensed dealer therein in Virginia. In April, 1955 Shell wrote to the Division of Motor Vehicles inquiring as to the applicability of the tax on motor fuels to Shell's sales of kerosene for use in jet aircraft. A reply was received from the Commissioner of the Division of Motor Vehicles informing Shell that all sales of aviation fuel would be subject to a tax of six cents per gallon and should be reported in the regular monthly tax report. Shell proceeded to collect the tax and file its reports in accordance with this advice. The taxes sought to be recovered involved sales between January 1, 1956 and March 30, 1960.

Shell contended below, and the court found, that 'Shell 640 Kerosene' was not subject to the tax on motor fuel imposed by § 58--711, Infra, since that product did not come within the definition of motor fuel set out in § 58--687. Sub-section (3) of that statute defines aviation fuel as 'a motor fuel designed for use in the operation of aircraft, and sold or used for that purpose'. Sub-section (2) defined motor fuel as '(a)ll products commonly or commercially known or sold as gasoline * * * and (a)ny liquid prepared, advertised, offered for sale or sold for use as or commonly and commercially used as a fuel in internal combustion engines' which falls within certain distillation limits. ¹ It is stipulated that 'Shell 640 Kerosene' does not fall within the limits set out in this provision.

There is no common law remedy by which to obtain a refund of taxes and Shell elected to proceed under § 58--1130, which reads in part:

'Any person, firm or corporation assessed with any State taxes on property or income or any State license tax, or any State capitation tax, aggrieved by any such assessment * * * may * * * apply for relief to the court * * *.'

It is Shell's position that the tax paid was a 'State license tax' under this section and that the court properly assumed jurisdiction of the cases. Shell concedes that a finding that the tax was a license tax was essential to the court's jurisdiction, and that '(t)he court below had jurisdiction only if the motor fuel tax is a 'license tax' as that term is used in § 58--1130'.

Section 58--711, as it applied to these cases, read in part:

'There is hereby levied a tax of six cents per gallon on all motor fuel which is sold and delivered or used in this State, * * * provided, that the tax herein imposed and assessed shall be collected by and paid to the State but once in respect to any motor fuel.' ²

The Commonwealth argues that the tax is an excise and not a license tax and relies heavily on Shanks v. Kentucky Independent Oil Co., 225 Ky. 303, 8 S.W.2d 383. The court in that case recognized that 'excise', in a broad sense, may include license taxes: 'A license tax or tax for the privilege of doing business is sometimes referred to as an excise, as are all forms of taxation which are not burdens laid directly upon persons or property.' 225 Ky. 307, 8 S.W.2d 385. See also 103 A.L.R. pp. 18, 19. The court held however that the three cents per gallon tax imposed by the Kentucky statute was not a license tax but was 'an excise in the original and limited sense, being 'something cut off from the price paid on a sale of goods, as a contribution to the support of the government ". Thus the court noted that 'excise tax' and 'license tax' are not mutually exclusive terms but held, in that case, that the excise was levied only in its limited sense and not as a license tax.

The tax imposed by § 58--711 takes the form of an excise tax and is expressly referred to as such in § 58--710. ³ The question for determination then is not whether it is an excise or license tax, but whether, as an excise, it is imposed as a license tax.

In support of its position Shell cites State v. Silver Bow Refining Co., 78 Mont. 1, 252 P. 301; Carson City v. Red Arrow Garage, 47 Nev. 473, 225 P. 487; Amos v. Gunn, 84 Fla. 285, 94 So. 615; Pauley v. California, 9 Cir., 75 F.2d 120; Roberts v. City of Baton Rouge, 236 La. 521, 108 So.2d 111. In our view these cases are not squarely in point. 'The declaration in a statute that the tax is of a particular nature, while not conclusive, is very important and must be given consideration in construing the statute'. 103 A.L.R. p. 19. As the Commonwealth points out, the statutes relied upon by the courts in these cases describe or refer to the taxes as license taxes. Chapter 13, Title 58 contains no such language with regard to the tax imposed by § 58--711. Section 58--710 refers to it only as an excise.

The trial court, in its opinion, states that the tax 'is collected from a dealer in the form of a tax for the privilege of engaging in the particular business of distributing aviation fuel' and is therefore, as is argued by Shell, a license tax. In Shanks, supra, the court stated: 'A careful reading of the act convinces us that the tax imposed was not intended as a license tax or a tax for the privilege of engaging in the business of selling gasoline in this state. It applies not only to sellers of gasoline but to users where the gasoline has not been sold in this state. On the other hand it does not apply...