Commonwealth, by Nelson, v. Dixie Greyhound Lines, Inc.

• Decision Date: 19 June 1934
• Citation: 255 Ky. 111,72 S.W.2d 1032
• Parties: COMMONWEALTH, by NELSON, Revenue Agent, v. DIXIE GREYHOUND LINES, Inc.
• Court: Kentucky Court of Appeals

72 S.W.2d 1032

255 Ky. 111

COMMONWEALTH, by NELSON, Revenue Agent, v. DIXIE GREYHOUND LINES, Inc.

Court of Appeals of Kentucky

June 19, 1934

Appeal from Circuit Court, McCracken County.

Action by the Commonwealth, by Jack W. Nelson, Revenue Agent for the state at large, against the Dixie Greyhound Lines Incorporated. From an adverse judgment, plaintiff appeals.

Reversed.

H Warren Middleton and Georgia Mae Nelson, both of Paducah, for appellant.

Wheeler Wheeler & Shelbourne, of Paducah, for appellee.

STANLEY Commissioner.

The case presents the question of liability of the appellee for the 5-cent gasoline tax under the conditions stated. In this suit of the commonwealth by its revenue agent against the appellee to collect such tax and penalties, the court adjudged upon the pleadings that there is no liability. We are of opinion that the defenses interposed cannot be sustained and the judgment is erroneous.

The material facts are substantially agreed upon. The appellee is a foreign corporation engaged in operating busses carrying passengers for hire. It has a station at Paducah, Ky. in and out of which its busses arrive and depart from and to destinations in Illinois and Tennessee over the highways of Kentucky and of those states. The greater number of its passengers are carried from points in one state to those in another. A comparatively small part of the traffic is between places wholly within Kentucky. The defendant alleged that it was not possible to determine what percentage of its traffic during the past period covered by the petition was intrastate. The company purchased 18,077 gallons of gasoline outside of this state which was delivered to its station at Paducah, where it was stored and distributed to its motors as needed. The case seeks to impose the tax upon this gasoline. At the time the answer was filed, part of it had been consumed in the operation of the busses entering and departing from that station, as above stated. The defendant alleged that it was not in position to ascertain what quantity was used in the operation of its cars in Kentucky and what quantity was used in other states, but charged that all of it was used in interstate traffic and that not more than 15 per cent. was actually used within Kentucky. None of the gasoline had been sold or distributed to another.

The law under which the tax is sought to be imposed is chapter 127 of the Acts of 1928, incorporated in the Kentucky Statutes as section 4224b-1 et seq., 1930 Edition. That act was repealed and re-enacted with some changes at the 1932 session of the General Assembly (chapter 150, Acts 1932), but the re-enactment had not become effective in time to affect the subject-matter, nor do the changes made in the statute affect the question to be determined.

Section 1 of the act (4224b-1, Statutes) defines gasoline for the purposes of the act and continues: "A state tax of five cents (5¢) per gallon is hereby imposed on all gasoline, as defined herein, sold in this Commonwealth at wholesale, as the words 'at wholesale' are hereinafter defined. *** The words 'at wholesale' as used in this act, shall be held and construed to mean and include any and all sales made for the purpose of re-sale or distribution, or for use, and, as well, the gasoline furnished or supplied for distribution within this State, whether the distributor be the same person who so furnished the same, his agent or employee, or another person; and also to mean and include any person who shall purchase or obtain gasoline without the state and sell or distribute or use the same within the state." The portions of the act particularly applicable to the case are italicized.

This is not a license or privilege tax. It is levied on the commodity itself and is an excise tax on distribution, consumption, or use and not on the act of selling. It is necessarily contemplated that the ultimate consumer shall pay the tax. The seller or distributer is made an agency of collection. State Tax Commission v. Hughes Drug Company, 219 Ky. 433, 293 S.W. 944; Shanks v. Kentucky Independent Oil Company, 225 Ky. 303, 8 S.W.2d 383; Kentucky Independent Oil Company v. Coleman, 236 Ky. 592, 33 S.W.2d 615; Willis' Thornton on Oil & Gas, § 857.

The appellee contends that imposition of the tax upon this gasoline would be a direct burden upon interstate commerce, and hence offensive to the commerce clause of the Federal Constitution, which commits the regulation of transportation between states exclusively to Congress. If it has that effect, it is to be quite readily agreed that it is beyond the power of the state to impose the tax. The two factors to be regarded in determining the usually perplexing question of applicability of that principle in cases of this character are, obviously, the nature of the tax and the particular facts.

The appellee relies principally upon Helson v. Commonwealth of Kentucky, 279 U.S. 245, 49 S.Ct. 279, 281, 73 L.Ed. 683, in which this identical statute (changed only in respect of matters not material here) was construed in relation to a different state of fact and which reversed our decision in Metropolis Ferry Company v. Commonwealth, 225 Ky. 45, 7 S.W.2d 506. The Supreme Court held under the circumstances that the tax was a burden upon the use of means of interstate transportation. The defendants in that action were nonresidents of Kentucky operating a ferryboat across the Ohio river between Metropolis, Ill., and a point near Paducah, Ky. The situs of their office and all of their personal property was in Illinois. The gasoline used in generating motive power for propelling the ferry was purchased and delivered to the defendants in Illinois. Because the river below the north low-water mark is in Kentucky, 75 per cent. of the gasoline was actually consumed within the limits of Kentucky, but all of it was in the making of interstate journeys. It was sought to impose the tax upon the use of gasoline thus consumed. It is to be observed that Mr. Justice McReynolds dissented from that opinion, and that three other members of that court acquiesced in the result only because of the earlier decisions, but, as stated in the concurring opinion by Mr. Justice Stone, they could find no justification for the interpretation given the commerce clause which would relieve those engaged in interstate commerce from their fair share of the expenses of government of the states in which they operate by exempting them from the payment of a tax of general application.

The appellant would distinguish the two cases upon the ground that as the tax is levied for the sole purpose of raising revenue for constructing and maintaining the highways of the state, its imposition upon the gasoline is but to require the appellee to compensate the state for the use of its roads, while the ferryboat made no such use, and point out that the Supreme Court in that case declared that, "The tax is exacted as the price of the privilege of using an instrumentality of interstate commerce." We doubt the intention of the court to make the distinction as made by counsel, for it must have had in mind the more practical conception that the gasoline itself was the instrumentality which was actually being used. The Louisiana court, in State v. Johnson, 173 La. 669, 138 So. 503, placed the applicability of a gasoline tax consumed by interstate motorbusses upon that ground. Perhaps there are other cases. Undoubtedly the state may impose on motor vehicles engaged exclusively in interstate commerce a reasonable charge as a fair contribution to the cost of the highways. Clark v. Poor, 274 U.S. 554, 47 S.Ct. 702, 71 L.Ed. 1199; Sprout v. City of South Bend, 277 U.S. 163, 48 S.Ct. 502, 72 L.Ed. 833, 62 A. L. R. 45; Interstate Transit, Inc., v. Lindsey, County Court Clerk, 283 U.S. 183, 51 S.Ct. 380, 75 L.Ed. 953; Carley & Hamilton v. Snook, 281 U.S. 66, 50 S.Ct. 204, 74 L.Ed. 704, 68 A. L. R. 194. But this levy is a tax and not a toll, or a charge for use of the highways, and its payment is not dependent upon the enjoyment by the taxpayer of any special benefit from the use of the funds. Geo. E. Breece Lumber Co. v. Mirabal, 34 N.M. 643, 287 P. 699, 84 A. L. R. 827, affirmed 283 U.S. 788, 51 S.Ct. 352, 75 L.Ed. 1415; Nashville, C. & St. L. R. Co. v. Wallace, 288 U.S. 249, 53 S.Ct. 345, 349, 77 L.Ed. 730, 87 A. L. R. 1191. The case must be decided upon some other hypothesis.

Material differences in the facts of the Helson Case and the instant one are the delivery into the state of the gasoline in bulk and its storage and distribution wholly within the state for use in both domestic and interstate transportation. In the ferryboat case the commodity was in this state only while in the engines actually engaged in moving the vehicle wholly in interstate commerce. The excise tax is, according to the terms of the statute, levied on all gasoline supplied for distribution and actually distributed in the state, as well as upon that used and sold within its limits. Under the particular aim of the statute to tax the commodity irrespective of the character of its use, the case may be decided.

In Kentucky Independent Oil Company v. Coleman, supra, one of the asserted avenues of attempted escape from the tax was that the company's business was interstate in character because the gasoline it sold was for use and consumption in interstate journeys. Noting that the commodity had come to rest in storage tanks or at service stations, it was regarded as having become part of the common property of the state and when sold to motorists and put into their machines the transaction was complete so far as the company was concerned. We denied the claim of immunity because an insignificant unallocated portion of the gasoline had actually been used by...