Diamond Shamrock Refining and Marketing Co. v. Nueces County Appraisal Dist.
| Decision Date | 15 June 1994 |
| Docket Number | No. D-3982,D-3982 |
| Citation | 876 S.W.2d 298 |
| Parties | , 129 Oil & Gas Rep. 203 DIAMOND SHAMROCK REFINING AND MARKETING COMPANY, Petitioner, v. NUECES COUNTY APPRAISAL DISTRICT and the Appraisal Review Board of the Nueces County Appraisal District, Respondents. |
| Court | Texas Supreme Court |
Edward Kliewer, III, Kenneth L. Malone, San Antonio, for petitioner.
Russell R. Graham, Peter W. Low, Austin, for respondents.
In this case we consider whether oil which is imported from abroad directly into Texas, which is its final destination, may be taxed while in transit within Texas under the Import-Export Clause and the Commerce Clause of the United States Constitution. We hold that it may, and we therefore affirm the judgment of the court of appeals. 853 S.W.2d 212.
Diamond Shamrock brought this action as a petition for review under the provisions of Chapter 42 of the Texas Property Tax Code, challenging the determination by the Nueces County Appraisal District and the Nueces County Appraisal Review Board that certain crude oil owned by Diamond Shamrock was taxable for the years 1988, 1989 and 1990. The parties tried this case upon an agreed statement of facts pursuant to TEX.R.CIV.P. 263.
The oil in question was shipped from foreign sources through the Gulf of Mexico, off-loaded at the Harbor Island storage facility in Nueces County, held there in tanks, and transmitted by pipeline to Diamond Shamrock's refinery in Three Rivers, Live Oak County, Texas. Some of Diamond Shamrock's crude oil was always present at Harbor Island between 1987 and 1990, although the particular oil in the tanks on January 1, 1988, 1989 and 1990 was actually present for a maximum period of 12 to 25.3 days. The government provides services to the Harbor Island facility in general and to Diamond Shamrock's crude oil in particular.
The parties stipulated that the grounds of Diamond Shamrock's complaint were as follows:
Plaintiff [Diamond Shamrock] protested the inclusion of its property on such appraisal rolls to Defendant, the Appraisal Review Board, pursuant to Chapter 41 of the Texas Property Tax Code on the ground that such property was not subject to ad valorem taxation in Texas for tax years 1988, 1989 and 1990, because such taxation is precluded by the Commerce Clause and the Import/Export Clause of the United States Constitution. Plaintiff did not protest the situs in Texas at which the property is taxed, nor its market value, and neither is at issue in these cases.
The trial court decreed that the oil in question was exempt from taxation by Nueces County for the tax years in question, and it ordered that the property be deleted from the applicable appraisal rolls for those tax years. The court of appeals reversed, rendering judgment that Diamond Shamrock's oil in Nueces County is not exempt property under either the Commerce Clause or the Import-Export Clause of the United States Constitution.
In this Court, Diamond Shamrock contends that, under both the Import-Export Clause and the Commerce Clause of the United States Constitution, U.S. CONST. art. I, § 10, cl. 2 and § 8, cl. 3, the oil is not taxable in Nueces County because it is "in transit." To support this proposition, Diamond Shamrock cites, e.g., R.J. Reynolds Tobacco Co. v. Durham County, 479 U.S. 130, 107 S.Ct. 499, 93 L.Ed.2d 449 (1986); Department of Revenue v. Ass'n of Wash. Stevedoring Cos., 435 U.S. 734, 98 S.Ct. 1388, 55 L.Ed.2d 682 (1978); Michelin Tire Corp. v. Wages, 423 U.S. 276, 96 S.Ct. 535, 46 L.Ed.2d 495 (1976); Louisiana Land & Exploration Co. v. Pilot Petroleum Corp., 900 F.2d 816 (5th Cir.1990), cert. denied, 498 U.S. 897, 111 S.Ct. 248, 112 L.Ed.2d 207 (1990); City of Farmers Branch v. Matsushita Elec. Corp., 537 S.W.2d 452 (Tex.1976); and Calvert v. Zanes-Ewalt Warehouse, Inc., 502 S.W.2d 689 (Tex.1973), appeal dism'd, 416 U.S. 923, 94 S.Ct. 1921, 40 L.Ed.2d 279 (1974). The District counters that none of the evils prevented by application of the Import-Export Clause or the Commerce Clause are implicated by its taxation of Diamond Shamrock's oil, and that Diamond Shamrock should pay for the government services provided to its property.
Under these facts, we do not resolve a number of significant questions. For instance, we do not decide whether oil passing through Texas on its way to a foreign country or to another State is taxable under the Import-Export Clause or the Commerce Clause. Nor do we decide whether oil arriving in Texas from another State is taxable. Rather, the only question presented is whether oil that enters Texas from a foreign country and reaches its ultimate destination here may, under the United States Constitution, be taxed in a particular Texas county, despite the fact that it is still "in transit" while there.
The Import-Export Clause of the United States Constitution states:
No state shall, without the consent of the Congress, lay any imposts or duties on imports or exports, except what may be absolutely necessary for executing its inspection laws: and the net product of all duties and imposts laid by any State on imports or exports, shall be for the use of the treasury of the United States: and all such laws shall be subject to revision and control of the Congress.
U.S. CONST. art. I, § 10, cl. 2. The leading case interpreting this Clause is Michelin Tire Corporation v. Wages, 423 U.S. 276, 96 S.Ct. 535, 46 L.Ed.2d 495 (1976), which overruled earlier cases to adopt a new analytical framework, thereby creating "a fundamentally different approach to cases claiming the protection of the Import-Export Clause." Limbach v. Hooven & Allison Co., 466 U.S. 353, 359, 104 S.Ct. 1837, 1841, 80 L.Ed.2d 356 (1984) ("Hooven II "). See also Department of Revenue v. Ass'n of Wash. Stevedoring Cos., 435 U.S. 734, 752, 98 S.Ct. 1388, 1400, 55 L.Ed.2d 682 (1978).
Michelin involved a challenge to a county ad valorem property tax on tires imported from France and Nova Scotia which were being held in a wholesale distribution warehouse. From there, the tires were distributed to franchised dealers in six southeastern states. Michelin, 423 U.S. at 278-80, 96 S.Ct. at 537-38. The Court upheld the tax, holding that it did not offend the three policies underlying the Import-Export Clause, to wit:
[ (1) ] the Federal Government must speak with one voice when regulating commercial relations with foreign governments, and tariffs, which might affect foreign relations, could not be implemented by the States consistent with that exclusive power; [ (2) ] import revenues were to be the major source of revenue of the Federal Government and should not be diverted to the States; and [ (3) ] harmony among the States might be disturbed unless seaboard States, with their crucial ports of entry, were prohibited from levying taxes on citizens of other States by taxing goods merely flowing through their ports to the inland States not situated as favorably geographically.
Id. at 285-86, 96 S.Ct. at 540-41. 1
Because the tax was a nondiscriminatory property tax, the Court held that it did not violate either the "one voice" policy or the "federal revenue enhancement" policy. Id. at 286, 287, 96 S.Ct. at 541, 541. As to the "harmony between the States" policy, Michelin likewise held that "nondiscriminatory ad valorem property taxes do not interfere with the free flow of imported goods among the States." Id., 423 U.S. at 288, 96 S.Ct. at 542. Although such taxes may increase the cost of goods purchased by "inland" consumers, such taxation is merely a quid pro quo for benefits actually conferred by the State. Thus, "[t]here is no reason why local taxpayers should subsidize the services used by the importer." Id. at 289, 96 S.Ct. at 542. The Clause was intended to prevent certain geographically situated States from being able to impose "exactions which were no more than transit fees on the privilege of moving through a State," and thus "[a] nondiscriminatory ad valorem property tax obviously stands on a different footing." Id. at 290, 96 S.Ct. at 543.
Michelin went on, however, to qualify its holding slightly for goods "merely in transit through the State," stating that "to the extent there is any conflict whatsoever with this purpose of the Clause, it may be secured merely by prohibiting the assessment of even nondiscriminatory property taxes on goods which are merely in transit through the State when the tax is assessed." Id., 423 U.S. at 290, 96 S.Ct. at 543.
Pointing to the parties' stipulation that its crude oil is "in transit" while in Nueces County, Diamond Shamrock argues that the tax here falls within the "merely in transit" qualification. We disagree. The tax in question here does not in any way impinge on the third "harmony among the States" policy of the Import-Export Clause. Although still on its foreign import journey and in that sense "in transit," 2 the oil in question here entered only the State of Texas and, according to the stipulated facts, never left Texas in its crude oil form. Thus, there simply was no opportunity for harmony between the states to be disturbed. 3 Read in context, the Michelin Court's qualification clearly applies only to goods in transit through the state to or from another state and not to goods merely in transit within the only state the goods ever enter. See Robert C.W. Frantz, Comment, Constitutional Law--Nondiscriminatory Ad Valorem Tax May Be Applied To Imports, 30 RUTGERS L.REV. 193, 197 (1976) (). Under the Import-Export Clause, the oil is taxable in Texas. Where in Texas--Nueces County, Live Oak County or elsewhere--is not a subject governed by that Clause.
The Commerce Clause of the United States Constitution grants Congress p...
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