Esso Standard Oil Co v. Evans United States v. Evans

CourtUnited States Supreme Court
Citation73 S.Ct. 800,97 L.Ed. 1174,345 U.S. 495
Docket Number378,Nos. 330,s. 330
PartiesESSO STANDARD OIL CO. v. EVANS et al. UNITED STATES v. EVANS et al
Decision Date04 May 1953

Mr. Oscar H. Davis, Washington, D.C., for the United States.

Mr. William Waller, Nashville, Tenn., for Esso Standard Oil Co.

Mr. K. Harlan Dodson, Jr., Nashville, Tenn., for appellees.

Mr. Justice REED delivered the opinion of the Court.

These are appeals from the Supreme Court of Tennessee, affirming a Chancery Court judgment for some $196,000 in favor of the State Commissioner of Finance and Taxation, against Esso Standard Oil Co., the party of record in No. 330. Ultimately liable, the United States intervened in that litigation and brought a separate appeal here, No. 378. It contended that the State tax involved in barred by principles of sovereign immunity. This is a test case. We are told that if the tax is sustained, a liability for upwards of $4,000,000 will result.

The facts are these. During World War II the Government was actively engaged in the production and procurement of high octane aviation fuel. All such gasoline produced was purchased before it left the refinery and, by formal passage of title, became immediately the property of the Defense Supplies Corporation, a corporation wholly owned by the Reconstruction Finance Corporation, 6 Fed.Reg. 2972, as amended 6 Fed.Reg. 3363, and specifically exempt from state storage and use taxes, 55 Stat. 248. Release from storage by the producing companies occurred only on notification by the Petroleum Administration for War, in accordance with allocation of specific lots of fuel to various official consumers, including the Services and the Allies. The Air Force, in particular, then arranged for transportation of its various allotments—sometimes by government carrier—from the refineries to the nearest consuming point.

We are concerned with certain lots of Air Force fuel produced in the South at various plants and shipped through Memphis, Tennessee. It appears that in 1943 a shortage of storage facilities developed in the area, forcing resort to privately owned tanks. Appellant Esso and the Lion Oil Company were able to provide such service through tanks at various points near Memphis. As a result, the Government entered into extensive contracts with Esso which in turn rented the Lion tanks, providing that the Company would 'render services * * * in receiving, storing, handling and loading Government-owned fuel.' The Company's service charge ranged from 18/100 of a cent to 6 3/10 cents per gallon. The United States agreed to assume liability for all state taxes. Pursuant thereto, allotments of gasoline were moved by barge from refineries to these private tanks, stored there pending need, and later reshipped by truck to consuming air fields on order of the Air Force. The operations continued from 1943 through 1946 under several contracts of similar import.

August 2, 1949, the State, after investigation, demanded that Esso pay taxes in connection with these operations under the Tennessee gasoline tax, 2 Williams' Tenn. Code §§ 1126—1147. This statute, in material part, provided:

'Every distributor when engaged in such business in this state, shall pay to the state comptroller, through commissioner of finance and taxation, for the exclusive use of the state, a special privilege tax, in addition to all other taxes, for engaging in and carrying on such business in this state, in an amount equal to six cents for each gallon of gasoline, and six cents for each gallon of distillate refined, manufactured, produced, or compounded by such distributor and sold, stored or distributed by him in this state, or shipped, transported or imported by such distributor into, and distributed, stored or sold by him within this state, during such year; * * *.' § 1127.

And § 1126 defines distribution as

'every person who engages in the business in the state of refining, manufacturing, producing, or compounding gasoline or distillate, and selling or storing the same in this state; and also every person who engages in the business in this state of transporting, importing, or causing to be imported, gasoline or distillate into this state, and distributing, storing, or making original sales of the same in this state, for any purpose whatsoever.'

Esso paid the required tax for the privilege of storing gasoline measured by the amount stored during the month of January 1944—the statute of limitations having run in regard to 1943 operations—and sued to recover. The Government intervened in the trial court and entered its plea, echoed by Esso, that the tax was barred by the constitutional doctrine of intergovernmental immunity; that to construe the Tennessee statute as applicable to storage off gasoline owned by the United States makes it repugnant to the Constitution and void. Both the Chancery Court and the Court or Appeals rejected the claimed immunity and held the statute valid as applied. We noted our probable jurisdiction on appeal. 28 U.S.C. § 1257(2), 28 U.S.C.A. § 1257(2).

The appellants take a firm stand on United States v. Allegheny County, 322 U.S. 174, 64 S.Ct. 908, 88 L.Ed. 1209, which they contend is an analogous case that compels reversal of this decision. They say, in effect, that the tax here is no less 'on' the property of the Federal Government than it was in that case, and in support of this claimed similarity they point to the following factors: that the statute grew out of the state's effort to tax sales to...

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