Esso Standard Oil Co. v. Evans
| Decision Date | 07 June 1952 |
| Parties | , 194 Tenn. 377 ESSO STANDARD OIL CO. v. EVANS, Com'r of Finance & Taxation. |
| Court | Tennessee Supreme Court |
Walker & Hooker, Cummings & Crabtree, Joe Brown Cummings and K. Harlan Dodson, Jr., all of Nashville, for Evans.
Waller, Davis & Lansden, Nashville, for Esso Standard Oil Co.
Ellis N. Slack, Acting Asst. Atty. Gen., and Berryman Green, Sp. Asst. to the Atty. Gen., for the United States, intervenor.
The bill in this cause was filed to recover certain gasoline taxes paid under protest by the complainant on demand of the defendant. In the Chancery Court, because certain governmental immunity was asserted, the Chancellor permitted the United States Government to file an intervening petition. For brevity and to conform with the method adopted by the parties, we will refer, in this opinion, to the complainant as 'Esso;' to the defendant as 'State;' and to the intervenor as the 'United States.'
The controversy rises out of services performed by Esso for the United States under written contracts which are exhibited. These contracts between United States and Esso contained indemnifying clauses which provide for payment by the United States of any state taxes for which Esso may be made liable on account of its activities under the contracts.
During the war years the United States was purchasing at the refineries, all 100-octane and higher octane gasoline used in aviation. From the refineries, the gas was moved, usually by common carrier, and principally by river barge, to various storage points. The United States had no storage facilities nor personnel to store and handle the gasoline, and for these services contracted with private corporations.
Esso owned certain storage tanks at Memphis, and rented others from the Lion Oil Company, and then contracted with United States to store the aviation gasoline belonging to the United States, in these tanks, and with Esso personnel to distribute the gas from these tanks on order of the United States.
The gasoline came up the Mississippi River by barge from Louisiana, where it had been purchased by the United States. When it arrived at Memphis, and while it was still on the barges, it was inspected by State officers, and thereafter pumped by Esso from the barges into its storage tanks, or in some cases, into tank trucks, and thereafter delivered to various Army posts on order of the United States. Some of these Army posts were in Tennessee, and others were in Arkansas and Mississippi.
Activity under the contracts here involved, commenced in 1943, and continued through the years 1944, 1945 and 1946. Since the Statute of Limitations had run on any taxes which accrued for the year 1943, the presnet suit was filed to recover taxes in the amount of $295,810.10, which had been paid under protest for the month of January 1944, after the State had prepared a distress warrant and threatened to have it served. It is agreed that the present suit is a test case, and will determine liability for taxes for the balance of the year 1944, and for the years 1945 and 1946. During the years when the contracts were in operation and Esso was rendering its services to the United States, inspection reports were rendered the Department of Finance and Taxation, and discussions were had with the State regarding tax liability. No formal decision of such liability was ever made, either by the then Commissioner, or by the Attorney General. Esso insists that it relied ont he contemporaneous and continued administrative construction of the then officers of the State, and that they concluded that Esso was not liable for any gasoline taxes in connection with the gasoline of the United States upon which Esso was rendering services under its contracts. The State, on the other hand, insists that the matter of liability was held in abeyance and was uncertain, and that Esso was never formally advised by any responsible authority, that it was not liable for these taxes.
Under the contracts, Esso received as compensation, amounts ranging from 18/100 of a cent to 6 3/10 cents a gallon for receiving and storing in its own facilities and those leased from others, the gasline belonging to the United States. Also it received varying amounts for gasoline distributed by its own facilities, or delivered to carriers on order of the United States.
From this, we conclude that the question presented for decision by this litigation are three, namely:
(1) On the facts stated, was Esso liable for inspection fees under Code sec. 6821?
(2) Was Esso liable for privilege tax for such operations under Code sec. 1126.1 et seq.?
(3) Was Esso liable for interest and penalties?
The Chancellor held that Esso was not liable for (1) and (3), but was liable for (2), and from those parts of the decree which were adverse, all parties have perfected appeals.
We consider first, the question of liability of Esso under Code sec. 6821, for the inspection fees. That section provides that every consignment of volatile substances, as such substances, are defined in previous sections of the Code, shall be inspected, and for such inspection, a charge shall be made to 'the consignor or consignee,' of 20 cents a barrel. Fifty gallons shall constitute a barrel, and the full charge made for any fraction of such barrel.
That this inspection fee is not merely a service charge, but is a revenue measure and an excise tas on the commodity, has been held in a number of our reported cases. State, ex rel. Fort v. City of Jackson, 172 Tenn. 119, 110 S.W.2d 323; Texas Co. v. McCanless, 177 Tenn. 238, 148 S.W.2d 360.
From Judge Cook's discussion of the nature of the tax and its purpose in State v. Reed Oil Co., 176 Tenn. 10, 19-20, 137 S.W.2d 292, it is clear that the tax is laid upon the commodity itself, as an excise. In the present case, the gasoline, while it was in the barges on the river, and also while it was in the storage tanks on the bank, was admittedly the property of the United States. The inspections were made before the contract of Esso came into play, and before Esso had pumped the gasoline from the barge into its storage tanks. We, therefore, agree with the Chancellor, that the State has no power to levy a tax on property of the United States under these admitted facts.
We come next to the consideration of the second question, and Esso's liability for the privilege tax under Code sec. 1126 et seq. This privilege tax has also been defined by reported decisions of this Court.
'This case (Foster & Creighton Co. v. Graham, 154 Tenn. 412, 258 S.W. 570, 47 A.L.R. 971) settled the proposition that the tax * * * is a privilege tax on the engaging in the business of storing gasoline based on the number of gallons in storage.' Texas Co. v. Fort, 168 Tenn. 679, 687, 80 S.W.2d 658, 661.
Nashville C. & St. L. RR. Co. v. Wallace, 288 U.S. 249, 265, 53 S.Ct. 345, 349, 77 L.Ed. 730.
Esso contends that it is a condition precedent to liability for this tax, that the taxpayer shall have imported the gasoline. While we find no support for this argument in the cases cited above, in the present case, it is unnecessary to decide that question since technically Esso did import the gasoline into Tennessee by removing it from the channels of interstate commerce on the barges on the river into its trucks and tanks on the bank.
Further, Esso insists that the decision in Tennessee Oil Co. v. McCanless, 178 Tenn. 683, 157 S.W.2d 267, 162 S.W.2d 1081, relieves it from liability in the present case. We find that case clearly distinguishable on the facts. In that case, the Obion County Board of Education rented a storage tank from the Tennessee Oil Company, with an agreement that it would pay the Tennessee Oil Company a fee of two cents a gallon for distributing the gas on order of the Board. In legal effect, the Board of Education, which was exempt, was storing gasoline in its own tank. Although the rental of the storage tank was a nominal...
To continue reading
Request your trial
-
Tennessee Farmers Assur. Co. v. Chumley
...taxes, even though failure might have resulted from misconstruction of law or might have been a gratuity); Esso Standard Oil Co. v. Evans, 194 Tenn. 377, 250 S.W.2d 569, 573 (1952) (stating where there was no formal remission of privilege taxes by responsible authority, and there was substa......
-
Roane-Anderson Co. v. Evans
...the property of the United States is used as a measure in fixing the amount of tax against the contractor. In Esso Standard Oil Co. v. Evans, 194 Tenn. 377, 250 S.W.2d 569, the distinction is clearly made. The attempt to collect an inspection fee on the Government owned gasoline was held in......
-
John Ownbey Co. v. Butler
...been a gratuity, or was not attempted for the reasons hereinbefore expressed, the State cannot be estopped. See Esso Standard Oil Company v. Evans, 194 Tenn. 377, 250 S.W.2d 569, and particularly at page 386 of the Tennessee Report, where this question is considered and the very respectable......
-
Stewart v. Sullivan County
...T. V. A. waived its Federal immunity and opened the door to complainants for a suit on the contract. Compare: Esso Standard Oil Co. v. Evans, 194 Tenn. 377, 387, 250 S.W.2d 569. Other assignments of error made by defendant T. V. A. are merely repetitory of those made by the County and which......