Graves v. Texas Co

Decision Date18 May 1936
Docket NumberNo. 727,727
PartiesGRAVES, Governor of Alabama, et al. v. TEXAS CO
CourtU.S. Supreme Court

Appeal from the District Court of the United States for the Middle District of Alabama.

Messrs. F. H. Moore and Richard T. Rives, both of Montgomery, Ala., for appellants.

Mr. John S. Coleman, of Birmingham, Ala., for appellee.

[Argument of Counsel from page 394 intentionally omitted] Mr. Justice BUTLER delivered the opinion of the Court.

Appellee brought this suit against appellants, officers of the state of Alabama, to restrain the collection under statutes of that state of taxes in respect of gasoline and other liquid motor fuels—which for brevity we shall call 'gasoline'—sold to the United States and used by it in performing governmental functions. P aintiff applied to the court of three judges for a temporary and a permanent injunction. After hearing on an agreed statement of facts, the court held that the Alabama statutes assailed are not distinguishable from the Mississippi exaction condemned as unconstitutional in Panhandle Oil Co. v. Knox, 277 U.S. 218, 48 S.Ct. 451, 72 L.Ed. 857, 56 A.L.R. 583, and granted a permanent injunction. Texas Co. v. Carmichael (D.C.) 13 F.Supp. 242. The Governor and the other state officers appealed. 28 U.S.C. § 345 (28 U.S.C.A. § 345). The United States, by brief filed here as amicus curiae, presented its argument asking affirmance on the ground that the taxes impose a burden on sales to it.1

In substance the Alabama statutes2 provide: The Act of February 10, 1923 (not here involved) required every distributor and retail dealer to pay an excise tax of two cents per gallon 'upon the sale' of gasoline. A distributor is one who sells gasoline at wholesale. A retail dealer is a distributor who also sells gasoline in broken quantities. The Act of January 25, 1927 (Gen.Acts Ala.1927, p. 16), required every distributor, retail dealer 'or storer' to pay 2 cents per gallon 'upon the selling, distributing or withdrawing from storage for any use' (§ 2). A storer is one 'who ships gasoline into this State * * * and stores the same and withdraws or uses the same for any purpose' (§ 1). The Act of August 27, 1927 (Gen.Acts Ala.1927, p. 326), amending that of 1923, employed the same from of words to define the exaction and made a total tax of 4 cents upon selling, distributing, or withdrawing for any use. The Act of July 27, 1931 (Gen.Acts Ala.1931, p. 859), added a cent and that of November 5, 1932 (Gen.Acts Ala.1932, Ex.Sess. p. 314), added another. The Act of January 31, 1935, repealed the 1931 and 1932 statutes, and, in lieu of the excises laid by them, imposed one of 2 cents. The Act of July 10, 1935 (Gen.Acts Ala.1935, p. 509, § 348, Schedule 156.1), repealed all the acts then in force and in their place enacted that 'Every distributor, refiner,3 retail dealer or storer of gasoline * * * shall pay an excise tax of six cents ($0.06) per gallon upon the selling, distributing, storing or withdrawing from storage in this State for any use, gasoline.'

All the acts here involved declare that the excise shall not be laid upon sales in interstate commerce and that the specified tax shall be paid but once. They make the excise apply whether 'withdrawals be for sale or other use,' declare that sellers may pay on the basis of their sales and required that others upon whom the excise is laid shall compute and pay the tax on the basis of their withdrawals. All must make monthly return of 'sales and withdrawals' (Schedule 156.3) and preserve records of 'sales, distributions or withdrawals' (Schedule 156.5). Any one who shall violate any provision may be restrained 'from distributing, refining, selling or withdrawing from storage any gasoline, the sale or withdrawal of which is taxable.' (Schedule 156.18.)

Appellee is a Delaware corporation, authorized to do business in Alabama. It sells gasoline in the 67 counties of that state. Gasoline refined at Port Arthur, Tex., is transported by barges to the company's terminals at Mobile, Ala., and Pensacola and Millville, Fla. Gasoline sold in Alabama is delivered from the Mobile terminal or the company's bulk plants in that State to which gasoline is shipped from the terminals and at which it is held in tanks until withdrawn for delivery at the plants to customers or for transportation to service stations where it is sold at retail to the public.

Practically all the gasoline received by the United States from the company in Alabama is sold and delivered pursuant to written contracts. Some provide for deliveries at the Mobile terminal, some at bulk plants and some at service stations. The deliveries from the Mobile terminal are made in railroad tank cars on tracks adjacent to the terminal. Gasoline delivered from bulk plants is that shipped from the terminals and stored in tanks at the plants until withdrawn. That delivered from service stations is shipped from the terminals to bulk plants and thence conveyed to the stations.

The United States requires that prices specified in bids and contracts shall be exclusive of state and municipal taxes. Between January 1, 1930, and September 22, 1935, the company sold and delivered to the United States in Alabama 286,639.36 gallons of gasoline. At the time of the trial, there were in force two contracts for sale and delivery of gasoline by the company to the United States in Alabama. One covered the period from October 1 to December 31, 1935, and called for deliveries at the Mobile terminal for the United States Army and the Tennessee Valley Authority. The other covered the period from October 1, 1935, to June 30, 1936, and called for service station deliveries for the Department of the Interior.

March 22, 1923, the Attorney General of Alabama ruled that sales to the United States were taxable under the 1923 act. But, after our decision May 14, 1928, in the Panhandle Case, the Attorney General, August 22, 1928, held that the Alabama statutes then in force (those enacted in 1927) were not distinguishable from that of Mississippi held repugnant to the Federal Constitution in the Panhandle Case. He said: 'Alabama also (in addition to taxing selling) taxes the distributing or withdrawing from storage for any use. It taxes but once, and where there is a sale, the tax is on the sale. Where there is no sale, but a distribution or withdrawing from storage for some use, other than selling, there is a tax on such withdrawal or distribution. We are not here considering such withdrawals, but only sales to the United States.

That construction was accepted by the state taxing officers and followed until July 5, 1935, when the then Attorney General advised the Tax Commission that the taxes levied under the Acts of 1927, 1931, and 1932 were essentially different in character from those condemned in the Panhandle Case. His ruling did not depend upon or result from the statutes enacted after 1927. He held the taxes were laid not upon sale, but upon storage and subsequent withdrawal, accruing at the time of withdrawals, and to be computed upon the basis of withdrawals. He said that 'so far as purchases of gasoline by the United States Government are concerned, these tax acts in question do not impose a burden upon the United States. * * * True it may be that the effect of these taxes may be to increase the price of the commodity which the Federal Government may desire to purchase.'

The company has not reported for taxation or paid any tax under these acts on gasoline sold to the United States since the Attorney General's ruling of August 22, 1928. On August 30, 1935, the commission informed appellee that it could not 'permit deductions from gasoline sales by reason of gallonage sold to the United States.' And, prior to the bringing of this suit, the sta e made demand for taxes upon all gasoline withdrawn and sold in Alabama during the preceding five years.

Appellants say that, upon the privilege of storing gasoline, the company is subject to a tax accruing upon and measured by the amount withdrawn, irrespective of subsequent sale or use. Upon that basis they maintain that the tax in respect of gasoline sold and delivered by the company to the United States is not one that operates to retard, impede, or burden the exercise by the United States of its constitutional functions.

But mere storing, i.e., that unassociated with selling, distributing, or withdrawing from storage, was not taxable under prior laws and is not taxable under the Act of July 10, 1935, now in force. While a storer is subject to excise in the Act of January 25, 1927 (Gen.Acts Ala.1927, p. 16), and subsequent statutes, storing without more is not enough to make one a storer. To be a storer, one must ship into the State and there store and withdraw gasoline for some use. Storing was not included among the acts or things taxed until the Act of July 10, 1935 (Gen.Acts Ala.1935, p. 508). That act supersedes and consolidates the earlier levies. We read its taxing clause with its other provisions that in substance were taken from the earlier statutes. In all the measures involved, it unmistakably appears—and it is conceded by the taxing officers—that one who has paid a tax on selling is not taxable on distributing, storing or withdrawing from storage. The opinion of the Attorney General, August 22, 1928, rightly held that the state taxes but once and, where there is a sale, the tax is on the sale. The purpose of the statutes subsequent to that of 1923 was to reach gasoline which was used, but not sold within the state. But, excepting only the addition of the word 'storing' in the taxing clause of the Act of July 10, 1935, there is nothing to suggest intention to tax 'storing' as such. Other provisions indicate that it was not the purpose so to tax. In all the acts, it is stated: The excise shall apply whether the withdrawal be for 'sale or other use'; sellers may pay on the basis of their sales but others...

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