Gurley v. Rhoden 8212 1734

• Decision Date: 12 May 1975
• Docket Number: No. 73,73
• Citation: 44 L.Ed.2d 110,95 S.Ct. 1605,421 U.S. 200
• Parties: W. M. GURLEY, dba Gurley Oil Company, Petitioner, v. Arny RHODEN, etc. —1734
• Court: U.S. Supreme Court

421 U.S. 200

95 S.Ct. 1605

44 L.Ed.2d 110

W. M. GURLEY, dba Gurley Oil Company, Petitioner,

v Arny RHODEN, etc.

No. 73—1734.

Argued March 18, 1975.

Decided May 12, 1975.

Syllabus

Mississippi imposes a 5% sales tax upon the 'gross proceeds' of retail sales of tangible personal property, including gasoline, and such gross proceeds are computed without deduction for any taxes. Mississippi also imposes a gasoline excise tax on each gallon sold by a distributor, which in the case of a distributor bringing gasoline into the State otherwise than by common carrier, accrues at the time when and at the point where the gasoline is brought into the State. And a federal gasoline excise tax is imposed on each gallon sold by a 'producer,' 26 U.S.C. § 4081(a), defined to include any person to whom gasoline is sold tax free, § 4082(a). Contending that the denial of a deduction for the Mississippi and federal excise taxes in computing the gross proceeds of retail gasoline sales for purpose of the sales tax was unconstitutional as a taking of property without due process in violation of the Fourteenth Amendment, and that he acts as a mere collector of the excise texes whose legal incidence is upon the purchaser-consumer, petitioner, an operator of several service stations in Mississippi who purchased his gasoline tax free in other States and transported it to Mississippi in his own trucks, paid the sales taxes under protest and sued for a refund in state court. His suit was dismissed, and the Mississippi Supreme Court affirmed, holding that the legal incidence of both excise taxes is on petitioner and not on the purchaser-consumer. Held: The denial of the deduction of the Mississippi and federal gasoline excise taxes in computing the gross proceeds of retail sales for purposes of the sales tax is not unconstitutional. Pp. 203-212.

(a) As reflected by the language of 26 U.S.C. §§ 4081(a) and 4082(a), and their legislative history, the legal incidence of the federal excise tax is on the statutory 'producer,' such as petitioner, and not on his purchaser-consumer. Pp. 204-208.

(b) The Mississippi Supreme Court's holding that the legal incidence of the state excise tax falls on petitioner, being consistent with a reasonable interpretation of the statute, is conclusive. Pp. 208-210.

(c) Petitioner's claim that liability for the excise taxes and sales tax arises simultaneously and results in a sales tax upon the excise tax is without merit, since the excise taxes attach prior to the point of the retail sale. Pp. 210-211.

(d) Petitioner is not denied equal protection as against dealers in other States who are not required to include the federal excise tax as part of the sales tax base, since the prohibition of the Equal Protection Clause is against its denial by the State as between taxpayers subject to its laws. P. 211-212. 288 So.2d 868, affirmed.

Charles R. Davis, Jackson, Miss., for petitioner.

Hunter M. Gholson, Columbus, Miss., for respondent.

Mr. Justice BRENNAN delivered the opinion of the Court.

Mississippi imposes a 5% sales tax upon the 'gross proceeds of the retail sales' of tangible personal property, including gasoline. Miss.Code Ann. § 27—65—17 (Supp.1974).¹ Petitioner operates as a sole proprietorship from West Memphis, Ark. He owns and operates five gasoline service stations in Mississippi and also sells gasoline at four other stations in Mississippi on a consignment basis. He purchases his gasoline tax free from sources in Tennessee and Arkansas. He transports the gasoline to his Mississippi stations in his own trucks. He holds a Mississippi distributor's permit and is also federally licensed because he is a 'producer' within the meaning of the Internal Revenue Code as one who sells gasoline bought tax free from other 'producers.'² He adds to his pump prices the amount of a Mississippi gasoline excise tax, now nine cents per gallon, Miss.Code Ann. § 27—55—11 (Supp.1974), and a federal gasoline excise tax of four cents per gallon, 26 U.S.C. § 4081(a).³ The State computes his gross proceeds of retail sales 'without any deduction for . . . taxes of any kind . . ..' Miss.Code Ann. § 27 65—3(h) (Supp.1974).⁴ Petitioner contends that the denial of a deduc- tion of the amount of the excise taxes added to his pump prices in the computation of his 'gross proceeds of the retail sales' of gasoline, and the resultant application of the 5% sales tax to so much of his pump prices as reflects the amount of the taxes, are unconstitutional. He therefore paid the sales taxes to that extent under protest, and used for a refund in Mississippi Chancery Court, Hinds County. Respondent cross-claimed for unpaid sales taxes accruing after the filing of the suit.⁵ After trial, the Chancery Court dismissed petitioner's suit and entered judgment for respondent on the cross-claim. The Supreme Court of Mississippi affirmed. 288 So.2d 868. We granted certiorari, 419 U.S. 1018, 95 S.Ct. 491, 42 L.Ed.2d 291 (1974). We affirm.

I

Petitioner's principal argument is that he acts as a mere collector of the taxes for the two governments because the legal incidence of both excise taxes is upon the purchaser-consumer. Upon that premise, he argues: 'Consequently, to impose the Mississippi sales tax upon amounts so received by (petitioner) would be to tax him upon gross receipts which are not his gross receipts, but rather the gross receipts of (the two governments). This would not only violate the fundamental conception of right and justice, but it would be taking (petitioner's) property without due process of the Fourteenth Amendment . . ..' Brief for Petitioner 37. He cites in support the statement in Hoeper v. Tax Comm'n, 284 U.S. 206, 215 52 S.Ct. 120, 122, 76 L.Ed. 248 (1931), that 'any attempt by a state to measure the tax on one person's property or income by reference to the property or income of another is contrary to due process of law as guaranteed by the Fourteenth Amendment.'

Also, petitioner advances an alternative argument limited to the denial of the deduction of the amount of the federal excise tax. He contends that the denial results to that extent in 'a state tax on . . . monies held in trust by (petitioner) as agent for the United States (and) is, in essence, a tax upon the United States . . . (that) . . . is clearly unconstitutional' as violating the constitutional immunity of the United States and its property from taxation by the States. McCulloch v. Maryland, 4 Wheat. 316, 4 L.Ed. 579 (1819). Brief for Petitioner 48.

Petitioner's arguments can prevail, as he apparently concedes, only if the legal incidence of the excise taxes is not upon petitioner, but upon the purchaser-consumer. Our task therefore is to determine upon whom the legal incidence of each tax rests.

II

The economic burden of taxes incident to the sale of merchandise is traditionally passed on to the purchasers of the merchandise. Therefore, the decision as to where the legal incidence of either tax falls is not determined by the fact that petitioner, by increasing his pump prices in the amounts of the taxes, shifted the economic burden of the taxes from himself to the purchaser-consumer. The Court has laid to rest doubts on that score raised by such decisions as Panhandle Oil Co. v. State of Mississippi ex rel. Knox, 277 U.S. 218, 48 S.Ct. 451, 72 L.Ed. 857 (1928); Indian Motorcycle Co v. United States, 283 U.S. 570, 51 S.Ct. 601, 75 L.Ed. 1277 (1931); and Kern-Limerick, Inc. v. Scurlock, 347 U.S. 110, 74 S.Ct. 403, 98 L.Ed. 546 (1954), at least under taxing schemes, as here, where neither statute required petitioner to pass the tax on to the purchaser-consumer. See Alabama v. King & Boozer, 314 U.S. 1, 62 S.Ct. 43, 86 L.Ed. 3 (1941); Lash's Products Co. v. United States, 278 U.S. 175, 49 S.Ct. 100, 73 L.Ed. 251 (1929); Wheeler Bridge & Supply Co. v. United States, 281 U.S. 572, 50 S.Ct. 419, 74 L.Ed. 1047 (1930); First Agricultural Nat. Bank v. State Tax Comm'n, 392 U.S. 339, 88 S.Ct. 2173, 20 L.Ed.2d 1138 (1968); American Oil Co. v. Neill, 380 U.S. 451, 85 S.Ct. 1130, 14 L.Ed.2d 1 (1965).

A majority of courts that have considered the question have held in agreement with the Mississippi Supreme Court in this case, that the legal incidence of the federal excise tax is upon the statutory 'producer' such as petitioner and not upon his purchaser-consumer. Martin Oil Service, Inc. v. Department of Revenue, 49 Ill.2d 260, 273 N.E.2d 823 (1971); People v. Werner, 364 Ill. 594, 5 N.E.2d 238 (1936); Sun Oil Co. v. Gross Income Tax Division, 238 Ind. 111, 149 N.E.2d 115 (1958); State v. Thoni Oil Magic Benzol Gas Stations, Inc., 121 Ga.App. 454, 174 S.E.2d 224, aff'd, 226 Ga. 883, 178 S.E.2d 173 (1970). Contra, see Tax Review Board v. Esso Standard Division, 424 Pa. 355, 227 A.2d 657 (1967); cf. Standard Oil Co. v. State, 283 Mich. 85, 276 N.W. 908 (1937); Standard Oil Co. v. State Tax Comm'r, 71 N.D. 146, 299 N.W. 447 (1941). Our independent examination of the federal statute and its legislative history persuades us also that the legal incidence of the federal tax falls upon the statutory 'producer' such as petitioner.

The wording of the federal statute plainly places the incidence of the tax upon the 'producer,' that is, by definition, upon federally licensed distributors of gasoline such as petitioner. Section 4082(a) provides that '(a)ny person to whom gasoline is sold tax-free . . . shall be considered the producer of such gasoline,' and § 4081(a) expressly imposes the tax 'on gasoline sold by the producer . . ..' (Emphasis added.) The congressional purpose to lay the tax on the 'producer' and only upon the 'producer' could not be more plainly revealed. Persuasive also that such was Congress' purpose is the fact that, if the producer does not pay the tax, the Government cannot collect it from his vendees; the statute has no provision making the vendee liable for its payment.⁶ First Agricultural Nat. Bank v. Tax Comm'n, supra, 392 U.S., at 347, 88...