Halliburton Oil Well Cementing Co. v. Reily
| Decision Date | 15 February 1961 |
| Docket Number | No. 44934,44934 |
| Parties | HALLIBURTON OIL WELL CEMENTING COMPANY v. James S. REILY, Collector of Revenue of the State of Louisiana. |
| Court | Louisiana Supreme Court |
Chapman L. Sanford, Emmett E. Batson, Frederick S. Haygood, Levi A. Himes, John B. Smullin, Baton Rouge, for defendant-appellant.
Taylor, Porter, Brooks, Fuller & Phillips, Baton Rouge, for plaintiff-appellee.
The following two questions are presented for our determination on this appeal from a judgment rendered in favor of Halliburton Oil Well Cementing Company and against Robert L. Roland, 1 Collector of Revenue of the State of Louisiana, in the sum of $43,325.63, plus 2% Interest from December 13, 1956 until paid:
(1) In the calculation of the Louisiana Use Tax (LSA-R.S. 47:301 et seq.) assessed on equipment brought into the State of Louisiana from another state, should such tax be levied only on the component parts of the whole, where the owner himself fabricated and assembled the whole or finished product outside of the State of Louisiana, or should the tax be levied on the cost price of the finished fabricated product as set forth in the statute, supra, so as to include labor and shop overhead?
(2) Is machinery or equipment purchased in another state through the transactions of so-called isolated sales and later brought into the State of Louisiana for use subject to the Louisiana Use Tax?
Halliburton Oil Well Cementing Company (hereinafter referred to as Halliburton) is engaged in the business of servicing oil wells throughout the oil producing states of the United States, including Louisiana. Its principal place of business is maintained in Duncan, Oklahoma, and there it manufactures, assembles, installs, and builds up specialized oil well service units which it employs in its oil well service operations. Halliburton procures from various vendors throughout the United States raw materials, semi-finished, and finished articles necessary for the manufacture, assembly, installation, and build-up of well service units. When a well service unit has been completely processed at Duncan, Oklahoma and has been tested for operation, it is assigned to one of Halliburton's various field camps in the United States, where it obtains a permanent situs unless transferred to another field camp location where greater use may be made of it. A certain number of these units came to rest in Louisiana and obtained a permanent situs therein servicing oil wells located in Louisiana. Halliburton's books are kept in Oklahoma; they reflect the cost value of the units as comprising material cost, labor cost, and shop overhead.
In addition to the above units, Halliburton keeps in Louisiana certain cementing service units it purchased from the Spartan Tool and Service Company of Houston, Texas when that company determined that it should no longer continue in the business of servicing oil wells, and an airplane purchased from the Western Newspaper Union of New York, which company is not regularly engaged in the business of selling airplanes.
For the years 1952, 1953, 1954, and 1955, Halliburton regularly filed with the State of Louisiana tax returns showing the amount of use tax money, as reflected by its calculations, due the State of Louisiana by it on service units employed in the State. Such amounts were paid to the State of Louisiana at the time of filing the statutory use tax returns.
On December 13, 1956, after lengthy correspondence and numerous conferences, Halliburton paid to the Collector of Revenue of the State of Louisiana (hereinafter referred to as Collector), under protest (LSA-R.S. 47:1576), a deficiency tax assessment of $57,278.17, representing principal and interest, and also paid additional interest of $142.83; it denied that $43,189.27, plus a proportionate part of the additional interest, was due the State of Louisiana. By stipulation the deficiency tax assessment was allocated in the following manner:
Phase Principal Interest Total
----------------------------- ---------- --------- ----------
1. Labor and shop overhead $30,942.20 $5,296.23 $36,238.43
2. Cost price versus depreciated
value 2,296.83 386.15 2,682.98
3. Isolated sales 3,789.20 615.02 4,404.22
---------- --------- ----------
Total amount in dispute $37,028.23 $6,297.40 $43,325.63
Amount not in dispute 12,063.03 2,032.34 14,095.37
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Totals $49,091.26 $8,329.74 $57,421.00
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Halliburton brought suit for a return of the amount in dispute, supra, alleging that the Use Tax, if interpreted and applied as the Collector would interpret and apply it to Halliburton, would cast upon the taxpayer (Halliburton) a burden more onerous than that which would be levied by the Louisiana Sales and Use Tax had the transactions involved occurred in Louisiana; and, that a state Use Tax may be upheld as reasonable, legal and constitutional, only insofar as the burden thereof is equal to and not in excess of the burden of the Sales Tax of that same state, to which Sales Tax said Use Tax is complementary. Plaintiff further alleged that the tax demanded of it infringed upon the right of regulation of interstate commerce by Congress (Article I, Section 8, Clause 3, Constitution of the United States), in that it was an attempt by the State of Louisiana to lay a tax on the privilege of engaging in interstate commerce and upon the carrying on of the business of interstate commerce. It still further alleged that it would be deprived of its property without due process of law, contrary to the protection and guaranty granted under the Constitution of the United States and particularly under the Fourteenth Amendment thereof and under Article I, Section 2, of the Constitution of the State of Louisiana, LSA, should it be required to pay the tax assessed.
The trial court agreed with plaintiff and rendered judgment in its favor after trial on the following three issues: 2
'1. For the purposes of calculating the Louisiana Use Tax upon items of specialized oil well equipment brought into the State of Louisiana and used therein by petitioner, the Collector included the actual cost to petitioner of the physical equipment and parts purchased by petitioner outside of Louisiana, and incorporated, outside of Louisiana, into such specialized equipment, and also the labor and shop overhead, incurred by petitioner in constructing said specialized oil field equipment in its shops in Oklahoma. Halliburton admits that the physical equipment and parts should properly be included in the tax base, but denies that the labor and shop overhead were properly included. (This phase of the matter is hereinafter sometimes called 'The labor and shop overhead phase' of this case.)
'2. For the purpose of calculating the Louisiana Use Tax upon items of specialized oil well equipment brought into the State of Louisiana and used herein by petitioner, the Collector used the 'original cost' of all equipment brought into the State of Louisiana without allowance for depreciation which had occurred prior to the equipment being brought into the State of Louisiana. Halliburton contends that the values used for computing the use tax due on this equipment should not be greater than the fair market value of the equipment at the time it was brought into Louisiana. (This phase of the matter is hereinafter sometimes called 'The cost price versus depreciated value phase' of this case.)
Appellant (Collector) agrees that the trial court was correct in its ruling on Issue No. 2, 'The cost price versus depreciated value phase,' supra, in view of the holding of the Supreme Court of Louisiana, in the case of Fontenot v. S.E.W. Oil Corporation, 232 La. 1011, 95 So.2d 638, that a person importing an article for use in this state must pay the 'use' tax the same as if it had been sold at retail, and that such use shall be considered equivalent to a sale at retail as of time of importation. The S.E.W. decision was handed down on May 6, 1957; the petition in the instant matter was filed on December 13, 1956, and judgment was rendered by the trial court on October 13, 1959. It is stated in appellant's brief:
'The Collector sought to impose the use tax on certain equipment which had sustained actual depreciation prior to its being brought into the State using as a tax base the original cost to the taxpayer. This Court has now held in the case of Fontenot vs. S.E.W. Oil Corporation, 232 La. 1011, 95 So.2d 638 (1957) that cost price means the fair market value of property at the moment of taxation--the time it becomes a part of the mass of property of the State and not original cost at the time of acquisition.
'The Collector agrees that the reasoning of the S.E.W. case correctly analyzes the intent and purpose of the Louisiana Use Tax and therefore will not argue this phase.'
The Collector urges that the district court erred in not finding that the incidence of the Louisiana Use Tax is non-discriminatory; that it is equal in its application...
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Halliburton Oil Well Cementing Company v. Reily, 24
...sales and use tax statute, the incidental discrepancy in tax burden did not amount to a discrimination against interstate commerce. 241 La. 67, 127 So.2d 502. On appeal to this Court, we noted probable jurisdiction. 368 U.S. 809, 82 S.Ct. 60, 7 L.Ed.2d 19. The case was first argued during t......
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Chicago Bridge & Iron Co. v. Cocreham
...... exception of prescription to the Collector's reconventional demand as well" as an answer denying the Collector's claim for additional use taxes. . \xC2".... See also this Court's opinion in Halliburton Oil Well Cementing Company v. Reily, 241 La. 67, 127 So.2d 502 (1961), ......