Nueces County Appraisal Dist. v. Diamond Shamrock Refining and Marketing Co.

• Citation: 853 S.W.2d 212
• Decision Date: 29 April 1993
• Docket Number: No. 13-91-308-CV,13-91-308-CV
• Parties: 129 Oil & Gas Rep. 175 NUECES COUNTY APPRAISAL DISTRICT and the Appraisal District Board of the Nueces County Appraisal District, Appellants, v. DIAMOND SHAMROCK REFINING AND MARKETING COMPANY, Appellee.
• Court: Court of Appeals of Texas

Page 212

853 S.W.2d 212

129 Oil & Gas Rep. 175

NUECES COUNTY APPRAISAL DISTRICT and the Appraisal District

Board of the Nueces County Appraisal District, Appellants, v. DIAMOND SHAMROCK REFINING AND MARKETING COMPANY, Appellee.

No. 13-91-308-CV.

Court of Appeals of Texas,

Corpus Christi.

April 29, 1993.

Rehearing Overruled May 27, 1993.

Russell R. Graham, Calame, Linebarger, Graham & Pena, Austin, for appellants.

Edward Kliewer, III, Kenneth Malone, Foster, Lewis & Langley, San Antonio, for appellee.

Before the court en banc.

OPINION

SEERDEN, Justice.

This is an ad valorem taxation case. The trial court entered a judgment against the Nueces County Appraisal District and the Appraisal Review Board of the Nueces County Appraisal District which decreed that the crude oil owned by Diamond Shamrock and located within appellants' appraisal jurisdiction on January 1st of 1988, 1989, and 1990, was exempt from ad valorem taxation for those years. By a single point of error, appellants complain that the trial court erred by holding that Diamond Shamrock's property was exempt from taxation. We reverse and render.

The Constitution of the State of Texas provides that "all real property and tangible personal property in this State, unless exempt as required or permitted by this Constitution ... shall be taxed in proportion to its value...." TEX. CONST. art. VIII, § 1(b). See TEX. CONST. art. VIII, §§ 1(d), 1-b, 1-j, 1-k, 2. Principles of federal law may limit a state's power to tax. TEX.TAX CODE ANN. § 11.12 (Vernon 1992); ¹ Dallas County Appraisal Dist. v. L.D. Brinkman, 701 S.W.2d 20, 20 (Tex.App.--Dallas 1985, writ ref'd n.r.e.). Thus, subject only to the state's constitutional exemptions and federal limitations, the State of Texas has the power and the duty to tax any real and tangible personal private property in the state. Id. When construing constitutional authorization of tax exemptions, "our courts must resolve any doubts against the exemption because tax exemptions are never favored." Aransas County Appraisal Review Board v. Texas Gulf Shrimp, 707 S.W.2d 186, 188 (Tex.App.--Corpus Christi 1986, writ ref'd n.r.e.).

The following facts, among others, were stipulated by the parties. The crude oil was shipped from foreign sources to American Petrofina's Harbor Island storage facility within the Nueces County Appraisal District to await shipment by pipeline to its final destination, Diamond Shamrock's refinery located approximately 100 miles from Harbor Island in Three Rivers, Texas. None of the crude oil was pumped or sold outside Texas. On January 1, 1988, 323,019 barrels of crude oil were present for no longer than 12 days at the Harbor Island facility; 658,968 barrels were present on January 1, 1989, for no longer than 25.3 days; and, 408,667 barrels were present on January 1, 1990, for no longer than 18.1 days. At all times during the years 1987 through 1990, some volume of crude oil owned by Diamond Shamrock was present in the Harbor Island storage facility. While located in Nueces County, the crude oil received governmental services.

Further, Diamond Shamrock admits that the tax is valid except to the extent that it may be precluded by the Import-Export Clause and the Commerce Clause of the United States Constitution, and, if valid, this property is subject to taxation in appellants' taxing district. The parties also stipulated that if the oil originated from sources within Texas, it would be subject to ad valorem taxation in Texas.

THE IMPORT-EXPORT CLAUSE

The Import-Export Clause states:

No State shall, without the consent of the Congress, lay any imposts or duties on imports or exports, except what may be absolutely necessary for executing its inspection laws: and the net produce of all duties and imposts laid by any State on imports or exports, shall be for the use of the treasury of the United States: and all such laws shall be subject to revision and control of the Congress.

U.S. CONST. art. I, § 10, cl. 2.

Diamond Shamrock contends that the oil was in transit to its refinery and immune from property taxes under the Import-Export Clause until it arrived at its final destination in Three Rivers, Texas. Using the traditional analysis of taxation under the Import-Export Clause, as urged by Diamond Shamrock, all taxes, even nondiscriminatory property taxes, on imports and the importing processes are banned by the Clause. City of Farmers Branch v. Matsushita Elec. Corp. of Am., 537 S.W.2d 452, 454 (Tex.1976) (citing Low v. Austin, 80 U.S. (13 Wall.) 29, 20 L.Ed. 517 (1871) and Brown v. Maryland, 25 U.S. 262, 12 Wheat 419, 6 L.Ed. 678 (1827)). A court's primary consideration, under this traditional approach, is whether the tax under review reaches imports or exports. Department of Revenue of Washington v. Association of Washington Stevedoring Cos., 435 U.S. 734, 752, 98 S.Ct. 1388, 1400, 55 L.Ed.2d 682 (1978).

Diamond Shamrock argues that whether goods are in transit and not subject to local taxation depends on the intent of the parties. Diamond Shamrock relies on cases that determine the validity of the tax by analyzing the character of the taxed property. Swift Textiles, Inc. v. Watkins Motor Lines, Inc., 799 F.2d 697, 699, 700-01, 701 n. 2 (11th Cir.1986); State v. Anderson, Clayton & Co., 92 F.2d 104, 107 (5th Cir.1937), cert. denied, 302 U.S. 747, 58 S.Ct. 265, 82 L.Ed. 578 (1937); Binderup v. Pathe Exch., Inc., 263 U.S. 291, 309, 44 S.Ct. 96, 99, 68 L.Ed. 308 (1923).

In Swift, the court considered the intent of the parties and whether the shipment was a part of a larger journey originating in a foreign country. It determined whether the intrastate shipment of machinery was a continuation of foreign commerce under the Carmack Amendment to the Interstate Commerce Act. Swift, 799 F.2d at 699, 700-01, 701 n. 2. Appellants correctly argue that the intentions of the parties might be relevant for defining the nature of a shipment when the dispute is between a common carrier and its client and the issues are contractual in nature. However, under the present facts we are concerned, not with a contract as it applies to an appropriate act, but with the validity of a tax imposed upon one of the parties by a third-party taxing district.

Diamond Shamrock cites the following propositions in Anderson, Clayton. "[T]he intention existing at the time the movement starts governs and fixes the character of the shipment," and "[t]emporary stoppage within the state, made necessary in furtherance of the interstate carriage, does not change its character." Anderson, Clayton, 92 F.2d at 107. Diamond Shamrock relies on cases that reflect the traditional analysis of taxation under the Import-Export Clause.

The United States Supreme Court abandoned the traditional inquiry into the character of the taxed property in Michelin Tire Corp. v. Wages, 423 U.S. 276, 279, 96 S.Ct. 535, 537, 46 L.Ed.2d 495 (1976). See R.J. Reynolds Tobacco Co. v. Durham County, North Carolina, 479 U.S. 130, 152, 107 S.Ct. 499, 513, 93 L.Ed.2d 449 (1986); Xerox Corp. v. County of Harris, 459 U.S. 145, 150-51, 103 S.Ct. 523, 526-27, 74 L.Ed.2d 323 (1982); Washington Stevedoring, 435 U.S. at 759, 98 S.Ct. at 1404; Recent Cases, 29 VANDERBILT L.REV. 487, 493-94 (1978). In Michelin, the Court initiated a new, fundamentally different approach to the Import-Export Clause. Under the contemporary analysis, instead of focusing on whether the property has lost its status as an "import," the Court focused on whether the tax sought to be imposed is an "impost or duty." Michelin, 423 U.S. at 290-94, 96 S.Ct. at 543-45; see Limbach v. Hooven & Allison Co., 466 U.S. 353, 360, 104 S.Ct. 1837, 1842, 80 L.Ed.2d 356 (1984); Louisiana Land & Exploration v. Pilot Petroleum, 900 F.2d 816, 820-21 (5th Cir.1990), cert. denied, 498 U.S. 897, 111 S.Ct. 248, 112 L.Ed.2d 207 (1990). Appellants urge that, under the holding in Michelin, the oil was not in transit for taxation purposes. Additionally, even if "in transit," appellants contend that it was not automatically immune from taxation.

"[T]he [Import-Export] Clause was fashioned to prevent the imposition of exactions which were no more than transit fees on the privilege of moving through a State." Michelin, 423 U.S. at 290, 96 S.Ct. at 543. The Court in Michelin concluded that an exaction by a state would be objectionable if it offended any of the three policy considerations which led the framers to incorporate the Import-Export Clause into the Constitution. These considerations are:

1. [T]he Federal Government must speak with one voice when regulating commercial relations with foreign governments, and tariffs, which might affect foreign relations, could not be implemented by the States consistently with that exclusive power;

2. [I]mport revenues were to be the major source of revenue of the Federal Government and should not be diverted to the States; and

3. [H]armony among the States might be disturbed unless seaboard States, with their crucial ports of entry, were prohibited from levying taxes on citizens of other States by taxing goods merely flowing through their ports to the inland States not situated as favorably geographically.

Michelin, 423 U.S. at 285-86, 96 S.Ct. at 540-41. We conclude that the tax at issue in this case offends none of these policies.

First, this property tax can have no impact on the federal government's exclusive regulation of foreign commerce. By definition, it does not fall on imports because of their place of origin. Michelin, 423 U.S. at 286, 96 S.Ct. at 541.

Second, the federal government retains the exclusive right to all revenues from exactions on imports and exports. Unlike imposts and duties, which are essentially taxes on the commercial privilege of bringing goods into a country, ad valorem property taxes are taxes by which a state apportions the cost of such services as police and fire protection among the beneficiaries. Michelin, 423 U.S. at 287, 96 S.Ct. at 541; Mat...