Ozark Pipe Line Corporation v. Monier, 181

• Decision Date: 12 January 1925
• Docket Number: No. 181,181
• Citation: 266 U.S. 555,45 S.Ct. 184,69 L.Ed. 439
• Parties: OZARK PIPE LINE CORPORATION v. MONIER et al
• Court: U.S. Supreme Court

266 U.S. 555

45 S.Ct. 184

69 L.Ed. 439

OZARK PIPE LINE CORPORATION

v MONIER et al.

No. 181.

Argued Nov. 26, 1924.

Decided Jan. 12, 1925.

Messrs. Truman Post Young and John H. Carroll, both of St. Louis, Mo., for appellant.

[Argument of Counsel from pages 556-557 intentionally omitted] Messrs. Jesse W. Barrett and J. Henry Caruthers, both of Jefferson City, Mo., for appellees.

[Argument of Counsel from pages 558-560 intentionally omitted] Mr. Justice SUTHERLAND delivered the opinion of the Court.

Appellant is a Maryland corporation. It owns and operates a pipe line, extending from within Oklahoma, through Missouri, to a point in Illinois, together with certain gathering lines in Oklahoma. Through this line crude petroleum is conducted to Illinois and there delivered. Oil is neither received nor delivered in the state of Missouri. Since it began operations appellant has been assessed and has paid general property taxes upon that portion of its line, and upon its other assets, in Missouri. It maintains its principal office in Missouri, where it keeps its books and bank accounts, and from which it pays its employees within and without the state, purchases supplies, employs labor, maintains telephone and telegraph lines, enters into contracts for transportation of crude oil, and carries on various other activities connected with and in furtherance of its pipe line operations. Along the pipe line in Missouri there are three pumping stations, the sole use of which is to accelerate the passage of the oil through the line. It owns and operates passenger and truck automobiles, but these as well as its other property in Missouri are used exclusively in the prosecution of its interstate business. In compliance with the laws of Missouri applicable to corporations formed in other states desirous of transacting business in Missouri, appellant filed with the secretary of state its articles of incorporation, and amended articles showing an increase in its capital stock, paid license taxes aggregating $6,401.50, and obtained a license and authority to engage 'exclusively in the business of transporting crude petroleum by pipe line.' It thereby acquired the right of eminent domain under the laws of the state.

The controversy arises over an attempt on the part of the state authorities to collect from appellant an annual franchise tax under sections 9836-9848, pp. 3015-3020, Rev. Stats. Mo. 1919. The statute requires every corporation not organized under the laws of Missouri, but engaged in business therein, to pay an annual franchise tax equal to one-tenth of 1 per cent. of the par value of its capital stock and surplus employed in business in the state. For the purpose of the tax the corporation is deemed to have employed in the state 'that proportion of its entire capital stock and surplus that its property and assets in this state bears to all its property and assets wherever located.' The corporation is required to make an annual report in writing to the state tax commission in such form as may be prescribed, giving the amount of its authorized and subscribed capital stock, the par value and market value thereof, and other specified information, as a basis, with other things, for the computation of the tax. Appellant, having failed to furnish this report, was threatened by appellees with an action in the name of the state to revoke its license, and with such proceedings as would cause the amount of the tax, together with penalties, damages, and interest, to become a lien upon its property and thereby create a serious cloud upon the title thereto. Upon these facts suit was brought to enjoin appellees from going forward with such action and proceedings, upon the ground that the statute as applied to appellant, contravenes the commerce clause of the Constitution of the United States. After a hearing the court below rendered a final decree against appellant dismissing its bill.

The tax is one upon the privilege or right to do business (State ex rel. v. State Tax Commission, 282 Mo. 213, 234, 221 S. W. 721), and if appellant is engaged only in interstate commerce it is conceded, as it must be, that the tax, so far as appellant is concerned, constitutionally cannot be imposed. It long has been settled that a state cannot lay a tax on interstate commerce in any form, whether on the transportation of subjects of commerce, the receipts derived therefrom, or the occupation or business of carrying it on. Leloup v. Port of Mobile, 127 U. S. 640, 648, 8 S. Ct. 1380, 32 L. Ed. 311; Kansas City Ry. v. Kansas, 240 U. S. 227, 231, 36 S. Ct. 261, 60 L. Ed. 617, and cases cited. Plainly, the operation of appellant's pipe line is interstate commerce and beyond the power of state taxation. Eureka Pipe Line Co. v. Hallanan, 257 U. S. 265, 272, 42 S. Ct. 101, 66 L. Ed. 227; United Fuel Gas Co. v. Hallanan, 257 U. S. 277, 42 S. Ct. 105, 66 L. Ed. 234. But the contention in justification of the tax is that appellant is also engaged in doing local business, the basis of such contention being the facts concerning its ownership and use of property, other than the pipe line, and its various acts and activities within the state hereinbefore recited, and, further, that the purposes for which it is incorporated, as declared in its articles, comprehend other activities than that of transporting petroleum, namely, the acquisition and operation of telegraph and telephone lines, dealing in and transporting merchandise, etc.

An extended review of the decisions of this court dealing with this phase of the subject is not necessary. All proceed from the same principles, but range themselves on one side or the other of the line as the facts do or do not demonstrate that the tax as a practical matter constitutes a burden upon interstate commerce. The facts upon which these former decisions rest, therefore. must be borne in mind in applying them to other and alleged similar cases. If the business taxed is in fact separate local business, not so connected with interstate commerce as to render the tax a burden upon such commerce, the tax is good. An illustration of such a tax is found in New York ex rel. Pennsylvania R. Co. v. Knight, 192 U. S. 21, 24 S. Ct. 202, 48 L. Ed. 325, where this court upheld a state franchise tax upon a cab service maintained wholly within the state of New York by the railroad company to convey passengers to and from its terminus in New York City, for which service the charges were separate from other transportation charges. The principle announced (page 27 ) was:

'Wherever a separation in fact exists between transportation service wholly within the state and that between the states, a like separation may be recognized between the control of the state and that of the nation. Osborne v. Florida, 164 U. S. 650; Pullman Co. v. Adams, 189 U. S. 420.'

On the other hand, in Norfolk, etc., Railroad Co. v. Pennsylvania, 136 U. S. 114, 120, 10 S. Ct. 958, 960 (34 L. Ed. 394), a Pennsylvania tax of similar character sought to be imposed upon a Virginia railroad corporation was held bad. The railroad company maintained an office in Pennsylvania for the use of its officers, stockholders, agents and employees, and expended large sums of money in that state in the purchase of materials and supplies for its railroad. It owned a small amount of property in this state. In holding that the tax contravened the commerce clause the court said:

'Was the tax assessed against the company for keeping an office in Philadelphia, for the use of its officers, stockholders, agents and employes, a tax upon the business of the company? In other words, was such tax a tax upon any of the means or instruments by which the company was enabled to carry on its business of interstate commerce? We have no hesitancy in answering that question in the affirmative. What was the purpose of the company in establishing an office in the city of Philadelphia? Manifestly for the furtherance of its business interests in the matter of its commercial relations. * * * Again, the plaintiff in error does not exercise, or seek to exercise, in Pennsylvania any privilege or franchise not immediately connected with interstate commerce and required for the purposes thereof. Before establishing its office in Philadelphia it obtained from the secretary of the Commonwealth the certificate required by the act of the state Legislature of 1874 enabling it to maintain an office in the state. That office was maintained because of the necessities of the interstate business of the company, and for no other purpose. A tax upon it was, therefore, a tax upon one of the means or instrumentalities of the company's interstate commerce, and as such was in violation of the commercial clause of the Constitution of the United States.'

Heyman v. Hays, 236 U. S. 178, 185, 186, 35 S. Ct. 403, 59 L. Ed. 527, involved a county privilege tax for carrying on a liquor business. The complainant was a liquor merchant who sold no liquor directly or indirectly within the state but conducted a mail order business with persons in other states exclusively. The effort to sustain the tax was upon the grounds that complainant had a stock of goods within the state susceptible of being sold therein, that care and attention for the purpose of packing and otherwise must necessarily be given these goods, that orders for shipment were received in the state, and that a clerical force or other assistance was maintained within the state to keep accounts, supervise the business, receive the price resulting from shipments, and so on. This court said that assuming these facts they did not take the business out of the protection of the commerce clause (page 186 ):

'We reach this conclusion because we are of opinion that giving the fullest effect to the conditions stated they were but the performance of acts accessory to and inhering in the right to make the interstate commerce shipments and therefore to admit the power because of...