Sonneborn Bros v. Cureton

• Decision Date: 11 June 1923
• Docket Number: No. 20,20
• Citation: 67 L.Ed. 1095,43 S.Ct. 643,262 U.S. 506
• Parties: SONNEBORN BROS. v. CURETON, Atty. Gen. of Texas, et al. Re
• Court: U.S. Supreme Court

262 U.S. 506

43 S.Ct. 643

67 L.Ed. 1095

SONNEBORN BROS.

v CURETON, Atty. Gen. of Texas, et al.

No. 20.

Reargued Oct. 5, 1922.

Decided June 11, 1923.

Messrs. J. M. McCormick and Francis Marion Etheridge, both of Dallas, Tex., for appellants.

Messrs. E. F. Smith and C. M. Cureton, both of Austin, Tex., and C. W. Taylor, of Corsicanna, Tex., for appellees.

Mr. Chief Justice TAFT delivered the opinion of the Court.

This is an appeal from a decree of a United States District Court under section 238, Judicial Code (Comp. St. § 1215), in a case in which a law of Texas is claimed to be in contravention of the Constitution of the United States. The law in question is article 7377 of the Revised Civil Statutes of Texas, approved May 16, 1907. Acts Tex. 1907, p. 479. It provides that every individual, firm, or corporation, foreign or domestic, engaging as a wholesale dealer in coal oil or other oils refined from petroleum, shall make a quarterly report to the state comptroller, showing the gross amount, collected and uncollected, from any and all sales made within the state during the quarter next preceding, and that an occupation tax shall be paid by such dealer equal to 2 per cent. of the gross amount of such sales, collected or uncollected.

From an agreed statement of facts, the following appears:

Sonneborn Bros. is a firm of nonresident merchants selling petroleum products, with its principal place of business in New York City. In January, 1910, it opened an office in Dallas, Tex., and since that time has maintained it and connecting warerooms and has rented space in a public warehouse at San Antonio, Tex. From January, 1910, until April 11, 1919, receipts from its total sales, made through orders received at the Dallas office, have amounted to $860,801.50. This sum included:

(1) Those from the sale of oil which, when sold, was not in Texas.

(2) Those from sales of oil to be delivered from Texas out of the state.

(3) Those arising from the sale of oil shipped into Texas and afterwards sold from the storerooms in unbroken original packages.

(4) Those from sales in Texas from broken packages.

The receipts from the first two classes amounted to $643,622.40 and the state authorities made no effort to tax them. The receipts from (4) amounted in the period named to $16,549.84 and appellants do not deny their liability for the tax thereon. The sales made under (3) of unbroken packages, after their arrival in Texas, and after storage in the warerooms or warehouse of appellants amounted to $217,179.10, and the tax on this, amounting to $4,674.58, is the subject of the contest here.

The question we have to decide is whether oil transported by appellants from New York or elsewhere outside of Texas to their warerooms or warehouse in Texas, there held for sales in Texas in original packages of transportation, and subsequently sold and delivered in Texas in such original packages, may be made the basis of an occupation tax upon appellants, when the state tax applies to all wholesale dealers in oil engaged in making sales and delivery in Texas.

Our conclusion must depend on the answer to the question: Is this a regulation of, or a burden upon, interstate commerce? We think it is neither. The oil had come to a state of rest in the warehouse of the appellants, and had become a part of their stock, with which they proposed to do business as wholesale dealers in the state. The interstate transportation was at an end, and, whether in the original packages or not, a state tax upon the oil as property or upon its sale in the state, if the state law levied the same tax on all oil or all sales of it, without regard to origin, would be neither a regulation nor a burden of the interstate commerce of which this oil had been the subject.

This has been established so far as property taxes on the merchandise are concerned by a formidable line of authorities. Brown v. Houston, 114 U. S. 622, 5 Sup. Ct. 1091, 29 L. Ed. 257; Coe v. Errol, 116 U. S. 517, 6 Sup. Ct. 475, 29 L. Ed. 715; Pittsburg Coal Co. v. Bates, 156 U. S. 577, 15 Sup. Ct. 415, 39 L. Ed. 538; Diamond Match Co. v. Ontonagon, 188 U. S. 82, 23 Sup. Ct. 266, 47 L. Ed. 394; American Steel & Wire Co. v. Speed, 192 U. S. 500, 520, 24 Sup. Ct. 365, 48 L. Ed. 538; General Oil Co. v. Crain, 209 U. S. 211, 28 Sup. Ct. 475, 52 L. Ed. 754; Bacon v. Illinois, 227 U. S. 504, 33 Sup. Ct. 299, 57 L. Ed. 615.

But the argument is that for articles in original packages the sale is a final step in the interstate commerce, and that the owner may not be taxed upon such sale, because this is a direct burden on that step. The reasoning is based on the supposed analogy of the immunity from state taxation of imports from foreign countries which lasts until the article imported has been sold, or has been taken from its original packages of importation and added to the mass of merchandise of the state. This immunity of imports was established by this court in Brown v. Maryland, 12 Wheat. 419, 446, 447, 6 L. Ed. 678, and was declared in obedience to the prohibition of the Constitution contained in section 10, art. 1, par. 2, providing that:

'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.'

The holding was that the sale was part of the importation. It is the article itself to which the immunity attaches and whether it is in transit or is at rest, so long as it is in the form and package in which imported and in the custody and ownership of the importer, the state may not tax it. This immunity has been enforced as against a license or occupation tax on the importer in Brown v. Maryland, 12 Wheat. 419, 6 L. Ed. 678, as against a personal property tax on a stock of wines of a wine dealer to the extent to which the stock included imported wines in the original packages. Low v. Austin, 13 Wall. 29, 20 L. Ed. 517, and as against an occupation tax on an auctioneer measured by his commissions on the sales of such imports, Cook v. Pennsylvania, 97 U. S. 566, 24 L. Ed. 1015. When, however, the article imported is sold or is taken from the original package and exposed for sale, the immunity is gone. Waring v. Mobile, 8 Wall. 110, 19 L. Ed. 342; May v. New Orleans, 178 U. S. 496, 20 Sup. Ct. 976, 44 L. Ed. 1165.

Cases subsequent to Brown v. Maryland show that the analogy between imports and articles in original packages in interstate commerce in respect of immunity from taxation fails. The distinction is that the immunity attaches to the import itself before sale, while the immunity in case of an article because of its relation to interstate commerce depends on the question whether the tax challenged regulates or burdens interstate commerce.

The first of the cases making this distinction is Woodruff v. Parham, 8 Wall. 123, 19 L. Ed. 382. In that case, Woodruff, an auctioneer in Mobile, received, in the course of his general business for himself and as consignee and agent for others, merchandise from Alabama and from other states and sold it in unbroken packages. The city of Mobile under its charter levied a uniform tax on real and personal property, on sales at auction, on sales of merchandise, and on capital employed in the business in the city. Woodruff objected to paying any tax on the auction sales of merchandise from other states in original packages. The question most considered by the court was whether merchandise exported from one state to another was an export which a state was forbidden to tax by article 1, § 10, par. 3, of the federal Constitution, above quoted. It was held that it was not, and that the words 'imports and exports' as there used referred to, and included only merchandise brought in from, or transported to, foreign countries. The court (8 Wall. 140, 19 L. Ed. 382) further held that such a tax which did not discriminate against the sales of goods from other states, but was imposed upon sales of all merchandise, whether its origin was in Alabama or in any other state, was not 'an attempt to fetter commerce among the states.'

At the close of the opinion in Brown v. Maryland, Chief Justice Marshall made the remark 'that we suppose the principles laid down in this case apply equally to importations from a sister state.' This was pronounced in Woodruff v. Parham not to be a judicial decision of the question, but an obiter dictum.

While the opinion by Mr. Justice Miller in Woodruff v. Parham is chiefly devoted to showing that exports are limited to goods sent out of the country, the decision on the interstate commerce phase of the issue was most fully considered. The adverse view was pressed with all the learning and force of argument of John A. Campbell, formerly a Justice of this court.

Immediately following Woodruff v. Parham is Hinson v. Lott, 8 Wall. 148, 19 L. Ed. 387, in which was at issue the validity of a provision of the Alabama law that before it should be lawful for a dealer introducing spirituous liquors into the state to offer the same for sale, he must pay 50 cents a gallon thereon. The provision was sustained as not being an attempt to burden interstate commerce, because by another section of the same law every distiller of the state was required to pay 50 cents a gallon on all liquor made by him, and the two sections were complementary in order 'to make the tax equal on all liquors sold in the state.'

Woodruff v. Parham was affirmed and applied in Brown v. Houston, 114 U. S. 622, 5 Sup. Ct. 1091, 29 L. Ed. 257, where coal mined in Pennsylvania and sent in barges to New Orleans, to be sold after arrival from those barges, without being landed, to a vessel bound to a foreign port, was held while awaiting sale to be subject to taxation by the state as property in Lousiana.

The case of Woodruff v. Parham has never been overruled, but has often been approved and followed, as the cases above cited show. As an authority it controls the...