Action
by the State against the Reed Oil Company to recover
inspection fees and privilege taxes on petroleum products.
From a decree for plaintiff, defendant appeals.
Decision
in accordance with opinion.
Frank
M. Thompson, Atty. Gen., and Charles C. Trabue, Sr., and
William L. Granbery, both of Nashville, for complainant.
Crabtree & Crabtree, of Memphis, for defendant.
COOK
Justice.
This
appeal involves the validity of Chapter 33, Pub. Acts of
1917, and related Statutes levying inspection fees on coal
oil and gasoline, and Chapter 54, Pub. Acts of 1925, imposing
a privilege tax on petroleum products on which the inspection
fees are not paid. A proviso of the Act excludes from
taxation products on which inspection fees have been paid.
The privilege tax imposed by the latter Act is slightly
higher than the fees paid under the former Acts.
The
Reed Oil Company was engaged in the sale of petroleum in
Tennessee and from July 1, 1924, to December 31, 1925
refused to pay any inspection fees. From April 11, 1925, to
December 31, 1925, it refused to pay the privilege tax. It
insisted that the inspection fees are so excessive as to
render the Statutes providing for the inspection of such
products void, and that the Act imposing the privilege tax
makes an arbitrary classification which renders it void.
The
Chancellor sustained both Acts and upon the admission of Reed
Oil Company that if the State was entitled to recover
inspection fees the recovery should be $16,704.90, he gave a
decree for that sum with interest. The inspection fees
allowed by the Chancellor covered the entire period for which
the State could claim a privilege tax and no recovery was
allowed under the latter Act because the Company could not be
held for both inspection fees and the privilege tax.
It is
said by the Company that the Statutes providing for the
inspection of petroleum products in this State and the
payment of the charge provided in Section 2, Chapter 33, Pub.
Acts of 1917, produces fees so greatly in excess of the cost
of the inspection as to render the Act void, and that it is
void because it constitutes a burden on interstate commerce.
It is insisted that Chapter 54, Pub.Acts of 1925, is void
because of its arbitrary classification contrary to Article
1, Sec. 8, and Article 11, Sec. 8, of the State Constitution
and the Fourteenth Amendment to the Federal Constitution,
U.S.C.A.
It
appears from the record that products of the Reed Oil Company
are all produced in another State and are shipped to this
State where they are sold and distributed. It also appears
that Reed Oil Company does not reship nor transport any of
its products after their arrival here to another State for
any purpose. A stipulation in the record shows:
"1.
Defendant, Reed Oil Company, is a corporation, and was
organized in 1922 and has since been engaged in business as
a dealer, both as wholesaler and jobber, in petroleum
products in Davidson and Madison Counties, Tennessee.
"2.
Defendant paid the coal oil and gasoline inspection fees on
all products sold by it up to July 1, 1924, since which
time it has failed and refused to pay such inspection fees;
but it then and has since offered to pay, and has been
ready, able and willing to pay, its proportionate part of
the expense to the State of making inspection.
"3.
Said defendant has likewise wholly failed and refused to
pay the one-half cent tax prescribed by chapter 54 of the
Acts of 1925.
"4.
The number of gallons of oil and gasoline sold by said
defendant from July 1, 1924, to December 31, 1925,
inclusive, upon which it has paid neither inspection tax
nor one-half cent gasoline tax is as shown in Exhibit A to
the bill in the cause Rule No. 37413.
"5.
Almost all petroleum products sold in Tennessee are
manufactured in other parts of the United States and
shipped into Tennessee, and this was true of all products
handled by defendant, Reed Oil Company. Such products were
and are brought in by dealers in various forms, quantities
and containers; some are in barrels and casks, which are
then by dealers resold to their customers in the original
unbroken containers. Also a portion of such commodities
were and are shipped to dealers in railroad tank cars, and
in instances are resold to customers in such tank cars
without being unloaded or broken, while in other instances
the cars are unloaded and the contents transferred to the
dealers' storage tanks; in other instances products are
sold to consumers on orders taken before shipment and
shipped from other states direct to purchaser. The greater
portion of the products are stored in storage tanks of
dealers and delivered to customers and consumers by tank
wagons or service station pumps. No distinction is made by
the State's inspectors between any of said commodities,
and no claim until now has been made by any dealer that any
particular portion of his commodity is exempt from payment
of inspection fees. This particular defendant does not
reship or transport any of its products to other states.
"6.
The following shows the aggregate inspection fees collected
by the state and also the cost thereof to the state,
including salaries and expenses, for the several periods
from 1915 to 1925, inclusive:
Amount
Cost to
Collected
State
For the
biennial period from 1922 to 1924 .. $769,725.03 $38,784.79
For the
biennial period from 1920 to 1922 ... 645,455.93 36,229.52
For the
biennial period from 1918 to 1920 ... 401,468.53 24,321.85
For the
biennial period from 1917 to 1918 ... 317,912.75 27,783.71
For the
biennial period from 1915 to 1917 ... 163,948.10 24,364.79
"7.
There are approximately 100 wholesale dealers and jobbers in
Tennessee who are engaged in the same business that
defendant, Reed Oil Company, is engaged in. Many of them
have, like said defendant, failed and refused to pay
inspection fees since August 1, 1924, and the 1/2 cent
privilege tax since its passage in April, 1925. Others have
paid the inspection fees falling due, and such as have paid
inspection fees have not and will not be required to pay
the 1/2 cent privilege tax under chapter 54, Pub.Acts 1925.
"8.
The quantity of gasoline reported by the State inspectors as
having been inspected in 1924 was 2,066,455 gallons less than
the quantity upon which the 2 cent privilege tax under Acts
1923 was paid through the Excise Tax Department in that year.
"9.
As shown in Section 4 hereof, the number of gallons sold by
defendant from July 1, 1924, to December 31, 1925, upon which
no inspection fees have been paid in 4,008,513; and if the
defendant is liable for said fees, then the amount of its
liability for the period from July 1, 1924, up to December
31, 1925, would be $16,704.90 exclusive of interest and
costs.
"10.
As shown in section 4 hereof, the number of gallons of oil
and gasoline sold by said defendant from and after the taking
effect of the one-half cent privilege tax on April 11, 1925,
up to and including December 31, 1925, is 2,507,749, and if
defendant is held bound to pay the one-half cent tax, then
the amount of its liability for that tax from April 11, 1925,
to December 31, 1925, would be $12,538.75 exclusive of
interest and costs.
"11.
Defendant denies in its answer that the petroleum products
involved have been inspected by the state as required by its
inspection laws. This stipulation shall not be construed as
admitting inspection, but that issue is left as made by the
pleadings, and either party may take such proof pertaining
thereto as desired within thirty days from this date; three
days' notice of time and place of taking depositions
shall be sufficient for either party to give the other."
Defendant
states in its answer that a large and undeterminable portion
of the petroleum products that are shipped into Tennessee is
interstate commerce, and that the inspection fees levied
thereon by the State constitutes a burden upon, and an
attempt to regulate interstate commerce in violation of the
commerce clause of the Federal Constitution, U.S.C.A. Const.
art. 1, § 8, cl. 3. Whether this statement in the answer
refers to such products generally, or is intended to apply to
the defendant's business does not clearly appear from the
answer. It does appear from the stipulation that the greater
portion of the products that Reed Oil Company sends in the
State is placed in the storage tanks of dealers and delivered
to consumers by tank wagons or service station pumps.
Numerous
depositions were taken, but this evidence is confined
altogether to the diligence and activity of the State's
inspectors. It does appear, however, from the deposition of
Mr. H. G. Buchanan that he is the warehouseman for the Reed
Oil Company in Nashville, Tennessee, having charge of the
Company's stock and of the unloading of all cars, and
that he also has supervision of loading oil into tank wagons
and the...
