Texas Co. v. Carmichael

• Decision Date: 07 December 1935
• Docket Number: No. 662.,662.
• Citation: 13 F. Supp. 242
• Parties: TEXAS CO. v. CARMICHAEL et al.
• Court: U.S. District Court — Middle District of Alabama

13 F. Supp. 242

TEXAS CO. v.CARMICHAEL et al.

No. 662.

District Court, M. D. Alabama.

December 7, 1935.

John S. Coleman, of Birmingham, Ala.(Bradley, Baldwin, All & White, of Birmingham, Ala., of counsel), for plaintiff.

Albert A. Carmichael, Atty. Gen. of Alabama, Frontis H. Moore, Asst. Atty. Gen., Peyton Bibb, Sp. Asst. Atty. Gen., Thomas J. Judge, of Birmingham, Ala., and Richard T. Rives, of Montgomery, Ala., for defendants.

Gessner T. McCorvey(of Stevens, McCorvey, McLeod, Goode & Turner), of Mobile, Ala. (J. S. Atkinson, of Shreveport, La., of counsel), for Gulf Refining Co., amici curiæ on behalf of plaintiff.

Frank J. Wideman, Asst. U. S. Atty. Gen., Andrew D. Sharpe, M. H. Eustace, and Paul R. Russell, Sp. Assts. to U. S. Atty. Gen., and T. D. Samford, Dist. Atty., of Montgomery, Ala., amici curiæ, on behalf of the United States.

Before HUTCHESON, Circuit Judge, and ERVIN and KENNAMER, District Judges.

ERVIN, District Judge.

This is a bill seeking to enjoin the state of Alabama from levying an excise tax on such gasoline as the complainant sells to United States government, in which it is contended that such tax would be unconstitutional if so levied.

Hearing was had on an agreement that the matter would be submitted both for a preliminary and final injunction.The submission was on an agreed statement of facts.

In this case it is contended that the Alabama statute levying an excise tax on gasoline is unconstitutional in so far as it undertakes to tax a sale of gasoline to the government.

In section 1 of the act of 1927(Gen. Acts, p. 326), amending the act of 1923(Gen.Acts.p. 36), we find a tax levied in the following words: "To impose an excise tax on persons, corporations, copartnerships, companies, agencies or associations engaged in the business of selling, distributing, storing or withdrawing from storage for any purpose whatsoever gasoline or other liquid motor fuels or devices or substitutes therefor in this State; and providing for the collection and payment of such tax and distribution of the funds derived therefrom, and providing for its enforcement and fixing a penalty for the violation of any of the provisions hereof."

It will be noticed that the tax is levied on persons "engaged in the business of selling, distributing, storing or withdrawing from storage for any purpose whatsoever."

It will be observed then that the statute classifies three different operations as separate businesses, namely: First, selling; secondly, distributing; and, thirdly, storing or withdrawing from storage the gasoline.Other portions of the act define these various businesses.

"The term `Distributor' shall include any person who shall engage in the selling of gasoline as herein defined in this State by wholesale in domestic trade, but shall not apply to any transaction by such distributor in interstate commerce.The term `retail dealer' shall include any person herein defined as `distributor' who is also engaged in the sale of gasoline as herein defined, at any place in this State, in broken quantities.The term `storer' as herein used shall include any person who ships gasoline into this State, in tank quantities and stores the same and withdraws or uses the same for any purpose."Section 2.

Section 3 of the act provides: "Every distributor, retail dealer or storer of gasoline as herein defined shall pay an excise tax of two cents per gallon upon the selling, distributing or withdrawing from storage for any use gasoline as herein defined in this State."

Here the tax is to be paid, not on the storage, but on the sale, distribution, or withdrawal from storage.

It further provides: "The excise tax imposed by subdivision (a) of this section shall apply to persons, firms, corporations, dealers or distributors storing gasoline and distributing the same or allowing the same to be withdrawn from storage, whether such withdrawals be for sales or other use — provided, that `sellers' of gasoline and its substitutes paying the tax herein provided may pay the same computed and paid on the basis of their sales as hereinafter required and storers and distributors shall compute and pay this tax on the basis of their withdrawals or distributions."(All italics mine.)

It is observed: "That `sellers' of gasoline and its substitutes paying the tax herein provided may pay the same computed and paid on the basis of their sales as hereinafter required and storers and distributors shall compute and pay this tax on the basis of their withdrawals or distributions."

Certainly sales are computed as such, while users are to be computed on the basis of withdrawals or distributions.How can it be contended then that sales are to be computed and paid as on storage?If sales are to be computed and paid on the basis of their sales, how can it be contended that such sales are to be computed on the storage of gasoline?

The act provides for monthly reports showing the amount of gasoline sold or withdrawn.Reports shall be sworn to.The act also imposes a penalty of 25 per cent. for failure to make this report.

There were several other acts passed imposing additional taxes aggregating 6 cents per gallon, but they contain the same verbiage, so the construction of one applies to all.

These definitions are the same in the act approved January 31, 1935, and also in the act of July 10, 1935, where the definition of a storer is in the following words: "The term `storer' as herein used shall include any person who ships or causes to be shipped or receives, gasoline into this State in any quantities, and stores the same in any amount and withdraws or uses the same for any purpose."

It is contended by defendants that the tax is on the storage of gasoline measured by the number of gallons withdrawn from storage regardless of the purpose for which such withdrawals were made.

The Constitution(art. 1, § 8, cl. 3), in effect, forbids the use of either sales or withdrawals of gasoline as a measure for state taxation, when made either in interstate transactions or in direct sales to the government.Panhandle Oil Co. v. State of Mississippi ex rel. Knox, 277 U.S. 218, 48 S.Ct. 451, 72 L.Ed. 857, 56 A.L.R. 583.

In the first place, we see the tax is levied on persons engaged in these separate businesses dealing in gasoline, and not anywhere on the gasoline dealt in.

First, are those engaged in the business of selling gasoline, such as retail dealers who store the gasoline in tanks and withdraw it from tanks and deliver it into autos and such vehicles as may buy it, in other words, filling stations.

Second, the distributors or wholesalers.

Third, storers, persons who ship gasoline into the state in tank quantities and withdraw or use it for any purpose.

In each instance the tax is "measured by" the number of gallons sold, distributed, or withdrawn.It nowhere imposes a tax on storage alone.

It is manifest that no double taxation is imposed.It is also manifest that one person may be engaged in one or all these businesses, but without increasing the tax he is required to pay.If he sells the gasoline, he pays so much a gallon for such as he sells, but does not have to pay an additional tax for the distribution or withdrawal of such as he has sold.

Recognizing that all dealers in gasoline must first store it, section 156.2 of the act of 1935 says: "The excise tax imposed by section 156.1 hereof shall apply to persons defined in this chapter, storing gasoline and distributing the same or allowing the same to be withdrawn from storage whether such withdrawals be for sale or other uses."

It is manifest that retail dealers or filling station operators must first store the gasoline in their tanks before they can retail it.The act manifestly contemplates that the retail dealers and distributors will be engaged in selling gasoline while the storer does not sell it but uses it himself in some way, so that he is taxed not on the sale, but on the use of the gasoline he withdraws from storage.This tax must have been imposed to cover those who brought gasoline into the state in large quantities and stored and withdrew it as needed for use to save paying the tax.

These people do not sell gasoline, but use it in their own vehicles or engines.

This is what the Alabama Supreme Court had before it in the case of State v. City of Montgomery, 228 Ala. 93, 151 So. 856, 857, where it is said: "A tax upon the separate acts of the owner in taking his property out of storage for his own use.* * * The acts in question impose a tax upon a storer as well as a distributor or retail dealer."

So a storer is one who stores for his own use and not for the purpose of sale, and the tax is levied only where he withdraws the gasoline for his own use.

The act expressly recognizes the fact that both dealers as well as users may store gasoline and withdraw it from storage where it says: "Every distributor, retail dealer or storer of gasoline as herein defined shall pay an excise tax of two cents per gallon upon the selling, distributing or withdrawing from storage for any use gasoline as herein defined in this State."Section 3.

This seems to me to recognize the proposition that the tax is imposed not on the storage, but on the use for which it is withdrawn.

In Edelman v. Boeing Air Transport, 289 U.S. 249, 252, 53 S.Ct. 591, 592, 77 L. Ed. 1155, it is said: "It is at the time of withdrawal alone that `use' is measured for the purposes of the tax. * * * A state may validly tax the `use' to which gasoline is put in withdrawing it from storage within the state, and placing it in the tanks of the planes, not withstanding that its ultimate function is to generate motive power for carrying on interstate commerce."

The act and the practice of the state has been where gasoline was withdrawn from one place of storage and placed in another no tax was imposed, yet here was a withdrawal from storage, but the purpose was not to use it or sell it, so again it was...