Texas Co. v. McCanless

• Decision Date: 08 March 1941
• Citation: 148 S.W.2d 360
• Parties: TEXAS CO. v. McCANLESS, Commissioner of Finance and Taxation.
• Court: Tennessee Supreme Court

148 S.W.2d 360

TEXAS CO. v. McCANLESS, Commissioner of Finance and Taxation.

Supreme Court of Tennessee.

March 8, 1941.

Appeal from Chancery Court, Davidson County; James B. Newman, Chancellor.

Suit by the Texas Company against George F. McCanless, Commissioner of Finance and Taxation, to recover so much of so-called inspection fee as the commissioner charged against gasoline kept by complainant for export to points out of state for a period of less than 60 days, which fee was paid under protest. From decree entered, both parties appeal.

Affirmed.

Seay, Stockell & Edwards, of Nashville, for complainant.

Roy Beeler, Atty. Gen., and W. F. Barry and Harry Phillips, Asst. Attys. Gen., for defendant.

GREEN, Chief Justice.

This case involves a controversy between the complainant and the Commissioner of Finance and Taxation with reference to the liability of the former for the so-called inspection fee exacted with respect to gasoline and like products by Code section 6809 et seq., more particularly by sections 6817, 6818, and 6821. The facts are stipulated. The chancellor decided the major portion of the controversy in favor of the complainant. Both parties assigned errors.

As a part of its business the complainant ships into this State from other States quantities of gasoline, which gasoline is stored in tanks for a period of less than sixty days, and then shipped out of the State to consumers there located. None of the gasoline involved in this litigation was sold or used in Tennessee.

Code, section 6817 and following sections exact a so-called inspection fee of 20 cents a barrel or less quantity upon gasoline and kindred substances enumerated, sold or used, and/or stored in this State. The nature of this exaction has been considered by the court in a number of decisions. The amount of the exaction largely exceeds the cost of inspection. In the recent case of State v. Nashville, C. & St. L. Ry. Co., 176 Tenn. 24, 137 S.W.2d 297, 299, we said:

"This court has long since recognized that the exaction here in question is in chief an excise tax and to a limited extent only an inspection charge. State of Tennessee v. Reed Oil Co. , 137 S.W. 2d 292; State ex rel. v. Jackson, 172 Tenn. 119, 110 S.W.2d 323. This is to say the statute assesses an excise tax on the sale, use or storage of these products measured by the number of barrels sold, used or stored. This as well as some charge for inspection."

Section 1126 et seq. of the Code levies a gasoline tax, an excise or privilege tax, on dealers in gasoline or distillates thereof equal to 5 cents for each gallon of gasoline or distillate sold or distributed by such dealer in the State during each year. This tax has been increased by subsequent legislation and made to apply to those storing gasoline or distillates thereof. Chapter 130 of the Acts of 1933.

Code, section 1140, dealing with the gasoline tax, provided "None of the provisions of this statute shall apply to the sales of gasoline or distillate when sold for, and exported out of the state." Pub.Acts 1923, c. 58, § 11.

A number of the Code sections constituting the gasoline tax laws were amended by this chapter 130 of the Acts of 1933. Among other things, section 13 of the Act of 1933 provides as follows:

"That Section 1140 be amended by striking out said Section and substituting in lieu thereof the following:

"`Gasoline or distillate not previously the subject of an original sale in this State, stored in this State for export to points outside the State, shall not be included in the measure of the tax liability of any distributor or dealer; provided that such gasoline or distillate is stored in a separate tank marked "export tank"';

"Provided that a bond is executed by the distributor or dealer that in the opinion of the Commissioner of Finance and Taxation adequately protects the State against loss of tax in case said gasoline or distillate is not subsequently exported outside the State;

"Provided that gasoline or distillate stored for export longer than a period of sixty days must be included in the measure of the tax liability of the distributor or dealer so storing such gasoline or distillate."

The exaction which the complainant is resisting, which it paid under protest and here seeks to recover, is so much of the so-called inspection fee as the Commissioner charged against gasoline kept and disposed of by the complainant in strict conformity with the terms of section 13 of the Act of 1933 for a period of less than sixty days.

The complainant takes the position that the exclusion of gasoline so handled in section 13 aforesaid from "the measure of the tax liability of any distributor or dealer" relieves it of liability from the so-called inspection fee, or at least so much of such inspection fee as is levied by way of a tax and not by way of inspection. The stipulation shows that 1/25 of this exaction covered the cost of inspection.

The Commissioner takes the position that section 13 of the Act of 1933 only relieves complainant of liability for the gasoline tax on gasoline handled in conformity with the terms of that section. That this exemption has no relation to the so-called inspection fee on gasoline exacted by Code, section 6809 et seq.

The complainant insists that all these acts are to be construed in pari materia. The Commissioner challenges this and urges the familiar rule that tax exemption statutes are strictly construed.

There has been a great argument in the case as to whether the gasoline over which this controversy is waged ever departed from the flow of interstate commerce — whether it ever became subject to the taxing power of the State. We do not find it necessary to consider this question, since we think the gasoline was by section 13 of the Act of 1933 relieved of the burden of section 6809 et seq. in so far as the latter sections imposed a tax.

It is not necessary, as has been suggested, to regard gasoline handled in accordance with the terms of section 13 of the Act of 1933 as remaining in the channels of interstate commerce in order to sustain the discrimination made between gasoline stored in a tank marked "Export Tank" and gasoline stored in a tank not so marked.

The taxing power of the State is limited to its jurisdiction. When a tax is measured with respect to property, as is the gasoline tax, the property must be located within the jurisdiction of the State. Street Railroad Company v. Morrow, 87 Tenn. 406, 11 S.W. 348; State Tax on Foreign-held Bonds, 15 Wall. 300, 319, 21 L.Ed. 179.

"To authorize an assessment of personal property in any other state or...