U.S. Plywood Corp. v. City of Algoma

• Court: Wisconsin Supreme Court
• Writing for the Court: WINGERT; BROWN
• Citation: U.S. Plywood Corp. v. City of Algoma, 87 N.W.2d 481, 2 Wis.2d 567 (Wis. 1958)
• Decision Date: 07 January 1958
• Parties: UNITED STATES PLYWOOD CORP., a foreign corporation, Appellant, v. CITY OF ALGOMA, a Wis. municipal corporation, Respondent.

Page 481

87 N.W.2d 481

2 Wis.2d 567

UNITED STATES PLYWOOD CORP., a foreign corporation, Appellant, v. CITY OF ALGOMA, a Wis. municipal corporation, Respondent.

Supreme Court of Wisconsin.

Jan. 7, 1958.

Whyte, Hirschboeck, Minahan, Harding & Harland, Milwaukee, Roger C. Minahan, Walter P. Rynkiewicz, Milwaukee, of counsel, for appellant.

S. Knudson, City Atty., Algoma, Larkin & Blum, Eau Claire, for respondent.

WINGERT, Justice.

The question for decision is whether clause 2, of sec. 10 of Art. I of the Constitution of the United States prohibits the imposition of the city's general property tax on the veneer and lumber imported by the plaintiff from other nations, which are still in the original package or form in which imported, but which are held and needed for the manufacturer's current operational needs.

The constitutional provision is as follows:

'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: and the net Produce of all Duties and Imposts, laid by any State on Imports or Exports, shall be for the Use of the Treasury of the United States; and all such Laws shall be subject to the Revision and Controul of the Congress. * * *'

The purpose of the provision so far as it relates to imports appears to have been to prevent discrimination against imports by means of taxation, and to prevent the seaport states through whose harbors most imports then came, from taxing the imports of the other states, and thus burdening the commerce of the latter and continuing the commercial warfare between the states which it was one of the main objectives of the framers of the Constitution to suppress. See Madison, Debates in the Federal Convention of 1787, August 28, 1787 (Hunt & Scott ed.) 479; Brown v. State of Maryland, 12 Wheat. 419, 440, 6 L.Ed. 678.

1. Established interpretations. As an original proposition, it might well be doubted that a general property tax not discriminating against imported goods is 'an impost or duty on imports'. The Supreme Court of the United States has held that such a tax is within the purview of the constitutional provision, however, and of course we are bound thereby. Low v. Austin, 13 Wall. 29, 34, 20 L.Ed. 517. ¹

The leading case on the interpretation of the constitutional provision is Brown v. State of Maryland, 12 Wheat. 419, 6 L.Ed. 678, in which a state statute requiring importers of foreign goods by bale or package to take out a license and pay a fee of $50 before selling the goods, was held to impose an unconstitutional impost on imports. The extensive opinion by Chief Justice Marshall is one of that jurist's landmark opinions and characteristically went beyond the necessities of the particular case. While the Maryland statute was plainly discriminatory against imports and might have been disposed of on that ground, the Chief Justice went further and declared in substance that a tax on an imported article in the hands of the importer may be a duty or impost on the import. Referring to the above stated purpose of the constitutional provision, the Chief Justice said:

'* * * it is plain, that the object would be as completely defeated by a power to tax the article in the hands of the importer the instant it was landed, as by a power to tax it while entering the port. * * * A duty on imports is a tax on the article which is paid by the consumer. The great importing States would thus levy a tax on the non-importing thus levy a tax on the non-importing states * * *'. phasis supplied.)

Conceding that the immunity cannot follow the import indefinitely, and must end somewhere, the Chief Justice proceeded:

'But, while we admit that sound principles of construction ought to restrain all Courts from carrying the words of the prohibition beyond the object the constitution is intended to secure; that there must be a point of time when the prohibition ceases, and the power of the State to tax commences; we cannot admit that this point of time is the instant that the articles enter the country. It is, we think, obvious, that this construction would defeat the prohibition.' (12 Wheat. at page 441.) (Emphasis supplied.)

The Chief Justice recognized that it would be futile to try to stake out in advance the line where immunity ceases and the states' power to tax attaches.

'The constitutional prohibition on the States to lay a duty on imports, a prohibition which a vast majority of them must feel an interest in preserving, may certainly come in conflict with their acknowledge power to tax persons and property within their territory.

* * * Yet the distinction exists, and must be marked as the cases arise. Till they do arise, it might be premature to state any rule as being universal in its application.' (12 Wheat. at page 441.) (Emphasis supplied.)

Nevertheless, and we must assume tentatively in view of the language just quoted, ² he suggested the following principle:

'It is sufficient for the present to say, generally, that when the importer has so acted upon the thing imported, that it has become incorporated and mixed up with the mass of property in the country, it has, perhaps, lost its distinctive character as an import, and has become subject to the taxing power of the State; but while remaining the property of the importer, in his warehouse, in the original form or package in which it was imported, a tax upon it is too plainly a duty on imports to escape the prohibition in the constitution.' (12 Wheat. at pages 441-442.)

Chief Justice Marshall said much more in the course of his lengthy opinion, by way of argument, illustration and dictum, and on another branch of the case held that the Maryland statute was also invalid under the commerce clause of the constitution (Art. I, sec. 8). It is no disparagement of the great Chief Justice to point out that some of his dicta have not been followed by the court in later cases, ³ as for example, that to the effect that the principles laid down in Brown v. State of Maryland, supra, would apply equally to importations from a sister state. 12 Wheat. at page 449. It has later been held consistently that goods brought from another state are not imports within the meaning of Art. I, sec. 10 of the United States Constitution. Woodruff v. Parham, 8 Wall, 123, 136, 19 L.Ed. 382; American Steel & Wire Co. v. Speed, 192 U.S. 500, 520, 24 S.Ct. 365, 48 L.Ed. 538. Likewise his original package doctrine has been repudiated as a criterion of immunity of interstate shipments under the commerce clause, from state taxation. Sonneborn Bros. v. Cureton, 262 U.S. 506, 43 S.Ct. 643, 67 L.Ed. 1095.

While Brown v. State of Maryland dealt with a statute prohibiting sale of imported goods by the importer without payment of a license fee, it has been accepted as authority for the broader proposition that the imported goods themselves cannot be taxed while held in the importer's warehouse in the original package, for resale. Low v. Austin, 13 Wall. 29, 34, 20 L.Ed. 517; F. May & Co. v. City of New Orleans, 178 U.S. 496, 507, 20 S.Ct. 976, 44 L.Ed. 1165. Immunity does not depend upon a showing that the tax is in fact discriminatory against imports. Richfield Oil Corp. v. State Board of Equalization, 329 U.S. 69, 76, 67 S.Ct. 156, 91 L.Ed. 80. After the merchandise has once been sold by the importer, however, it is taxable as other property, even though remaining in the original package. Waring v. Mayor, etc., of City of Mobile, 8 Wall. 110, 122, 19 L.Ed. 342. ⁴ If the goods are taken out of the original outer package, even before sale, their immunity as 'imports' ceases though they are still in smaller original packages. F. May & Co. v. City of New Orleans, 178 U.S. 496, 508-509, 20 S.Ct. 976, 44 L.Ed. 1165. Brown v. State of Maryland, supra, and most of the earlier cases dealt with attempts to tax, directly or indirectly, goods held for resale. The leading case on state taxation of imports held by the importer for use in manufacture is Hooven & Allison Co. v. Evatt, 324 U.S. 652, 65 S.Ct. 870, 89 L.Ed. 1252, decided in 1945. In that case it was held that bales of hemp brought from the Phillipine Islands and stored in a manufacturer's warehouse in Ohio preliminary to use in the manufacture of cordage were imports in the hands of the importer within the meaning of Art. I, sec. 10, United States Constitution, and under Brown v. State of Maryland, supra, were immune from state ad valorem taxes. (12 Wheat. at pages 664-668). Four justices dissented from that feature of the decision now pertinent, in an opinion by Mr. Justice Black, 324 U.S. at page 686, 65 S.Ct. at page 887.

In Hooven & Allison Co. v. Evatt, supra, the court recognized that the constitutional immunity from state taxation is lost when imported goods are but to the use for which they were importer, or when the original packages in which they were imported are broken. 324 U.S. 652, at pages 665, 666, 65 S.Ct. 870, at page 877. However, the majority was unwilling to terminate the constitutional immunity when the goods reached the factory warehouse in the original package.

'But no opinion of this Court has ever said or intimated that imports held by the importer in the original package and before they were subjected to the manufacture for which they were imported, are liable to state taxation.' 324 U.S. at page 666, 65 S.Ct. at page 877.

On the contrary, the majority affirmed the dictum of Chief Justice Taney in License Cases, 5 How. 504, 575, 12 L.Ed. 256.

'Indeed, goods imported, while they remain in the hands of the importer, in the form and shape in which they were brought into the country, can in no just sense be regarded as a part of that mass of property in the State usually taxed for the support of State government.' 324 U.S. at page 666, 65 S.Ct. at page 877.

Nevertheless the majority cautiously limited the decision to the case before it, holding that 'It cannot be...