Union Barge Line Corp. v. Marcum

• Decision Date: 22 June 1962
• Citation: Union Barge Line Corp. v. Marcum, 360 S.W.2d 130 (Ky. 1962)
• Parties: UNION BARGE LINE CORPORATION, Appellant, v. James V. MARCUM, etc., Appellee. AMERICAN BARGE LINE COMPANY, Appellant, v. James V. MARCUM, etc., Appellee. MISSISSIPPI VALLEY BARGE LINE COMPANY, Appellant, v. James V. MARCUM, etc., Appellee. Consolidated Cases
• Court: Supreme Court of Kentucky

Page 130

360 S.W.2d 130

UNION BARGE LINE CORPORATION, Appellant, v. James V. MARCUM, etc., Appellee.

AMERICAN BARGE LINE COMPANY, Appellant, v. James V. MARCUM, etc., Appellee.

MISSISSIPPI VALLEY BARGE LINE COMPANY, Appellant, v. James V. MARCUM, etc., Appellee. Consolidated Cases

Court of Appeals of Kentucky.

June 22, 1962.

Rehearing Denied Oct. 5, 1962.

James W. Stites, Louisville, for appellants.

John B. Breckinridge, Atty. Gen., Wm. S. Riley, Asst. Atty. Gen., Francis D. Burke, Frankfort, for appellee.

CLAY, Commissioner.

These three cases in which a declaration of rights was sought continue a controversy concerning the right of the Commonwealth to impose a franchise tax on appellant barge line companies. They are foreign corporations engaged in interstate commerce. The trial court adjudged in effect that the Commonwealth had made a prima facie showing that appellants' boats and barges have a taxable situs in Kentucky which would justify the levy of a franchise tax based on an aliquot portion thereof. No assessment has been made but appellants were required by the judgments to supply necessary reports and data to the Kentucky Department of Revenue upon which a tax liability could be ascertained.

The proceedings in these cases and the judgments are sequential to our decision in Allphin v. Ohio River Company, Ky., 306 S.W.2d 94. In that case we held that KRS 136.120 was unconstitutional to the extent it purported to impose a franchise tax upon a foreign common carrier water transportation company based upon the value of the right to navigate the Ohio River through this state. In that opinion we pointed out that if the tax was conditioned upon the company's doing business in Kentucky or having physical properties with a taxable situs here, such tax would perhaps be valid.

Following that decision the Commonwealth examined appellants' books to determine the nature and extent of their operations on what are described as 'Kentucky waters'. This investigation disclosed a considerable business was conducted by appellants in picking up and discharging cargo at Kentucky ports on the Ohio River, and that a substantial percentage of their ton-mile interstate operations was in this state. Based on these findings the trial court concluded as a matter of law that 'the frequent and continuous use of plaintiffs' boats and barges within the jurisdiction and territorial limits of the Commonwealth of Kentucky' supported a determination that an aliquot portion thereof had a taxable situs in Kentucky and in the counties in which appellants operate. The parties apparently agree that the 'franchise' tax involved is an ad valorem tax upon the added value of physical properties of a going concern which are located in Kentucky.

The basic contention of appellants is that no taxable situs of its tangible property (upon which the franchise tax rests) can properly be found to exist in this state because appellants' operations do not conform to a 'system' which would sustain a finding of 'permanence' in the location of any part of their fleets in Kentucky. This contention is founded on the fact that the operations are not upon fixed schedules or between fixed points and are subject to the exigencies of traffic, weather conditions, river stages and amount of freight to be transported. It is maintained the movement of their boats and barges on the Ohio River may be classified as casual and sporadic, lacking the character of continuity and permanence which would create a tax situs.

Suggesting that it may somehow resolve the principal issue, appellants stress the proposition that by virtue of the commerce clause of the United States Constitution, the Virginia Compact and the Northwest Ordinance, the navigation of the Ohio River shall be free from any tax, impost or duty. Such was recognized in Allphin v. Ohio River Company, Ky., 306 S.W.2d 94, wherein we held an attempt to tax that right or privilege would impose an unauthorized burden on interstate commerce. That problem is no longer involved these cases.

The proposed tax is not upon the right or privilege of appellants to navigate the Ohio River or to engage in interstate commerce thereon. It is based upon the presence and use of physical facilities within this state and subject to its jurisdiction. Long ago the United States Supreme Court decided that a tax on tangible property moving in and out of a state is not a tax on or because of transportation or the right of transit. Pullman's Palace-Car Company v. Pennsylvania, 141 U.S. 18, 11 S.Ct. 876, 35 L.Ed. 613.

A Kentucky case confirming this principle is State Tax Commission v. Central Greyhound Lines, 252 Ky. 300, 67 S.W.2d 35. Neither the Virginia Compact nor the Northwest Ordinance impairs the power of Kentucky to impose taxes on property used on the Ohio River. Reeves v. Island Creek Fuel & Transportation Co., 313 Ky. 400, 230 S.W.2d 924. The right of navigation is not here involved. Consequently the case of Commonwealth v. Lee Line Co., 159 Ky. 476, 167 S.W. 409, upon which appellants rely, is not pertinent to the real issue before us.

The difficult problem is to determine whether a proportionate part of appellants' boats and barges, as tangible property, has a tax situs in this state. The development of the law with respect to the taxability of movable property of a transportation enterprise, flowing through different states, has been devious indeed. See Roy Stone Transfer Corp. v. Messner, 377 Pa. 234, 103 A.2d 700. The most serviceable anchor to windward has been the concept that benefits or protection conferred or afforded a foreign corporation by a particular state furnishes a proper constitutional basis for properly apportioned taxation by such state. See Northwest Airlines v. Minnesota, 322 U.S. 292, 64 S.Ct. 950, 88 L.Ed. 1283; Ott v. Mississippi Valley...