Union Stock Yards v. State Tax Commission of Utah

• Citation: 93 Utah 174,71 P.2d 542
• Decision Date: 14 September 1937
• Docket Number: 5849
• Court: Supreme Court of Utah
• Parties: UNION STOCK YARDS v. STATE TAX COMMISSION OF UTAH et al

71 P.2d 542

93 Utah 174

UNION STOCK YARDS v. STATE TAX COMMISSION OF UTAH et al

No. 5849

Supreme Court of Utah

September 14, 1937

Original proceeding by the Union Stock Yards against the State Tax Commission of Utah and others to review a decision of the defendants herein.

DECISION AFFIRMED.

DeVine Howell & Stine, of Ogden, for plaintiff.

Ned Warnock, of Salt Lake City, for defendants.

FOLLAND Chief Justice. HANSON, MOFFAT, WOLFE, and LARSON, JJ., concur.

OPINION

FOLLAND, Chief Justice.

This is a review of a decision of the Utah State Tax Commission holding plaintiff liable for a sales tax on hay, grain, and straw fed by it to livestock in interstate shipments, plaintiff being under contract with interstate carriers. Plaintiff complains: (a) That the tax is an unlawful burden on interstate commerce repugnant to the Commerce Clause of the Constitution of the United States; and (b) that plaintiff's service is expressly exempt under the Sales Tax Law (Laws 1933, c. 63, as amended by Laws 1933, 2d Sp. Sess., c. 20). The decision of the Tax Commission must be sustained for reasons which will presently appear.

There is no conflict in the evidence, as the facts are all stipulated. Plaintiff is a corporation engaged at Ogden City in the business of unloading, feeding, watering, and reloading livestock in transit in interstate commerce as agent of interstate railroads operating in and through Ogden. There is a federal law known as the Twenty-Eight Hour Law, 45 U.S.C. A. §§ 71-74, which prohibits the confining of livestock moving in cars in interstate commerce by a common carrier for more than twenty-eight consecutive hours without unloading into properly equipped pens for rest, water, and food for a period of at least five hours. The primary duty of feeding and resting livestock is with the shipper, but the carrier is subject to penalty if it fails to furnish proper facilities and opportunity for the unloading, feeding, and resting of the animals so moving in interstate commerce. Where this service is furnished by the carrier, there is a lien on the livestock for the cost thereof collectible at destination the same as transportation charges. Pursuant to contract with the carriers, plaintiff between June 1, 1933, and May 13, 1935, performed the services mentioned in numerous instances, the cost of all of which was added to the transportation costs of the livestock and collected at the destination with the transportation charges.

The State Tax Commission levied against plaintiff a tax on the value of the hay, grain, and straw furnished by plaintiff to livestock under such contracts. The tax levied includes a small amount assessed for the furnishing of hay, grain, and straw to livestock moving in intrastate commerce. The tax was imposed on the sales price of the feed alone and not on the value of the entire service rendered by plaintiff to the interstate carriers; that is, the Tax Commission did not levy any tax on the value of the service of loading, unloading, or use of the pens for the resting and watering of the animals. The shipments were all made to packers who butchered the livestock for sale to wholesalers who sold to retailers, who in turn sold to the ultimate consumers. The packers in the interstate shipments resided in other states, the intrastate consignees being packers in Utah. In the case of the interstate shipments, neither the shippers of the livestock nor consignees were citizens of Utah.

At the hearing before the Commission and in this court, plaintiff argued that the feed sold by it for consumption by the animals awaiting slaughter or being transported toward slaughter pens in other states became component parts of the flesh and meat products of the slaughtered animal, which products were sold at retail in this or some other states.

It may be conceded without discussion that the livestock in question were in transit in interstate commerce and that the carriers provided for the feeding of such livestock by plaintiff pursuant to the Federal statute. 4 R. C. L. 983. The tax cannot be defeated because the feed sold is consumed by animals in the course of shipment in interstate commerce. The incidence of the tax is before the interstate commerce begins, as applied to the articles taxed. The Utah sales tax is a tax on a transaction. State Tax Commission v. City of Logan, 88 Utah 406, 54 P.2d 1197; W. F. Jensen Candy Co. v. State Tax Commission, 90 Utah 359, 61 P.2d 629, 107 A. L. R. 261. Here the hay, grain, and straw did not become a part of interstate commerce until after it had been fed to the livestock. The situation is analogous to that in the case of Nashville, C. & St. L. Ry. v. Wallace, 288 U.S. 249, 53 S.Ct. 345, 77 L.Ed. 730, 87 A. L. R. 1191, where gasoline purchased by the carrier outside of the State of Tennessee was brought into that state in tank cars, unloaded, and placed in carrier's own storage tanks. It was withdrawn and used by the carrier as motive power in interstate operations. The United States Supreme Court held that the gasoline on being unloaded and being stored ceased to be a subject of interstate commerce and lost its immunity as such from state taxation. The state tax was imposed on the withdrawal of the gasoline for use by the carrier. The principles of this case were reaffirmed in Edelman v. Boeing Air Transport, Inc., 289 U.S. 249, 53 S.Ct. 591, 592, 77 L.Ed. 1155, in which case the distinction is drawn between a valid and an unconstitutional tax on the use of gasoline. The court there said:

"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, notwithstanding that its ultimate function is to generate motive power for carrying on interstate commerce. Such a tax cannot be distinguished from that considered and upheld in Nashville, Chattanooga & St. Louis Ry. v. Wallace, supra. There it was pointed out that 'there can be no valid objection to the taxation of the exercise of any right or power incident to * * * ownership of the gasoline, which falls short of a tax directly imposed on its use in interstate commerce deemed forbidden in Helson v. Kentucky, supra (279 U.S. 245, 49 S.Ct. 279, 73 L.Ed. 683).' As the exercise of the powers taxed, the storage and withdrawal from storage of the gasoline, was complete before interstate commerce began, it was held that the burden of the tax was too indirect and remote from the function of interstate commerce, to transgress constitutional limitations."

In the instant case plaintiff relies on the decision of the Supreme Court in the case of Helson v. Kentucky, 49 S.Ct. 279, 279 U.S. 245, 73 L.Ed. 683. The distinction however, is well pointed out by Mr. Justice Stone, speaking for the court in Edelman v....