United Air Lines, Inc v. Mahin 8212 862

• Decision Date: 05 March 1973
• Docket Number: No. 71,71
• Parties: UNITED AIR LINES, INC., Appellant, v. George E. MAHIN et al. —862
• Court: U.S. Supreme Court

410 U.S. 623

93 S.Ct. 1186

35 L.Ed.2d 545

UNITED AIR LINES, INC., Appellant,

v George E. MAHIN et al.

No. 71—862.

Argued Nov. 8, 1972.

Decided March 5, 1973.

Syllabus

The Illinois use tax was applied to appellant's aviation fuel stored in the State and loaded aboard its aircraft there and consumed in interstate flights, the tax authorities having revised their previous 'burn off' interpretation of a statutory exemption for temporary storage. Under the 'burn off' interpretation only fuel consumed in flight over Illinois was used to measure the tax imposed for storage before loading, but under the reinterpretation all fuel loaded was deemed to measure the tax on the 'use' of storage or withdrawal from storage. The Illinois Supreme Court upheld the statute against appellant's contention that the tax as reinterpreted impermissibly burdened interstate commerce. Held:

1. The statute as authoritatively construed by the State's highest court to tax storage and not consumption does not place an unconstitutional burden on interstate commerce. Edelman v. Boeing Air Transport, Inc., 289 U.S. 249, 53 S.Ct. 591, 77 L.Ed. 1155; Nashville, Chattanooga & St. Louis R. Co. v. Wallace, 288 U.S. 249, 53 S.Ct. 345, 77 L.Ed. 730. Cases allowing the taxation of storage of fuel before loading have not outlived their usefulness. Pp. 626—630.

2. The 'burn off' rule is not unconstitutional, being distinguishable from a tax imposed on consumption such as was invalidated in Helson v. Com. of Kentucky, 279 U.S. 245, 49 S.Ct. 279, 73 L.Ed. 683. Since some of the Illinois Supreme Court majority were under the mistaken impression that Helson precluded use of the 'burn off' interpretation, the case is remanded to enable that court to construe the temporary-storage provision under state law free from any constraint that such interpretation would not be constitutionally permissible. Pp. 630—632.

49 Ill.2d 45, 273 N.E.2d 585, vacated and remanded.

Mark H. Berens, Chicago, Ill., for appellant.

Robert J. O'Rourke, Chicago, Ill., for appellees.

Mr. Justice BLACKMUN delivered the opinion of the Court.

United Air Lines, Inc., challenged the constitutionality of the Illinois general revenue use tax as applied to aviation fuel stored in Illinois and then loaded aboard aircraft there and consumed in interstate flights. The Supreme Court of Illinois upheld the state tax as currently applied, concluding that it did not impose an unconstitutional burden on interstate commerce. 49 Ill.2d 45, 273 N.E.2d 585 (1971). We noted probable jurisdiction. 405 U.S. 989, 92 S.Ct. 1249, 31 L.Ed.2d 452 (1972). We now affirm that holding, but we vacate the judgment and remand the case for consideration of an issue under state law.

Since 1953, United has purchased aviation fuel from a supplier for delivery from the supplier's Indiana facilities. This fuel is utilized by United in its extensive operations out of O'Hare and Midway airports in the Chicago area of Illinois. Although the method of delivery varies for different types of fuel and for the two airports,¹ all fuel is delivered by common carrier and is held for periods ranging from two to 12 days in ground storage facilities maintained in Illinois by United.² Fuel for both interstate and intrastate operations is delivered in the same manner.³ United voluntarily has paid the tax on fuel consumed in purely intrastate operations. Only the tax as applied to fuel used in interstate flights is in issue.

In 1955, Illinois enacted a general tax on the 'privilege of using' tangible personal property in the State. Ill.Rev.Stat., c. 120, § 439.3 (1971). 'Use' was defined to include the 'exercise . . . of any right or power over tangible personal property incident to the ownership of that property.' § 439.2. Some exceptions from this inclusive definition were made. One of these exceptions, which the statute recites, § 439.3, is '(t)o prevent actual or likely multi-state taxation,' is the temporary-storage provision. This denies application of the tax to property brought from another State and stored temporarily in Illinois before use solely outside the State.⁴

Since this general use tax, apart from its exceptions, reached all tangible personal property, it applied by its terms to fuel stored for use in vehicles. From 1955 to 1963, the Illinois Department of Revenue allowed interstate common carriers to benefit from the temporary-storage provision to the extent that fuel, although loaded aboard in Illinois, was not consumed by the vehicle in that State. The amount of aviation fuel used over Illinois could be calculated because scheduled airline routes are precise and the rate of consumption by each type of aircraft is known. This 'burn off' interpretation was changed in 1963, however, when the Department announced by bulletin that it was reinterpreting the temporary-storage provision to mean that 'temporary storage ends and a taxable use occurs when the fuel is taken out of storage facilities and is placed into the tank of the airplane, railroad engine or truck.' Thus, as the Illinois court described it, 'all fuel loaded on United's planes at the two airports was deemed to measure the tax.' 49 Ill.2d, at 49, 273 N.E.2d, at 587.

United's suit attacked the new interpretation on both state and federal grounds. All justices of the Supreme Court of Illinois agreed that the new interpretation did not run afoul of the Federal Constitution, but the justices disagreed over the applicability and validity of the 'burn off' alternative discussed in the several opinions. 49 Ill.2d, at 50—53, 56, 57—59, 273 N.E.2d, at 587—589, 591—592.

I

Two decisions of this Court were relied upon by the Illinois court in reaching its conclusion that the present application of the state tax was not offensive to the Federal Constitution. The cases are Edelman v. Boeing Air Transport, 289 U.S. 249, 53 S.Ct. 591, 77 L.Ed. 1155 (1933), and Nashville, Chattanooga & St. Louis R. Co. v. Wallace, 288 U.S. 249, 53 S.Ct. 345, 77 L.Ed. 730 (1933). We agree that these cases support the application of the Illinois tax to all fuel stored in Illinois and loaded aboard United's aircraft for in-flight consumption.

In Edelman, this Court upheld a state gasoline use tax, even when imposed on gasoline imported from outside the State, stored in tanks at an airport, and loaded aboard planes departing on interstate flights. The decision in Edelman followed the holding in Nashville that oil purchased by a railroad outside Tennessee but stored in Tennessee solely for the purpose of providing motive power for the railroad's interstate and intrastate operations could be subjected constitutionally to a Tennessee privilege tax. In Nashville, as in this case, none of the fuel stored was held as inventory for sale, and the tax was not one for the use of special services furnished by the State to the taxpayer railroad.

In Edelman, the Court accepted the State's determination that the taxable event was withdrawal from storage rather than consumption. 289 U.S., at 251, 53 S.Ct., at 591—592. The airline in Edelman contended, id., at 252, 53 S.Ct., at 592, that the state tax was invalid under Helson v. Com. of Kentucky, 279 U.S. 245, 49 S.Ct. 279, 73 L.Ed. 683 (1929). In Helson, the Court held that a Kentucky tax on the use of gasoline within the State fell too directly on interstate commerce when it was imposed on fuel loaded in Illinois but consumed in the course of an interstate ferry's trip through Kentucky. In Edelman, the Court distinguished Helson because storage, rather than consumption, was the taxable event. See Southern Pacific Co. v. Gallagher, 306 U.S. 167, 59 S.Ct. 389, 83 L.Ed. 586 (1939).

The Supreme Court of Illinois characterized the taxable 'use' under the Illinois statute as either storage or withdrawal from storage. United argued in the state court that the temporary-storage provision constituted a legislative waiver of the right to tax storage prior to loading. The Illinois court rejected this contention, noting that United stored fuel at the airport for general use. On these facts, the Supreme Court of Illinois concluded that the Illinois use tax applied to storage by United before loading and that this application was constitutional:

'Under the circumstances, the 'storage' becomes something more than a 'temporary storage' for safekeeping prior to its use solely outside of Illinois. Such storage, under the plain words of the statute, does not qualify under the temporary storage exemption and, as the authorities already discussed reveal, either the storage itself or the withdrawal therefrom are uses which may be taxed without offending the commerce clause of the Federal constitution.' 49 Ill.2d, at 55—56, 273 N.E.2d, at 590 (emphasis added).

The Illinois dissenters, too, treated the taxable event as storage or withdrawal. 49 Ill.2d, at 57, 273 N.E.2d, at 591.⁵

This Court usually has deferred to the interpretation placed on a state tax statute by the highest court of the State. Scripto, Inc. v. Carson, 362 U.S. 207, 210, 80 S.Ct. 619, 621, 4 L.Ed.2d 660 (1960); General Trading Co. v. State Tax Comm'n, 322 U.S. 335, 337, 64 S.Ct. 1028, 1029, 88 L.Ed. 1309 (1944). See Evco v. Jones, 409 U.S. 91, 93 S.Ct. 349, 34 L.Ed.2d 325 (1972). As in Edelman, we see no reason to ignore, or to disagree with, the state court's determination that the taxable event is storage rather than consumption.

We hold that Edelman and Nashville support the conclusion of the Supreme Court of Illinois that this tax, as applied to all fuel withdrawn from storage for consumption in an interstate vehicle, does not place an unconstitutional burden on interstate commerce. Further, we decline to hold that Edelman has outlived its usefulness.⁶ We must concede that for a long time this area of state tax law has been cloudy and complicated, primarily because the varied nature of interstate activities makes line drawing difficult. This Court has established some precedents, however, and...