Vinmar, Inc. v. Harris County Appraisal Dist.

• Decision Date: 20 June 1997
• Docket Number: No. 95-0243,95-0243
• Citation: 947 S.W.2d 554
• Parties: 40 Tex. Sup. Ct. J. 697 VINMAR, INC. f/k/a Vinmar Impex, Inc., Petitioner, v. HARRIS COUNTY APPRAISAL DISTRICT and Harris County Appraisal Review Board, Respondents.
• Court: Texas Supreme Court

Page 554

947 S.W.2d 554

40 Tex. Sup. Ct. J. 697

VINMAR, INC. f/k/a Vinmar Impex, Inc., Petitioner, v. HARRIS COUNTY APPRAISAL DISTRICT and Harris County Appraisal Review Board, Respondents.

No. 95-0243.

Supreme Court of Texas.

June 20, 1997.

Katja Glockner, James J. Sentner, Jr., Houston, for Petitioner.

Kenneth Wall, Houston, for Respondents.

ABBOTT, Justice, delivered the opinion of the Court, in which GONZALEZ, CORNYN, SPECTOR and BAKER, Justices, join.

This is an appeal of a trial court's judgment in favor of the appraisal district in a suit protesting the assessment of property taxes on goods awaiting export. Because we conclude that the tax violates the Commerce Clause of the United States Constitution, we reverse the judgment of the court of appeals and remand this case to the trial court for entry of judgment consistent with this opinion.

I

Vinmar, Inc. is a Texas corporation with its principal place of business in Houston. Upon receiving an order from a client in a foreign country, Vinmar purchases plastic resin from vendors in the United States. After Vinmar purchases the resin, it seeks the foreign import clearances, currency clearances, and letters of credit necessary to complete the transaction. The Harris County Appraisal District assessed taxes against the resin held by Vinmar in a Houston warehouse on January 1 of 1989 and 1990.

The facts in Virginia Indonesia Co. v. Harris County Appraisal Dist. and Harris County Appraisal Review Bd., 910 S.W.2d 905 (Tex.1995), cert. denied, --- U.S. ----, 116 S.Ct. 2523, 135 L.Ed.2d 1048 (1996) ("VICO "), are strikingly similar to the facts in this case. In VICO, just as in this case, the Harris County Appraisal District assessed taxes against property that VICO purchased for export and temporarily stored in Harris County while awaiting import clearance and related transportation activities. In VICO, we held that the assessment of ad valorem taxes against such property violated the Import-Export Clause of the United States Constitution. Virginia Indonesia Co., 910 S.W.2d at 906, 915.

In this case, Vinmar does not assert that the tax violated the Import-Export Clause. Instead, Vinmar relies on the Commerce Clause and the Equal Protection Clause of the United States Constitution.

II

Vinmar asserts that the property tax assessed in this case violates the Commerce Clause of the United States Constitution. The United States Supreme Court set out a four-pronged test for evaluating whether a state tax complies with the Commerce Clause of the United States Constitution. U.S. CONST. art. I, § 8, cl. 3. To be valid, a state tax must: 1) apply to an activity having a substantial nexus with the taxing state; 2) be fairly apportioned; 3) not discriminate against interstate commerce; and 4) be fairly related to the services provided by the state. Complete Auto Transit, Inc. v. Brady, 430 U.S. 274, 279-287, 97 S.Ct. 1076, 1079-83, 51 L.Ed.2d 326 (1977). If the tax is on foreign commerce, in addition to the Complete Auto criteria, the tax must not: 1) create a substantial risk of international multiple taxation; or 2) prevent the federal government from speaking with one voice in its regulation of commercial relations with foreign governments. Japan Line, Ltd. v. County of Los Angeles, 441 U.S. 434, 451, 99 S.Ct. 1813, 1823-24, 60 L.Ed.2d 336 (1979). In order to establish that a state tax is unconstitutional, the taxpayer need only prove that the tax fails one of the six criteria announced in Complete Auto and Japan Line. See Container Corp. of Am. v. Franchise Tax Bd., 463 U.S. 159, 175-76, 103 S.Ct. 2933, 2945-46, 77 L.Ed.2d 545 (1983).

The one-voice prong of the test used to analyze state taxes under the Commerce Clause is the same as the one-voice prong of the test used to analyze cases under the Import-Export Clause. Itel Containers Int'l Corp. v. Huddleston, 507 U.S. 60, 77, 113 S.Ct. 1095, 1105-06, 122 L.Ed.2d 421 (1993). In VICO, this Court held that an ad valorem tax assessed against goods awaiting export under the same circumstances as in this case violated the one-voice prong of the Import-Export Clause test. Virginia Indonesia Co., 910 S.W.2d at 914. Likewise, the tax in this case interferes with the federal government's ability to speak with one voice in its regulation of commercial relations with foreign governments. See Japan Line, 441 U.S. at 449-51, 99 S.Ct. at 1822-23. Thus, we hold that the tax on Vinmar's goods violates the Commerce Clause of the United States Constitution. ¹ See Itel Containers Int'l Corp., 507 U.S. at 77, 113 S.Ct. at 1105-06; Cf. Virginia Indonesia Co., 910 S.W.2d at 915.

Accordingly, pursuant to Rule 170 of the Texas Rules of Appellate Procedure, the Court, without hearing oral argument, reverses the judgment of the court of appeals and remands the case to the trial court for entry of judgment consistent with this opinion.

HECHT, Justice, filed a dissenting opinion, in which PHILLIPS, Chief Justice, ENOCH and OWEN, Justices, join.

Contrary to what the Court says, the facts in this case are not "the same", ante at 555, as those in Virginia Indonesia Company v. Harris County Appraisal District, 910 S.W.2d 905 (Tex.1995), cert. denied, --- U.S. ----, 116 S.Ct. 2523, 135 L.Ed.2d 1048 (1996). The taxing authorities here have not attempted to tax property that has actually entered the export stream. Therefore, the judgments of the lower courts are correct and should be affirmed. Accordingly, I respectfully dissent.

Plaintiff Vinmar, Inc. (formerly known as Vinmar Impex, Inc.) sued the Harris County Appraisal District and the Harris County Appraisal Review Board, challenging their assessment of ad valorem taxes on plastic resins Vinmar purchases, on orders it receives from overseas customers, and on property stored in Harris County pending export. Vinmar complained that the taxes violated various provisions of the state and federal constitutions. The district court rendered judgment for the taxing authorities. On petition for writ of error, Vinmar argues only that the taxes violate the Commerce Clause of the United States Constitution and the Equal Protection Clause of the Fourteenth Amendment. The court of appeals affirmed. 890 S.W.2d 493.

This case was submitted to the district court on an agreed statement of facts. TEX.R. CIV. P. 263. I quote the relevant portions of that statement, omitting section divisions and combining some paragraphs:

Plaintiff is a corporation organized and existing under the laws of the State of Texas and its principal place of business is located in Houston, Harris County, Texas.

The instant case is an ad valorem tax suit brought by Plaintiff Vinmar pursuant to Chapter 42 of the Texas Property Tax Code challenging the inclusion of certain of its property on the Defendants' appraisal rolls for the 1989 and 1990 tax years. Plaintiff Vinmar protested the inclusion of the property in such appraisal rolls to Defendant Harris County Appraisal Review Board pursuant to Chapter 41 of the Texas Property Tax Code on the grounds that the property is not subject to ad valorem taxation in Texas because the product is purchased for export. Vinmar alleges that taxation of Vinmar's product by the State of Texas and its political subdivisions is therefore precluded by the Commerce, Import-Export, Due Process and Equal Protection clauses of the United States Constitution and the Due Course of Law, Equal Protection, and Uniform Tax clauses of the Texas Constitution. Plaintiff Vinmar admits the taxation of its product for the 1989 and 1990 tax years is in all respects valid except to the extent that its taxation may be precluded by the Commerce, Import-Export, Due Process and Equal Protection clauses of the United States Constitution and the Due Course of Law, Equal Protection, and Uniform Tax clauses of the Texas Constitution.

Plaintiff has complied with all prerequisites for filing and maintaining the instant lawsuit and this Court has jurisdiction to hear and decide this case.

The various accounts under which Harris County Appraisal District appraised and taxed Plaintiff Vinmar's personal property are described in the attached Addendum which is incorporated herein by reference.

Vinmar, Inc. is in the business of purchasing quantities of plastic resin for foreign customers and exporting the plastic resin to the appropriate country. Plaintiff Vinmar purchases goods to fill contract orders that it has already received from its customers, and all of the goods are destined for foreign countries.

Prior to purchasing the resin, Vinmar obtains orders from its customers and enters into contracts with them. Vinmar then enters into the market to locate and purchase the goods. Once Vinmar locates the necessary grade of product, Vinmar purchases the goods dedicated to the contract of sale and has those goods shipped by common carrier to a warehouse in Houston to await finalization of import clearance, currency control procedures, and letters of credit after which Vinmar arranges for transportation of the goods to the customer in the foreign country.

Vinmar's profit margin is small, usually approximately 2%. While the goods are at the warehouse, Vinmar incurs daily storage charges. Vinmar cannot pass these storage charges onto its customer. Payment of personal property taxes on these goods purchased for export can render the transactions profitless and Vinmar then faces the possibility of sustaining a loss on the transaction.

The goods or property that is the subject of this litigation were in warehouses in Houston, Texas on January 1 of the year for which the disputed personal property taxes were assessed.

The foreign countries to which Vinmar ships the goods that it has sold have stringent currency controls which require that those purchasing goods first obtain from their government an import permit or license, a foreign exchange permit, and a foreign exchange clearance letter. Import permits are very scarce...