Western Maryland Ry. Co. v. Goodwin, Nos. 14636

CourtSupreme Court of West Virginia
Writing for the CourtNEELY
Citation167 W.Va. 804,282 S.E.2d 240
PartiesWESTERN MARYLAND RAILWAY CO. v. Thomas R. GOODWIN, Tax Commr., etc. W. VA. MOTOR DELIVERY CO., INC. v. Thomas R. GOODWIN, Tax Commr., etc. UNION BARGE LINE CORP. v. David C. HARDESTY, Jr., Tax Commr., etc.
Docket NumberNos. 14636,14473 and 14870
Decision Date17 July 1981

Page 240

282 S.E.2d 240
167 W.Va. 804
WESTERN MARYLAND RAILWAY CO.
v.
Thomas R. GOODWIN, Tax Commr., etc.
W. VA. MOTOR DELIVERY CO., INC.
v.
Thomas R. GOODWIN, Tax Commr., etc.
UNION BARGE LINE CORP.
v.
David C. HARDESTY, Jr., Tax Commr., etc.
Nos. 14636, 14473 and 14870.
Supreme Court of Appeals of West Virginia.
July 17, 1981.
Rehearing Denied Oct. 8, 1981.

Page 242

Syllabus by the Court

1. A state tax on interstate commerce will not be sustained unless it: "(1) has a substantial nexus with the State; (2) is fairly apportioned; (3) does not discriminate; and (4) is fairly related to the services provided by the State." Maryland v. Louisiana, --- U.S. ----, ----, 101 S.Ct. 2114, 2133, 68 L.Ed.2d 576 (1981).

2. W.Va.Code, 11-12A-2 (1967, 1971) taxes the income of carriers derived from business which begins and ends in West Virginia, regardless of whether the business may also be related to interstate commerce in a tangential way.

3. It is not improper to rely on post-1976 precedent to assess taxes for 1967-73.

[167 W.Va. 805] 4. Income earned by a railroad for switching operations and from demurrage tariffs, when both of these activities take place entirely within West Virginia, is properly taxed under W.Va.Code, 11-12A-2 (1967, 1971).

5. The discretion given the State Tax Commissioner by W.Va.Code, 11-12A-6 (1967) to consider federal net income figures for tax purposes does not give the commissioner the right to confer the substantive benefit of allowing carriers to carry losses forwards and backwards from one year to others. However, when the commissioner requests federal tax figures from taxpayers and then assesses their taxes on some other basis not otherwise indicated to the taxpayers, he may not assess a penalty in addition to the revised assessment.

6. Income derived by a trucking company for deliveries made between its West Virginia warehouse and points within West Virginia is taxable under W.Va.Code, 11-12A-2 (1967, 1971).

7. A ruling by the tax commissioner, not appealed within thirty days, is final only with regard to the particular tax, taxpayer, and years covered by the ruling under W.Va.Code, 11-12A-8c (1962).

8. A foreign barge company which tows barges to and from West Virginia, as well as through it and between points within it, may be taxed under W.Va.Code, 11-12A-3 (1967). To the extent that this is inconsistent with American Barge Line Co. v. Koontz, 136 W.Va. 747, 68 S.E.2d 56 (1951), that decision is overruled.

Noel P. Copen, Huddleston, Bolen, Beatty, Porter & Copen, Huntington, for Western Maryland.

Arden J. Curry, Thomas H. Vanderford, IV, Pauley, Curry & Thaxton, Charleston, for W.Va. Motor Delivery Co., Inc.

[167 W.Va. 806] Thomas N. Chambers, James R. Snyder, Jackson, Kelly, Holt & O'Farrell, Charleston, for Union Barge.

Chauncey H. Browning, Atty. Gen., Robert Digges, Jr., Asst. Atty. Gen., Charleston, for Tax Commissioner.

Albert F. Good, Bibby & Good, Charleston, for Cook Motor Lines, et al., amicus curiae.

NEELY, Justice:

These three tax cases involve the well cultivated field of the constitutional and statutory limitations on the power of the State to tax interstate commerce. The cases were briefed and argued separately before us, but we consolidated them to treat

Page 243

in one opinion the common issues raised. Of course, ultimately the determination of each turns on its facts, so to that extent they will be considered separately.

The cases involve the application of the State's Tax on the Income of Certain Carriers, W.Va.Code, 11-12A-1, et seq., (1967, 1971), particularly sections 2 and 3. Code, 11-12A-2 (1967, 1971) taxes a host of carriers of people and/or property for their business "beginning and ending" in this State. 1 The tax is levied on the gross income [167 W.Va. 807] generated by such business. Code, 11-12A-3 (1967, 1971) taxes the same carriers, in addition to the tax in section 2, (giving a credit for the taxes paid under section 2) for the portion of their interstate transportation business which takes place in this State. 2 This tax on interstate business [167 W.Va. 808] is levied on a carrier's net income by multiplying that income by a fraction, the numerator of which is West Virginia cargo miles and the denominator of which is total cargo miles in the carrier's system.

None of the taxpayers in these cases challenges the State's power to tax interstate commerce in the abstract, but they do challenge the legitimacy of one or the other of these taxes as applied to particular aspects

Page 244

of their activities, either on statutory or constitutional grounds.

The State's taxing powers with regard to interstate commerce are limited by the Due Process and Commerce Clauses of the U.S.Const., amend. XIV and Art. 1, sec. 8, cl. 3. Together, these provisions require that the incidence and particular applications of state taxes meet a four-part test. A tax will not be sustained unless the tax: "(1) has a substantial nexus with the State; (2) is fairly apportioned; (3) does not discriminate against interstate commerce; and, (4) is fairly related to the services provided by the State." Maryland v. Louisiana, --- U.S. ----, 101 S.Ct. 2114, 68 L.Ed.2d 576 (1981). This test is referred to in Maryland as the Complete Auto test, after the ruling in Complete Auto, Inc. v. Brady, 430 U.S. 274, 97 S.Ct. 1076, 51 L.Ed.2d 326 (1977), and it will be referred to as such in the course of this opinion. Subsequent Supreme Court rulings allow us to expand briefly on the contemporary requirements of the Complete Auto test.

1. Nexus

The U.S. Supreme Court as often as not has spoken about what is not sufficient in a particular case to meet the nexus requirement. The determination of the issue is fact-bound. However, some observations can be made generally. It seems that the nexus criterion inevitably runs into the fourth criterion, the relation to services provided by the State. See Commonwealth Edison Co. v. Montana, --- U.S. ----, 101 S.Ct. 2946, 68 L.Ed.2d 884 (1981). In National Geographic Soc'y. v. California Bd. of Equalization, 430 U.S. 551, 557, 97 S.Ct. 1386, 1391, 51 L.Ed.2d 631 (1977), the Court stated that: "It is particularly significant ... that the Court (in Standard [167 W.Va. 809] Pressed Steel Co. v. Washington Rev. Dep't, 419 U.S. 560, 95 S.Ct. 706, 42 L.Ed.2d 719 (1975)) characterized as 'frivolous' the argument that the seller's in-state activities were so thin and inconsequential that the tax had no reasonable relation to the protection and benefits conferred by the taxing State." It is clear that, when a direct relationship can be demonstrated between the tax and the cost to the State of the benefits and protections it affords, there is a sufficient nexus for taxation, see id. at 558, 97 S.Ct. at 1391, but the opposite is not true, i. e., nexus may exist even if the in-state activities are not shown to cost the State as much as the amount of the taxes. Neither is it necessary for there to be a nexus between the particular in-state activities of the taxpayer and the activity sought to be taxed. Id. We conclude that purposive, revenue generating activities in the State are sufficient to render a person liable for taxes, See International Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945).

2. Fair Apportionment

This requires little explanation. A tax on a person involved in both wholly intrastate commerce and interstate commerce with in-state aspects, must be tailored so as to attach primarily to revenue derived from in-state activities. In the case of transportation, it is true most of the time that a tax related to cargo or passenger miles traveled in state or to the miles of the line in state will be valid, see Norfolk & W. Ry. v. North Carolina, 297 U.S. 682, 684, 56 S.Ct. 625, 626, 80 L.Ed. 977 (1936); Ott v. Mississippi Valley Barge Line Co., 336 U.S. 169, 69 S.Ct. 432, 93 L.Ed. 585 (1949).

3. Discrimination

Essentially this criterion requires equal treatment of interstate and local commerce, see Maryland v. Louisiana, --- U.S. ----, ----, 101 S.Ct. 2114, 2133, 68 L.Ed.2d 576 (1981). No state may " 'impose a tax which discriminates against interstate commerce ... by providing a direct commercial advantage to local business,' " id., quoting Northwestern States Portland Cement Co. v. Minnesota, 358 U.S. 450, 458, 79 S.Ct. 357, 362, 3 L.Ed.2d 421 (1959). See, too, Boston Stock Exchange v. State Tax Comm'n, 429 U.S. 318, 97 S.Ct. 599, 50 L.Ed.2d 514 (1977).

[167 W.Va. 810] 4. Relation To Services

The very recent decision in Commonwealth Edison Co. v. Montana, --- U.S.

Page 245

----, 101 S.Ct. 2946, 68 L.Ed.2d 884 (1981) is rather instructive on this issue. Commonwealth Edison makes it clear that there need not be any direct correlation between the value of benefits afforded the taxpayer by the State and the cost of the tax to the taxpayer. Once the nexus requirement has been met, the fourth criterion "imposes the additional limitation that the measure of the tax must be reasonably related to the extent of the contact, ... the activities or presence of the taxpayer in the State." Id. at ----, 101 S.Ct. at 2950. Therefore, "when the measure of a tax is reasonably related to the taxpayer's activities or presence in the State ... the taxpayer will realize, in proper proportion to the taxes it pays, '(t)he only benefit to which it is constitutionally entitled ... (:) that derived from his enjoyment of the privileges of living in an organized society, established and safeguarded by the devotion of taxes to public purposes.' Carmichael v. Southern Coal & Coke Co., 301 U.S., (495) at 522 (57 S.Ct. 868, 878, 81 L.Ed. 1245)" id. at ----, 101 S.Ct. at 2960.

The actual holding in Complete Auto, supra, was simply that a privilege tax on interstate commerce is not per se unconstitutional. However, the case was heralded at the time as a clarification of the previously murky waters which were the bane of any court's...

To continue reading

Request your trial
13 practice notes
  • In re West Virginia Asbestos Litigation, No. 31237.
    • United States
    • Supreme Court of West Virginia
    • 4 Diciembre 2003
    ...American Barge Line Co. v. Koontz, 136 W.Va. 747, 68 S.E.2d 56 (1951), overruled on other grounds by Western Maryland Ry. v. Goodwin, 167 W.Va. 804, 816, 282 S.E.2d 240, 248 (1981). Moreover, we believe that the federal government's longstanding and pervasive interest in the oversight of ra......
  • Hartley Marine Corp. v. Mierke, Nos. 23052
    • United States
    • Supreme Court of West Virginia
    • 12 Julio 1996
    ...this same test for determining violations of our state commerce clause in syllabus point one of Western Maryland Railway Co. v. Goodwin, 167 W.Va. 804, 282 S.E.2d 240 (1981), appeal dismissed, 456 U.S. 952, 102 S.Ct. 2025, 72 L.Ed.2d 477 (1982). Appellants argue that the use tax at issue vi......
  • Armco, Inc. v. Hardesty, No. 15437
    • United States
    • Supreme Court of West Virginia
    • 25 Mayo 1983
    ...is subject to this state's Business and Occupation Tax consistent with the Commerce Clause." In Western Maryland Railway Co. v. Goodwin, 167 W.Va. 804, 282 S.E.2d 240, 244 (1981), in speaking of the nexus issue, we referred to National Geographic Society v. California Board of Equalization,......
  • Tax Com'R v. Mbna America Bank, N.A., No. 33049.
    • United States
    • Supreme Court of West Virginia
    • 21 Noviembre 2006
    ...Louisiana, [451] U.S. [725], [754], 101 S.Ct. 2114, 2133, 68 L.Ed.2d 576 (1981)." Syllabus Point 1, Western Maryland Ry. Co. v. Goodwin, 167 W.Va. 804, 282 S.E.2d 240 2. The United States Supreme Court's determination in Quill Corp. v. North Dakota, 504 U.S. 298, 112 S.Ct. 1904, 119 L.Ed.2d......
  • Request a trial to view additional results
13 cases
  • In re West Virginia Asbestos Litigation, No. 31237.
    • United States
    • Supreme Court of West Virginia
    • 4 Diciembre 2003
    ...American Barge Line Co. v. Koontz, 136 W.Va. 747, 68 S.E.2d 56 (1951), overruled on other grounds by Western Maryland Ry. v. Goodwin, 167 W.Va. 804, 816, 282 S.E.2d 240, 248 (1981). Moreover, we believe that the federal government's longstanding and pervasive interest in the oversight of ra......
  • Hartley Marine Corp. v. Mierke, Nos. 23052
    • United States
    • Supreme Court of West Virginia
    • 12 Julio 1996
    ...this same test for determining violations of our state commerce clause in syllabus point one of Western Maryland Railway Co. v. Goodwin, 167 W.Va. 804, 282 S.E.2d 240 (1981), appeal dismissed, 456 U.S. 952, 102 S.Ct. 2025, 72 L.Ed.2d 477 (1982). Appellants argue that the use tax at issue vi......
  • Armco, Inc. v. Hardesty, No. 15437
    • United States
    • Supreme Court of West Virginia
    • 25 Mayo 1983
    ...is subject to this state's Business and Occupation Tax consistent with the Commerce Clause." In Western Maryland Railway Co. v. Goodwin, 167 W.Va. 804, 282 S.E.2d 240, 244 (1981), in speaking of the nexus issue, we referred to National Geographic Society v. California Board of Equalization,......
  • Tax Com'R v. Mbna America Bank, N.A., No. 33049.
    • United States
    • Supreme Court of West Virginia
    • 21 Noviembre 2006
    ...Louisiana, [451] U.S. [725], [754], 101 S.Ct. 2114, 2133, 68 L.Ed.2d 576 (1981)." Syllabus Point 1, Western Maryland Ry. Co. v. Goodwin, 167 W.Va. 804, 282 S.E.2d 240 2. The United States Supreme Court's determination in Quill Corp. v. North Dakota, 504 U.S. 298, 112 S.Ct. 1904, 119 L.Ed.2d......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT