Interstate Oil Pipe Line Company v. Stone/Opinion of the Court

United States Supreme Court

337 U.S. 662

Interstate Oil Pipe Line Company  v.  Stone

 Argued: Jan. 13, 1949. --- Decided: June 20, 1949

This appeal questions the power of Mississippi, as affected by the commerce clause, to impose a tax measured by gross receipts from the operation of a pipe line wholly within the state.

Appellant is a Delaware corporation which has qualified to do business in Mississippi as a foreign corporation. It owns and operates pipe lines which are used to transport oil from lease tanks in various oil fields in Mississippi to loading racks adjacent to railroads elsewhere in the state. ^[1] From these racks the oil is pumped into railroad tank cars for shipment outside the state. If there are no tank cars available the oil is stored in tanks near the racks. But such delays in loading are usually of short duration and never exceed a week, according to appellant's uncontradicted statement. When delivered to appellant the oil is accompanied by shipping orders from the producer or owner directing that the oil be transported to out-of-state destinations. There are no refineries in Mississippi. There is no through bill of lading from the point of origin at the fields to the destination outside the state. Appellant ships the oil by rail as agent of the owner on bills of lading showing the owner as shipper, the appellant as agent of the shipper and indicating the destination specified in the shipping orders issue to appellant. Appellant is paid by the producer at the rate per barrel specific in its tariff ^[2] from the gathering point to the rack and is paid an additional charge for loading the oil in the tank cars.

The chairman of the Mississippi State Tax Commission, appellee, levied a tax against appellant for the years 1944, 1945 and the first half of 1946, in the sum of $20,296.36, measured by appellant's receipts for transporti g oil from the lease tanks to the railroad loading platforms, pursuant to the following sections of the Mississippi Code, Miss. Code, 1942, Ann., tit. 40, c. 3, §§ 10105, 10109 (Supp. 1948), which provide:

'10105. There is hereby levied and shall be collected annual privilege taxes, measured by the amount or volume of business done, against the persons, on account of the business activities, and in the amounts to be determined by the application of rates against values, or gross income, or gross proceeds of sales, as the case may be, as follows (see sections following):'

'10109. * * * Upon every person engaging or continuing within this state in the business of operating a pipe line for transporting for compensation or hire from one point to another in this state oil or natural gas or artificial gas through pipes or conduits in this state, there is likewise hereby levied and shall be collected a tax, on account of the business engaged in, equal to two per cent of the gross income of the business. * * * 'There shall be excepted from the gross income used in determining the measure of the tax imposed in this section so much thereof as is derived from the business conducted in commerce between this state and other states of the United States, or between this state and foreign countries which the state of Mississippi is prohibited from taxing under the constitution of the United States of America. * * *' ^[3]

The State Tax Commission sustained the assessment. The trial court dismissed a declaration seeking review of the Commission's action. The Supreme Court of Mississippi affirmed that judgment, overruling appellant's contention that because the tax was levied on the privilege of conducting an interstate business and measured by gross receipts therefrom the tax could not be imposed without offending the commerce clause of the Federal Constitution. 203 Miss. 715, 35 So.2d 73.

The state supreme Court held that the operation of these pipe lines between points within the state was intrastate rather than interstate commerce, and that the tax was therefore 'merely on the privilege of operating a pipe line wholly within this State as a local activity. * * * a tax on the privilege of doing an intrastate business, and measured by a percent of gross income as a matter of convenience.' 203 Miss. at 715, 35 So.2d at page 81.

Appellant contends that operation of the pipe lines between points in Mississippi was in fact interstate commerce, and that the tax was construed by the Supreme Court of Mississippi to be a tax on the privilege of operating the pipe lines. From these premises, together with the major premise that no state can tax the privilege of engaging in interstate commerce, appellant concludes that the tax may not constitutionally be imposed.

We do not pause to consider whether the business of operating the intrastate pipe lines is interstate commerce for, even if we assume that it is, Mississippi has power to impose the tax involved in this case. Further, we do not find it necessary to dispute that the Supreme Court of Mississippi construed the statute as imposing a tax on the privilege of operating a pipe line wholly within the state, and not a tax solely upon the 'local activities of 'maintaining, keeping in repair, and otherwise in manning the facilities" situated in Mississippi, Memphis Gas Co. v. Stone, 335 U.S. 80, 92-93, 68 S.Ct. 1475, 1481, 92 L.Ed. 1832, or upon the gross receipts themselves, Central Greybound Lines v. Mealey, 334 U.S. 653, 68 S.Ct. 1260, 92 L.Ed. 1633. While we are of course bound by the constructio given a state statute by the highest court of the State, ^[4] we are concerned with the practical operation of challenged state tax statutes, not with their descriptive labels. ^[5]

The statute is not invalidated by the commerce clause of the Federal Constitution merely because, unlike the statute attacked in Memphis Gas Co. v. Stone, supra, it imposes a 'direct' tax on the 'privilege' of engaging in interstate commerce. ^[6] Any notions to the contrary should not have survived Maine v. Grand Trunk R. Co., 142 U.S. 217, 12 S.Ct. 121, 163, 35 L.Ed. 994, which flatly rules the case at bar. That case sustained a state statute which imposed upon an interstate railroad corporation 'an annual excise tax (measured by apportioned gross receipts), for the privilege of exercising its franchises in this State.' ^[7] The Grand Trunk decision has been approved by this Court as recently as the other controlling case of Central Greyhound Lines v. Mealey, supra, 334 U.S. at page 658, 663, 68 S.Ct. at pages 1263, 1266, 92 L.Ed. 1633, in which the Court permitted New York to impose a tax on the gross receipts from the operation of an interstate bus line, provided that tax was apportioned according to mileage traveled within the state. The Mealey case is not distinguished by saying that it involved only a tax on gross receipts and not a tax on interstate commerce itself, for gross receipts taxes have long been regarded as 'direct' in cases which are supposed to support the proposition that 'direct' taxes on interstate commerce are invalid under the commerce clause. ^[8]

Since all the activities upon which the tax is imposed are carried on in Mississippi, there is no due process objection to the tax. ^[9] The tax does not discriminate against interstate commerce in favor of competing intrastate commerce of like character. ^[10] The nature of the subject of taxation makes apportionment unnecessary; there is no attempt to tax interstate activity carried on outside Missi sippi's borders. No other state can repeat the tax. ^[11] For these reasons the commerce clause does not invalidate this tax.

The judgment is affirmed.

Affirmed.

Notes

1. Appellant also gathers oil which is transported through the Mississippi pipe lines directly into interstate trunk lines, through which the oil is carried outside the state. Mississippi has not attempted to tax the receipts attributable to shipments of this kind.
2. All appellant's transportation of oil in Mississippi is covered by tariffs which are published and filed with the Interstate Commerce Commission as required by the Interstate Commerce Act as amended, 49 U.S.C. §§ 1(1), 1(3), and 6, 49 U.S.C.A. §§ 1(1, 3), 6.
3. Other provisions of the Mississippi Code not here involved impose franchise, net income and ad valorem property taxes, all of which appellant paid for the years involved. This fact does not of course preclude Mississippi from exacting a different tax for the protection upon which one or more of these taxes is based. E.g., Memphis Natural Gas Co. v. Stone, 335 U.S. 80, 85, 68 S.Ct. 1475, 1477, 92 L.Ed. 1832.
4. State of Minnesota ex rel. Pearson v. Probate Court. 309 U.S. 270, 273, 60 S.Ct. 523, 525, 84 L.Ed. 744, 126 A.L.R. 530; Guaranty Trust Co. v. Blodgett, 287 U.S. 509, 513, 53 S.Ct. 244, 245, 77 L.Ed. 463.
5. International Harvester Co. v. Dept. of Treasury, 322 U.S. 340, 346, 347, 64 S.Ct. 1019, 1022, 88 L.Ed. 1313; Nelson v. Sears, Roebuck & Co., 312 U.S. 359, 363, 61 S.Ct. 586, 588, 85 L.Ed. 888, 132 A.L.R. 475.
6. See concurring opinion in Freeman v. Hewit, 329 U.S. 249, 259, 67 S.Ct. 274, 280, 91 L.Ed. 265.
7. Nothing in the Grand Trunk opinion suggests the explanation hazarded by Mr. Justice Holmes in Galveston, H. & S.A.R. Co. v. Texas, 210 U.S. 217, 226, 28 S.Ct. 638, 639, 52 L.Ed. 1031, that the tax in the Grand Trunk case was sustained on the ground that it was imposed in lieu of ad valorem taxes. A copy of the statute reprinted in the margin of the Reports discloses that the tax was 'in lieu of all taxes upon such railroad, its property and stock,' except that cities and towns were permitted to tax not only all buildings owned by the railroad but also railroad-owned 'lands and fixtures' outside the right of way. 142 U.S. 217-218, n. 1, 12 S.Ct. 163, 35 L.Ed. 994.
8. See the cases discussed in Western Live Stock v. Bureau of Revenue, 303 U.S. 250, 255-257, 58 S.Ct. 546, 548, 549, 82 L.Ed. 823, 115 A.L.R. 944; Concurring opinion in Freeman v. Hewit, 329 U.S. 249, 264-266, 67 S.Ct. 274, 282, 283, 91 L.Ed. 265. As the cited discussions point out, most of the cases invalidating 'direct' taxes on interstate commerce are explicable on the ground that the taxes were not fairly apportioned. But cf. the following cases, which involve apportioned franchise or privilege taxes measured by a standard other than gross receipts: Ozark Pipe Line Corp. v. Monier, 266 U.S. 555, 45 S.Ct. 184, 69 L.Ed. 439; Alpha Portland Cement Co. v. Massachusetts, 268 U.S. 203, 45 S.Ct. 477, 69 L.Ed. 916, 44 A.L.R. 1219; cf. Anglo-Chilean Nitrate Sales Corp. v. Alabama, 288 U.S. 218, 53 S.Ct. 373, 77 L.Ed. 710.
9. Nippert v. City of Richmond, 327 U.S. 416, 423-424, 66 S.Ct. 586, 589, 590, 90 L.Ed. 760, 162 A.L.R. 844; Wisconsin v. J. C. Penney Co., 311 U.S. 435, 444-445, 61 S.Ct. 246, 249, 250, 85 L.Ed. 267, 130 A.L.R. 1229, separate opinion in International Harvester Co. v. Dept. of Treasury, 322 U.S. 340, 352-353, 64 S.Ct. 1019, 1032, 88 L.Ed. 1313, concurring opinion in Freeman v. Hewit. 329 U.S. 249, 271, 67 S.Ct. 274, 286, 91 L.Ed. 265; concurring opinion in Memphis Natural Gas Co. v. Stone, 335 U.S. 80, 96, 68 S.Ct. 1475, 1483, 92 L.Ed. 1832.
10. Best & Co. v. Maxwell, 311 U.S. 454, 61 S.Ct. 334, 85 L.Ed. 275; Hale v. Bimco Trading Co., 306 U.S. 375, 59 S.Ct. 526, 83 L.Ed. 771; Guy v. City of Baltimore, 100 U.S. 434, 25 L.Ed. 743.
11. Cf. Gwin, White & Prince v. Henneford, 305 U.S. 434, 439 440, 59 S.Ct. 325, 327, 328, 83 L.Ed. 272; Adams Mfg. Co. v. Storen, 304 U.S. 307, 311-312, 58 S.Ct. 913, 915, 916, 82 L.Ed. 1365, 117 A.L.R. 429; Western Live Stock v. Bureau of Revenue, 303 U.S. 250, 255-257, 58 S.Ct. 546, 548, 549, 82 L.Ed. 823, 115 A.L.R. 944.