3 Or. Tax 229 | Or. T.C. | 1968
Decision in part for plaintiff and in part for defendant rendered July 8, 1968.
Affirmed 89 Adv Sh 167,
Plaintiff, a manufacturer of welded steel pipe, both imports coil steel from Japan and purchases steel from domestic companies in the United States. On January *230 1, 1967 the plaintiff had an inventory of Japanese coil steel valued at $493,991.00. The imported wire is bound in a coil and kept in a storage area near plaintiff's main assembly building but separate from the domestic steel. Approximately 12 coils or $40,000 worth of imported steel are kept at all times in the assembly building behind the tube mill so that the operation of the tube mill will not be interrupted.
It requires approximately three months from the time an order is placed by plaintiff with the Japanese manufacturer until the shipment arrives from Japan. The inventory of Japanese steel on hand on January 1, 1967, constituted a ten-month supply. Plaintiff used ten percent of this imported steel inventory in January, six percent in February and 10.8 percent in March, 1967. Under normal circumstances an order for plaintiff's steel products can be filled within two weeks' time.
The plaintiff is primarily engaged in manufacturing steel products but it has occasionally sold some of its steel inventory to other companies.
The rule concerning the ability of states to tax imports was first announced in Brown v. Maryland, 12 Wheat 419,
"It is sufficient for the present to say, generally, that when the importer has so acted upon the thing imported that it has become incorporated and mixed up with the mass of property in the country, it has, perhaps, lost its distinctive character as an import, and has become subject to the taxing power of the state; but while remaining the property of the importer, in his warehouse, in the original form or *231 package in which it was imported, a tax upon it is too plainly a duty on imports to escape the prohibition in the constitution."
In Hooven Allison Co. v. Evatt,
In Youngstown Sheet Tube Co. v. Bowers and United StatesPlywood Corp. v. City of Algoma, (decided together)
The Supreme Court of Colorado in City and County of Denver v.Denver Publishing Co., 153 Col 396,
The Supreme Court of Ohio has followed the decision in theDenver Publishing Co. case and is now firmly committed to the rule that only the amount of the importer's imported and stored material required for current operational needs is taxable. ORRFelt Blanket Co. v. Schneider,
California has rejected completely the formula *233
used by the Ohio and Colorado courts for determining current operational needs of an importer-manufacturer. In Virtue Bros.v. County of Los Angeles,
1. The formula used by Colorado and Ohio to determine current operational needs on the basis of the length of time required to secure an additional supply from the foreign source is reasonable. In the instant case it is clear that only a portion of plaintiff's inventory on hand on January 1, 1967, was needed for plaintiff's current operational needs. Two shiploads of steel happened to arrive three days before the assessment date and altogether this amounted to about ten months' supply of Japanese steel. The testimony showed that it required about 90 days to secure delivery of an order from the mills in Japan. There was also testimony that the plaintiffs used a total of 26.8% *234 of the January 1 inventory during the first 90 days of 1967. Applying the formula used by the Colorado and Ohio courts, 26.8% of $493,991 or $132,389.59 had been committed to plaintiff's current manufacturing needs and is taxable and the balance of $361,601.41 is immune from taxation as an import.
*235"No State shall, * * * lay Imposts or Duties on Imports or Exports, except which may be absolutely necessary for executing it's inspection Laws * * *."