RICHFIELD OIL CORP. v. STATE BOARD OF EQUALIZATION.
No. 46
Supreme Court of the United States
Argued October 24, 1946. - Decided November 25, 1946.
329 U.S. 69
Reversed.
MR. JUSTICE REED, MR. JUSTICE FRANKFURTER, and MR. JUSTICE JACKSON dissent. It is admitted that the Government had given the contractor “notice to proceed” which in our opinion had the legal consequences set forth in the opinion of the court below whose judgment we would affirm.
Norman S. Sterry argued the cause for appellant. With him on the brief was Robert E. Paradise.
John L. Nourse, Deputy Attorney General of California, argued the cause for appellee. With him on the brief was Robert W. Kenny, Attorney General.
This case is here on appeal from the Supreme Court of California which sustained a California tax against the claim that it was repugnant to
Appellant is engaged in producing and selling oil and oil products in California. It entered into a contract with the New Zealand Government for the sale of oil. The price was f. o. b. Los Angeles, payment in London. Delivery was “to the order of the Naval Secretary, Navy Office, Wellington, into N. Z. Naval tank steamer R. F. A. ‘Nucula’ at Los Angeles, California.” The oil was to be consigned to the Naval-Officer-In-Charge, Auckland, New Zealand. Appellant carried the oil by pipe line from its refinery in California to storage tanks at the harbor where the Nucula appeared to receive the oil. When the Nucula had docked and was ready to receive the oil, appellant pumped it from the storage tanks into the vessel. Customary shipping documents were given the master, including a bill of lading which designated appellant as shipper and consigned the oil to the designated naval officer in Auckland. Payment of the price was made in London. The oil was transported to Auckland, no portion of it being used or consumed in the United States. Appellant filed with the Collector of Customs a shipper‘s export declaration. It did not collect, nor attempt to do so, any sales tax from the purchaser. Appellee assessed a retail sales tax against appellant meas-
I. We are met at the outset with the question whether the judgment of the California Supreme Court is a “final judgment” within the meaning of the Judicial Code § 237,
The designation given the judgment by state practice is not controlling. Department of Banking v. Pink, 317 U. S. 264, 268. The question is whether it can be said that “there is nothing more to be decided” (Clark v. Williard, 292 U. S. 112, 118), that there has been “an effective determination of the litigation.” Market Street Ry. Co. v. Railroad Commission, 324 U. S. 548, 551; see Radio Station WOW v. Johnson, 326 U. S. 120, 123-24. That question will be resolved not only by an examination of the entire record (Clark v. Williard, supra) but, where necessary, by resort to the local law to determine what effect the judgment has under the state rules of practice. Brady v.Terminal Railroad Assn., 302 U. S. 678; Brady v. Southern Ry. Co., 319 U. S. 777. See Boskey, Finality of State Court Judgments under the Federal Judicial Code, 43 Col. L. Rev. 1002, 1005.
This suit is brought under the California Retail Sales Tax Act, § 23 and § 31, which prescribes the sole remedy for challenging the tax. The procedure prescribed is payment of the tax, the filing of a claim for refund which sets forth “the specific grounds upon which the claim is founded,” Cal. Stats. 1941, pp. 1328, 1329, and, in case the claim is denied, the institution of a suit within ninety days “on the grounds set forth in such claim.” Cal. Stats. 1939, pp. 2184, 2185. The claim thus frames and restricts the issues for the litigation. Although the Supreme Court reversed the judgment of the trial court without direction, its decision controls the disposition of the case. See Estate of Baird, 193 Cal. 225, 223 P. 974; Bank of America v. Superior Court, 20 Cal. 2d 697, 128 P. 2d 357. Since the facts have been stipulated1 and the Supreme Court of California has passed on the issues which control the litigation, we take it that there is nothing more to be
II. We turn then to the merits.
The Supreme Court of California held that this provision did not bar the tax because the delivery of the oil which resulted in the passage of title occurred prior to the commencement of the exportation. The court suggested, and the appellee concedes, that a different result might follow if the oil had been delivered to a common carrier; “for then it would have been placed in the hands of an instrumentality whose sole purpose is to export goods, thus indelibly characterizing the process as a part of exportation.” 27 Cal. 2d p. 153, 163 P. 2d p. 3. The court, in reaching the conclusion that the tax was constitutional, rested in part on our recent decisions (particularly McGoldrick v. Berwind-White Coal Mining Co., 309 U. S. 33; Department of Treasury v. Wood Preserving Corp., 313 U. S. 62; International Harvester Co. v. Department of Treasury, 322 U. S. 340) which sustained the levy of certain state taxes against the claim that they violated the Commerce Clause. The court concluded that if this had been an interstate transaction, it would have been subject to the tax. It saw no greater limitation on the power of the States under
The two constitutional provisions, while related, are not coterminous. To be sure, a state tax has at times been held unconstitutional both under the Import-Export Clause and under the Commerce Clause. Brown v. Maryland, 12 Wheat. 419; Crew Levick Co. v. Pennsylvania, 245 U. S. 292. But there are important differences between the two. The invalidity of one derives from the prohibition of taxation on the import or export; the validity of the other turns nowise on whether the article was, or had ever been, an import or export. See Hooven & Allison Co. v. Evatt, 324 U. S. 652, 665-66, and cases cited. Moreover, the Commerce Clause is cast, not in terms of a prohibition against taxes, but in terms of a power on the part of Congress to regulate commerce. It is well established that the Commerce Clause is a limitation upon the power of the States, even in absence of action by Congress. Southern Pacific Co. v. Arizona, 325 U. S. 761; Morgan v. Virginia, 328 U. S. 373. But the scope of the limitation has been determined by the Court in an effort to maintain an area of trade free from state interference and at the same time to make interstate commerce pay its way. As recently stated in McGoldrick v. Berwind-White Coal Mining Co., supra, p. 48, the law under the Commerce Clause has been fashioned by the Court in an effort “to reconcile competing constitutional demands, that commerce between the states shall not be unduly impeded by state action, and that the power to lay taxes for the support of state government shall not be unduly curtailed.” That accommodation has been made by upholding taxes designed to make interstate commerce bear a fair share of the cost of the local government from which it receives benefits (see e. g. Western Live Stock v. Bureau of Reve-nue, 303 U. S. 250, 254-55, and cases cited; McGoldrick v. Berwind-White Coal Mining Co., supra) and by invalidating those which discriminate against interstate commerce, which impose a levy for the privilege of doing it, which place an undue burden on it. Adams Mfg. Co. v. Storen, 304 U. S. 307; Gwin, White & Prince, Inc. v. Henneford, 305 U. S. 434; Best & Co. v. Maxwell, 311 U. S. 454; Nippert v. Richmond, 327 U. S. 416.
It seems clear that we cannot write any such qualifications into the Import-Export Clause. It prohibits every State from laying “any” tax on imports or exports without the consent of Congress. Only one exception is created-“except what may be absolutely necessary for executing it‘s inspection Laws.” The fact of a single exception suggests that no other qualification of the absolute prohibition was intended. It would entail a substantial revision of the Import-Export Clause to substitute for the prohibition against “any” tax a prohibition against “any discriminatory” tax. As we shall see, the question as to what is exportation is somewhat entwined with the question as to what is interstate commerce. But the two clauses, though complementary, serve different ends. And the limitations of one cannot be read into the other.
It is suggested, however, that the history of the Import-Export Clause shows that it was designed to prevent discriminatory taxes and not to preclude the levy of general taxes applicable alike to all goods. Support for that is found in the fact that this provision was defended in the Convention2 and later in the debates3 on the ground that it protected the inland States from levies by the coastal States through the taxation of exports. Yet that func-
“In expounding the Constitution of the United States, every word must have its due force, and appropriate meaning; for it is evident from the whole
instrument, that no word was unnecessarily used, or needlessly added. The many discussions which have taken place upon the construction of the Constitution, have proved the correctness of this proposition; and shown the high talent, the caution, and the foresight of the illustrious men who framed it. Every word appears to have been weighed with the utmost deliberation, and its force and effect to have been fully understood. No word in the instrument, therefore, can be rejected as superfluous or unmeaning...”
We cannot, therefore, read the prohibition against “any” tax on exports as containing an implied qualification.
The questions remain whether we have here an export within the meaning of the constitutional provision and, if so, whether this tax was a prohibited impost upon it.
The requirement that foreign commerce be involved (Woodruff v. Parham, 8 Wall. 123, 136) is met, for concededly the oil was sold for shipment abroad. The question whether at the time the tax accrued the oil was an export presents a different problem. There are few decisions of the Court under
“When taxed it was not held with the intent or for the purpose of exportation, but with the intent and for the purpose of sale there, in New Orleans. A duty on exports must either be a duty levied on goods as a condition, or by reason of their exportation, or, at least, a direct tax or duty on goods which are intended for exportation. Whether the last would be a duty on exports, it is not necessary to determine. But cer-
tainly, where a general tax is laid on all property alike, it cannot be construed as a duty on exports when falling upon goods not then intended for exportation, though they should happen to be exported afterwards.”
In Coe v. Errol, 116 U. S. 517, the Court had before it a case under the Commerce Clause. Logs, cut in New Hampshire, were being held on a river there for transportation to Maine. New Hampshire‘s non-discriminatory tax on them was sustained. What the Court said concerning commerce is what we deem to be the correct principle governing exports: “... goods do not cease to be part of the general mass of property in the State, subject, as such, to its jurisdiction, and to taxation in the usual way, until they have been shipped, or entered with a common carrier for transportation to another State, or have been started upon such transportation in a continuous route or journey.” P. 527.
That view has been followed in cases involving
That line has been marked by other decisions under
“The rise in rates for insurance as immediately affects exporting as an increase in freight rates, and the taxation of policies insuring cargoes during their transit to foreign ports is as much a burden on exporting as if it were laid on the charter parties, the bills of lading, or the goods themselves. Such taxation does not deal with preliminaries, or with distinct or separable subjects; the tax falls upon the exporting process.”
Closer in point is Spalding & Bros. v. Edwards, 262 U. S. 66. It involved a federal tax on baseball bats and balls sold by the manufacturer. A Venezuelan firm ordered a New York commission house to buy a quantity of bats and balls for their account. The New York commission house placed the order with the manufacturer instructing it to deliver the packages to an exporting carrier in
“The very act that passed the title and that would have incurred the tax had the transaction been domestic, committed the goods to the carrier that was to take them across the sea, for the purpose of export and with the direction to the foreign port upon the goods. The expected and accomplished effect of the act was to start them for that port. The fact that further acts were to be done before the goods would get to sea does not matter so long as they were only the regular steps to the contemplated result.”
The circumstance that title was in the New York commission house and that it might change its mind and retain the goods for its own use was dismissed by the statement that “Theoretical possibilities may be left out of account.” P. 70. The Court concluded that if exportation was put at a later point, exports would not receive “the liberal protection that hitherto they have received.” P. 70.
This line of cases was summarized in Willcuts v. Bunn, 282 U. S. 216, 228, as construing the constitutional prohibition against federal taxation of exports so as to give “immunity to the process of exportation and to the trans-
The fact that delivery to a common carrier for export gave the sale immunity in Spalding & Bros. v. Edwards, supra, is seized upon as stating a rule that the process of exportation has not started until such delivery has been made. And cases like Superior Oil Co. v. Mississippi, 280 U. S. 390, are relied upon as indicating that delivery to the purchaser is not sufficient. That case arose under the Commerce Clause. Mississippi was upheld in its effort to tax a distributor or wholesaler who purchased gasoline and later took it to Louisiana for sale. The Court said, p. 395, that although the course of business indicated the likely destination of the oil, it was “in the hands of the purchaser to do with as it liked, and there was nothing that in any way committed it to sending the oil to Louisiana except its own wishes.” The Court held, therefore, that the tax was not on goods moving in interstate commerce. But it added, p. 396, “Dramatic circumstances, such as a great universal stream of grain from the State of purchase to a market elsewhere, may affect the legal conclusion by showing the manifest certainty of the destination and exhibiting grounds of policy that are absent here.”
The certainty that the goods are headed to sea and that the process of exportation has started8 may normally be best evidenced by the fact that they have been delivered to a common carrier for that purpose. But the same degree of certainty may exist though no common carrier is involved. The present case is an excellent illustration. The foreign purchaser furnished the ship to carry the oil abroad. Delivery was made into the hold of the vessel
It seems clear under the decisions which we have reviewed involving
It is argued, however, that the present tax is not an impost within the meaning of the Import-Export Clause. The tax is measured by the gross receipts of retail sales and is levied on retailers “For the privilege of selling tangible personal property at retail.” Cal. Stats. 1935, p. 1253. The retailers are authorized to collect the tax from the consumers. Cal. Stats. 1933, p. 2602. And a sale is “any transfer of title or possession . . . in any manner or by any means whatsoever, of tangible personal property, for a consideration.” Cal. Stats. 1935, p. 1256. The California Supreme Court held that the tax is an excise tax for the privilege of conducting a retail business meas-
That construction, being a matter of state law, is binding on us. But it is not determinative of the question whether the tax deprives the taxpayer of a federal right. That issue turns not on the characterization which the state has given the tax, but on its operation and effect. See St. Louis Southwestern Ry. Co. v. Arkansas, 235 U. S. 350, 362; Kansas City, Ft. S. & M. R. Co. v. Kansas, 240 U. S. 227, 231.
Appellee concedes that the prohibition of the Import-Export Clause would be violated if the goods were taxed as exports or because of their exportation, or if the process of exportation were itself taxed. We perceive, however, no difference in substance between any tax so labeled and the present tax. The California Supreme Court conceded that the delivery of the oil “resulted in the passage of title, and the completion of the sale, and the taxable incident.” 27 Cal. 2d p. 153, 163 P. 2d pp. 2-3. The incident which gave rise to the accrual of the tax was a step in the export process.
Moreover, Brown v. Maryland, supra, rejected an argument that while a State could not tax imports, it could tax the privilege of selling imports. Chief Justice Marshall stated, p. 444:
“All must perceive, that a tax on the sale of an article, imported only for sale, is a tax on the article itself. It is true, the State may tax occupations generally, but this tax must be paid by those who employ the individual, or is a tax on his business. The lawyer, the physician, or the mechanic, must either charge more on the article in which he deals, or the thing itself is taxed through his person. This the State has a right to do, because no constitutional prohibition
extends to it. So, a tax on the occupation of an importer is, in like manner, a tax on importation. It must add to the price of the article, and be paid by the consumer, or by the importer himself, in like manner as a direct duty on the article itself would be made. This the State has not a right to do, because it is prohibited by the constitution.”
The same reasoning was applied to exports, p. 445:
“The States are forbidden to lay a duty on exports, and the United States are forbidden to lay a tax or duty on articles exported from any State. There is some diversity in language, but none is perceivable in the act which is prohibited. The United States have the same right to tax occupations which is possessed by the States. Now, suppose the United States should require every exporter to take out a license, for which he should pay such tax as Congress might think proper to impose; would government be permitted to shield itself from the just censure to which this attempt to evade the prohibitions of the constitution would expose it, by saying, that this was a tax on the person, not on the article, and that the legislature had a right to tax occupations?”
The prohibition contained in the Import-Export Clause against taxation on exports clearly involves more than a mere exemption from taxes laid specifically upon the exported goods themselves. That is true of the constitutional prohibition against federal taxes on exports. United States v. Hvoslef, supra. What was said there (p. 13) is equally applicable here: “If it meant no more than that, the obstructions to exportation which it was the purpose to prevent could readily be set up by legislation nominally conforming to the constitutional restriction but in effect overriding it.” And see Anglo-Chilean Nitrate Sales Corp. v. Alabama, 288 U. S. 218.
Reversed.
MR. JUSTICE MURPHY took no part in the consideration or decision of this case.
MR. JUSTICE BLACK, dissenting.
Richfield Oil Corporation, while doing business in California, sold oil extracted from California soil. Its purchaser bought the oil to transport and use abroad. California, like many other states, raises a large proportion of its revenue by a generally applied tax on sales.1 The Court holds that application of the California sales tax to this transaction is a “tax on exports” and therefore violates
In Spalding & Bros. v. Edwards, 262 U. S. 66, 69, a precedent upon which today‘s decision heavily relies, this Court said that “with regard to any transaction we have to fix a point at which, in view of the purpose of the Constitution, the export must be said to begin. As elsewhere in the law there will be other points very near to it on the other side, so that if the necessity of fixing one definitely is not remembered any determination may seem arbitrary.” This principle announced in the Spalding case seems to follow what was said in Cornell v. Coyne, 192 U. S. 418, 427, that the constitutional prohibition against a tax on exports was not intended to relieve exported articles “from the prior ordinary burdens of taxation which rest upon all property
similarly situated.” Every transaction held by this Court to have occurred after rather than before exportation began makes an encroachment not only on the power of states to tax, but, as the Court points out, the Federal Government‘s area of taxation is also narrowed. The result of such a holding is all the more serious because, unlike the consequences of holding a state tax invalid under the Commerce Clause, the prohibitions against taxing exports are, with a minor exception, permanent, absolute and unqualified. After today‘s ruling, Congress itself can neither tax nor permit states to tax sales like the one here proscribed. To classify sales transactions as having occurred after exportation began, therefore, results in creating an island of constitutional tax immunity for a substantial proportion of the profitable business of the nation. Such a result not only grants tax immunity to many profitable businesses which share governmental protections from payment of their fair part of taxes; it also throws an unfair part of the tax burden on others. Since we cannot assume that the framers of the Constitution looked with favor on such consequences, we should, before classifying a transaction in such a way as to render a tax on it unconstitutional, give it the most careful factual scrutiny. We should not invalidate such a tax unless satisfied beyond doubt that it falls squarely and wholly within the area marked by the Constitution for tax exemption.
The economic consequences of such sales taxes are probably about the same as would flow from a property or severance tax applied to Richfield. For all three types of taxes would likely be reflected in an increased sales price of Richfield‘s oil. No one, I suppose, would think of saying that such a property or severance tax would be unconstitutional as a tax on exports. The reason would be that the taxable event clearly arose before and not after exportation began. This sales tax was no more applied after export had actually begun than a property or severance
Concededly, as the Court points out, the Constitution prohibits imposition of state and federal “imposts and duties” on “exports.” But the Constitution does not define in words what is an impost or tax on exports and what is not. It is well known that taxation of exports was primarily forbidden by the Constitution at the insistence of inland states which feared that seaboard states would exact a tribute from all goods sold in the interior which were
True, the tax would impose a burden on export commerce to the extent that it increased the export price of Richfield oil. But if a tax on export sales be unconstitutional for imposing such a burden, so is a property tax or a severance tax applied to Richfield‘s oil anywhere from well to consumer. For all these types of taxes would likely be reflected in the price of Richfield‘s oil. But the history and the evolution of the constitutional prohibition against taxation of exports manifest that there was no intention to subsidize either export businesses or foreign purchasers by any such broad immunity from state and federal taxation.
I cannot believe that it was the purpose of the Constitution to let all goods destined for shipment abroad escape uniformly applied state and federal taxes, nor that a state whose resources are depleted is powerless to enforce its sales tax if the depleter sells to customers for immediate