UNITED AIR LINES, INC. v. MAHIN, DIRECTOR OF DEPARTMENT OF REVENUE, ET AL.
No. 71-862
Supreme Court of the United States
Argued November 8, 1972-Decided March 5, 1973
410 U.S. 623
BLACKMUN, J.
Robert J. O‘Rourke argued the cause for appellees. With him on the brief were William J. Scott, Attorney General of Illinois, and Warren K. Smoot and Calvin C. Campbell, Assistant Attorneys General.*
*MR. JUSTICE BLACKMUN delivered the opinion of the Court.
United Air Lines, Inc., challenged the constitutionality of the Illinois general revenue use tax as applied to aviation fuel stored in Illinois and thеn loaded aboard aircraft there and consumed in interstate flights. The Supreme Court of Illinois upheld the state tax as currently applied, concluding that it did not impose an unconstitutional burden on interstate commerce. 49 Ill. 2d 45, 273 N. E. 2d 585 (1971). We noted probable jurisdiction. 405 U. S. 986 (1972). We now affirm that holding, but we vacate the judgment and remand the case for consideration of an issue under state law.
Since 1953, United has purchased aviation fuel from a supplier for delivery from the supplier‘s Indiana facilities. This fuel is utilized by United in its extensive operations out of O‘Hare and Midway airports in the Chicago area of Illinois. Although the mеthod of delivery varies for different types of fuel and for the two airports,1 all fuel
In 1955, Illinois enacted a general tax on the “privilege of using” tangible personal property in the State.
United‘s suit attacked the new interpretation on both state and federal grounds. All justices of the Supreme Court of Illinois agreed that the new interpretation did not run afoul of the Federal Constitution, but the justices disagreed over the applicability and validity of the “burn off” alternative discussed in the several opinions. 49 Ill. 2d, at 50-53, 56, 57-59, 273 N. E. 2d, at 587-589, 591-592.
I
Two decisions of this Court were relied upon by the Illinois court in reaching its conclusion that the present application of the state tax was not offensive to the Federal Constitution. The cases are Edelman v. Boeing Air Transport, 289 U. S. 249 (1933), and Nashville, Chattanooga & St. Louis R. Co. v. Wallace, 288 U. S. 249 (1933). We agree that these cases support the
In Edelman, this Court upheld a state gasoline use tax, even when imposed оn gasoline imported from outside the State, stored in tanks at an airport, and loaded aboard planes departing on interstate flights. The decision in Edelman followed the holding in Nashville that oil purchased by a railroad outside Tennessee but stored in Tennessee solely for the purpose of providing motive power for the railroad‘s interstate and intrastate operations could be subjected constitutionally to a Tennessee privilege tax. In Nashville, as in this case, none of the fuel stored was held as inventory for sale, and the tax was not one for the use of special services furnished by the State to the taxpayer railroad.
In Edelman, the Court accepted the State‘s determination that the taxable event was withdrawal from storage rather than consumption. Id., at 251. The airline in Edelman contended, id., at 252, that the state tax was invalid under Helson v. Kentucky, 279 U. S. 245 (1929). In Helson, the Court held that a Kentucky tax on the use of gasoline within the State fell too directly on interstate commerce when it was imposed on fuel loaded in Illinois but consumed in the course of an interstate ferry‘s trip through Kentucky. In Edelman, the Court distinguished Helson because storage, rather than consumption, was the taxable event. See Southern Pacific Co. v. Gallagher, 306 U. S. 167 (1939).
The Supreme Court of Illinois characterized the taxable “use” under the Illinois statute as еither storage or withdrawal from storage. United argued in the state court that the temporary-storage provision constituted a legislative waiver of the right to tax storage prior to loading. The Illinois court rejected this contention, noting that United stored fuel at the airport for general use.
“Under the circumstances, the ‘storage’ becomes something more than a ‘temporary storage’ for safekeeping prior to its use solely outside of Illinois. Such storage, under the plain words of the statute, does not qualify under the temporary storage exemption and, as the authorities already discussed reveal, either the storage itself or the withdrawal therefrom are uses which may be taxed without offending the commerce clause of the Federal constitution.” 49 Ill. 2d, at 55-56, 273 N. E. 2d, at 590 (emphasis added).
The Illinois dissenters, too, treated the taxable event as storage or withdrawal. 49 Ill. 2d, at 57, 273 N. E. 2d, at 591.5
We hold that Edelman and Nashville support the conclusion of the Supreme Court of Illinois that this tax, as applied to all fuel withdrawn from storage for consumption in an interstate vehicle, does not place an unconstitutional burden on interstate commerce. Further, we decline to hold that Edelman has outlived its usefulness.6 We must concede that for a long time this area of state tax law has been cloudy and complicated, primarily because the varied nature of interstate activities makes line drawing difficult. This Court has established some precedents, however, and Edelman and Nashville remain useful guidelines.
The line drawn between an impermissible tax on mere consumption of fuel, as in Helson, and a permissible tax on storage of fuel before loading, as in Edelman and Nashville, continues to serve rational purposes. Retaining the line at this point minimizes the danger of double taxation and yet provides a source of revenue having a
Since no persuasive reason has been advanced for changing the established rule, we reaffirm Edelman and Nashville as precedents.
II
United contended in state court that the Illinois temporary-storage exemption should be interpreted, as a mattеr of state law, to encompass the “burn off” rule which, as noted above, had received administrative sanction for eight years. 49 Ill. 2d, at 49, 273 N. E. 2d, at 587. Two justices of the Illinois court deemed themselves bound under Helson to regard the “burn off” rule as invalid under the Federal Constitution. 49 Ill. 2d, at 50, 273 N. E. 2d, at 587. This basis for construing a state statute creates a federal question. Red Cross Line v. Atlantic Fruit Co., 264 U. S. 109, 120 (1924). The possibility that the state court might have reached the same conclusion if it had decided the question purely as a matter of state law does not create an adequate and independent state ground thаt relieves this Court of the
The facts in Helson are different from the facts here. In Helson, the operators of the interstate ferry boat purchased and took delivery of fuel in Illinois. The office, the place of business, and the situs of all the taxpayer‘s property were in Illinois. The boat crossed the Ohio River into Kentucky on regular runs, and Kentucky sought to impose a tax on the use of gasoline consumed in Kentucky. The Court invalidated the tax “computed and imposed upon the use of the gasoline thus consumed.” 279 U. S., at 248.
In the present case, Illinois is the State of storage of United‘s fuel before loading. If Illinois imposed a tax on the basis of that storage but measured the tax only by the fuel consumed over Illinois, a lower tax would result. The dangers of multiple taxation and possible tax windfalls, already suggested as justifying the Helson decision, would not be present if the tax were imposed on storage prior to loading but wеre measured by consumption. Multiple taxation and tax windfalls are avoided because only one State-the State of storage before loading-has a local event upon which a tax is imposed. Under Helson, States over which the planes fly will be unable to impose a tax on mere consumption.8
Since we now determine that the federal compulsion felt by two justices of the Illinois court is not warranted, we remand the case to avoid the risk of “an affirmance of a decision which might have been decided differently if the court below had felt free, under our decisions, to do so.” Perkins v. Benguet Mining Co., 342 U. S., at 443. We, of course, express nо opinion on the construction of the temporary-storage provision under state law.
The judgment of the Supreme Court of Illinois is vacated and the case is remanded to that court for further proceedings.
It is so ordered.
MR. JUSTICE DOUGLAS, with whom MR. JUSTICE STEWART and MR. JUSTICE WHITE concur, dissenting.
The Court today makes a break with the history of the Commerce Clause that has been largely responsible for creating in this Nation a great common market. One
The Supreme Court of Illinois sustained the Illinois Use Tax1 on all aviation fuel loaded aboard United‘s interstate and foreign flights departing from Chicago. United purchases fuel outside Illinois and stores it in Illinois temporarily for its interstate and foreign operations. The use tax exempts from the tax property purchased outside Illinois, temporarily stored in the State, and used solely outside the State.2
Until 1963 the temporary storage exception was construed by the Illinois Department of Revenue so as to subject to the use tax only that fuel loaded on departing flights that was actually burned over Illinois. In 1963 the Department changed its prior ruling and announced:
“[T]emporary storage ends and a taxable use occurs when the fuel is taken out of storage facilities
and is placed into the tank of the airplane, railroad engine or truck. At this point, the fuel is converted into its ultimate use, and, therefore, a taxable use ocсurs in Illinois.”
The Supreme Court of Illinois upheld that construction and application of the use tax against the claim that it violates the Commerce Clause, saying that United‘s storage becomes something more than temporary storage for safekeeping “prior to its use solely outside of Illinois.” 49 Ill. 2d 45, 55, 273 N. E. 2d 585, 590.
The taxable event is the act of loading the fuel aboard United‘s aircraft in Illinois preparatory to their interstate or foreign journey. The majority states that the Supreme Court of Illinois concluded that either the storage of the gasoline itself or the withdrawal therefrоm is a use which may be taxed without offending the Federal Constitution. But that statement of the Supreme Court of Illinois was made in its discussion of the exemption from the use tax which, as relevant here, provides: “[T]he temporary storage, in this State, of tangible personal property which is acquired outside this State and which, subsequent to being brought into this State and stored here temporarily, is used solely outside this State.”
If that event were used to tax fuel used on an intrastate flight, no problem under the Commerce Clause would arise. But loading is part of the interstate activity when planes prepare for an interstate journey, just as loading is a part of the shipment of goods by rail or water interstate (Puget Sound Stevedoring Co. v. Tax Comm‘n, 302 U. S. 90, 92-94; Joseph v. Carter & Weekes Stevedoring Co., 330 U. S. 422, 427, 433-434) and just as local pickups of parcels and local delivery of parcels in interstate movement are not permissible grounds “for a state license, privilege or occupation tax.” Railway Express Agency v. Virginia, 347 U. S. 359, 368.
In Richfield Oil Corp. v. State Board, 329 U. S. 69, we held invalid a state sales tax levied on the delivery of fuel oil into a ship for overseas carriage. We said “[t]he incident which gave rise to the accrual of the tax was a step in the export process.” Id., at 84. A like result was reached in Michigan-Wisconsin Pipe Line Co. v. Calvert, 347 U. S. 157, where a State sought to impose a severance tax on the transfer of gas from a refinery pipeline to an interstate pipeline. We noted that the “taxable incidence” was the taking of gas from a local plant “for the purpose of immediate interstate transmission.”
The present tax is analogous to the tax on the privilege of carrying on an exclusively interstate business which we struck down in Spector Motor Service v. O‘Connor, 340 U. S. 602, 608. A tax upon an integral part of interstate commerce is a tax that no State by reason of the Commerce Clause is empowered to impose, unless authorized by Congress. Id., at 608.
The fuel in United‘s planes propels the interstate flights; because it is the source of the motive power, it is essential to the interstate journey. It is, therefore, indisputably a part and parcel of the interstate movement. McCarroll v. Dixie Greyhound Lines, 309 U. S. 176, involved an Arkansas statute whiсh prohibited any truck or automobile from entering the State with more than 20 gallons of gasoline in its tank unless an excise tax were paid on the gasoline. The Court held the tax unconstitutional because it imposed a tax on “gasoline to be immediately transported over the roads of Arkansas for consumption beyond.” Id., at 180 (emphasis added). Similarly, Illinois imposes its tax on all of the fuel loaded into airplane tanks, whether or not that fuel is consumed out of State. In Helson v. Kentucky, 279 U. S. 245, on which the Illinois Supreme Court relied in disapproving the earlier construction of the statute, a ferry boаt operated between Illinois and Kentucky, having its office in Illinois and buying all its fuel there. Kentucky sought to tax that portion of the fuel used in Kentucky. This Court invalidated the tax, saying it was “exacted as the price of the privilege of using an instrumentality of interstate commerce.” Id., at 252. If that tax is invalid, it follows a fortiori that Illinois may not tax the movement of airplanes from Illinois to California, from Illinois to Europe, or from Illinois to any other out-of-state point.
Sales within the State, however, are taxable, though the goods have reached the market by interstate channels. Magnano Co. v. Hamilton, 292 U. S. 40, 43; McGoldrick v. Berwind-White Co., supra, at 58. The sales tax in Berwind-White was on the “transfer of title or possession, or both,” id., at 43. And we sustained the tax because of “a local activity” which we described as “delivery of goods within the state upon their purchase for consumption,” id., at 58. As a consequence, an out-of-state buyer who purchases goods in New York City and takes them with him pays the tax, while if he has them shipped to him, he pays no sales tax.
Although “delivery of goods” within the State may be taxed, “solicitation” within the State for out-of-state
The use tax came into being to complement the sales tax, i. e., to fill in gaps where the States could not constitutionally tax interstate arrivals or departures. See Henneford v. Silas Mason Co., 300 U. S. 577, 581. Thus, goods may be taxed at the end of their interstate journey, where the tax does not discriminate against interstate commerce. Id., at 582-583; Felt & Tarrant Co. v. Gallagher, 306 U. S. 62 (use tax on storage, use, or other consumption); Southern Pacific Co. v. Gallagher, 306 U. S. 167 (storage and use). Use taxes imposed on storage or withdrawal from storage have consistently been sustained. Eastern Air Transport v. Tax Comm‘n, 285 U. S. 147; Gregg Dyeing Co. v. Query, 286 U. S. 472; Nashville, Chattanooga & St. Louis R. Co. v. Wallace, 288 U. S. 249; McGoldrick v. Berwind-White Co., supra, at 49.
Nice distinctions are often necessary because, although all taxes on interstate carriers “in an ultimate sense, come out of interstate commerce” (Freeman v. Hewit, 329 U. S. 249, 256), the constitutional ban relates only to “a direct imposition on that very freedom of commercial flow which for more than a hundred and fifty years has been the ward of the Commerce Clause.” Id., at 256.
For Illinois to tax the storage of fuel within its borders is, оf course, constitutionally permissible, even though in time the fuel may be used in interstate or foreign commerce. In Edelman v. Boeing Air Transport, 289 U. S. 249, 251, the use tax was “not levied upon the consumption of gasoline in furnishing motive power for re-
By contrast, the taxable event on which Illinois levies her tax is not storage for future use, or withdrawal from storage, but only loading in the tanks of planes preparing for interstate or foreign journeys. It is, therefore, inescapably a tax on the actual motive power for an interstate or foreign journey. Taxing the fuel loaded in a plane destined for an interstate or foreign journey is, in other words, taxing the privilege of using a facility in commerce, because the motive power3 represented by the fuel has become part and parcel of the facility. The decision today marks a break with our cоnstitutional tradition, which, absent an Act of Congress, has led this Court consistently to hold that the free flow of interstate commerce is a ward of the Commerce Clause. Without that free flow of commerce we would not have the great common market we enjoy today.
I would reverse the judgment of the Supreme Court of Illinois.
MR. JUSTICE WHITE, dissenting.
The Illinois statute in question,
Notes
“To put it another way, the legislature has stated that the temporary storage and the withdrawal therefrom are not taxable uses, if the property in question is to be used solely outside the State. It is clear that if United was to withdraw its fuel from storage at Des Plaines and the airports and transport it outside the State for use elsewhere, as for example at an airport in nearby Wisconsin, the exemption would apply and neither the storage, nor the withdrawal, nor the trаnsportation of the fuel outside the State would be uses subject to the tax.” 49 Ill. 2d, at 55, 273 N. E. 2d, at 590.
Under this view, all the fuel is “used” and subject to Illinois tax when it is temporarily stored or withdrawn from storage. The taxable event is nullified, however, if the fuel is transported from the State for consumption elsewhere.
Although this use of a subsequent event to define the effect of a prior event may appear somewhat unusual, the result may be said to be compelled since fuel in transit may not be constitutionally taxed. See Michigan-Wisconsin Pipe Line Co. v. Calvert, 347 U. S. 157 (1954). A similar exemption for gasoline “exported or sold for exportation from the State” was present in the Wyoming statute challenged in Edelman v. Boeing Air Transport, 289 U. S. 249, 250 (1933).