Story Case

The General Oil Company, a Tennessee corporation, engaged in the manufacture and sale of coaloil throughout the various states, with its principal plant in Pennsylvania, maintained a shipping depot at Memphis, Tennessee. Oil was forwarded from the plant in Pennsylvania by tank cars to Memphis, and there loaded into barrels for shipment to southern points, as ordered. The state of Tennessee levied a tax upon all the oil at the shipping station. To this the company objected, on the ground that the tax was an interference with interstate commerce. Is this contention correct?

Ruling Court Case No. 1. Missouri Vs. Wilton, Volume 91 United States Reports, Page 275

Wilton was indicted, tried, and convicted in the state of Missouri for selling goods without a license. The first section of the statute under which he was indicted is as follows:

"Whoever shall deal in the selling of patent or other medicines, goods, wares, or merchandise, which are not the growth, product, or manufacture of this state, by going from place to place to sell the same, is declared to be a peddler."

The statute then prohibits the dealing of peddlers without a license, and imposes a penalty for failure to comply with the law.

Wilton contended that this law was unconstitutional, in that the requirement of procuring a license was equivalent to a tax upon imports, and in violation of that part of the Constitution of the United States which forbids a state to levy any duty upon exports or imports.

Mr. Justice Field said: "The general power of the state to impose taxes in the way of licenses upon all pursuits and occupations within its limits is admitted, but, like all other powers, must be exercised in subordination to the requirements of the Federal Constitution. Where the business or occupation consists of the sale of goods, the license tax required for its pursuit is in effect a tax upon the goods themselves.

"In the case of Brown vs. Maryland, Volume 12 Wheaton Reports, Page 425, the question arose whether an act of the legislature of Maryland requiring importers of foreign goods to pay the state a license tax before selling them in the form and condition in which they were imported, was valid and constitutional. Treating the exaction of the license tax from the importers as a tax on the goods imported, the court held that the act of Maryland was in conflict with the Constitution; with the clause prohibiting a state, without the consent of Congress, from laying any impost or duty on imports or exports, and with the clause investing Congress with the power to regulate commerce with foreign nations."

In accordance with the opinion, the law involved in the case was declared unconstitutional, and judgment was given for Wilton.

Ruling Court Case No. 2. Brown Vs. Houston, Volume 114 United States Reports, Page 622

Brown was a coal dealer in the city of New Orleans. The coal which he sold was brought into Louisiana from Pittsburg, Pennsylvania, by boat. One year, the tax assessor for the city of New Orleans levied a tax upon a boat load of coal afloat in the Mississippi River. The tax was assessed under the general taxing laws of the state, which provided for a tax upon all property within the state at the time the assessment was made. Brown refused to pay the tax, and the taxing authorities started proceedings to seize and hold the coal in question for the tax. Thereupon, Brown asked the court to enjoin this procedure. He contended that coal in its condition as brought into the state, was not subject to taxation by the state, because it would unreasonably interfere with interstate commerce, power of which was vested in Congress. .

Mr. Justice Bradley said: "It was not a tax imposed upon the coal as a foreign product, or as the product of another state than Louisiana, nor a tax imposed by reason of the coal being imported or brought into Louisiana, nor a tax imposed whilst it was in a state of transit through that state to some other place of destination. It was imposed after the coal had arrived at its destination, and was put up for sale. The coal had come to its place of rest, for final disposal or use, and was a commodity in the market of New Orleans. It might continue in that condition for a year or two years, or only for a day. It had become a part of the general mass of property in the state, and as such it was taxed for the current year, as all other property in the city of New Orleans was taxed."

It was held that the tax authorities should not be enjoined from proceeding to collect the tax in question.

Ruling Law. Story Case Answer

A state may not levy a burden upon interstate commerce. Therefore, it cannot levy a tax upon the receipts of transportation from another state until the goods lose their identity as interstate commerce. Also, a state may not tax the privilege of doing an interstate business, since that would amount to an indirect tax on the commerce. The Ruling Court Case of Wilton vs. Missouri is an example of an indirect burden upon interstate commerce. If the state of Missouri had levied a tax upon sewing machines, irrespective of their place of manufacture, the tax upon those brought into the state would be valid, when these commodities cease their transit; also, had this peddler's tax been levied upon all peddlers doing business within the state, whether selling machines manufactured within the state or without, the tax would not have been an unjust discrimination against interstate commerce, and would have been valid.

It is frequently difficult to determine when an importation ceases to be the subject of interstate commerce and becomes a part of the property of the state. It is agreed that goods actually in transit are not subject to state taxation. But, on the arrival of goods at their destination, even though these remain in the original packages, the state has the right to levy a tax for the protection it renders. It is also agreed that, if the goods have a temporary situs in the state, preparatory to being shipped elsewhere under orders, it is not interstate commerce and may be taxed. The oil company in the Story Case must, therefore, pay its tax.