A statute of New Mexico (Laws 1919, c. 93, p. 182), applicable
to distributors of gasoline, imposes an excise of 2 cents for each
gallon sold or used, and an annual license tax of $50.00, payable
in advance, for each distributing station, place of business, or
agency, and makes it a penal offense to carry on the business
without paying the license tax.
Held:
(1) That the excise provision, assuming it intended to include
both interstate and domestic transactions, is not therefore void
in toto in its application to a distributor engaged in
both, since, the subject matter being separable, full protection
can be afforded by enjoining enforcement as to the interstate
business. P.
256 U. S.
646.
(2) But that the license tax, falling with its prohibition upon
the business as a whole, cannot constitutionally be applied where
interstate and intrastate business necessarily are conducted
indiscriminately at the same stations and by the same agencies. P.
256 U. S.
647.
(3) That gasoline imported by the distributor from another
state, but used in the conduct of its business, loses its
interstate character and may be subjected to the excise
consistently with the Commerce Clause. P.
256 U. S.
648.
(4) That the tax upon the use is not a tax on tangible property,
within the meaning of § 1 of Article VIII of the New Mexico
Constitution, but in effect, as in name, an excise tax, and
conforms to the requirement of that section that taxes shall be
equal and uniform upon subjects of taxation of the same class. P.
256 U. S.
649.
(5) The excise tax, as applied to local sale and use of gasoline
by a distributor, is consistent with the due process and equal
protection clauses of the Fourteenth Amendment. P.
256 U. S.
649.
Reversed.
The case is stated in the opinion.
Page 256 U. S. 643
MR. JUSTICE PITNEY delivered the opinion of the Court.
This suit was brought by the Continental Oil Company against the
Attorney General and certain other officials of the State of New
Mexico to restrain the enforcement against the company, a
distributor of and dealer in gasoline and other petroleum products
in that state, of the provisions of an act of the legislature (Laws
New Mexico 1919, c. 93, p. 182) imposing an excise tax of 2 cents
for each gallon of gasoline sold or used and an annual license tax
of $50 for each distributing station or place of business. The case
was here before under the name of
Askren v. Continental Oil
Co., 252 U. S. 444, on
review of an order of the district court (three judges sitting)
granting a temporary injunction. It is now here for review of the
final decree, and, Mr. Askren's term as Attorney General having
expired, Mr. Bowman, his successor in office, has been substituted
as a party in his stead.
On the former appeal, it appeared upon the face of the bill that
plaintiff (appellee) purchases gasoline in various states other
than New Mexico and ships it into that state, there to be sold and
delivered; that it carries on business in two ways: first, gasoline
is brought in from other states either in tank cars, in barrels, or
in packages containing not less that two five-gallon cans, and sold
and delivered to customers in the original packages, in the same
form and condition as when received by plaintiff in the State
Page 256 U. S. 644
of New Mexico, as to which we held plaintiff is engaged in
interstate commerce, and not liable to pay to the state a license
tax for purchasing, shipping, and selling gasoline in that manner;
secondly, a part of plaintiff's business consists of selling
gasoline from the tank cars, barrels, and packages in quantities to
suit purchasers, and we held that business of this kind is properly
taxable by the laws of the state, although the gasoline is brought
into the state in interstate commerce; that the mere fact that it
was produced in another state does not show a discrimination
against the products of such state, and that sales from broken
packages in quantities to suit purchasers are a subject of taxation
within the legitimate power of the state. But these latter sales
were little emphasized in the bill, which stressed the sales in
original packages, and, since from its averments it was impossible
to determine whether the sales from broken packages were of
substantial importance, we did not at that stage of the case go
into the question whether the act was separable, but reserved it
for the final hearing, while affirming the order for a temporary
injunction.
Upon the going down of the mandate, plaintiff amended its bill
by averring that, in addition to carrying on the business of buying
and selling gasoline and other petroleum products, it is using
gasoline at each of its distributing stations within the State of
New Mexico (37 in number) in the operation of its automobile tank
wagons and otherwise; that, under the terms of the act, it is
prohibited from using this gasoline except upon the payment of the
excise tax of 2 cents per gallon therefor; that this is a property
tax, void under § 1 of article VIII of the state constitution
because not levied in proportion to the value of the gasoline, and
that the imposition of the tax denies to plaintiff the equal
protection of the laws and amounts to a taking of its property
without due process of law, in contravention of the Fourteenth
Amendment, and further is in
Page 256 U. S. 645
violation of the commerce clause of the Constitution of the
United States.
Defendants answered alleging that plaintiff's sales in tank cars
or other unbroken packages are insignificant as compared with its
sales made after original packages have been broken; denying that
the act exacts of the plaintiff payment of a license tax for the
privilege of shipping or selling gasoline in interstate commerce,
or of an excise tax on the gasoline sold in such commerce; averring
that the State of New Mexico and its officers charged with
enforcement of the law do not construe the act as affecting
interstate commerce, and have no purpose or intention to enforce it
so as to do so, or otherwise than so far as intrastate commerce is
concerned, and averring that any gasoline used by plaintiffs at its
distributing stations is no longer in interstate commerce, but has
become commingled with the general mass of property in the state,
and a tax upon its use is not void under the state constitution or
a violation of the commerce clause or the Fourteenth Amendment.
The case came on for final hearing upon stipulated facts as to
the course of plaintiff's business, from which it appeared that,
during the years 1918 and 1919 and the first seven months of 1920,
its sales of gasoline in bulk or from broken packages constituted
about 94.5 percent of its aggregate business, and sales in original
barrels, packages, or tank cars without breaking the packages about
5.5 percent, in addition to which the company consumed in the
conduct of its own business gasoline equal to about 8 percent of
its total sales. It was further stipulated that this represents the
ordinary course of business of the company, but that future
percentages will depend upon the demands of customers.
The trial court, after referring to our decision in 252 U.S.,
proceeded to pass upon the question whether the statute is
separable and capable of being sustained so far
Page 256 U. S. 646
as it imposes a tax upon domestic business legitimately taxable.
Reciting the language of the act, and reading it as including every
distributor of gasoline, whether selling at retail or in original
packages, as imposing an excise tax upon all gasoline, whether sold
in one way or the other, and as making no exemption from either the
license or the excise tax for persons selling gasoline or for
gasoline sold in original packages, the court declared that it
could not read an exemption into it without giving it a meaning the
legislature might never have intended, and held the act not
separable, but void as to both interstate and domestic business.
Having reached this conclusion, the court found it unnecessary to
pass upon the question whether the imposition of an excise tax of 2
cents per gallon upon the gasoline used by plaintiff in its
automobiles and trucks employed in the business of distributing its
wares for sale was in violation of the provision of § 1, art. VIII,
of the constitution of the state because not levied in proportion
to the value of the gasoline so used.
Assuming that, upon the question of construction, the district
court was right, and that the act manifests an intent to tax
interstate as well as domestic transactions in gasoline, and is not
in this respect capable of separation, still, so far as the excise
tax is concerned, imposed as it is upon the sale and use of
gasoline according to the number of gallons sold and used, the
divisible nature of the subject renders it feasible to control the
operation and effect of the tax so as to prevent it from being
imposed upon sales in interstate commerce, while allowing the state
to enforce it with respect to domestic transactions, and with the
allowance of an injunction limited accordingly plaintiff will
receive the full protection to which it is entitled under the
Constitution of the United States. The applicable rule is that laid
down in
Ratterman v. Western Union Telegraph Co.,
127 U. S. 411,
where, in response to a question whether a single tax, assessed by
a state upon
Page 256 U. S. 647
the receipts of a telegraph company derived partly from
interstate commerce and partly from commerce within the state, but
returned and assessed in gross and without separation or
apportionment, was wholly invalid or invalid only in proportion and
to the extent that the receipts were derived from interstate
commerce, this Court unanimously answered that, so far as levied
upon receipts derived from interstate commerce, the tax was void,
but so far as levied upon receipts from commerce wholly within the
state, it was valid. This case has been cited repeatedly with
approval and its principle accepted.
Western Union Telegraph
Co. v. Alabama, 132 U. S. 472,
132 U. S.
476-477;
Lehigh Valley R. Co. v. Pennsylvania,
145 U. S. 192,
145 U. S.
200-201;
Postal Tel. Cable Co. v. Charleston,
153 U. S. 692,
153 U. S. 697;
Western Union Tel. Co. v. Kansas, 216 U. S.
1,
216 U. S. 31.
But with the license tax it is otherwise. If the statute is
inseparable, then both, by its terms, and by its legal operation
and effect this tax is imposed generally upon the entire business
conducted, including interstate commerce as well as domestic, and
the tax is void under the authority of
Leloup v. Port of
Mobile, 127 U. S. 640,
127 U. S. 647,
Crutcher v. Kentucky, 141 U. S. 47,
141 U. S. 58-59,
Williams v. Talladega, 226 U. S. 404,
226 U. S. 419,
and other cases of that character.
Upon the question of severability, we are constrained to concur
in the view adopted by the district court, and this notwithstanding
our hesitation, in advance of a declaration by the court of last
resort of the state, to adopt a construction bringing the law into
conflict with the federal Constitution.
Ohio Tax Cases,
232 U. S. 576,
232 U. S. 591;
St. Louis Southwestern Ry. v. Arkansas, 235 U.
S. 350,
235 U. S.
369-370. The act, in its second section, requires every
distributor of gasoline to pay an annual license tax of $50 for
each distributing station or place of business or agency, requires
it to be paid in advance, and renders it unlawful to carry on the
business without having paid it.
Page 256 U. S. 648
Section 8 declares that any person who shall engage or continue
in the business of selling gasoline without a license shall be
deemed guilty of a misdemeanor, and, upon conviction, be punished
by fine or imprisonment, or both. The subject taxed is not in its
nature divisible, as in the case of the excise tax. The imposition
falls upon the entire business indiscriminately, and so does the
prohibition against the further conduct of business without making
the payment. By accepted canons of construction, the provisions of
the act in respect of this tax are not capable of separation so as
to confine them to domestic trade, leaving interstate commerce
exempt.
United States v. Reese, 92 U. S.
214,
92 U. S. 221;
Trade-Mark Cases, 100 U. S. 82,
100 U. S. 99;
Poindexter v. Greenhow, 114 U. S. 270,
114 U. S.
304-305;
Pollock v. Farmers' Loan & Trust
Co., 158 U. S. 601,
158 U. S.
636.
No doubt the state might impose a license tax upon the
distribution and sale of gasoline in domestic commerce if it did
not make its payment a condition of carrying on interstate state or
foreign commerce. But the state has not done this by any act of
legislation. Its executive and administrative officials have
disavowed a purpose to exact payment of the license tax for the
privilege of carrying on interstate commerce. But the difficulty is
that, since plaintiff, so far as appears, necessarily conducts its
interstate and domestic commerce in gasoline indiscriminately at
the same stations and by the same agencies, the license tax cannot
be enforced at all without interfering with interstate commerce
unless it be enforced otherwise than as prescribed by the statute
-- that is to say, without authority of law. Hence, it cannot be
enforced at all.
With the excise tax as imposed upon the use of gasoline by
plaintiff at its distributing stations, in the operation of its
automobile tank wagons and otherwise, we have no difficulty.
Manifestly gasoline thus used has passed
Page 256 U. S. 649
beyond interstate commerce, and the tax can be imposed upon its
use, as well as upon the sale of the same commodity in domestic
trade, without infringing plaintiff's commercial rights under the
federal Constitution. Section 1, Art. VIII, of the state
constitution, invoked by plaintiff, reads:
"Taxes levied upon tangible property shall be in proportion to
the value thereof, and taxes shall be equal and uniform upon
subjects of taxation of the same class."
Clearly the first part of this refers to property taxation. The
tax imposed by the act under consideration upon the "sale or use of
all gasoline sold or used in this state" is not property taxation,
but in effect, as in name, an excise tax. We see no reason to doubt
the power of the state to select this commodity, as distinguished
from others, in order to impose an excise tax upon its sale and
use, and since the tax operates impartially upon all, and with
territorial uniformity throughout the state, we deem it "equal and
uniform upon subjects of taxation of the same class," within the
meaning of § 1 of Article VIII.
There is no substance in the objection that the excise tax, as
applied to domestic sales and domestic use of gasoline, infringes
plaintiff's rights under the due process and equal protection
clauses of the Fourteenth Amendment. The contention that it
interferes with interstate commerce because the gasoline is the
product of other states already has been disposed of.
The decree under review should be reversed, and the cause
remanded, with directions to grant a decree enjoining the
enforcement as against plaintiff of the license tax without
qualification, and of the excise tax upon the sale or sue of
gasoline only with respect to sales of gasoline brought from
without the state into the State of New Mexico, and there sold and
delivered to customers in the original packages, whether tank cars,
barrels, or other packages, and in the same form and condition as
when
Page 256 U. S. 650
received by plaintiff in that state, but without prejudice to
the right of the state, through appellants or other officers, to
enforce collection of the excise tax with respect to sales of
gasoline from broken packages in quantities to suit purchasers,
notwithstanding such gasoline may have been brought into the state
in interstate commerce, and with respect to any and all gasoline
used by plaintiff at its distributing stations or elsewhere in the
state in the operation of its automobile tank wagons or otherwise,
and without prejudice to the right of the state, through appellants
or other officers, to require plaintiff to render detailed
statements of all gasoline received, sold, or used by it, whether,
in interstate commerce or not, to the end that the state may the
more readily enforce said excise tax to the extent that it has
lawful power to enforce it as above stated.
Decree reversed, and the cause remanded for further
proceedings in conformity with this opinion.