A state law applicable to interstate and intrastate commerce
which imposes fees for the inspection of petroleum products in
excess of the legitimate cost of inspection imposes a tax, and is
void if not so far separable that the excess may properly be
assigned to intrastate commerce alone. P. 261 U. S.
277 F. 463 affirmed.
Appeal from an interlocutory decree of the district court
restraining the collection of fees for inspection of petroleum
MR. JUSTICE McKENNA delivered the opinion of the Court.
The Cleveland Company is a dealer in petroleum products, and
brought this suit to restrain the execution of an act passed by the
General Assembly of Ohio May 19,
Page 261 U. S. 450
1915, entitled "An act to provide for the inspect on of
petroleum, illuminating oils, gasoline, and naphtha, and to repeal
§§ 844 to 868, inclusive, of the General Code." Ohio Laws, vol.
105, p. 309.
The case presented by the bill is as follows: the company is
engaged in business in East Cleveland, and has the necessary
instrumentalities for carrying on its business (the bill enumerates
them). It buys its products in other states, ships them into Ohio,
and receives at its place of business large quantities of them. It
has contracts for them which it is bound to consummate, and which
it cannot perform without great loss except through its established
By the terms of the statute, oil intended for sale for
illuminating purposes must be inspected in Ohio, and it designates
the fees to be paid to the state inspector or his deputy, which are
payable on demand and are made a lien upon the articles inspected,
and there are provisions which safeguard the quality of the
The quantities of petroleum products are increased year by year,
and the revenue derived by the state will increase over and above
the revenue derived in past years if the enforcement of the act is
permitted to continue, and the act is repugnant to Article I, § 10,
clause 2, of the Constitution of the United States forbidding
states from laying imposts without the consent of Congress upon
interstate commerce, except such as may be absolutely necessary for
the execution of inspection laws.
The act violates § 8, Article I, giving to Congress the power to
regulate commerce, and also violates certain provisions of the
Constitution of Ohio.
The district court decided that "the act, except as to the
amount of fees charged for inspection" was,
"in its essential details and even in nearly all of the language
employed, a reenactment of the law declared unconstitutional in
Castle v. Mason,
91 Ohio St. 296."
Page 261 U. S. 451
on the latter case, the court said it found the earlier act did
not differ materially from the law pronounced void in Foote v.
Maryland, 232 U. S. 494
that also held to be void in Red "C" Oil Manufacturing Co. v.
Board of Agriculture, 222 U. S. 380
"The General Assembly, with at least constructive knowledge
that, under the operations of the law, the excess of receipts over
expenses was large and annually mounting, permitted the inspection
charges to remain undisturbed, and in this respect its conduct has
the conduct "of the Minnesota legislature with reference to the
act considered in Pure Oil Co. v. Minnesota, 248 U.
The conclusion of the court was upon further consideration of
the facts pertinent to the purpose and quality of the act, that it
was an interference with interstate commerce. The court said:
"The fees prescribed by the statute are beyond the cost of
legitimate inspection to determine the quality of the articles
inspected, and the act is therefore not only a police measure, but
a revenue measure also. Such cost, by necessary operation, unduly
burdens and obstructs the freedom of interstate commerce, and, as
such commerce cannot be separated from the intrastate shipments,
the whole tax is void."
The court was of opinion that the other questions discussed by
counsel were not necessary to consider.
Phipps, as an individual, was dismissed from the case, except as
director of the department of commerce. Against him as such, a
temporary injunction was ordered issue.
Appellant contests the conclusion of the court and condenses his
assignments of error to the following propositions:
"1. The state's cost of interstate inspection is greater than
the fees charged therefor. 2. In practical administration, the
comparative cost of interstate inspection is ascertainable as
distinguished from the cost of intrastate inspection. "
Page 261 U. S. 452
It is admitted that these conclusions depend upon an estimate of
the evidence, and the district court adjudged against them. The
court found that the fees collected from July 1, 1915, to June 30,
1920, amounted to $639,057.47, the disbursements to $321, 188.68.
The court further found that: "The collections, when least, were 63
percent greater than the inspection costs," and had
"so advanced from year to year that the fees provided by the
statute must be held to be unreasonable and disproportionate to the
service rendered, and the act must be declared unconstitutional, as
imposing a direct burden upon interstate commerce, unless
interstate shipments under the provisions of the act are separable
from intrastate shipments and the fees collected for the inspection
of the former are equal or substantially equal to the cost of
inspecting shipments of that character. The defendant's
[appellant's] position is that the two classes of shipments are
thus separable, and the interstate shipments have in fact been
inspected at a loss to the state."
The position was held untenable by the court upon considerations
and reasoning which we need not reproduce. It is enough to say we
approve of them. It is contended by appellant that whatever defects
may exist on the face of the act may be and will be corrected in
its administration, and whatever excess there may be in the fees
collected will not be assigned to interstate commerce. There is
quite a minute and detailed argument to show how this can be done.
The district court upon consideration in connection with the
evidence, rejected it, and we affirm its judgment.