1. Section 3 of the Organic Act of Puerto Rico, as amended by
the Act of March 4, 1927, authorizing the insular legislature to
levy internal revenue taxes as soon as the articles to be taxes are
manufactured, sold, used, or "brought into the Island," gives the
consent of Congress to a nondiscriminatory sales tax so far as it
is laid on the delivery, in consummation of sales, of fuel oil
imported in bond and withdrawn, duty free (pursuant to the Tariff
Act of 1930 and the Revenue Act of 1932), for delivery to vessels
in Puerto Rican ports for use as fuel upon their voyages to ports
of the United States or foreign countries.
McGoldrick v. Gulf
Oil Corp., 309 U. S. 414,
distinguished. P.
311 U. S.
25.
2. Considering the relationship of general Congressional
legislation to legislation specifically applicable to the
territories and insular possessions, repeals by implication are not
to be favored, and will not be adjudged unless the legislative
intention to repeal is clear. P.
311 U. S.
29.
108 F.2d 144 affirmed.
This was a suit brought by the Oil Company against Bonet,
Treasurer of Puerto Rico (for whom Domenech, successor in the
office, has been substituted) praying for a determination of the
validity of the taxes in question. A declaratory judgment rendered
by a District Court of Puerto Rico against the tax was reversed by
a judgment of the Supreme Court of the Territory, 54 P.R.Dec. 732,
which was, in turn, affirmed by the court below.
Page 311 U. S. 24
MR. JUSTICE STONE delivered the opinion of the Court.
The question is whether a Puerto Rico sales tax imposed by §§
16(a), 62 of the Internal Revenue Act of Puerto Rico, (as amended
by Act No. 17 of June 3, 1927, Laws of 1927, Special Session, pp.
458-486), is invalid because as applied it infringes Congressional
regulations of foreign and domestic commerce effected by the tariff
laws and customs regulations of the United States. The tax is
challenged so far as it is laid on the delivery, in consummation of
sales, of fuel oil which has previously been imported in bond and
then withdrawn, duty free for delivery to vessels in Puerto Rican
ports for use as fuel upon their voyages to ports of the United
States or foreign countries. The Court of Appeals for the First
Circuit has affirmed the judgment of the Supreme Court of Puerto
Rico sustaining the tax, 54 P.R.Dec. 732 (Spanish edition).
West India Oil Co. v. Sancho, 108 F.2d 144. We granted
certiorari, 309 U.S. 652, because the question presented is of
importance in the administration of the customs laws of the United
States and of the revenue laws of Puerto Rico, and because of an
asserted conflict with our decision in
McGoldrick v. Gulf Oil
Corp., 309 U. S. 414.
Petitioner brings fuel oil from a foreign country, where it is
produced and refined, to Puerto Rico, where it is stored in bonded
warehouses in the joint custody of petitioner
Page 311 U. S. 25
and the customs officers of the United States, as provided by §
555 of the Tariff Act of 1930, 46 Stat. 743, 19 U.S.C. § 1555, and
applicable customs regulations. From time to time, petitioner
withdraws some of the oil from bond for disposition and use in
Puerto Rico. Petitioner also withdraws some of the oil, with which
we are now concerned, and delivers it to vessels in Puerto Rican
ports upon sales for use as ships' stores in the manner already
indicated. Upon such withdrawal and delivery, the import tax
imposed on fuel oil by § 601(a), (c)(4) of the Revenue Act of 1932,
47 Stat. 169, 259, 260, and required by § 601(b) to be "treated for
the purposes of all provisions of law relating to the customs
revenue as a duty imposed by (the Tariff Act of 1930)," is remitted
pursuant to § 309 of the Tariff Act of 1930, 46 Stat. 590, 690, and
§ 630 of the Act of 1932, added by the amendment of June 16, 1933,
48 Stat. 256.
Section 309 authorizes withdrawal from bonded warehouse, duty
free under treasury regulations, of articles of foreign manufacture
or production for use as ships' supplies, and §§ 601(b), 630 of the
Revenue Act of 1932 extend the benefit of those provisions to fuel
oil imported in bond and withdrawn and "sold for use as fuel . . .
on vessels . . . engaged in foreign trade or trade . . . between
the United States and any of its possessions."
See McGoldrick
v. Gulf Oil Corp., supra, 309 U. S. 423
et seq.
It is true, as petitioner urges, that, in
McGoldrick v. Gulf
Oil Corporation, supra, we held that the provisions of the
Tariff Act of 1930 and of the Revenue Act of 1932, and the customs
regulations relating to bonded manufacturing warehouses, when
applied to crude oil imported into New York and there manufactured
into fuel oil in bonded warehouses and withdrawn duty free for sale
as ships' stores, manifested an intention of Congress to regulate
the foreign commerce involved, in the interest of and for the
protection of American manufacturers, and that a
Page 311 U. S. 26
state tax on the sale was invalid because in conflict with such
regulation. We do not stop to consider whether, as respondent
insists, a different result should be reached here because the
imported oil was imported in its manufactured state and was not, as
in the
Gulf Oil case, earmarked for manufacture in bonded
warehouse and withdrawn after manufacture for sale as ships'
stores. We need not now determine whether, standing alone, the
statutory characterization of the oil sold as ships' supplies as
"exports" within the meaning of the customs laws, § 309(b) Tariff
Act of 1930; § 630 of the Revenue Act of 1932, does more than make
applicable to it the provisions of the Tariff Act of 1930 for
remission of customs duties upon merchandise imported in bond and
later exported. Nor is it necessary to examine the various
arguments advanced that the tax, without the consent of Congress,
is an infringement of its constitutional power over commerce. For
we think a sufficient answer to all the contentions of petitioner
is to be found in the Congressional consent to the tax given by the
March 4, 1927, amendment of § 3 of the Organic Act of Puerto Rico,
44 Stat. 1418.
Before the amendment, § 3 had prohibited duties "on exports from
Puerto Rico," but had provided that "taxes and assessments on
property, internal revenue" etc.,
"may be imposed for the purposes of the insular and municipal
governments respectively, as may be provided and defined by the
legislature of Puerto Rico. . . ."
Congress, by the amendment, added to § 3 a proviso
"that the internal revenue taxes levied by the Legislature of
Puerto Rico in pursuance of the authority granted by this Act on
articles, goods, wares or merchandise may be levied and collected
as such legislature may direct, on the articles subject to said
tax, as soon as the same are manufactured, sold, used, or brought
into the island:
Provided, That no discrimination be made
between the articles imported
Page 311 U. S. 27
from the United States or foreign countries and similar articles
produced or manufactured in Puerto Rico. The officials of the
Customs and Postal Services of the United States are hereby
directed to assist the appropriate officials of the Puerto Rican
government in the collection of these taxes."
The plain purport of the words of this proviso is that any tax
authorized by the Organic Act with respect to articles of domestic
production may likewise be levied with respect to imported articles
"as soon as [they] are manufactured, sold, used, or brought into
the island," provided only that there be no tax discrimination
between articles brought from the United States and foreign
countries and domestic articles. The amendment seems to have been
occasioned by doubts which had arisen whether merchandise brought
to the Island from the United States was subject to local taxation
while in the original package, and also whether the merchandise
has, while in the control of the customs authorities, the same
status as respects local taxation as goods similarly controlled
which have been imported from foreign countries and whether the
power of the insular legislature to tax imports from foreign
countries was any greater than that of the states which are
forbidden, by Clause 2, of § 10 of Art. I of the Constitution, to
tax imports and exports without the consent of Congress. S.Rep. No.
1011, 69th Cong., 1st Sess., p. 2.
Cf. Sonneborn Bros. v.
Cureton, 262 U. S. 506,
with Baldwin v. Seelig, 294 U. S. 511,
294 U. S. 526.
These questions were involved in Porto Rico Tax Appeals, 16 F.2d
545, decided January 7, 1927, shortly before the amendment of § 3
of the Organic Act. The judgments in that case were reversed and
the suits ordered dismissed by this Court for want of jurisdiction
October 24, 1927, after the amendment to the Organic Act of March
4, 1927, which deprived the federal courts of jurisdiction in the
pending and other like suits to restrain the assessment and
collection of Puerto Rico taxes.
Page 311 U. S. 28
Moreover, practical difficulties appear to have been experienced
in levying insular taxes upon goods on their arrival from the
United States and while in the custody or control of postal or
customs officers, due to the fact that the local tax, while, in its
practical effect, a customs duty, was not collected by postal or
customs officials. S.Rep. No. 1011, 69th Cong., 1st Sess. The
doubts and the difficulty were removed by the amendment to § 3,
giving the Congressional consent that articles should be subject to
the taxing jurisdiction of the Puerto Rico legislature as soon as
brought into the Island, whether from the United States or from
foreign countries, and directing that the United States customs
officials and postal service should aid local officers in the
collection of the tax. The effect of the broad language of the
amendment was not only to subject to taxation all imported goods,
whether from the United States or foreign countries, when brought
into the Island in the original package, but to neutralize the
regulatory effect of the customs laws and regulations insofar as
they protected articles from local taxation after their arrival.
Merchandise in the original package was thus subjected to tax when
brought into the Island without regard to customs regulations. It
would seem plain that other merchandise not in the original package
was left in no more favorable situation, and, in the face of the
broad and unambiguous language of the statute, we cannot say that
the one, more than the other, is immune from local taxation. Even
if the oil sold as ships' stores were to be regarded as "exported,"
cf. Swan & Finch Co. v. United States, 190 U.
S. 143,
190 U. S. 145;
United States v. Chavez, 228 U. S. 525;
Cunard S.S. Co. v. Mellon, 262 U.
S. 100, the tax is one clearly within the terms of the
proviso added to § 3, and so is one consented to by the United
States.
The procedure for segregating imported merchandise in bond
without payment of customs duties pending its
Page 311 U. S. 29
withdrawal and shipment out of the country is old, long
antedating the amendment of § 3 of the Organic Act.
See
McGoldrick v. Gulf Oil Corp., supra. The later Acts of 1930
and 1932 thus placed fuel oil, so far as Puerto Rico is concerned,
in the same category as other merchandise brought into the Island
in the original package or in bond, which, by virtue of the proviso
of § 3 of the Organic Act was made subject to local taxation as
soon as brought into the Island. The extension by Congress to fuel
oil of the benefits of the customs laws and regulations affecting
merchandise imported in bond did not imply that those laws and
regulations were to be given any different effect in Puerto Rico
than they then were permitted to have under § 3 of the Organic Act.
In any event, considering the relationship of general Congressional
legislation to legislation specifically applicable to our
territories and possessions, repeals by implication are not to be
favored, and will not be adjudged unless the legislative intention
to repeal is clear.
Posadas v. National City Bank,
296 U. S. 497,
296 U. S. 501
et seq.
Affirmed.
MR. JUSTICE REED, dissenting.
This judgment should be reversed on the authority of
McGoldrick v. Gulf Oil Corp., 309 U.
S. 414. That case has just established the superiority
of a federal statute for the protection of commerce over a state's
right to levy a sales tax. In it, we pointed out that it was
inconsistent with the plenary power of Congress over commerce to
permit local exactions to cut into the competitive advantages
provided through the remission of customs duties to suppliers and
exporters by the ship stores and fuel oil provisions of § 309 of
the Tariff Act of 1930 and § 601(b) and § 630 of the Revenue Act of
1932. Congress authorized these advantages to give our ship
chandlers
Page 311 U. S. 30
opportunity to compete for this trade on an even basis with
nonresidents. The
Gulf Oil case held that imported fuel
oil carried in New York bonded warehouses for export might be sold,
under Treasury oversight, to noncoastwise shipping without payment
of the city sales tax. The opinion demonstrated that the purpose of
Congress would be thwarted if local taxation were permitted to
interfere. The same holding, in my opinion, is required here.
Fuel oil imports into Puerto Rico are governed by the same
tariff provisions, regulations for bonded warehouses, and
deliveries in bond to purchasers for use in overseas voyages as are
those into the continental United States. The language of the
Butler Act is held by the Court to require different treatment in
New York or Puerto Rico of the same situation, despite the tax
inequality produced between the respective taxing units. One would
expect that Puerto Rico would have no more authority than a state
to levy a sales tax on bonded fuel oil, but this Court's ruling
permits it to tax where New York failed.
The authority is said to lie in the grant by Congress to Puerto
Rico of the right to tax "as soon as the same [articles subject to
tax] are manufactured, sold, used, or brought into the island." As
the fuel oil is brought into the Island, this Court's opinion
concludes, it is taxable. The report upon the Butler Act points out
the reason for its enactment.
* It was to enable
Puerto Rico to tax
Page 311 U. S. 31
in the original package. It should take more than a general tax
authorization to destroy the symmetry of the federal control over
imports bonded for export and to permit local taxation in Puerto
Rico of what is free from local taxation in New York. "Brought"
should be construed to mean when goods pass from the customs
control to private control, or the authority to tax of the Butler
Act should be held to be subject to the federal power of tax
exemption exercised generally in favor of fuel oil by § 309 of the
Tariff Act of 1930 and § 601(b) and § 630 of the Revenue Act of
1932. Since the right to tax imports in the original package,
granted Puerto Rico by the Butler Act, merely makes goods in the
original package in Puerto Rico taxable as other goods in the
common mass of taxable property, the Butler Act gives to Puerto
Rico no broader power to tax oil sales than was
Page 311 U. S. 32
possessed by New York, by virtue of its sovereign power, in the
Gulf Oil case.
McGoldrick v. Berwind-White Co.,
309 U. S. 33.
Nothing requires us to frustrate the legislative policy of free
competition in world markets.
The decree below should be reversed.
MR. JUSTICE ROBERTS joins in this opinion.
*
"In making use of the authority granted by section 3 to levy and
collect internal revenue taxes, the government of Porto Rico has
found itself unable to collect said taxes on articles purchased in
and sent from the United States to Porto Rico by mail, or sometimes
when said articles are sent by vessel, as the courts have held that
the post office or customs officials have no authority to withhold
[the] delivery of such articles subject to the internal revenue tax
until the tax is paid, as such tax collected in this manner is in
effect a customs duty. In other words, the courts have held that
the internal revenue tax cannot be collected while the article
subject to the tax is in the original package."
"This condition of affairs has practically nullified the power
of the insular government to levy internal revenue taxes, and
therefore the efficacy of this sort of revenue has been seriously
impaired."
"For the purpose of righting this situation, a new provision is
added to section 3, which states as follows:"
"
And it is further provided, That the internal revenue
taxes levied by the Legislature of Porto Rico in pursuance of the
authority granted by this act on articles, goods, wares, or
merchandise may be levied and collected as such legislature may
direct on the articles subject to said tax as soon as the same are
manufactured, sold, used, or brought into the island:
Provided, That no discrimination in rates be made between
the articles imported from the United States or foreign countries
and similar articles produced or manufactured in Porto Rico. The
officials of the Customs and Postal Services of the United States
are hereby directed to assist the appropriate officials of the
Porto Rican government in the collection of these taxes."
"It is expected that the government of Porto Rico will so make
use of this power as not to unnecessarily place any barriers in the
way of the free trade conditions now existing between [Porto Rico]
and the mainland, which is the principal factor in the progress and
prosperity of Porto Rico."
Senate Rep. No. 1011, 69th Cong., 1st Sess., p. 2.