1. The Georgia laws (Civil Code § 1800-1814 as amended; Penal
Code §§ 639, 642) providing for inspection of oil and gasoline and
collection of inspection fees are to be construed as remaining
applicable to products stored within the state or sold in internal
commerce, even if invalid as applied to interstate commerce, in
view of the declaration to that effect in the Act of August 17,
1920 (Ga.Laws 1920, No. 800). P.
258 U. S.
473.
2. A statute bearing on the right to an injunction must be given
effect by an appellate court though enacted pending the appeal. P.
258 U. S.
474.
3. As applied to oil and gasoline in interstate commerce, state
inspection fees imposed without the consent of Congress and so
clearly exceeding the cost of inspection as to amount to a revenue
tariff, are unconstitutional. P.
258 U. S.
475.
4. Goods imported into one state from another, which have
reached their destination and are held in storage in the original
packages awaiting sale, are subject to nondiscriminatory state
taxation. P.
258 U. S.
475.
5. A tax levied in respect of goods of a particular kind is not
to be held a discrimination against interstate commerce merely
because goods of that kind are not produced locally, but are all
imported from other states. P.
258 U. S. 476.
Askren v. Continental Oil Co., 252 U.
S. 444.
6. Oil and gasoline imported from another state in tank cars not
used for indefinite storage or as distributing tanks for local
sales remain in interstate commerce, and not subject without the
owner's consent to local inspection fees amounting to taxation
until unloaded. P.
258 U. S.
477.
7. The Georgia laws,
supra, provide for inspection of
illuminating oil and gasoline and for inspection fees, yielding
revenue in excess of inspection cost, fixed at higher rates per
gallon for small quantities than for large, and imposed once only,
in connection with the
Page 258 U. S. 467
inspection,
viz., upon dealers at the time of first
domestic sale or during storage preliminary to such sale, and upon
persons who buy or bring in these products for their own local
consumption, the latter enjoying an exemption from paying more than
a specified total annually which does not apply to dealers.
Held that the charge, as applied to local transactions, is
an excise, and is
(a) Not arbitrary or unreasonable, in violation of the
Fourteenth Amendment. P.
258 U. S.
479.
(b) Nor contrary to Art. 7, § 2, par. 1, of the Georgia
Constitution, which requires uniform valuation of all property
subject to be taxed and that all taxation shall be uniform on the
same class of subjects and levied and collected under general laws.
P.
258 U. S.
480.
266 F. 577 affirmed.
Appeal from a decree of the district court refusing, in part, an
application for an interlocutory injunction in a suit brought by
the appellant to restrain the appellees, officials of Georgia, from
enforcing laws of that state imposing inspection fees in respect of
oil and gasoline brought in by the appellant from other states.
Page 258 U. S. 470
MR. JUSTICE PITNEY delivered the opinion of the Court.
This is a suit in equity by appellant, a corporation and citizen
of Texas, against appellees, both individually and as officers of
Georgia, to restrain enforcement of laws respecting fees for
inspection of petroleum and petroleum products, especially kerosene
oil and gasoline, so far as concerns products brought by plaintiff
from other states into Georgia and there disposed of.
The laws in question, as they stood when suit was commenced
(March, 1920), comprise provisions found in Georgia Civil Code
1910, §§ 1800-1814, which originally referred only to illuminating
oils; an amendatory Act of August 19, 1912 (Acts 1912, No. 570, p.
149), which extended the inspection system to gasoline; an
amendatory Act of August 19, 1913 (Acts 1913, No. 258, p. 110), and
certain sections of the Penal Code, 1910. They provide for official
state inspection of petroleum and petroleum products; prescribe
tests relating to their fitness for use a flash test for
illuminating oils, a specific gravity test for gasoline, and
establish inspection fees dependent upon the quantity inspected,
but at a higher rate per gallon in small quantities than in large;
the fees being fixed, however, upon a basis that has been found in
practice to yield revenues substantially in excess of the costs of
inspection. The officials in charge of enforcement of the system,
here made defendants, are the commissioner of agriculture, a
general inspector of oils, and numerous local inspectors, whose
duties are set forth in the cited Code sections and in the Act of
1912. Among other provisions for rendering the acts effective, §
639 of the Penal Code makes it a misdemeanor to sell or offer for
sale illuminating fluids in violation of the pertinent provisions
of the Civil Code, and § 642, to sell or keep for sale, or in
storage, crude or refined petroleum, naphtha, kerosene, etc.,
without having the same inspected and approved by an authorized
inspector.
Page 258 U. S. 471
The federal jurisdiction was invoked both because of diverse
citizenship and because the suit arose under the Constitution of
the United States. Upon the merits, questions of state law were and
are raised, as they may be (
Greene v. Louisville &
Interurban R. Co., 244 U. S. 499,
244 U. S.
508), in addition to federal questions.
Enforcement of the inspection fees was and is resisted upon the
ground that they constitute an arbitrary and unreasonable exaction,
not sustainable as a fair exercise of the taxing power, but invalid
as violative of the guaranty of due process of law contained in the
state constitution, as well as that in the Fourteenth
Amendment.
A more specific objection is that the imposition of the fees is
in conflict with Art. 7, § 2, par. 1, of the state constitution,
which provides:
"All taxation shall be uniform upon the same class of subjects,
and
ad valorem on all property subject to be taxed within
the territorial limits of the authority levying the tax, and shall
be levied and collected under general laws."
But the contention most emphasized is rested upon the commerce
clause of the Constitution of the United States, the insistence
being that inspection fees exceeding the cost of inspection, as
imposed upon plaintiff's products, constitute a burden upon
interstate commerce. As to this, defendants denied that the laws in
question, by proper construction, applied, or as enforced by the
state officers were made to apply, to plaintiff's products while in
interstate commerce; they averred that inspections were not
required to be made, nor fees to be paid, until after the products
had arrived at destination in the state and were held in storage by
the consignee for the purposes of sale in the state.
Upon amended bill and answer, and affidavits pro and con, an
application for interlocutory injunction was heard before three
judges pursuant to § 266, Judicial Code, as amended March 4, 1913,
c. 160, 37 Stat. 1013, and resulted
Page 258 U. S. 472
in a decision June 28, 1920 (one judge dissenting), pursuant to
which an injunction
pendente lite was granted restraining
the collection of inspection fees in respect to kerosene oil,
gasoline, or other petroleum products of plaintiff brought into the
State of Georgia from other states and intended to be sold in the
original packages, and so sold; but injunction was refused, and
restraining orders theretofore granted were dissolved, as to
products brought in for indefinite storage within the state, or for
sale after breaking the original package, after completion of the
interstate transportation. 266 F. 577. An appeal was taken by
plaintiff direct to this Court, as authorized by § 266, Judicial
Code.
The controlling facts are not in dispute. Plaintiff carries on
in Georgia and extensive business in the distribution and sale of
illuminating oil and gasoline. Neither commodity is produced in
Georgia, and all plaintiff's supplies for that are brought from
points in other states, principally by rail in tank cars owned by
plaintiff, having a capacity of approximately 8,000 gallons each.
Plaintiff has 34 local agencies or distributing stations at
different points in the state at which are stationary storage tanks
for oil and gasoline respectively, pumps and other apparatus for
transferring the products from tank car to storage tank, and either
a railroad siding, or (in a few cases) a private track in proximity
to the storage tanks. Plaintiff also maintains wagons for the
delivery of oil and gasoline from the stationary tanks to its
customers. The principal part of its products comes to the
distributing stations consigned to plaintiff or its manager or
agent. As a rule, and as a part of plaintiff's own system, as soon
as one of the tank cars is started from the point of origin outside
the state, a request for inspection, together with a check for the
inspection fees, is forwarded by plaintiff to the local inspector
nearest the point of destination, notifying him that the shipment
is en route and requesting
Page 258 U. S. 473
him to give it immediate attention upon arrival. Upon its
arrival, the local agent notifies the inspector, who thereupon, in
compliance with the previous request, inspects the oil or gasoline
by taking a sample from the tank car, after which its contents are
conveyed to and into the storage tank, and then distributed and
sold to patrons, either directly from the tank or by means of the
delivery wagons. In some instances, involving substantial
quantities but only a small proportion of the whole -- less than
five percent -- plaintiff sells tank cars of gasoline and kerosene
direct to its customers in Georgia, making interstate shipment
direct to customer's address.
The majority of the judges held that the provisions for
inspection of petroleum products were a permissible exercise of the
state's police power; that, insofar as the fees yielded revenue in
excess of the cost of inspection, they were attributable to the
taxing power of the state, and not objectionable except as applied
to interstate commerce, as to which they were invalid; that they
were not in conflict with the uniformity clause of the state
constitution; that, so far as plaintiff's products were
indefinitely stored within the state, or sold there after breaking
bulk or original packages, they were subject not only to
inspection, but to the tax imposed, as soon as the interstate
transportation was ended, and that the state should be permitted to
enforce the inspection fees so soon as the products passed out of
interstate commerce, although restrained with respect to products
while in such commerce, citing
Ratterman v. Western Union Tel.
Co., 127 U. S. 411.
After the interlocutory decree and pending the appeal, evidently
in view of the controversy raised in this case, the General
Assembly passed an act, approved August 17, 1920 (Ga.Laws 1920, No.
800, p. 163), declaring that the laws relating to inspection and
tests, and prescribing the fees therefor and the duties of the
Commissioner of Agriculture
Page 258 U. S. 474
and general oil inspector and local inspectors, as set forth in
§§ 1800 to 1814, both inclusive, of the Civil Code, and in Act of
August 19, 1912, and the penalties provided in §§ 639 and 642 of
the Penal Code,
"shall never be held or construed to apply to oils and gasoline,
benzine, or naphtha, or other articles mentioned in said laws,
imported into this state in interstate commerce and intended to be
sold in the original and unbroken tank cars or other original
receptacles or packages, and so sold, while the same are in
interstate commerce."
In view of the provisions of this act, we need spend no time in
discussing whether the judges were right in following the rule of
practical separability in administration, applied by this Court to
a taxing law single on its face in
Ratterman v. Western Union
Tel. Co., 127 U. S. 411, a
case followed, since the decision below, in
Bowman v.
Continental Oil Co., 256 U. S. 642. Any
question whether the same or a different rule ought to be applied
to an inspection law employed for the purpose of revenue taxation,
based upon doubt as to the intent of the state legislature to
permit the system to remain in force with respect to products
stored within the state or sold in domestic commerce, when
determined to be unenforceable as to the like goods while in
interstate commerce, is set at rest by the new act, which, under
the circumstances, must be accepted as manifesting an intent that
the system shall remain in effect as to products that are subject
to the taxing power of the state, as clearly as it declares a
contrary purpose as to products still remaining in interstate
commerce. Although passed after the decree below, this act must be
given effect in deciding the appeal, since the case involves only
relief by injunction, and this operates wholly
in futuro.
Duplex Printing Press Co. v. Deering, 254 U.
S. 443,
254 U. S.
464.
That a state is within its governmental powers in requiring
inspection, including tests as to quality, as a
Page 258 U. S. 475
safeguard with respect to inflammable substances such as those
here involved, when found within its borders, or even when moving
in commerce from state to state (there being no legislation by
Congress upon the subject), is well settled.
Pure Oil Co. v.
Minnesota, 248 U. S. 158,
248 U. S. 162.
That with respect to such substances when they have passed out of
interstate commerce and have come to rest within the state and
become a part of the general mass of property or have become the
subject of domestic commerce, the state may impose inspection fees
substantially in excess of the cost of inspection, and thus make
them a source of general revenue, is also free from doubt, other
than any which may arise from its own Constitution. But a state may
not, without consent of Congress, impose this or any other kind of
taxation directly upon interstate commerce, and inspection fees
made to apply to such commerce, exceeding so clearly and obviously
the cost of inspection as to amount in effect to a revenue tariff,
are to the extent of the excess a burden upon the commerce
amounting to a regulation of it, and hence invalid because
inconsistent with the exclusive authority of Congress over that
subject.
Standard Oil Co. v. Graves, 249 U.
S. 389,
249 U. S.
394-395.
Plaintiff makes the broad contention that inspection charges
amounting in effect to taxation cannot be imposed even upon that
part of its product which has come to rest within the state, or is
disposed of in domestic trade, in view of the fact that all of it
has come from other states. But
American Steel & Wire Co.
v. Speed, 192 U. S. 500,
192 U. S. 520,
settles the principle that goods brought into a state, not from a
foreign country but from another state, having reached their
destination and being held in storage awaiting sale and
distribution, enjoying the protection which the laws of the state
afford, may without violation of the commerce clause be subjected
to nondiscriminatory state taxation, even though still
contained
Page 258 U. S. 476
in original packages. This decision is in line with the previous
cases of
Woodruff v.
Parham, 8 Wall. 123,
75 U. S. 140,
and
Brown v. Houston, 114 U. S. 622,
114 U. S.
632-634, and it was pointed out that their authority was
not overruled by
Leisy v. Hardin, 135 U.
S. 100, or other cases of like character.
Appellant insists that
Standard Oil Co. v. Graves,
249 U. S. 389, is
inconsistent with the imposition of inspection fees on a revenue
basis upon goods brought from another state, however held or
disposed of in Georgia. That decision, however, extended the
exemption from such fees of goods brought from state to state, no
further than "while the same are in the original receptacles or
containers in which they are brought into the state" (App.
249 U. S.
394-395), and so it was interpreted in
Askren v.
Continental Oil Co., 252 U. S. 444,
252 U. S.
449.
Brown v. Houston and
American Steel & Wire Co.
v. Speed, supra, sustain the power of a state to impose
property taxes upon goods brought from another state after they
have come to rest in the taxing state. But this carries equally the
power to tax, without discrimination, domestic sales made of
personal property similarly freed from interstate commerce, as is
illustrated in
Woodruff v.
Parham, 8 Wall. 123,
75 U. S. 140;
Wagner v. City of Covington, 251 U. S.
95,
251 U. S.
102-103, and cases there cited. The fact that no goods
of the like kind are produced within the taxing state, and that
necessarily all have come from other states, is not of itself
sufficient to show a discrimination against interstate commerce.
The precise point was dealt with in
Askren v. Continental Oil
Co., supra, in that part of the opinion which treated of the
excise tax imposed by New Mexico upon retail sales of gasoline,
respecting which the Court said (pp.
252 U. S.
449-450):
"A business of this sort, although the gasoline was brought into
the state in interstate commerce, is properly taxable by the laws
of the state. Much is made of the fact that New Mexico
Page 258 U. S. 477
does not produce gasoline, and all of it that is dealt in within
that state must be brought in from other states. But, so long as
there is no discrimination against the products of another state,
and none is shown from the mere fact that the gasoline is produced
in another state, the gasoline thus stored and dealt in is not
beyond the taxing power of the state."
The ruling was reiterated in the same case at its final state,
Bowman v. Continental Oil Co., 256 U.
S. 642.
Something should be said as to the inspection of plaintiff's
products, involving liability for fees, while the products yet
remain in the tank cars. A like question raised in
Pure Oil Co.
v. Minnesota, 248 U. S. 158,
248 U. S. 164,
concerning the oil inspection law of that state, was unnecessary
then to be decided, the Court having found the inspection fees
there imposed were not shown to be so largely in excess of the cost
of inspection as to amount to a tax inadmissible as applied to
subjects still in interstate commerce, and hence that they might be
imposed while the products remained in such commerce. In this case,
the fees concededly being a source of revenue, the question of so
adjusting their application as to avoid taxing interstate commerce
becomes important.
The practice, uniformly followed with plaintiff's consent,
indeed at its request and for its convenience, has been to inspect
the oil and gasoline arriving at its distributing stations while
remaining in the tank cars, with resulting immediate liability for
the fees, otherwise as to direct deliveries to its customers buying
in tank car lots. In the normal course of the business, as shown by
this record, the tank cars are not only the vehicles but the
original containers for interstate transportation, as well with
respect to products consigned to plaintiff's own stations as to
deliveries made direct to other interstate consignees. Ordinarily,
unless a loaded car be used for indefinite storage, or as a
distributing tank for local sales
Page 258 U. S. 478
(nothing of either kind appears in the case) it remains in
interstate commerce until unloaded, and the agents of the state may
not lawfully subject its contents to the inspection charges until
transferred to the storage tank, unless with plaintiff's consent.
Neither under a fair construction of the Act of 1920 nor (if that
permitted) under the Constitution of the United States may such
inspection, combined with taxation, be imposed as a condition of
admitting into the domestic market goods arriving at destination in
interstate commerce. The mere fact that a loaded tank car has been
halted upon a siding, or even upon a private track, for the purpose
of unloading at a station either of plaintiff or of any other
interstate consignee does not, under the course of business here
shown, amount to a "coming to rest within the state" authorizing
state taxation. And, although the state may tax the first domestic
sale of the products, or tax them upon their storage in stationary
tank awaiting sale, it may not, without consent of the owner,
impose its power upon the products while yet in the tank car, but
must resort to other means of collection, if need be.
The evidence strongly tends to show that it may be more
convenient to plaintiff that inspection before unloading of tank
cars, as heretofore practiced, be continued, and there is no legal
objection to this if done with plaintiff's free consent. Aside from
this, the authority of defendants to tax the products or their
storage or sale commences when they have come to rest, ordinarily
when transferred from the tank car to the storage tank and added to
plaintiff's stock in trade kept therein for local distribution and
sale.
We interpret the decree below as permitting no interference by
defendants with the right of plaintiff freely to carry on its
interstate commerce under the Constitution of the United States, as
that right is here stated.
Page 258 U. S. 479
That matter being out of the way, plaintiff's objections to the
inspection and taxing system as arbitrary and unreasonable, and not
a fair exercise of the taxing power, though magnified by confused
manner of statement, are easily disposed of. Considering not merely
the terms, but the practical operation and effect of the statutory
provisions, which is the proper method (
St. Louis S.W. Ry. v.
Arkansas, 235 U. S. 350,
235 U. S.
362), we have here a combined inspection and revenue law
applicable to petroleum products not materially differing in main
features (aside from the revenue derived from the fees) from those
adopted by other states, and doubtless chosen for facility and
economy in operation and equitable apportionment of the burdens
according to the benefits. It has a two-fold object: first, that
these inflammable substances be not stored or distributed among the
people of Georgia without such assurance of quality and fitness as
the prescribed inspection and tests may afford; secondly, that
charges sufficient to defray the cost, with something additional
for the general treasury, be imposed in a way to operate as an
indirect tax upon the ultimate consumers of the products,
approximately in proportion to the amounts consumed. That it
combines regulation with revenue raising is not a valid objection
from the standpoint of the Fourteenth Amendment.
Gundling v.
Chicago, 177 U. S. 183,
177 U. S. 189.
The tax, to describe it according to its essential nature, is an
excise upon domestic sale or storage, designed to affect the use of
the products, a tax imposed at the time of inspection, the
inspector acting also as tax gatherer, inspection and tax payment
required but once, and that, ordinarily, from the dealer at the
time of the first domestic sale, or during storage preliminary to
such sale. The self-interest of the dealer and the customs of trade
are relied upon to add the tax to the price of the product, and
thus pass it on to the
Page 258 U. S. 480
ultimate consumer -- a method appropriate in indirect taxation,
and certainly a not unreasonable mode of distributing the burden
among those who share in the benefits.
That the legislature intended the effect of the tax to fall upon
the ultimate consumer is evident not only from the obviously
inevitable result of requiring its payment, ordinarily, by the
first domestic seller, but from the specific provisions of the
amendatory Act of 1913, that the 1912 Act
"shall apply not only to gasolines, benzines, and naphthas sold
or offered for sale in the State of Georgia, but likewise to all
such commodities that may be sold elsewhere and brought into the
State of Georgia, for consumption or use. Where such commodities or
any of them may be purchased within the state, or without the
state, and brought into the state, by any person, firm or
corporation not for the purpose of selling or offering the same for
sale, but for the purpose of use or consumption by the purchaser in
manufacturing or other lawful uses, either as fuel or otherwise,
the inspections herein prescribed shall be made, and the fees above
fixed shall be paid therefor, except that no such purchaser shall
be required to pay more than twelve hundred dollars per year for
the inspection of all such commodities used or consumed by him as
aforesaid, and such payments may, in the discretion of the
Commissioner of Agriculture, be divided into equal monthly payments
of one hundred dollars each."
No case is shown for the application of this act; the judges
below found no occasion to pass upon it, plaintiff's products not
being brought in for its own consumption. In this Court, there has
been no discussion as to its proper construction, plaintiff's
counsel insisting merely that it shows the inspection fees are not
imposed as a privilege tax for the conduct of any particular kind
of business.
Page 258 U. S. 481
Apparently it was intended to cover the case of large consumers
who otherwise might find it advantageous to bring in, and store
until needed, quantities of oil or gasoline sufficient for their
own consumption, thus escaping dealer's profit and inspection tax
as well. We find in its provisions nothing to raise a question
about the validity of the system.
We are unable to see in Article 7, § 2, paragraph 1, of the
state constitution anything to prevent the application of these
statutes to plaintiff's business. The requirement of uniform
valuation upon all property subject to be taxed manifestly refers
to property taxes imposed by reason of ownership, which this is
not. The clauses requiring that all taxation shall be uniform upon
the same class of subjects, and levied and collected under general
laws, are not violated by the tax in question. Classification is in
terms permitted, and a law based on reasonable classification must
be deemed a general law in the sense of the Constitution.
The decisions of the Supreme Court of Georgia hold that, while
property taxes must be strictly on an
ad valorem basis --
without variance even as between real and personal property
(
Verdery v. Village of Summerville, 82 Ga. 138;
Mayor
v. Weed, 84 Ga. 683, 687) -- other subjects of taxation may be
resorted to, and the taxes adjusted according to reasonable methods
of classification.
Atlanta National Assn. v. Stewart, 109
Ga. 80, 87. Thus, inheritance taxes, being not a tax upon property
but an excise upon the privilege of transfer upon death of an
owner, were held valid, although not
ad valorem, in
Farkas v. Smith, 147 Ga. 503, 512.
The peculiar qualities of illuminating oils and gasoline seem to
us a sufficient warrant for putting them in a class by themselves
for excise taxation upon their sale or use. So we held, in
Bowman v. Continental Oil Co., supra, with respect to an
excise upon the sale or use of gasoline, under
Page 258 U. S. 482
a provision of the Constitution of New Mexico not differing
materially.
While some of the Georgia decisions indicate a rather strict
view of the uniformity required (
Johnson v. Mayor, etc., of
Macon, 62 Ga. 645;
Beckett v. Mayor, etc., of
Savannah, 118 Ga. 58), we have found none going so far as it
would be necessary to go in order to overthrow the inspection tax
now in question. That it is imposed, as a rule, only upon the
dealer who makes the first domestic sale, not upon those who may
make subsequent sales, is consistent with the nature of the tax and
the purpose to distribute its burden among those who ultimately
consume the product. To impose a like tax each time the commodity
changed hands in retail trade might place so heavy a burden upon
those purchasing other than at first hand as to render it
impossible for the retailer to compete and thus seriously obstruct
general distribution. The graduation of the inspection charges
according to the quantity that may be inspected at one time -- 1/2
cent per gallon in lots of 400 gallons and upwards, 1 cent in
quantities between 200 and 400 gallons, 1 1/2 cents in quantities
less than 200 gallons -- speaks for itself, and plainly is
sustainable on the ground that the travel, care, and responsibility
of the inspector may be greater than uniform fees per gallon would
compensate in the case of the smaller lots. The only other
diversity we have noticed in the operation of the tax is that which
may arise out of the Act of 1913, entitling a purchaser who buys
not for resale but for his own use or consumption to a limitation
of inspection fees to $1,200 per annum. No point is made of this,
but a rather obvious ground of classification suggests itself, in
that the purchaser for his own use of consumption has no
opportunity to make a profit out of resale, as plaintiff and other
dealers who pay the full inspection fees may do.
Page 258 U. S. 483
Finally, our attention is called to an act, approved August 10,
1921 (Acts 1921, No. 173, p. 83) providing for an occupation tax
upon all distributors selling gasoline and other motor fuels in the
state, requiring them to register and make returns, and "(except
those importing and selling it in the original packages in which it
is brought into the state)" to pay an occupation tax based upon the
quantities sold. It is conceded that this does not repeal or affect
the inspection laws, and no argument in rested upon it except in
support of contentions already disposed of.
The decree of the district court must be and it is
Affirmed.