Gregg Dyeing Company v. Query City of Greenville/Opinion of the Court
By these actions, within the original jurisdiction of the Supreme Court of South Carolina, appellants sought to restrain the enforcement of the state statute known as the 'Gasoline Tax Act of 1930' (Acts So. Car., 1930, p. 1390). The statute was assailed upon state and federal grounds, the latter being that the act violated the commerce clause (article 1, § 8, par. 3), and the equal protection clause of the Fourteenth Amendment of the Federal Constitution. The state court overruled these contentions and dismissed the complaints. The cases are brought here by appeal.

The provisions of the statute which give rise to the federal questions are found in sections 1 and 6 as follows:

'Section 1. * * * Every person, firm, corporation,      municipality, * * * in the State of South Carolina which      shall import into this State from any other State or foreign      Country, or shall receive by any means into this State, and      keep in storage in this State for a period of twenty-four      hours or more, after the same shall have lost its interstate      character as a shipment in interstate commerce, any gasoline      or any other like products of petroleum or under whatever      name designated, which is intended to be stored or used for      consumption in this State, shall pay a license tax of six      cents per gallon for every gallon of gasoline, or other like      products of petroleum aforementioned, which shall have been      shipped or imported into this State from any other State or      foreign country, and which shall hereafter, for a period of      twenty-four hours after it loses its interstate character as      a shipment of interstate commerce be kept in storage in this      State to be used and consumed in this State by any person,      firm, or corporation, municipality, * * * and which has not      already been subjected to the payment of the license taxes      imposed upon the sale thereof by acts of the General Assembly      of the State of South Carolina, the same being Act No. 34,      Acts of 1925, approved the 23rd day of March, 1925, and Act      No. 102, Acts of 1929, approved the 16th day of March, 1929,      imposing license taxes for the privilege of dealing in      gasoline or other like products or petroleum: Provided, That      this Act shall not impose a tax upon crude petroleum,      residium or smudge oil: Provided, further, That one per cent.      to cover loss by evaporation, spillage or otherwise shall be      deducted by the taxpayer when remitting the tax required by      this Act. * * * '§ 6. Nothing within this Act shall be construed to impose a      license tax upon any selling agent, consumer, or retailer,      selling, consigning, shipping, distributing or using      gasoline, combinations thereof, or substitutes therefor,      which may have been bought from any oil company on which the      license taxes imposed by Act No. 34, Acts of the General      Assembly of 1925, approved the 23rd of March, 1925, and Act      No. 102, Acts of the General Assembly of 1929, approved the      16th day of March, 1929, have been paid nor shall this Act be      construed as applying in the case of interstate commerce.'

In the case of Gregg Dyeing Company (No. 170), the facts alleged in the complaint were admitted by demurrer, and other facts were stipulated as if the complaint had set them forth. It thus appeared that plaintiff conducted a bleachery in Aiken, S.C.., and used gasoline in its processes; that its practice is to buy gasoline in bulk from dealers outside the state of South Carolina and to have the gasoline shipped in interstate commerce to plaintiff's plant where the gasoline is unloaded and stored, and kept in storage, in plaintiff's tanks, for more than twenty-four hours and until it is needed for use, and in its entirety is used by plaintiff in its manufacturing business and for its own purposes, and is not brought into the state for resale and is not resold; that there is in Charleston, S.C.., a refinery maintained by the Standard Oil Company at which large quantities of gasoline are produced; that much of the gasoline thus produced, and much that is brought into the state by oil companies for resale, is stored within the state for more than twenty-four hours before it is sold or used, and is not taxed for its importation and/or storage in South Carolina, but is taxed when it is used or sold in that state by such oil companies; and that such gasoline, produced in the refinery above mentioned, as is shipped to other states is not taxed in South Carolina. Final judgment was rendered in favor of defendants upon the demurrer. 164 S. E. 588.

In the case brought by the City of Greenville (No. 245), plaintiff alleged that it was a municipal corporation which had brought into the state of South Carolina gasoline in tank car lots, purchased outside the state, and thereafter had stored, and used and consumed it for public purposes. Defendants demurred, there was an agreed statement of facts in addition to the allegations of the complaint, and the judgment upon the demurrer thus raised the same federal questions as those presented in the case first mentioned.

In maintaining rights asserted under the Federal Constitution, the decision of this Court is not dependent upon the form of a taxing scheme, or upon the characterization of it by the state court. We regard the substance rather than the form, and the controlling test is found in the operation and effect of the statute as applied and enforced by the state. St. Louis Southwestern Railway Co. v. Arkansas, 235 U.S. 350, 362, 35 S.C.t. 99, 59 L. Ed. 265; Hanover Fire Insurance Co. v. Harding, 272 U.S. 494, 509, 510, 47 S.C.t. 179, 71 L. Ed. 372, 49 A. L. R. 713. The operation and effect of this tax act has been determined definitely by the state court in the instant cases. Construing the act, that court has said:

'The Act in question may be said to be complementary to the      other statutes of South Carolina under which are assessed a      gallonage tax on gasoline and other petroleum products.      Indeed, it expressly excludes from its provisions all      gasoline upon which a like tax has been paid under other      statutes. It so declares in its title and specifically      designates in its body the statutes, payment of the tax under      which exempts from its burden. * * *

'In South Carolina, commencing about a decade ago, the      General Assembly expressed its public policy as to revenue to      be derived from the use of gasoline, vol. 32, Stat. at Large,      p. 835. The tax then imposed was two cents a gallon. In 1925, the tax was increased to five cents,      and in 1929, to six cents on the gallon. These statutes,      however, only reached 'dealers' in this commodity.

'Statutes of this nature have been uniformly construed as      imposing a tax on the ultimate consumer or user, as will be      hereafter shown. Realizing that large users of gasoline      either were evading or would evade the payment of the tax      imposed under these Acts, by bringing in gasoline in      quantities from without the State, and storing it for their      own purposes, the Legislature in 1930 enacted the statute      under consideration, applying the six cents tax to every      person, firm, corporation, municipality or any subdivision      subject to its terms. * * * Thus, with the Act of 1930      complementing the other statutes referred to, all consumers      of gasoline in South Carolina pay a tax of 6 cents per      gallon, no matter what the origin of, or State in which, the      gasoline is produced. * * *

'On its face, the Act expressly negatives an intention to tax      interstate commerce. It does not purpose to tax any gasoline      until twenty-four hours after it has lost its interstate      character. It seeks to operate only after the commodity has      been severed from its interstate character and has become at      rest as a part of the general mass of property in this State      subject to the protection of its laws. * * *

'The tax here imposed is an excise tax and not a property      tax. * * * All oil companies in South Carolina, including the      Standard Oil Company in Charleston, S.C.., are required to      pay and do pay the tax upon any gasoline they sell and all      that they use in South Carolina, whether it be for operating      their trucks upon the highways or otherwise (34 Stat. at      Large, p. 197). * * *

'The tax applies only to persons who store with intent to use      and consume the gasoline in South Carolina. * * * Mere      storage after manufacture or production is not enough to provoke the application of the tax. The only kind      of storage affected is that with intent to use and consume      the product in South Carolina. Such intention on its part      petitioner admits to exist in the instant case, and in all      future transactions. The fact that the Standard Oil Company      at Charleston, S.C.. manufactures and produces large      quantities of gasoline which is stored at its refinery and      which is untaxed before its sale or use in South Carolina,      does not, to our mind, work a discrimination against      petitioner or producers in other States. It is admitted that      that company, like all others, is required to pay and does      pay a tax of six cents on all of its products sold in South      Carolina or used and consumed in its business.'

We may lay aside, as not here involved, any question relating to importations from foreign countries. As to interstate commerce, the questions are (1) whether the act as applied by the state court imposes a direct burden upon that commerce, and (2) whether, although the subject of the tax would otherwise be within the power of the state, the tax is invalid because it creates an unconstitutional discrimination against transactions in interstate commerce.

As to the first question, we are not concerned with what the tax is called, but with what the statute does. It imposes an exaction with respect to gasoline purchased in other states and brought into South Carolina and there placed by appellants, in storage for future use within the State. By the terms of the act, as construed by the state court and applied to these appellants, interstate commerce in relation to the subject of the tax has ended. The gasoline has come to rest within the state, having been placed in appellants' storage tanks and added to appellants' property kept for local purposes. In such circumstances the state has the authority 'to tax the products or their storage or sale.' Texas Co. v. Brown, 258 U.S. 466, 478, 42 S.C.t. 375, 379, 66 L. Ed. 721; Sonneborn Bros. v. Cureton, 262 U.S. 506. 519, 520, 43 S.C.t. 643, 67 L. Ed. 1095; Hart Refineries v. Harmon, 278 U.S. 499, 501, 502, 49 S.C.t. 188, 189, 73 L. Ed. 475. Not only may local sales of gasoline thus brought into the state be taxed, but its use as well. This was specifically determined in Bowman v. Continental Oil Co., 256 U.S. 642, 648, 649, 41 S.C.t. 606, 65 L. Ed. 1139. See Hart Refineries v. Harmon, supra; Breece Lumber Co. v. Asplund, 283 U.S. 788, 51 S.C.t. 352, 75 L. Ed. 1415. There is an exception in the case of a tax directly on use in interstate commerce, as on use in interstate transportation. Helson v. Kentucky, 279 U.S. 245, 252, 49 S.C.t. 279, 73 L. Ed. 683; Eastern Air Transport v. South Carolina Tax Commission, 285 U.S. 147, 52 S.C.t. 340, 76 L. Ed. -, decided March 14, 1932. In view of these well-established principles, we find no ground for concluding that the state could not impose the tax with respect to the gasoline of appellants which was kept within the state for use in their local enterprises. As the Court said, in Hart Refineries v. Harmon, supra, interstate transportation having ended, the taxing power of the state in respect of the commodity may, so far as the commerce clause of the Federal Constitution is concerned, 'be exerted in any way which the state's Constitution and laws permit.' This, of course, is on the assumption that the tax does not discriminate against the commodity because of its origin in another state.

The state court answered the contention as to discrimination against interstate commerce by referring to other statutes of the state imposing a tax upon the sale and use of gasoline within the state. The state court said that the act in question 'taxes all gasoline stored for use and consumption upon which a like tax has not been paid under other statutes. By the kindred Acts all users are taxed.' But appellants question the right to invoke other statutes to support the validity of the act assailed. To stand the test of constitutionality, they say, the act must be constitutional 'within its four corners,' that is, considered by itself. This argument is without merit. The question of constitutional validity is not to be determined by artificial standards. What is required is that state action, whether through one agency or another, or through one enactment or more than one, shall be consistent with the restrictions of the Federal Constitution. There is no demand in that Constitution that the state shall put its requirements in any one statute. It may distribute them as it sees fit, if the result, taken in its totality, is within the state's constitutional power. Where the Supreme Court of the state has held that two or more statutes must be taken together, we accept that conclusion as if written into the statutes themselves. Hebert v. Louisiana, 272 U.S. 312, 317, 47 S.C.t. 103, 71 L. Ed. 270, 48 A. L. R. 1102. See Lindsley v. Natural Carbonic Gas Co., 220 U.S. 61, 73, 31 S.C.t. 337, 55 L. Ed. 369, Ann. Cas. 1912C, 160.

Reading together the statutes with respect to gasoline taxes, the state court took the view that, as to the gasoline tax with respect to sales within the state, the burden actually rests upon the consumer, although not placed upon the consumer directly. No reason is found to challenge this view. Texas Co. v. Brown, supra, 258 U.S. at page 479, 42 S.C.t. 375, 66 L. Ed. 721; Panhandle Oil Co. v. State of Mississippi ex rel. Knox, 277 U.S. 218, 222, 48 S.C.t. 451, 72 L. Ed. 857, 56 A. L. R. 583; Indian Motocycle Co. v. United States, 283 U.S. 578, 579, 51 S.C.t. 601, 75 L. Ed. 1277. So far as dealers in gasoline within the state are concerned, there appears to be no ground for appellants' claim of discrimination. The point with respect to appellants is that they are not dealers, but users, consumers of gasoline in their business. They are required to pay the tax with respect to the gasoline they keep for such use and consumption within the state. As to such gasoline, they pay precisely the same amount per gallon as other consumers within the state are in effect required to pay through the tax on the dealers from whom such consumers buy. Discrimination is asserted in relation to manufacturers who produce gasoline within the state and consume it in their enterprises. Appellants have directed particular attention to the case of a refining company which produces gasoline in South Carolina and consumes gasoline in its business and also sells it within the state. The state court, construing the applicable statute, has held that in such a case the producing company is taxed with respect to the gasoline it uses as well as with respect to the gasoline it sells. The decision is unequivocal that 'all oil companies in South Carolina are required to pay and do pay the tax upon any gasoline they sell and all that they use in South Carolina.' With respect, then, to the gasoline used by appellants in their business, there is in this aspect no discrimination against them because their gasoline has its origin in another state, as others either buying or producing gasoline within the state pay the tax at the same rate in relation to their consumption.

Discrimination, like interstate commerce itself, is a practical conception. We must deal in this matter, as in others, with substantial distinctions and real injuries. Shaffer v. Carter, 252 U.S. 37, 55, 40 S.C.t. 221, 64 L. Ed. 445. Appellants' attack upon the tax comes to this, in the last analysis, that the tax in their case is laid with respect to the gasoline they have bought outside the state and keep in storage for use and consumption in their business, whereas others are taxed, not with respect to the gasoline they keep in store for use and consumption, but for the gasoline they use and consume. But appellants have admitted, as the state court has said, that 'the only kind of storage affected' is that for the purpose of use and consumption. In this view the state court found no distinction of substance with respect to the practical operation of the taxing statutes in pari materia, as all in like case, appellants and others who use gasoline in their business enterprises, pay the same amount on the gasoline they consume. Appellants had the burden of showing an injurious discrimination against them because they bought their gasoline outside the state. This burden they have not sustained. They have failed to show that, whatever distinction there existed in form, there was any substantial discrimination in fact.

The same considerations, with respect to discrimination, apply to the claim that the statute in question violates the equal protection clause of the Fourteenth Amendment. The statement of this Court in General American Tank Car Corporation v. Day, 270 U.S. 367, 373, 46 S.C.t. 234, 236, 70 L. Ed. 635, is apposite: 'In determining whether there is a denial of equal protection of the laws by such taxation, we must look to the fairness and reasonableness of its purposes and practical operation, rather than to minute differences between its application in practice and the application of the taxing statute or statutes to which it is complementary.'

The right of the city of Greenville (No. 245) to raise the questions presented under the Federal Constitution does not appear to have been challenged or passed upon by the state court and has not been discussed at this bar. Accordingly, that question has not been considered here.

Judgments affirmed. 

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