Standard Oil Co. v. Peck, Tax Commissioner et al., 72 S. Ct. 309 (1952) Held: The ad valorem taxes levied by various states must be fairly apportioned to the commerce carried on within the taxing state. The rule permitting taxation of personal property used in interstate operations by two or more states on an apportionment basis precludes taxation on full value of all such property by the state of domicile

Baker, Sam W.

English

Cleveland-Marshall College of Law

Cleveland State UniversityEngagedScholarship@CSUCleveland State Law Review Law Journals1952Modification of Domiciliary State's Power to TaxVessels Engaged in Interstate CommerceSam W. BakerFollow this and additional works at: https://engagedscholarship.csuohio.edu/clevstlrevPart of the Tax Law CommonsHow does access to this work benefit you? Let us know!This Article is brought to you for free and open access by the Law Journals at EngagedScholarship@CSU. It has been accepted for inclusion inCleveland State Law Review by an authorized editor of EngagedScholarship@CSU. For more information, please contact library.es@csuohio.edu.Recommended CitationSam W. Baker, Modification of Domiciliary State's Power to Tax Vessels Engaged in Interstate Commerce, 1 Clev.-Marshall L. Rev. 85(1952)RECENT DECISIONMODIFICATION OF DOMICILIARY STATE'S POWER TOTAX VESSELS ENGAGED IN INTERSTATE COMMERCE.A corporation domiciled in Ohio operated vessels to transportoil on the Ohio and Mississippi Rivers. Cincinnati was registeredas home port of the vessels, which operated from terminals inTennessee, Kentucky, Indiana and Louisiana. Oil was neitherpicked up nor discharged in Ohio, but the vessels made occasionalstops in Cincinnati for fuel or repairs. Maximum mileage traveledon any cargo-carrying trip through waters bordering Ohio was17 miles. Acting under §§ 5325 and 5328 of the Ohio GeneralCode, the Tax Commissioner of Ohio levied an ad valorem per-sonal property tax on all of the corporation's barges and boats.On appeal by the oil company, which contended that its vesselswere taxable only to the extent of use in Ohio, the Board of TaxAppeals affirmed and the Supreme Court of Ohio sustained theCommissioner's action.'The oil company appealed to the United States Supreme Courton the ground that the tax violated the due process clause of theFourteenth Amendment. Held: The ad valorem taxes levied byvarious states must be fairly apportioned to the commerce car-ried on within the taxing state. The rule permitting taxation ofpersonal property used in interstate operations by two or morestates on an apportionment basis precludes taxation on full valueof all such property by the state of domicile. 2 Ohio, in effect,could tax the vessels only to the extent of their use within thejurisdiction of the state.In reversing the Ohio court's decision, the United States Su-preme Court relied on its decision in Ott v. Mississippi BargeLine,3 which held that vessels moving in interstate operationswere taxable by the same standards first applied to railroad carsin interstate commerce. That standard was to apportion the taxfairly to the commerce carried on within the state.4 In the Ottcase, however, the domiciliary state had not sought to tax the full'Standard Oil Co. v. Glander, Tax Commissioner et al., 155 Ohio St. 61,98 N. E. 2d 8 (1951).'Standard Oil Co. v. Peck, Tax Commissioner et al., 72 S. Ct. 309 (1952).'336 U. S. 169 (1949).'Pullman's Palace Car Co. v. Pennsylvania, 141 U. S. 18 (1890).1Published by EngagedScholarship@CSU, 1952CLEVELAND-MARSHALL LAW REVIEWvalue of the vessels; its taxing statute only covered an averageportion of property within the state throughout the taxing year.A state taxing statute that discriminates against interstatecommerce is invalid.5 Interstate commerce cannot be subjectedto a double tax to which intrastate commerce is not exposed.This type of tax is forbidden by the commerce clause of theFederal Constitution.Domicile of the owner has always been the situs of vesselsengaged in interstate commerce.6 That domicile is the situs ofthe vessels for taxation purposes. 7 This rule was qualified inAyer & Lord Tie Co. v. Kentucky,s which held that where avessel engaged in interstate commerce has acquired an actualsitus in a state other than the place of domicile of the owner, itmay be taxed in the state of actual situs because it is within thejurisdiction of its taxing authority. Landing of a ship within theports of a state does not in itself confer jurisdiction on that stateto tax the ship.9Prior to the decision in the principal case, courts held thatthe domiciliary state's power to levy an ad valorem tax on allthe vessels of the domiciled corporation was not defeated by amere possibility that some other state might attempt to levy anapportioned tax on the vessels.' 0 It was necessary to show thatthe property taxed was continuously without the state duringthe whole tax year, or that a defined part of the domiciliary cor-pus had acquired a taxing situs elsewhere.11A tax levied by the state of Minnesota on full value of air-planes owned by an airline, including those used in interstatecommerce, was upheld because there was no showing that a de-fined part of the domiciliary corpus had acquired a taxing situselsewhere.12 In this instance, Mr. Justice Frankfurter pointedout that, if property having no locality other than the state of itsowner's domicile is not subject to taxation there, such floatingproperty would be free from taxation everywhere. Neither the' Adams Mfg. Co. v. Storen, 304 U. S. 307 (1938).'Transportation Co. v. Wheeling, 99 U. S. 273 (1878).'Southern Pacific Co. v. Kentucky, 222 U. S. 63 (1911).'202 U. S. 409 (1906).'Hays v. Pacific Mail S. S. Co., 17 How. 596 (U. S. 1855).Southern Pacific Co. v. Kentucky, supra, note 7.New York ex rel. New York C. & H. R. R. R. v. Miller, 202 U. S. 584(1906).Northwest Airlines v. Minnesota, 322 U. S. 292 (1944).2https://engagedscholarship.csuohio.edu/clevstlrev/vol1/iss1/12RECENT DECISION 87commerce clause nor the Fourteenth Amendment affords suchconstitutional immunity.The principal case modifies the general rule that actual taxingsitus of a defined part of the domiciliary corpus in another statemust be shown. Now, mere absence of the property from thestate of domicile, creating a possibility of taxation elsewhere, issufficient to defeat the domiciliary state's power to levy an advalorem tax on full value of the property.SAm W. BAKER3Published by EngagedScholarship@CSU, 19524https://engagedscholarship.csuohio.edu/clevstlrev/vol1/iss1/12

Modification of Domiciliary State\u27s Power to Tax Vessels Engaged in Interstate Commerce

EngagedScholarship @ Cleveland State University

Cleveland State University
EngagedScholarship@CSU
Cleveland State Law Review Law Journals
1952
Modification of Domiciliary State's Power to Tax
Vessels Engaged in Interstate Commerce
Sam W. Baker
Follow this and additional works at: https://engagedscholarship.csuohio.edu/clevstlrev
Part of the Tax Law Commons
How does access to this work benefit you? Let us know!
This Article is brought to you for free and open access by the Law Journals at EngagedScholarship@CSU. It has been accepted for inclusion in
Cleveland State Law Review by an authorized editor of EngagedScholarship@CSU. For more information, please contact library.es@csuohio.edu.
Recommended Citation
Sam W. Baker, Modification of Domiciliary State's Power to Tax Vessels Engaged in Interstate Commerce, 1 Clev.-Marshall L. Rev. 85
(1952)
RECENT DECISION
MODIFICATION OF DOMICILIARY STATE'S POWER TO
TAX VESSELS ENGAGED IN INTERSTATE COMMERCE.
A corporation domiciled in Ohio operated vessels to transport
oil on the Ohio and Mississippi Rivers. Cincinnati was registered
as home port of the vessels, which operated from terminals in
Tennessee, Kentucky, Indiana and Louisiana. Oil was neither
picked up nor discharged in Ohio, but the vessels made occasional
stops in Cincinnati for fuel or repairs. Maximum mileage traveled
on any cargo-carrying trip through waters bordering Ohio was
17 miles. Acting under §§ 5325 and 5328 of the Ohio General
Code, the Tax Commissioner of Ohio levied an ad valorem per-
sonal property tax on all of the corporation's barges and boats.
On appeal by the oil company, which contended that its vessels
were taxable only to the extent of use in Ohio, the Board of Tax
Appeals affirmed and the Supreme Court of Ohio sustained the
Commissioner's action.'
The oil company appealed to the United States Supreme Court
on the ground that the tax violated the due process clause of the
Fourteenth Amendment. Held: The ad valorem taxes levied by
various states must be fairly apportioned to the commerce car-
ried on within the taxing state. The rule permitting taxation of
personal property used in interstate operations by two or more
states on an apportionment basis precludes taxation on full value
of all such property by the state of domicile. 2 Ohio, in effect,
could tax the vessels only to the extent of their use within the
jurisdiction of the state.
In reversing the Ohio court's decision, the United States Su-
preme Court relied on its decision in Ott v. Mississippi Barge
Line,3 which held that vessels moving in interstate operations
were taxable by the same standards first applied to railroad cars
in interstate commerce. That standard was to apportion the tax
fairly to the commerce carried on within the state.4 In the Ott
case, however, the domiciliary state had not sought to tax the full
'Standard Oil Co. v. Glander, Tax Commissioner et al., 155 Ohio St. 61,
98 N. E. 2d 8 (1951).
'Standard Oil Co. v. Peck, Tax Commissioner et al., 72 S. Ct. 309 (1952).
'336 U. S. 169 (1949).
'Pullman's Palace Car Co. v. Pennsylvania, 141 U. S. 18 (1890).
1Published by EngagedScholarship@CSU, 1952
CLEVELAND-MARSHALL LAW REVIEW
value of the vessels; its taxing statute only covered an average
portion of property within the state throughout the taxing year.
A state taxing statute that discriminates against interstate
commerce is invalid.5 Interstate commerce cannot be subjected
to a double tax to which intrastate commerce is not exposed.
This type of tax is forbidden by the commerce clause of the
Federal Constitution.
Domicile of the owner has always been the situs of vessels
engaged in interstate commerce.6 That domicile is the situs of
the vessels for taxation purposes. 7 This rule was qualified in
Ayer & Lord Tie Co. v. Kentucky,s which held that where a
vessel engaged in interstate commerce has acquired an actual
situs in a state other than the place of domicile of the owner, it
may be taxed in the state of actual situs because it is within the
jurisdiction of its taxing authority. Landing of a ship within the
ports of a state does not in itself confer jurisdiction on that state
to tax the ship.9
Prior to the decision in the principal case, courts held that
the domiciliary state's power to levy an ad valorem tax on all
the vessels of the domiciled corporation was not defeated by a
mere possibility that some other state might attempt to levy an
apportioned tax on the vessels.' 0 It was necessary to show that
the property taxed was continuously without the state during
the whole tax year, or that a defined part of the domiciliary cor-
pus had acquired a taxing situs elsewhere.11
A tax levied by the state of Minnesota on full value of air-
planes owned by an airline, including those used in interstate
commerce, was upheld because there was no showing that a de-
fined part of the domiciliary corpus had acquired a taxing situs
elsewhere.12 In this instance, Mr. Justice Frankfurter pointed
out that, if property having no locality other than the state of its
owner's domicile is not subject to taxation there, such floating
property would be free from taxation everywhere. Neither the
' Adams Mfg. Co. v. Storen, 304 U. S. 307 (1938).
'Transportation Co. v. Wheeling, 99 U. S. 273 (1878).
'Southern Pacific Co. v. Kentucky, 222 U. S. 63 (1911).
'202 U. S. 409 (1906).
'Hays v. Pacific Mail S. S. Co., 17 How. 596 (U. S. 1855).
Southern Pacific Co. v. Kentucky, supra, note 7.
New York ex rel. New York C. & H. R. R. R. v. Miller, 202 U. S. 584(1906).
Northwest Airlines v. Minnesota, 322 U. S. 292 (1944).
2https://engagedscholarship.csuohio.edu/clevstlrev/vol1/iss1/12
RECENT DECISION 87
commerce clause nor the Fourteenth Amendment affords such
constitutional immunity.
The principal case modifies the general rule that actual taxing
situs of a defined part of the domiciliary corpus in another state
must be shown. Now, mere absence of the property from the
state of domicile, creating a possibility of taxation elsewhere, is
sufficient to defeat the domiciliary state's power to levy an ad
valorem tax on full value of the property.
SAm W. BAKER
3Published by EngagedScholarship@CSU, 1952
4https://engagedscholarship.csuohio.edu/clevstlrev/vol1/iss1/12


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Modification of Domiciliary State\u27s Power to Tax Vessels Engaged in Interstate Commerce

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