Ozark Pipe Line Corp. v. Monier

Background

A Maryland corporation owns and runs a crude-oil pipe line from Oklahoma through Missouri to Illinois and delivers the oil in Illinois; no oil is received or delivered in Missouri. The company keeps its main office in Missouri, operates three pumping stations there, maintains telephones and telegraphs, owns vehicles, pays employees, and buys supplies in the State. Missouri issued a license letting the company operate “exclusively in the business of transporting crude petroleum by pipe line,” and sought to collect an annual franchise tax under Rev. Stats. Mo. §§ 9836–9848 (one-tenth of one percent of the par value of capital stock and surplus apportioned to in-state assets).

Reasoning

The key question was whether Missouri could impose that franchise tax when the company’s Missouri activities were claimed to be part of interstate commerce. The Court found the pipe line’s operation was interstate commerce and that the company’s Missouri office, pumping stations, equipment, and other in-state activities were means of carrying that interstate commerce. Applying prior decisions, the Court held that taxing these instrumentalities would burden interstate commerce and therefore that applying the Missouri statute to this company violated the Constitution’s protection for interstate commerce. The Supreme Court reversed the lower court’s dismissal and declared the statute unconstitutional as applied.

Real world impact

The ruling prevents Missouri from collecting this franchise tax from the company given the record facts, protecting companies whose in-state property and activities are tied solely to moving goods across state lines from similar state taxation. The decision leaves open that different facts might allow taxation.

Dissents or concurrances

Justice Brandeis dissented, arguing the tax targets the corporate franchise, is minimal, nondiscriminatory, and should be valid despite the company’s interstate activities.