Standard Oil Co. of Cal. v. California

Background

A Delaware fuel company that qualified to do business in California sold and delivered 420 gallons of gasoline to the Army post exchange inside the Presidio of San Francisco. California’s law imposed a license tax of three cents per gallon on fuel “sold and delivered” in the State. The State demanded payment for that sale; the company refused and sued. The trial court ruled for the company, but the California Supreme Court held the sale was taxable because it occurred within the state’s geographic boundaries.

Reasoning

The central question was whether California could tax a sale completed inside a military reservation where the United States has exclusive legislative authority. The Court explained that by an 1897 act California ceded exclusive jurisdiction over the Presidio to the United States and that the area has been a federal military reservation since the mid-1800s. Relying on recent cases about ceded military reservations, the Court concluded the State surrendered the power to legislate there and therefore could not impose its distributor license tax on transactions begun and finished within the Presidio. The Court reversed the state supreme court’s decision and ordered further proceedings consistent with this ruling.

Real world impact

The ruling prevents California from collecting the per-gallon license tax on fuel sales that take place entirely within the Presidio where the United States has exclusive control. Companies that sell or deliver goods inside such ceded military reservations are not subject to the State’s taxing power for those transactions. The case will return to the lower court for additional steps that must follow the Supreme Court’s decision.