Bingaman v. Golden Eagle Western Lines, Inc.

Background

A Delaware corporation that runs buses across state lines, including New Mexico, sued New Mexico’s tax officials. The company does no within-state business in New Mexico and buys gasoline in other states to store on its buses for interstate trips. New Mexico passed a 1933 law charging five cents per gallon as an excise tax on the sale and use of gasoline and requiring distributors to hold a $25 annual license. The law defined “distributor” to include companies that bring fuel into the state for use. A 1931 law offered refunds for certain purchase taxes but not for taxes on the use of fuel. The bus company asked a federal court to block enforcement of the tax and license as an unlawful regulation of interstate commerce.

Reasoning

The main question was whether the statute charged the company for using New Mexico’s roads or instead imposed an excise tax on fuel used in interstate transportation. The Court followed New Mexico’s highest court decisions interpreting earlier, similar laws. Those decisions treated the levy as a general excise on the use of gasoline, not a fee for road use, and held that a use tax on fuel bought out of state was incompatible with interstate commerce rules. Applying that reasoning, the Supreme Court found the license fee and excise, as applied to the purely interstate carrier, to be a direct burden on interstate commerce and therefore invalid. The Court affirmed the lower court’s injunction.

Real world impact

Interstate bus companies that buy and carry fuel from other states are protected from this kind of state tax and licensing charge when they use that fuel only for interstate trips. States cannot treat out-of-state fuel used exclusively in interstate transportation as a taxable “use” without running afoul of the constitutional limit on state interference with interstate trade. The 1931 refund law for purchase taxes did not change this result.