McCarroll v. Dixie Greyhound Lines, Inc.

1940-03-11

Headline: Court affirms injunction blocking Arkansas from taxing gasoline carried in interstate buses for use in other states, limiting states’ ability to collect highway taxes on fuel reserves carried across state lines.

Holding: The Court held that Arkansas cannot tax gasoline carried in buses’ fuel tanks for use in other states because the levy does not fairly measure intrastate highway use, and it affirmed the lower court’s injunction forbidding enforcement.

Real World Impact:

Prevents states from taxing fuel reserves carried for use outside the state.
Protects interstate carriers from taxes not tied to actual intrastate highway use.
Allows states to tax gasoline actually consumed within their borders.

Topics: interstate commerce, state fuel taxes, highway user fees, bus and truck regulation

Summary

Background

A Delaware bus company runs interstate routes from Memphis through Arkansas to St. Louis. Arkansas law forbids entry of vehicles carrying more than twenty gallons of gasoline unless a state tax of six and one-half cents per gallon is paid. The buses normally start with about seventy-seven gallons, of which only about sixteen gallons are used while in Arkansas. The company sued for an injunction; the federal district court denied relief, the Court of Appeals reversed and enjoined enforcement, and the Supreme Court affirmed that injunction.

Reasoning

The key question was whether Arkansas may tax gasoline placed in a vehicle’s tank for use outside the State as a way to charge for highway use. The Court said a State may exact reasonable compensation for use of its roads, but this tax—measured only by fuel in the tank above twenty gallons—does not fairly or consistently relate to the bus’s actual use of Arkansas highways. The measure could produce large untaxed use or, conversely, charge reserves that mainly serve travel in other States, so it cannot be sustained as a fair highway user charge.

Real world impact

Interstate bus and truck operators are protected from this form of state taxation on fuel reserves carried for extrastate use. States remain free to tax gasoline actually consumed within their borders or to use other vehicle measures (weight, mileage) to raise highway funds. The ruling applies to the statute as enforced in this concrete situation.

Dissents or concurrances

A concurrence emphasized the lack of any demonstrable relationship between the tax and intrastate use. A dissent argued the tax has a presumption of validity, funds highway work, and that combined route calculations might show no net unfairness; dissenters urged legislative or congressional resolution.