Hooven & Allison Co. v. Evatt

1945-04-23

Headline: Ohio tax on imported hemp and fibers blocked as Court reverses state ruling, holding materials stored in original packages for manufacture are immune from state ad valorem tax, including goods from the Philippines.

Holding: The Court held that the manufacturer was the importer and that hemp and fibers brought from abroad and the Philippine Islands, while stored in their original packages awaiting manufacture, are immune from state ad valorem taxation.

Real World Impact:

Prevents states from taxing imported raw materials held in original packages awaiting manufacture.
Includes goods shipped from the Philippine Islands as constitutionally protected imports.
Limits state revenue from taxing manufacturers’ imported inventory.

Topics: state taxation, imported raw materials, manufacturing supply, Philippine imports

Summary

Background

A tax official in Ohio assessed ad valorem taxes on bales of hemp and other fibers that a rope manufacturer had imported and stored in the original packages at its Xenia, Ohio, factory in 1938–1940. The state Board of Tax Appeals and the Ohio Supreme Court upheld the tax, reasoning the company had purchased the goods after arrival and that storage before use made the goods part of taxable state property.

Reasoning

The U.S. Supreme Court considered three plain questions: who caused the goods to be imported, whether goods kept in original packages and held for manufacture remain imports, and whether goods shipped from the Philippine Islands count as imports. The Court found the manufacturer’s contracts and longstanding business practice made it the importer in substance. It held that imports kept in their original packages by the importer and awaiting the use for which they were brought retain constitutional immunity from state taxation. The Court also explained that goods from the Philippine Islands qualify as imports for this rule because the Islands, though under U.S. authority, are not part of the United States in the constitutional sense that governs the import clause.

Real world impact

The Court reversed the Ohio decision and protected the taxed fibers from state ad valorem tax. The ruling prevents states from taxing imported raw materials held in original packages pending manufacture and treats Philippine shipments as constitutionally protected imports. This decision limits a state’s ability to collect tax on inventories of imported materials owned and stored by manufacturers.

Dissents or concurrances

Several Justices disagreed in part. A dissent argued imports held for use should lose immunity and be taxable; another Justice dissented about treating the Philippines as outside the constitutional "country." A concurrence agreed the Philippines’ goods are imports but joined the view that storage-for-use might forfeit immunity.