Ott, Commissioner of Public Finance v. Mississippi Barge Line Co.

Background

A group of out-of-state corporations that run barges and tugboats up and down the Mississippi and Ohio Rivers brought cargo into New Orleans and other Louisiana ports. Louisiana and the City of New Orleans imposed ad valorem taxes on those vessels based on the ratio of miles run inside the State to total miles run elsewhere. The companies paid the taxes under protest and sued, arguing the taxes violated the Fourteenth Amendment’s Due Process protection and the Commerce Clause because the vessels had no tax situs in Louisiana.

Reasoning

The Court focused on whether states can fairly tax parts of an interstate transportation business that operate within their borders. It said inland-water vessels are not treated differently from other interstate carriers for tax purposes. The Court approved applying a mileage-based apportionment formula (like the Pullman approach used for railroad rolling stock) to allocate the tax burden. It found such a nondiscriminatory, fairly apportioned tax ties to benefits and protections the State provides and avoids multiple taxation. The decision was confined to inland waters and did not decide taxation for ocean-going ships.

Real world impact

The ruling reverses the lower courts and allows Louisiana’s assessment method to stand in principle, subject to proper administrative or judicial correction of any assessment errors. River carriers that visit a State only briefly can still be taxed there if the tax is apportioned reasonably. The opinion notes questions about how to measure average presence during a year but leaves administrative remedies in the State to address specific assessment mistakes.