Empresa Siderurgica, S. A. v. County of Merced

Background

A Colombian company bought a complete cement plant in Merced County, California, for export to South America. The buyer obtained an export license, deposited a letter of credit, took title and possession, and a carrier was hired to dismantle and pack the plant. On the tax assessment date, March 5, 1945, 12% of the plant had already left the county and was exempted from tax; the county taxed the remaining 88% (10% crated for shipment, 34% dismantled but not crated, and 44% still assembled). The buyer paid the tax under protest and sued to recover it.

Reasoning

The Court applied the longstanding rule that property remains taxable until it has been shipped, entered with a common carrier, or otherwise started on a continuous route to another country — in short, until it has entered the "export stream." The Court said mere intent to export, contractual plans, or partial dismantling do not suffice. Because large portions had not been delivered to a carrier or placed on their export journey by the tax date, those parts could be taxed. The Supreme Court therefore affirmed the state court's decision allowing the tax on the items not yet in the export stream.

Real world impact

This decision makes clear that exporters must actually place goods into the export stream by a tax date to avoid state property taxes. Local tax authorities may assess taxes on exported items that remain in the State and have not been delivered to a carrier or begun their continuous shipment.

Dissents or concurrances

Justice Frankfurter dissented, arguing the record left uncertain whether the plant was an indivisible "organic" whole and that the case should be sent back for more factual finding before deciding the constitutional issue.