American Oil Co. v. Neill

Background

An out-of-state fuel seller, a Delaware corporation that bid from Salt Lake City, contracted to sell large quantities of gasoline to a federal agency for use in Idaho. The contract called for delivery f.o.b. Salt Lake City; the fuel was shipped by common carriers selected and paid by the federal agency to Idaho Falls. Idaho required a dealer permit and charged a six-cent-per-gallon excise tax on motor fuel “received” in the State; the State treated the gasoline as constructively “received” by the licensed dealer when the fuel was unloaded in Idaho. The seller paid taxes under protest and sued for a refund in state court.

Reasoning

The central question was whether Idaho could constitutionally tax a sale that was made and delivered outside the State but later imported into Idaho by a federal agency. The Court accepted the lower courts’ finding that the tax’s legal incidence fell on the dealer, but held that due process requires a real link between the State and the taxed transaction. The Court found the sale and delivery occurred entirely outside Idaho, with no in-state activities contributing to the contract; the dealer’s Idaho permit and its knowledge that the gasoline would be imported were not enough to create the required connection. The Court therefore concluded the tax violated the Due Process Clause and reversed the Idaho Supreme Court.

Real world impact

The ruling limits a State’s power to tax out-of-state sales that are dissociated from the seller’s local business. It affects licensed dealers who sell and deliver goods outside a State but whose goods are later brought in by buyers, and it leaves unresolved separate Commerce or federal-preemption questions because the Court decided the case on due process grounds.

Dissents or concurrances

Justice Black is noted as dissenting, but the Court’s opinion speaks for the majority and reverses the state-court decision.