Kosydar v. National Cash Register Co.
Headline: Court limits export tax immunity, reverses Ohio decision and allows states to tax goods stored awaiting shipment until the actual export movement begins, affecting companies with foreign-bound inventory.
Holding: The Court held that the Constitution’s ban on state duties does not protect goods merely stored for export; the exemption applies only once the items have begun actual movement into the export stream.
- Allows states to tax goods stored for export until actual export movement begins.
- Businesses with foreign orders may owe state property taxes during storage.
- Prevents companies from using mere intent or certainty to avoid state taxes.
Summary
Background
A large Ohio manufacturer of cash registers and data machines shipped some machines abroad. Its international division built machines to foreign specifications, packed them in crates, and stored them in a Dayton warehouse awaiting shipment. The Ohio Tax Commissioner assessed an ad valorem personal property tax on those crated machines on December 31, 1967. The company argued the stored machines were exports and immune from state tax under the Constitution’s Import-Export Clause. State tax boards and courts reached conflicting results before the case reached the Supreme Court.
Reasoning
The central question was whether goods must actually begin their movement toward a foreign port before the Constitution bars state taxation. The Court relied on earlier decisions saying the tax exemption “attaches to the export and not to the article before its exportation.” It reviewed cases where delivery to a carrier or placement on a ship started the export stream, and cases holding that mere plans, contracts, or long delays do not. Here, the crated machines were kept in Dayton, title and possession remained with the company, no payment or export license had issued, and no shipment had begun. The Court therefore held the machines were not yet in the export stream and were subject to the Ohio tax.
Real world impact
The ruling means states may collect property taxes on goods kept in domestic warehouses until those goods actually start on their journey abroad. Businesses that build, crate, and store items for foreign customers cannot rely solely on intent or special design to avoid state tax. The decision follows long-standing rules and keeps the rule that physical movement into the export stream, not just plans or certainty, triggers constitutional protection.
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