Askren v. Continental Oil Co.

Background

Three companies that buy gasoline in other states and ship it into New Mexico sued to stop a 1919 New Mexico law that imposed a $50 annual license for distributors, a $5 license for retail dealers, and a 2¢ per gallon excise tax. The law also created inspectors with power to examine business records and directed revenue toward road construction. The companies said the law unfairly taxed their business when they sold imported gasoline in the same packages it arrived in. A federal district court temporarily blocked enforcement, and the case reached this Court on appeal.

Reasoning

The central question was whether New Mexico could treat sales of gasoline brought in from other states and sold in their original containers as a taxable privilege. The Court said that when distributors import gasoline and sell it in the original tank cars or unopened packages, the State cannot impose a license or privilege tax that puts a direct burden on goods brought from other states. The Court relied on earlier decisions to reach that conclusion. At the same time, the Court noted that ordinary retail sales made in smaller quantities after the gasoline is stored in the State may be lawful subjects of state taxation. The question of whether the law can be split to tax only the retail part was left for later.

Real world impact

For now, companies that import and sell gasoline in original packages are protected from this license tax, while local retail sales remain taxable. The ruling is preliminary; the final outcome on how much of the law survives will be decided at the full hearing.