Texas Co. v. Brown

Background

A Texas oil company that distributes kerosene and gasoline in Georgia sued state officials to stop enforcement of Georgia laws requiring official inspection and fees for petroleum products. The company ships most supplies in its own tank cars into Georgia, stores product at local stations, and sometimes requests inspection while the tank cars are still on site. Georgia statutes set inspection tests and fees that often produce revenue in excess of inspection costs, and state penal provisions make selling uninspected fuel a misdemeanor. A three-judge federal court granted a temporary injunction for goods sold in original packages while in interstate commerce; Georgia then passed a law excluding such interstate sales from inspection requirements.

Reasoning

The central question was whether Georgia can impose inspection fees that act like a tax on goods still in interstate commerce. The Court held that a State may require inspection and collect fees as a valid regulatory and revenue measure once goods have come to rest in the State or are sold in domestic commerce. But the State cannot, without the owner's consent, impose inspection fees that amount to a revenue tax on products while they remain in interstate tank cars before transfer to local storage. The Court gave effect to Georgia’s 1920 statute clarifying that original tank-car sales in interstate commerce are not subject to the inspection system, and affirmed the district court’s decree.

Real world impact

Distributors who bring petroleum into Georgia in tank cars are protected from state inspection fees that act like taxes while the shipments remain in interstate transit, unless they consent to inspection. Georgia may inspect and charge fees once the product is unloaded into storage or sold domestically, and may continue using inspection fees as a revenue source consistent with the State constitution and non-discrimination rules.