Halliburton Oil Well Cementing Company v. Reily – Oral Argument – March 26, 1962

Media for Halliburton Oil Well Cementing Company v. Reily

Audio Transcription for Oral Reargument – December 03, 1962 in Halliburton Oil Well Cementing Company v. Reily
Audio Transcription for Oral Argument – March 27, 1962 in Halliburton Oil Well Cementing Company v. Reily

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Number 264, Halliburton Oil Cementing Company versus James S. Reily, Collector of Revenue, State of Louisiana.

Mr. Taylor.

Benjamin B. Taylor, Jr.:

Mr. Chief Justice, members of the Court.

This case presents an important point of constitutional law upon a brief statement of facts which had been stipulated.

This is a suit for refund of tax monies paid under protest to the State of Louisiana.

The case arises in the field of state taxation of interstate commerce and the governing principle of law under the Constitution of the United States is that the Constitution of the United States, the Interstate Commerce Clause forbids tax discrimination by the states for the forthright or ingenious.

That the Equal Protection of the law’s Clause, that the Due Process Clause forbids arbitrary tax discrimination by the states even where there is no element of interstate commerce.

The classification for tax purposes may not be probably arbitrary.

Now, the Louisiana Collector of Revenue, as we see it, takes the position that Louisiana may levy an excise tax upon the privilege of engaging in interstate commerce.

The Louisiana Supreme Court has upheld the Collector of Revenue and as we view that decision has held that Louisiana may discriminate against the multistate or interstate business that Louisiana may thus give a direct commercial advantage to local business.

Halliburton Oil Well Cementing Company of Duncan, Oklahoma, appellant taxpayer, has appealed from this decision of the Louisiana Supreme Court on the ground that it is repugnant to the Constitution of the United States and particularly to the Interstate Commerce Clause, the Equal Protection of the laws Clause and the Due Process Clause.

This Court has noted probable jurisdiction.

The tax in question is the Louisiana use tax which as a part of the Louisiana sales and use tax law.

The tax rate is 2%.

In the case of the sales tax, the intrastate tax, the rate is 2% of the sales tax — of the sales price to the purchaser.

In the case of the use tax, the rate is 2% of the cost price to the purchaser who imports the goods, that is the purchaser who has purchased the goods outside of the State of Louisiana and brought them into the state for his own use.

Halliburton’s complaint is not of the 2% tax rate which is the same in both taxes.

Halliburton’s complaint is of discrimination in the choice of tax basis to which the 2% rate is applied.

John M. Harlan II:

Does the use tax apply only to one who has purchased outside of Louisiana?

Benjamin B. Taylor, Jr.:

That is correct Your Honor, then brings it into the state —

John M. Harlan II:

And then brings it into the state —

Benjamin B. Taylor, Jr.:

— and uses it there.

John M. Harlan II:

And uses it there.

William O. Douglas:

That’s state comparable to the Hannaford.

Benjamin B. Taylor, Jr.:

Of the Henneford case — Henneford versus Silas Mason is the key case of which is cited, reported and relied upon by both sides.

Actually, that is the only case at issued here today.

Felix Frankfurter:

What are the terms of the statute defining the virtues upon whom a use tax could be levied?

Benjamin B. Taylor, Jr.:

The use tax sir —

Felix Frankfurter:

I’m talking about the statute, the terms of the statute.

Benjamin B. Taylor, Jr.:

If falls upon, “the first use –“

Audio Transcription for Oral Argument – March 27, 1962 in Halliburton Oil Well Cementing Company v. Reily

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Felix Frankfurter:

What?

Benjamin B. Taylor, Jr.:

“The first use within the statute” sir.

Felix Frankfurter:

First use of it.

Benjamin B. Taylor, Jr.:

That’s correct sir.

Felix Frankfurter:

Does that mean that if I travel from Texas — if I buy something in Texas, and by car, go into Louisiana, to Louisiana and then out of Louisiana, not a record under Louisiana and use something that I bought or opened the package that I bought in Texas just as a —

Benjamin B. Taylor, Jr.:

No sir.

Felix Frankfurter:

— fugitive passing there through?

Benjamin B. Taylor, Jr.:

No, that should — it would not go that far sir.

Felix Frankfurter:

Well, now what is the — what are the terms of the statute?

How do I know whether it goes that far enough?

Benjamin B. Taylor, Jr.:

Well, here’s what it says to Section 302.

Here is the sales tax —

William O. Douglas:

Where are you reading counsel?

Benjamin B. Taylor, Jr.:

This is from page 80 of the larger yellow brief where we have quoted the statute as a supplement at page 8.

Section 302, at the top of the (a) there right at the middle of the page, fixes the sales tax upon the sale.

Now Section 302 (a) (2) almost at the bottom of page 80 has this language.

Here’s the fixing of the tax.

At the rate of 2% of the cost price of each item or article of tangible personal property, when the same is not sold but used, consumed, distributed or stored for use or consumption in the state.

Felix Frankfurter:

Therefore the — the — it must be all — the use must be exhausted within the state, is that right?

There must be a used, consumed, distributed or stored to use or consumption in the state if I buy some food in Texas and then eat it in Louisiana, is there a use tax or not?

Benjamin B. Taylor, Jr.:

There would — that be solely sir because there’s exemption for food, but otherwise (Voice Overlap)

Felix Frankfurter:

(Inaudible)

Benjamin B. Taylor, Jr.:

That would be a use tax sir.

Felix Frankfurter:

I put them on — buying in Texas, I put them on in — to Louisiana — driving through Louisiana out of the state.

Benjamin B. Taylor, Jr.:

That’s correct sir.

Felix Frankfurter:

There would be.

Benjamin B. Taylor, Jr.:

There’s a using in the State of Louisiana.

The use tax, historically, the sales tax has preceded the use taxes and it was found that people would go outside the state for their major purchases, and so the use taxes were put in to cover that gap.

Felix Frankfurter:

Now suppose I buy that pair of shoes in Texas and there is a nice box and I keep it in the box — that would not be in it because it isn’t used, consumed, distributed or stored for use.

Benjamin B. Taylor, Jr.:

It would be stored for use sir.

Audio Transcription for Oral Argument – March 27, 1962 in Halliburton Oil Well Cementing Company v. Reily

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Felix Frankfurter:

It would be stored for use.

Benjamin B. Taylor, Jr.:

That’s correct sir.

Felix Frankfurter:

So that will be subject to the use tax.

Benjamin B. Taylor, Jr.:

That is correct.

Now we —

Felix Frankfurter:

And every — bringing into the State of Louisiana, anything from without, even for the most fugitive persons in the state is subject to the use tax?

Benjamin B. Taylor, Jr.:

That is correct sir.

Felix Frankfurter:

Alright, now I understand.

Benjamin B. Taylor, Jr.:

Now, as this Court may judicially notice, the sales and use taxes have become important taxes, 37 American states levy such taxes and they account for 20% of the combined total tax take of all states.

An important question of constitutional law is presented today, substantial tax monies are at stake and seven interstate taxpayers have filed the briefs, amicus curiae, on the jurisdictional statement, among them Humble Oil and Refining Company, Chicago Bridge and Iron, Sperry Rand and American Can.

Let us focus now upon the heart of this controversy.

The Louisiana sales tax, as distinguished from the use tax, falls only upon intrastate sales.

The use tax on the other hand, falls only upon the use within the state, of goods acquired outside the state and then imported into the state and used within the state.

So the sales tax is an intrastate tax and the use tax is an interstate tax, the interstate counterpart of the intrastate sales tax.

In the Silas Mason case to which reference has been made —

Felix Frankfurter:

Now, before you go into cases —

Benjamin B. Taylor, Jr.:

Yes sir.

Felix Frankfurter:

— I would be greatly helped if you’d tell us exactly what are the controlling — what are the real — the actual detailed facts in this case so I wouldn’t be considering a lot of abstract talk and decisions.

Benjamin B. Taylor, Jr.:

Halliburton Oil Well Cementing Company is manufacturer which uses its own wet product.

An economist would classify it as a manufacturer-user or producer-consumer.

Halliburton is not engaged in buying or selling the equipment here in question so as to give rise to the sales tax.

Halliburton’s operation is this, Halliburton manufactures complex truck-borne scientific equipment, specialized oil well servicing equipment for cementing, logging, testing, surveying and perforated center for oil wells.

This equipment is produced and fabricated in Halliburton’s own production shops in Duncan, Oklahoma.

We have found it helpful to visualize this equipment and photographs of this equipment appear in the transcript of record, opposite page 16.

Halliburton conducts a multi-state operation, interstate operation partially within Louisiana and partially outside Louisiana.

Felix Frankfurter:

Now, all of this — all of manufacturing is done in Oklahoma?

Benjamin B. Taylor, Jr.:

That’s correct sir.

It conducts its operations in three steps.

First, the manufacturing in its own shops in Duncan, Oklahoma of this complex equipment, the next step is a transportation of this equipment in the channels of interstate commerce on interstate highways across state lines and the importation of this equipment into Louisiana.

The third step is the using of this product in Louisiana on the contract for the purpose of servicing oil wells.

Audio Transcription for Oral Argument – March 27, 1962 in Halliburton Oil Well Cementing Company v. Reily

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Benjamin B. Taylor, Jr.:

Halliburton does not sell this equipment but uses it on the contract in Louisiana.

John M. Harlan II:

Mr. Taylor, does it bill this equipment from the ground up itself or does it purchase something?

Benjamin B. Taylor, Jr.:

It purchase certain major parts such as the chassis and major pieces of scientific equipment but it is of the — it is of the essence of this case sir, that approximately two-thirds of the cost of this — this finished equipment — two-thirds of it was in labor and shop overhead.

That you have focused upon the key point on the case that one-third of the finished cost price was materials which we call cost element (Voice Overlap)

William J. Brennan, Jr.:

The labor and shop overhead actually applied however in Oklahoma?

Benjamin B. Taylor, Jr.:

In Oklahoma sir.

William J. Brennan, Jr.:

In other words, what comes into Louisiana is this completed truck that we see here at page 16, is that it?

Benjamin B. Taylor, Jr.:

Yes sir.

William J. Brennan, Jr.:

But what you do is buy the components.

Benjamin B. Taylor, Jr.:

That’s correct.

William J. Brennan, Jr.:

And then you assemble them in Oklahoma.

Benjamin B. Taylor, Jr.:

That’s correct sir.

William J. Brennan, Jr.:

And the — in figuring your cost, you include not or you rather — you add to the cost of the tangible items, the labor and overhead that goes into the assembling —

Benjamin B. Taylor, Jr.:

Right.

Felix Frankfurter:

What you say is two-thirds?

Benjamin B. Taylor, Jr.:

Actually in — yes, a little over two-thirds.

Actually, for the tax year in question 52 to a part of 53 was about three-quarters of a million dollars in materials and about 1 1/2 million a little more in labor and shop overhead.

We say a third and two-thirds.

Actually, it’s 32% and 38%.

Again, anticipating a portion of our argument if Halliburton Oil Well and Cementing Company, and this is the essence, there are two factual phases of this case Your Honor, the first we’ve called, the labor and shop overhead phase and the second, we have called the — the isolated sales phase.

On the labor and shop overhead and this is the real heart of the case.

If Louisiana had its production shops in the State of Loui — I mean if Halliburton had its production shops in the State of Louisiana instead in the State of Oklahoma, there would be no tax on anything but cost element number one materials.

There would be no cost, no sales tax upon labor and shop overhead.

So the tax is — they’re asking three times as much tax because Halliburton conducted a multi-state operation.

At page 34 —

William J. Brennan, Jr.:

All because Halliburton, by accident, had its shops in Oklahoma rather than Louisiana.

Benjamin B. Taylor, Jr.:

That’s correct sir.

And —

William J. Brennan, Jr.:

And the multi-state operation would still be a multi-state operation I think.

Benjamin B. Taylor, Jr.:

I beg your pardon?

Audio Transcription for Oral Argument – March 27, 1962 in Halliburton Oil Well Cementing Company v. Reily

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William J. Brennan, Jr.:

It might still be a multi-state operation but had you had your shops in Louisiana, you can take one-third of the tax you’re required not applied in —

Benjamin B. Taylor, Jr.:

That is correct.

William J. Brennan, Jr.:

— in Oklahoma.

Benjamin B. Taylor, Jr.:

If — at page 34 and 34 of our brief is the most important page because on that page, we have collected the two vital elements of our stipulation of fact, page 34 of the brief, that’s the larger of the yellow briefs, I’m sorry Your Honor, the thicker, cream-colored brief.

On the labor and shop overhead, it is stipulated that if Halliburton had operated on a location within the State of Louisiana, it would have been a sales tax in the State of Louisiana upon the cost of materials purchased in Louisiana and a use tax on materials purchased outside Louisiana but there would have been no Louisiana sales tax or a use tax due upon the labor and shop overhead.

Now will you note that there’s a second phase, isolated phase.

Now one reason that I started to go into the discussion of the law ahead of the facts, Mr. Justice Frankfurter, is that there are two factual circumstances which — each of which raise the same facts and issue of law.

Now, I will revert briefly back to the Henneford decision if this — at this time if I may.

Felix Frankfurter:

But before I let you do that if you’ll permit me.

Benjamin B. Taylor, Jr.:

Sure.

Felix Frankfurter:

I want to get all the facts are relevant to the legal question before I have to make up my mind, look at the Henneford case and this case and some other case.

Benjamin B. Taylor, Jr.:

I —

Felix Frankfurter:

What I want to know — I want to know a few more facts. Halliburton is probably receptive if the corporation — what’s it?

Duncan —

Benjamin B. Taylor, Jr.:

Duncan, Oklahoma sir.

Felix Frankfurter:

Is it doing business in Louisiana?

Benjamin B. Taylor, Jr.:

Yes sir.

Doing extensive business operation in Louisiana in the year — the tax years —

Felix Frankfurter:

It’s a foreign corporation domesticated in —

Benjamin B. Taylor, Jr.:

That is correct Your Honor.

Felix Frankfurter:

— in Louisiana.

Benjamin B. Taylor, Jr.:

As Your Honor put it in — I think that this covers it Your Honor’s words in General Trading Company versus State Tax Commission, Your Honor said this.

Of course no state can tax a privilege of doing interstate business.

On the other hand, a mere fact that property is used for interstate commerce or has come to rest or — excuse me or has come within an owner’s possession as a result of interstate commerce does not diminish the protection which he may — which he may draw from a state to the upkeep of which he may bear — maybe made to bear his fair share.

But, and You Honor put it this way, a fair share precludes legislation obviously hostile or practically discriminatory to an interstate commerce.

Felix Frankfurter:

Now, what happens?

Do know anything more not to delay you longer but your eagerness to get to the discussion of law.

When this truck — when this truck comes in, they then levy this use tax on — on the value of what is on that truck, is that right?

Benjamin B. Taylor, Jr.:

That’s correct sir and there — the word is cost.

It’s been held to be cost less depreciation.

Audio Transcription for Oral Argument – March 27, 1962 in Halliburton Oil Well Cementing Company v. Reily

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Felix Frankfurter:

Of course.

William O. Douglas:

Now, if you had purchased this whole unit outside the state —

Benjamin B. Taylor, Jr.:

And then —

William O. Douglas:

— from another — from another manufacturer and brought up within the state?

Benjamin B. Taylor, Jr.:

Then it would be upon the cost price less than a depreciation which had been incurred before it came to the state.

Now —

Felix Frankfurter:

You mean if one had been — if one had been — somebody had bought it, not the manufacturer.

Benjamin B. Taylor, Jr.:

That’s correct.

Felix Frankfurter:

Not the lessor — Halliburton is the lessor and —

Benjamin B. Taylor, Jr.:

It uses under contract, not as a lessor.

Felix Frankfurter:

Whatever you call it.

Now the same kind of — suppose the same interruption, I don’t mean to be disrespectful, but the same mechanism, device is put together in Louisiana by some rival of yours, what tax would it be subject to?

Benjamin B. Taylor, Jr.:

Now, it would be subject to a sales tax upon the cost of materials which were purchased in Louisiana and a use tax upon the cost of materials which were reported into Louisiana by that manufacturer unit.

Felix Frankfurter:

Excluding all the labor and the —

Benjamin B. Taylor, Jr.:

Excluding labor and shop overhead; that is the stipulation at page 34.

Felix Frankfurter:

Yes.

Benjamin B. Taylor, Jr.:

If Halliburton had operated at a — at a location within Louisiana, there would have been a sales tax on materials, but “there would have been no Louisiana sales tax or a use tax due upon the labor and shop overhead.

Felix Frankfurter:

Now, before you go to the cases, I don’t mean to direct your argument Mr. Taylor, what is your, forget the cases for a moment, what is your legal proposition which you tender to this Court regarding Louisiana’s exerted taxing power in reference to you and what is your view with the taxing power she does have over you?

Benjamin B. Taylor, Jr.:

It is the basic contention of Halliburton that the interstate nature of its operations ought not in it of itself give rise to any additional tax burden, and Halliburton should not be taxed by Louisiana anymore heavily than it would be taxed if Halliburton conducted the identical operation in Louisiana minus the element of interstate commerce.

The discrimination of which Halliburton complains here arises on two different sets of operative facts, that’s the discrimination against the interstate operation that in favor of a comparable intrastate operation.

Felix Frankfurter:

And you’re further ready to pay the equivalent — the amount of the sales tax would be on this aggregate if brought in by resident Louisianan or manufactured there.

Benjamin B. Taylor, Jr.:

It is a stipulated fact sir that Halliburton has already paid 100% of the fact — of the tax which it would be required to pay or which a competing operator, exactly the same operation minus the element of interstate commerce would be required to pay, 100% and that is a stipulated fact.

In addition to the labor and shop overhead which we have discussed to an extent, we have the isolated sales phase of the case which we submit, raises the same issue.

Each phase, it is important to remember that Halliburton imports equipment into Louisiana for its own use and uses it there.

It does not buy or sell this equipment so as to give rise to a sales tax.

The precise facts of the labor and shop over —

Felix Frankfurter:

Why do we have to bother about sales tax?

The state isn’t impo — trying to impose a sales tax.

Benjamin B. Taylor, Jr.:

Sir?

Felix Frankfurter:

The state isn’t trying to impose a sales tax.

Audio Transcription for Oral Argument – March 27, 1962 in Halliburton Oil Well Cementing Company v. Reily

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Benjamin B. Taylor, Jr.:

We are comparing the use tax on the interstate — the sales tax and the use tax of the same statute.

They have their counterparts.

The use tax is the interstate part and the sales tax is the intra.

You can’t compare — compare the interstate but when you say interstate tax, you’ve got to say sales tax.

When you say — when you say intra, you have to say sales tax.

When you say interstate, you have to say use tax.

Felix Frankfurter:

And what you’re saying — what you’re arguing in effect you’re saying it is that since there’s an equivalent as to local people and as to local manufacturer and as to local use, the same equivalents must pertain to this situation, is that right?

Benjamin B. Taylor, Jr.:

Yes sir.

All we are asking is this postscript to the Henneford case.

Henneford said that a state tax — a use tax although it falls only on goods which have been moved in interstate commerce, does not discriminate against the interstate commerce because it’s exactly equal to and no greater than, and therefore, it doesn’t discriminate, and since it doesn’t discriminate, it doesn’t defend the Interstate Commerce Clause.

We ask for this corollary, but if in a given case, the use tax which is the interstate counterpart is heavier than the sales tax which is the intrastate phase of the same tax law.

When the interstate phase is heavier then it does discriminate and because of such discrimination is valid in the federal constitution.

Specifically, could you repeal the sales tax on the intrastate sales and leave a use tax so that it fell only upon in the interstate transaction goods imported into the state.

Could you — if you have the use tax, the intrastate tax fixed at 50% or a 100% or a 1000% and leave the state sales tax of 2%, we submit that you could not.

Mr. Taylor may — may I ask you this question?

Benjamin B. Taylor, Jr.:

Yes sir.

It maybe imperative but suppose instead of being the kind of company yours — yours is — you’re a machinery sales organization and this machinery was built outside of Louisiana and was brought in there and you sold it in your — in your showrooms, would you be required to pay both — on both the value of the materials and the shop overhead and labor?

Benjamin B. Taylor, Jr.:

The vendor would not pay at all —

No but —

Benjamin B. Taylor, Jr.:

— but he would be the collecting agent —

Yes.

Benjamin B. Taylor, Jr.:

— for the state but he would collect all his sales price.

Yes, yes.

Benjamin B. Taylor, Jr.:

Which would (Voice Overlap) it would include materials and labor and shop overhead and profit.

Yes.

Benjamin B. Taylor, Jr.:

The collector and this is the most — fact that the Louisiana Supreme Court, we managed somehow to have seven judges disagree with us on this and this how they did it.

They said, this thing is not — you don’t have to compare the operation of an intrastate manufacture user, who manufactures and uses it himself, you can compare an intrastate manufacture user in Halliburton’s position with what the sales tax would have been if the thing was so.

Now, the reason that throws the thing your mind into confusion right away sir is because they’re comparing non-comparables.

We say that to test for discrimination and nondiscrimination, you should compare comparables like transactions, comparable transactions to a similar contraction — transactions.

For example, and we say that this is the only fair comparison, that if Halliburton Oil Well Cementing Company moved its shops to Louisiana, or in the alternative if they were in Louisiana, direct competitor and precisely and exactly the same operation doing the same kind of operation, would the tax of the intrastate operation and the tax of multi-state or intrastate operation be the same.

Audio Transcription for Oral Argument – March 27, 1962 in Halliburton Oil Well Cementing Company v. Reily

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Benjamin B. Taylor, Jr.:

Now it’s obviously, it’s stipulated here that one of them would be taxed and the other one would not be taxed on the labor and the shop overhead.

Let me — let me ask just one more question?

Suppose this machinery was constructed in Louisiana and then went to a salesroom and was sold there in the ordinary course of trade, on what part of the cost would the sales tax be charged?

Benjamin B. Taylor, Jr.:

It would not be computed with reference to cost sir, it would be computed with reference to the sale price.

To the sale price, well that — would that — now I want to ask, would that include the cost of materials, the cost of shop overhead, the cost of labor plus profit?

Benjamin B. Taylor, Jr.:

That’s correct sir or alternatively if it was a bad week and they were selling things cheap —

Yes.

Benjamin B. Taylor, Jr.:

It might be sold for a price less than the sum total of labor and overhead plus —

Yes, I get it.

Benjamin B. Taylor, Jr.:

Sales price is completely a different thing.

It is as we see it, we think that — that to compare for fairness, you’ve got to compare the same type of operation.

And that sir is one of the — what we think is one of the basic fallacies of the Louisiana Supreme Court.

Turning briefly to the other phase of the case, before I get to that, it might be interesting on the labor and shop overhead to see one of the things that the Louisiana Collector said in his motion to dismiss about this labor and shop overhead.

He says that for Halliburton, “this is not an interstate commerce problem, but a problem of management in locating its operations so as to reduce its cost of operations.

A taxpayer may reduce his tax burden by manufacturing equipment within Louisiana for his own use.

Felix Frankfurter:

Does that means that that — that the choice to give you is to pay this or move from Oklahoma to Louisiana.

Benjamin B. Taylor, Jr.:

Yes sir.

We’ve discussed that in our brief under the heading, “A problem of management”, save Louisiana taxes by manufacturing in Louisiana.

Frankly, that seems to us in incredible.

The Collector contends that his position is nondiscriminatory.

Simultaneously, he argues it by a good corporate management, Halliburton could have avoided this Louisiana tax by ceasing its interstate operations and becoming an entirely domestic or intrastate operator, having its entire operation with Louisiana — within Louisiana’s borders.

John M. Harlan II:

Well, and as to recognize, it is a very frank statement of beliefs.

Benjamin B. Taylor, Jr.:

Well, sir — and that is his position —

Felix Frankfurter:

That would take care of a lot of commerce problems, wouldn’t it?

Benjamin B. Taylor, Jr.:

It would sir and this case if I — I have this — Halliburton and Halliburton’s counsel have never been able to see any complexion to this case.

At interstate commerce, you’ve got a tax, take away interstate commerce, and you’ve got no tax and that is stipulated parenthetically with reference to the stipulation that appear on page 34.

It is one of the most eloquent arguments that we can make.

Atlantic counsel for the Collector has never mentioned those in any of his briefs or in any of his arguments to any court and we forecast that he will not mention them here unless specifically cross-examined.

Potter Stewart:

What’s that, the stipulations?

Benjamin B. Taylor, Jr.:

Stipulations which appear found on page 34 sir.

Audio Transcription for Oral Argument – March 27, 1962 in Halliburton Oil Well Cementing Company v. Reily

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Benjamin B. Taylor, Jr.:

With reference to the second factual situation relating to isolated sales, an isolated sale or a casual sale as defined by Louisiana law is a sale by a person not regularly engaged in selling the type of goods in question.

Isolated sales are expressly exempted from the Louisiana intrastate sales tax.

For example, if I should have sold in Louisiana, in Baton Rouge, before I left to let a counsel for the Collector.

I’ll offer for my necktie, assuming that I’m not regularly engaged in the business of merchandising such acts, there would have been no Louisiana sales tax on that casual isolated transaction because such transactions from persons not regularly engaged in selling for tax free by specific exemption from the sales tax and that also is stipulated on page 34 of our brief in this language because this is applied to Halliburton situation but it covers this precisely.

The entire purchase price would not have been subject to the Louisiana sales tax or the Louisiana use tax had the purchase of such equipment been made within the State of Louisiana.

Now of course when I bought this tie in Baton Rouge, it had a 2% sales tax upon it.

If I should resell it to the Collector in Baton Rouge, there would have been no 2% use tax upon it that’s stipulated.

But if I should sell them in this Courtroom, this larva or this necktie and if he should take them and put them in his briefcase, the book and the necktie around his neck and move them in the channels of interstate commerce back to Louisiana and they’ll use it, if he should walk into the office of the Collector of Revenue wearing his necktie which he bought in the office — in the Supreme Court room in Washington, the Collector would say, “Did you buy that outside the state?

If you did and if you moved it in the channels of interstate commerce, you owe me a 2% use tax.”

Now, of course it wouldn’t be sales tax if you had bought it in Louisiana, but whenever you add the element of interstate transportation to casually purchased or isolated — isolated sales, we want to a use tax because there is no comparable — or isolated transaction in the use tax, the interstate part of Louisiana sales and use tax statute.

John M. Harlan II:

(Voice Overlap) your sales point, I take it is a supplemental point — it’s the alternative point to the —

Benjamin B. Taylor, Jr.:

No sir, it’s the same —

John M. Harlan II:

(Voice Overlap) and this particular —

Benjamin B. Taylor, Jr.:

That’s correct.

John M. Harlan II:

— is going out of business.

Benjamin B. Taylor, Jr.:

It is a less important point only in that it involves less money and only in that it does not recur with the complete regularity of the other point.

But as we see it, the two exactly the same, in the case of the labor and overhead, a manufacturer outside the state step one, a transport of the channels of interstate commerce and leave the state and use it.

In the case of the isolated sales, they buy it outside the state, they move it in the channels of interstate commerce and they use it.

Now, if you eliminate that multi-state activity in each one, it is stipulated that there is no tax and that stipulation which we forecast that the Collector will ignore is as follows.

In reference to labor and overhead, Halliburton operated in a location within the State of Louisiana, there would have been no Louisiana sales tax or use tax due upon the labor and shop overhead.

With reference to isolated sales, again at page 34 stipulated, the purchase price would not have been subject to Louisiana sales tax or the Louisiana use tax at the sale — at the purchase of such equipment been made within the State of Louisiana.

Henneford simply — in the Henneford case, the Silas Mason Company had brought into the State of Washington heavy moving equipment to construct the Grand Coulee Dam and they said, “Look, you can’t put this use tax on us by definition, it implies only to goods that have been brought across the state line in interstate commerce.”

Not so, said Mr. Justice Cardozo through this item of the use tax only falls upon goods which have been moved in interstate commerce but the tax is exactly equal to and does not discriminate and therefore it does not offend the Interstate Commerce Clause.

We’ll recess now.