Halliburton Oil Well Cementing Company v. Reily

PETITIONER: Halliburton Oil Well Cementing Company
RESPONDENT: James S. Reily, Collector of Revenue of the State of Louisiana
LOCATION: Louisiana Dept. of Revenue

DOCKET NO.: 24
DECIDED BY: Warren Court (1962-1965)
LOWER COURT: Louisiana Supreme Court

CITATION: 373 US 64 (1963)
ARGUED: Mar 26, 1962 / Mar 27, 1962
REARGUED: Dec 03, 1962
DECIDED: May 13, 1963

ADVOCATES:
Benjamin B. Taylor, Jr. - argued and reargued for the appellant
Chapman L. Sanford - argued and reargued for the appellee

Facts of the case

The State of Louisiana charged a 2% tax on goods sold in the state. It also charged a 2% tax on goods bought in another state but used in the state. This use tax was reduced by the amount of any use taxes paid in another state. Halliburton Oil Well Cementing Co. shipped several cementing trucks to Louisiana. On its tax return, Halliburton calculated the use tax using the value of the raw materials used in manufacturing the trucks. Halliburton did not factor in the value of the labor required to manufacture the trucks. Louisiana assessed a tax deficiency of $36,238.43 to take into account the value of the labor. Halliburton paid the tax under protest and sued for a refund in the Louisiana District Court for the 19th District. Halliburton argued that they would not pay taxes on labor if the trucks were manufactured in Louisiana, so the use tax unconstitutionally discriminated against interstate commerce in violation of the Commerce Clause. The district court ruled in favor of Halliburton, but the Louisiana Supreme Court reversed, holding that the tax discrepancy was only incidental.

Question

Does the Louisiana use tax violate the Commerce Clause as applied to Halliburton?

Media for Halliburton Oil Well Cementing Company v. Reily

Audio Transcription for Oral Argument - March 27, 1962 in Halliburton Oil Well Cementing Company v. Reily
Audio Transcription for Oral Argument - March 26, 1962 in Halliburton Oil Well Cementing Company v. Reily

Audio Transcription for Oral Reargument - December 03, 1962 in Halliburton Oil Well Cementing Company v. Reily

Earl Warren:

-- versus James S. Reily, Collector of Revenue, State of Louisiana.

The orders -- the other orders of the court are cert -- have been certified by the Chief Justice and filed with the clerk and will not be orally announced.

Now, Mr. Taylor.

Benjamin B. Taylor, Jr.:

Mr. Chief Justice Warren, members of the Court, may it please the Court.

This is the second argument of one of the cases which was argued before eight-judge court last term.

This is a suit for refund on tax moneys paid under protest to the State of Louisiana where the field of state taxation of interstate commerce, constitutional law, the Interstate Commerce Clause forbids tax discrimination by states against interstate commerce.

The equal protection of the laws clause or the Due Process Clause forbids arbitrary tax discrimination by states even if there is no element of interstate commerce.

Classifications for tax purposes may not be held by the arbiter.

The Louisiana Supreme Court has held that Louisiana may discriminate against the multistate or interstate business and thus give a direct commercial advantage to local business.

It held specifically that Louisiana may place an excise tax upon the interstate business of Halliburton which is three times as heavy as the tax burden would be -- upon the same identical, and I emphasize the word “identical” operation if it were purely local and intra-Louisiana.

The Halliburton Company of Duncan, Oklahoma has appealed from the Louisiana Supreme Court urging the invalidity of the discriminatory tax and claiming the constitutional protection of three clauses, interstate commerce, equal protection and due process.

This Court noted probable jurisdiction.

The tax in question is the Louisiana use tax, a part of the sales and use tax law of the State of Louisiana.

The tax rate is 2%.

The case of the sales tax, the intrastate tax, the rate is 2% of the sales price of intrastate sales.

In the case of the use tax, the interstate tax, the rate is 2% of cost price to the purchaser who imports, that is who purchases outside Louisiana and imports through channels of interstate commerce into Louisiana for its own use.

Halliburton's complaint is not of the tax rate which is 2% in both cases but Halliburton does complain of discrimination in the determination of the tax basis to which the 2% rate is applied.

Specifically, Halliburton complains that the tax base is larger, three times larger in the case of the intrastate use tax which falls upon Halliburton and the tax base would be in the case of the intrastate sales tax which would fall upon a local intrastate competitor of Halliburton in an identical -- in an identical intrastate business operation.

Is that the result of the way the statute is written or is the result of the way the stat -- the statute (Voice Overlap) --

Benjamin B. Taylor, Jr.:

Oh, I think there's a split of opinion on that, sir.

I think that the Collector of Revenue thinks -- says that's the way the statute is written.

We disagree with him on that.

We think that this problem is with his interpretation of the statute.

Your court construed it as being required by the statute.

Benjamin B. Taylor, Jr.:

That's correct, sir.

We disagree with -- we don't think the statute needed to be construed that way but in any event it has been construed that way so we are faced with that as a jurisprudence of Louisiana unless this Court reverses this Court -- the Supreme Court of Louisiana.

What are the facts of this case?

Potter Stewart:

We can't reverse the Supreme Court of Louisiana on its construction of the Louisiana statute.

We're -- we take -- we had to take that (Voice Overlap) --

Benjamin B. Taylor, Jr.:

But you can.