Media for Kosydar v. National Cash Register CompanyAudio Transcription for Opinion Announcement - May 20, 1974 in Kosydar v. National Cash Register Company
Audio Transcription for Oral Argument - March 19, 1974 in Kosydar v. National Cash Register Company
Warren E. Burger:
We will hear arguments next in 73-629, Kosydar against the National Cash Register Company.
Mr. Pettay, you may proceed when you're ready.
Dwight C. Pettay, Jr.:
Mr. Chief Justice, and may it please the Court.
This case concerns the continuing conflict between the State’s power to tax and the prohibition from taxing exports contained in the Import-Export Clause, which is Article I, Section 10, Clause 2.
This case originated by the Tax Commissioner of Ohio issuing a tangible personal property tax assessment against National Cash Register (NCR) and issuing it against their international inventories which were located and resting in Dayton, Ohio on a tax listing date which was December 31, 1967.
The National Cash Register appealed this assessment to the Ohio Board of Tax Appeals, which is an administrative body and it did affirm the Tax Commissioner.
Upon appeal to the Ohio Supreme Court by the NCR, the court in which we considered an unprecedented decision of 5:2 overturn 100 years, this Court has carefully developed the definition of export and held that the property in question was in fact an export.
It is our contention that tangible personal property located in a state on tax listing date is subject to the State’s right to tax.
And that’s especially clear where in a situation like this the property has received something from the state for which the state can ask something in return and where no movement of any sort has occurred toward a stream of exportation.
The facts in this case basically are not in dispute.
The National Cash Register Company has its world headquarters, main production facilities and warehouse in Dayton, Ohio.
It primarily manufactures cash registers, accounting machines and data processing machines.
It markets these throughout the United States and in 124 foreign countries.
When a foreign order is placed with NCR, it is sent to the factory in Dayton where the product is manufactured.
NCR maintains no inventory of machines, capable of meeting incoming orders from foreign customers.
This is because many countries will not allow a partial shipment and because in some cases, the import licenses cannot be gotten.
After the machine is produced and inspected, it is packaged for export shipment.
The property involved in this case was specifically constructed for foreign customers, finished, crated and in storage and inventory in NCR’s warehouse awaiting foreign shipment on December 31, 1967 when Ohio personal property taxation was assessed.
So on tax listing date, which was December 31st, 1967, payment had not been made to NCR by the perspective purchasers, no export license had been issued, no letter of credit authorized, the machines were in complete control of NCR, and of most importance, no movement toward the foreign destination had occurred.
And according to NCR’s on witness, this means the items were in inventory and that is prior to when the items had been put on board, the commercial carrier had actually left the shipping dock.
Some machines have remained in storage in the warehouse awaiting shipment for up to three years.
The record does show that no machines manufactured by NCR were ever diverted or are capable of being diverted to the domestic market.
Due to special construction, the machines could not economically be converted from domestic use and sale.
The record shows that against NCR’s profit margin of about 5%, the conversion cost would be approximately 16% of the cost of the machine.
Would those machines have any scarp value at all?
Dwight C. Pettay, Jr.:
I would imagine they would show the -- the record does not show that but I’m sure they would.
It is our position that in interpreting the Import-Export Clause of the U.S. Constitution, this Court has had at least seven occasions in which to consider the question and this started in 1886 and the last one was in 1949.
And in each of these cases, the Court has taken a consistent position and that being is that there is not export until movement -- final movement does occur.
I would like very briefly to discuss three of these cases if I may, which we think represents this Court’s opinion.
The first case of importance is Coe versus Errol and this was an 1886 case.