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07/24/50 District of Columbia v. Smoot Sand & Gravel Corp.

July 24, 1950




Before PROCTOR, BAZELON, and FAHY, Circuit Judges.



FAHY, Circuit Judge.

The principal question presented is whether under statutes applicable in the District of Columbia tugs, scows and launches owned by the respondent Delaware corporation and employed to a substantial degree in its business in the District may be subjected to the personal property tax of the District on an apportionment basis.

The problem is before us a second time, now on petition of the District to review a decision of the Board of Tax Appeals holding in substance that the vessels may not be taxes on an apportionment basis because of the absence of statutory authority so to do. Accordingly taxes and penalties collected for a number of years were ordered to be refunded to respondent. This was done notwithstanding our previous decision that these properties could constitutionally be taxed by the District upon a fair apportionment of value though not at full value.Smoot Sand & Gravel Corp. v. District of Columbia, 1949, 84 U.S.App.D.C. 367, 174 F.2d 505. We had remanded the cause to the Board of Tax Appeals for further proceedings not inconsistent with the opinion. In those proceedings the District took the position we had decided the properties could be taxed on an apportionment basis and contends now the Board disregarded our mandate to that effect. The Board thought we had held no more than that such a tax would be constitutional. It construed our earlier decision in Queen City Brewing Co. v. District of Columbia, 1943, 77 U.S.App.D.C. 213, 134 F.2d 44, as foreclosing such a tax in the absence of a statute which authorized and defined a method of apportionment.

The case need not turn on whether or not our mandate in Smoot Sand & Gravel Corp. v. District of Columbia (supra) has been obeyed. The substantive questions are fairly presented. Our mandate on the previous decision is not to be construed as having directed an apportioned tax if that is illegal in the District. On the other hand, if such a tax is permitted by existing statutes the present petition is well taken. I. The Vessels Have a Taxable Situs in the District of Columbia.

In our prior decision we stated the facts as follows:

"The property consists of tugs, scows and launches. They are used for the transportation of sand and gravel from deposits in Virginia and Maryland to storage places in the District of Columbia and thereafter to points of delivery on the Potomac River and the Chesapeake Bay in Maryland and Virginia. They come into the District from the places of deposit on an average of once a day but spend more time out of the District than in the District. The scows were not licensed or enrolled anywhere. The other vessels were licensed and enrolled at the port of Alexandria, Virginia.

"Petitioner corporation is domiciled in Delaware. Its commercial office is in the District of Columbia.Its business is production and sale. Its production occurs in Virginia and Maryland. Its commercial transactions center in the District. Its deliveries are made in the District, in Maryland, and in Virginia. Its tugs and scows are used exclusively in interstate commerce." 84 U.S.App.D.C. at pages 367, 368, 174 F.2d at pages 505, 506.

It also appears that no personal property tax is levied on the property in Delaware, that such tax has not been paid in Maryland, but that taxes are levied on the equipment in Virginia on the basis of an assessment of approximately 30% of its value.

It should be added that respondent, for purposes of income tax deductions, had apportioned 75% of the depreciation on its machinery and equipment, including the vessels here involved, to the District, and also has apportioned 75% of its income from its sand and gravel business (sales and services) as derived from District of Columbia sources.

The principal statute relied upon by the District reads as follows:

"On all tangible personal property, assessed at a fair cash value (over and above the exemptions provided in section 47 - 1208), including vessels, ships, boats, tools, implements, horses, and other animals, carriages, wagons, and other vehicles, there shall be paid to the collector of taxes of the District of Columbia the rate of tax provided by law." 47 D.C.Code ยง 1207 (1940).

This provision expressly includes vessels, ships and boats. They may not be excluded merely because their domiciliary situs is not in the District. It is no longer open to doubt that the tax situs of personal property is not necessarily limited to the domicile of the owner. Pullman's Palace Car Company v. Pennsylvania, 1890, 141 U.S. 18, 11 S. Ct. 876, 35 L. Ed. 613, see, also, Union Refrigerator Transit Co. v. Kentucky, 1905, 199 U.S. 194, 26 S. Ct. 36, 50 L. Ed. 150, 4 Ann.Cas. 493; American Refrigerator Transit Co. v. Hall, 1898, 174 U.S. 70, 19 S. Ct. 599, 43 L. Ed. 899. It is a question of the nature and extent of the use of the property within the state asserting the authority to tax. By virtue of their extensive, habitual and continuous use in business in the District ...

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