SHELL OIL COMPANY, APPELLANT V. DIRECTOR OF REVENUE OF MISSOURI No. 87-609 In the Supreme Court of the United States October Term, 1987 On Appeal from the Supreme Court of Missouri Brief for the United States as Amicus Curiae Supporting Appellee This brief is submitted in response to the Court's order inviting the Solicitor General to express the views of the United States. TABLE OF CONTENTS Question Presented Statement Discussion Conclusion QUESTION PRESENTED Whether the imposition of county sales taxes on appellant's sales of aviation fuel to various airlines at an airport within the county violated the Commerce Clause or the Fourteenth Amendment. STATEMENT 1. Appellant Shell Oil Company is a Delaware corporation with its principal business office in Houston, Texas. It has long been engaged in the business of marketing various petroleum products throughout most of the United States. For the period at issue in this case (1978-1981), appellant entered into contracts for the sale of aviation fuel to a number of airlines, some of which used Lambert-St. Louis International Airport in St. Louis County, Missouri. Each contract was executed by appellant in Houston and included an estimated annual gallonage of fuel to be sold. Stip. paras. 1-4, 6; App., infra, 1a-2a. /1/ Appellant did not maintain, operate, or own any aviation fuel storage facility at the St. Louis County airport. Nor did it maintain anywhere in Missouri any administrative or sales office, store, warehouse, or similar facility that participated in the sale or delivery of aviation fuel to the airlines at that airport. Stip. paras. 15, 19; App., infra, 3a-4a. Rather, appellant sold the contracted-for fuel to the airlines through a series of fuel "exchange agreements" with Amoco Oil Company (Amoco). Those agreements, together with appellant's airline contracts, allowed appellant to sell and to deliver aviation fuel to the airlines at the airport via fuel facilities at the airport maintained by Allied Aviation Fueling Company of St. Louis, Inc. (Allied), and a pipeline from Amoco's refinery at Wood River, Illinois. Stip. paras. 5, 9; App., infra, 2a, 3a. An airline's purchase of particular quantities of fuel from appellant began with Allied, a company with which appellant had no contractual relationship and in which appellant had no financial interest. Allied operated an aviation fuel storage and distribution system at the airport; it contracted with the airlines to render fueling services to them and was directly paid by them. Upon receiving instructions from the airlines, Allied employees decided when to request delivery of fuel, the quantity of fuel to be delivered, what airlines would receive particular deliveries, and when deliveries would begin and end. Stip. paras. 12, 13, 17; App., infra, 3a, 4a. The aviation fuel thus ordered through Allied was obtained from the Amoco refinery in Wood River, Illinois, and transported to airport storage tanks through a pipeline. /2/ A meter owned by Amoco at the airport end of the pipeline was read by Allied employees, who recorded the quantity of fuel delivered into storage, tendered the meter ticket to the airline customer, and sent a copy to appellant's Chicago office, which then billed the airline purchasing the fuel. Stip. paras. 5, 9, 11, 12, 16, 20; App., infra, 2a, 3a, 4a. Pursuant to appellant's contracts with Amoco and with the airlines, appellant both obtained and transferred title to the fuel at the airport: as aviation fuel flowed through the meter at the airport and was delivered into storage, title to the fuel passed instantaneously from Amoco to appellant and then to the airline for which the fuel had been ordered. Stip. paras. 12-14, 17, 18; App., infra, 3a, 4a. 2. The State of Missouri has long imposed a statewide sales tax (at three percent from 1978 through 1979, and four percent thereafter) on the sale of tangible personal property at retail in the State. Mo. Ann. Stat. section 144.020.1(1) (Vernon 1976 & Supp. 1988). /3/ The seller is primarily responsible for payment of the tax, but the seller is also generally directed to add the tax to the sale price to the purchaser (id. sections 144.021, 144.080, 144.285). Appellee Director of Revenue collects the tax (id. section 32.028.1 (Vernon Supp. 1988)). /4/ Pursuant to Mo. Ann. Stat. section 66.600 (Vernon Supp. 1987), St. Louis County may add to the state sales tax a county-wide sales tax of its own, at a rate of one percent. /5/ Pursuant to Mo. Ann. Stat. section 94.605 (Vernon Supp. 1987), St. Louis County (and the cities of St. Louis and Kansas City) may also impose a transportation sales tax of up to 1/2 percent. Both taxes may be imposed only on sales subject to the state sales tax and only in the manner of, and in accordance with the rules governing, that tax. Id. sections 66.605, 66.610, 94.605, 94.610. St. Louis County adopted the authorized one percent supplemental sales tax in 1977. J.S. App. 36a (St. Louis County, Mo., Ordinance 8378 (Sept. 13, 1977)). It adopted the authorized transportation tax in 1973. J.S. App. 35a-36a (St. Louis County, Mo., Ordinance 6792 (June 28, 1973)). Sections 66.615 and 94.620, Mo. Ann. Stat. (Vernon Supp. 1987), contain identical language concerning where particular sales are deemed to occur for purposes of the two county taxes. With exceptions not relevant here, each provides that "all retail sales shall be deemed to be consummated at the place of business of the retailer." Each further provides: "In the event a retailer has more than one place of business in this state which participates in the sale, the sale shall be deemed to be consummated at the place of business of the retailer where the initial order for the tangible personal property is taken, even though the order must be forwarded elsewhere for acceptance, approval of credit, shipment or billing." 3. Appellant paid the statewide "sales or use taxes" for aviation fuel delivered at the airport and has not contested its liability for such taxes (Stip. para. 24; App., infra, 5a). /6/ Appellant denied its liability for the two taxes imposed by St. Louis County on the same fuel transactions (ibid.). Appellee Director, taking the contrary view, assessed appellant for the two county taxes for the period from March 1, 1978, through February 28, 1981, in the aggregate amount of $103,009.53, including interest (Stip. paras. 21, 22; App., infra, 4a-5a). /7/ Appellant appealed to the State Administrative Hearing Commission, which agreed with appellee's assessment (J.S. App. 14a-24a). After making findings based on the stipulated facts (id. at 15a-17a), the Commission concluded that appellant's contracts with the airlines were merely contracts for future sales (id. at 22a-23a), that the actual sales and transfers took place at the airport upon each airline's "request for service from Allied" (id. at 23a-24a), and that appellant accordingly had a "place of business" in the county, within the terms of Mo. Ann. Stat. sections 66.615 and 94.620 (Vernon Supp. 1987) (J.S. App. 23a-24a). The Commission did not discuss appellant's constitutional challenge to the imposition of the county taxes. A divided Supreme Court of Missouri affirmed (J.S. App. 1a-12a). After observing that the airport fuel sales were subject to the Missouri sales tax because title passed at the airport (id. at 4a-5a), the court rejected appellant's "principal contention" -- that its sales were exempt under the "place of business" provisions, Mo. Ann. Stat. sections 66.615, 94.620 (Vernon Supp. 1987), "because it (did) not maintain a place of business in St. Louis County" (J.S. App. 1a). The court rules that the relied-on provisions, which state that "retail sales shall be consummated at the place of business of the retailer," apply only to transactions that might have a nexus with more than one state subdivision. They do not apply here, the court held, because "(t)hese sales (were) entirely consummated in St. Louis County where() (appellant), through its agents, deliver(ed) the aviation fuel, and passe(d) title to the purchasers and ultimate users, the airlines with whom it has contracted." Id. at 5a. Based on the same view of the fuel sales, the court also rejected appellant's Commerce Clause and Due Process Clause challenges (J.S. App. 7a-8a). "Since this Court has found the sale(s) to be intrastate in character, this challenge evaporates. * * * The sale(s) themselves are inextricably linked to St. Louis County. Through its agent, (appellant) maintains a continuing presence at Lambert Field by which it fulfills its contracts with airlines which operate there." Ibid. /8/ The dissenting judges concluded (id. at 9a-12a), to the contrary, that appellant's sales had an insufficient connection to Missouri. DISCUSSION Appellant contends in this Court that the Commerce Clause (J.S. 12-18), the Fourteenth Amendment Due Process Clause (id. at 20), and the Equal Protection Clause (id. at 21-22) prohibit imposition of the St. Louis County taxes on its sales of fuel to the Lambert Field airlines. As appellant recognizes (id. at 12), the Commerce Clause contention is governed by the standards summarized by this Court in Complete Auto Transit, Inc. v. Brady, 430 U.S. 274, 279, (1977): the taxed activity must have a nexus with the taxing State; the measure of the tax must be fairly related to the State's protections and services; the tax must be fairly apportioned so as to protect against multiple taxation; and the tax must not discriminate against interstate commerce. See, e.g., Wardair Cananda Inc. v. Florida Dep't of Revenue, 477 U.S. 1, 8 (1986); Commonwealth Edison Co. v. Montana, 453 U.S. 609, 622-626 (1981). If, as we will show, those standards are easily met in this case, appellant's other challenges fail as well; for, as appellant recognizes (J.S. 20), due process requirements are met here if Commerce Clause requirements are met (see, e.g., Exxon Corp. v. Department of Revenue, 447 U.S. 207, 220, 227-228 (1980)), and appellant's equal protection argument (J.S. 21-22), which in any event appellant never raised in the state courts (id. at 11 n.7), is at best simply a version of the Commerce Clause discrimination argument. /9/ If we put temporarily to one side the question of discrimination, this Court's decisions on state sales taxes (i.e., taxes on sellers imposed on sales and measured by sale price) make clear that the nexus fair relationship, and fair apportionment requirements of the four-part Complete Auto test are satisfied if enough significant aspects of the taxed sales are connected with the taxing State that the sales may be said to take place in that State, so that no other State may tax those sales. See Tyler Pipe Indus., Inc. v. Washington State Dep't of Revenue, No. 85-1963 (June 23, 1987), slip op. 18 (only one State may tax sale). Although it would be consistent with this Court's decisions to identify the place of passage of title, or ownership, as the single determinative factor that fixes the location for a particular sale (see U.C.C. section 2-106(1) ("sale" is "the passing of title from the seller to the buyer")), this Court has not yet found it necessary, in this relatively uncontroversial area, to adopt such a test. Rather, the Court's decisions have focused on several aspects of sales -- principally, order taking, delivery, and title passage -- without expressly indicating whether one aspect might be determinative. See American Oil Co. v. Neill, 380 U.S. 451 (1965) (sales tax invalid where invitations for bids, submission of bids, delivery, and passage of title all occurred out-of-State); Norton Co. v. Department of Revenue, 340 U.S. 534 (1951) (state sales tax valid as applied to sales having some relation to in-State retail outlets, but invalid where in-State customers sent orders to an out-of-State office, which shipped goods directly to the customer, with no involvement of the in-State retail outlet); McLeod v. J.E. Dilworth Co., 322 U.S. 327, 330 (1944) (sales tax invalid where orders were accepted and title was passed, upon delivery to carrier, out-of-State: seller was "through selling" before goods reached taxing State); McGoldrick v. Berwind-White Coal Mining Co., 309 U.S. 33 (1940) (sales tax valid where "seller completed his sales" (McLeod, 322 U.S. at 330) in the taxing State -- order taking, sales office, and delivery all were in the taxing State); Wiloil Corp. v. Pennsylvania, 294 U.S. 169 (1935) (sales tax valid where orders taken and delivery made in taxing State, even though seller obtained goods out-of-State); Sonneborn Bros. v. Cureton, 262 U.S. 506 (1923) (same); Wagner v. City of Covington, 251 U.S. 95 (1919) (sales tax valid where soft-drink seller from out-of-State came to State with loaded truck and took orders and delivered goods in the taxing State). This is a straightforward case, for, as the Missouri Supreme Court concluded (J.S. App. 5a), the record indicates that all of the relevant aspects of the sale occurred at the airport in the State. First, as the parties' stipulation expressly states, title to the aviation fuel was passed from appellant to the airlines at the airport; indeed, appellant itself did not own the fuel sold to the airlines until the fuel was present in Missouri. Stip. para. 18; App., infra, 4a. Second appellant, through its contractual arrangements with Amoco and the airlines, delivered the fuel to the airlines' agent (Allied) at the Missouri airport. Stip. para. 5; App., infra, 2a (arrangements allow appellant to "deliver aviation fuel at the airport"). Third, although appellant's Texas office had executed "estimated annual gallonage" contracts for future sales (Stip. paras. 3, 4; App., infra, 2a), orders for particular quantities of fuel (billed at the time of delivery) were placed by the airlines through Allied's employees, presumably at the airport, who passed on the orders and controlled the deliveries. Stip. para. 17; App., infra, 4a. In these circumstances, it is not surprising that the parties' stipulation expressly states that appellant's arrangements allowed it "to sell * * * aviation fuel at the airport" (Stip. para. 5; App., infra, 2a), and there can be no doubt that Missouri, and hence St. Louis County, may constitutionally tax the sales at issue. That the fuel was obtained by appellant from an out-of-State supplier (Amoco's Illinois refinery) is irrelevant, because it does not alter the fact that appellant's sales to the airlines took place at the airport. See Wiloil Corp. v. Pennsylvania, supra; Sonneborn Bros. v. Cureton, supra; cf. J. Bacon & Sons v. Martin, 305 U.S. 380 (1939) (tax on post-sale "receipt" in the State valid). Nor is it relevant that the aviation fuel arrived at the airport by a pipeline operated by someone other than appellant. See Memphis Gas Co. v. Beeler, 315 U.S. 649, 653 (1942) ("sale of gas at the burner tips by one who pipes the gas into the state or by a local distributor acquiring the gas from another who has similarly brought it into the state, is subject to state taxation"). Nor, contrary to appellant's protests (J.S. 13-14), can it matter that the Missouri Supreme Court referred to appellant's use of "agents" in the airport sales (J.S. App. 5a, 7a, 8a): whatever the terminology, the fact remains that appellant had a series of contractual arrangements that enabled it to respond to airline customer orders and to obtain, to deliver, and to transfer title to aviation fuel at the Missouri airport. Appellant suggests (J.S. 15-16) that other States -- i.e., Texas and Illinois -- could "conceivably" tax the same sales of aviation fuel that Missouri taxes. But no other State has tried or is likely to try to tax those sales, since it is clear that no sale by appellant occurred either in Texas, where only contracts for future sales were executed, or in Illinois, where Amoco but not appellant owned and possessed the fuel. /10/ In any event, for precisely the same reasons that Missouri may tax the sales, no other State could validly do so. The two decisions on which appellant principally relies (J.S. 14-15, 19-20), National Bellas Hess, Inc. v. Department of Revenue, 386 U.S. 753 (1967), and Norton Co. v. Department of Revenue, supra, involve entirely different facts from those presented here. In both cases, in-State purchasers sent orders out-of-State for goods that the purchaser knew would come from the seller's out-of-State stock. In this case, as far as the record indicates, the airlines placed their orders for fuel at the airport, without regard to the source of the fuel that would fill the orders. Moreover, in neither National Bellas nor Norton is there any suggestion that title to the shipped goods was passed to the purchaser within the taxing State. /11/ Here, it is undisputed that title to the fuel passed in Missouri. And, indeed, in this case, unlike National Bellas and Norton, the goods sold did not in fact come from the seller's out-of-State stock: the seller never even owned the goods being sold before those goods arrived in the taxing State. Unlike the sellers in National Bellas and Norton, appellant could not conceivably be described as an out-of-State seller. /12/ If, as we have shown, the fact that all relevant aspects of the fuel sales occurred at the airport answers appellant's arguments with respect to the first three components of the Complete Auto test, that fact also disposes of appellant's argument with respect to the discrimination component of the Complete Auto test. The Missouri provisions that govern the county taxes at issue (Mo. Ann. Stat. sections 66.615, 94.620 (Vernon Supp. 1987)) state that, when "a retailer has more than one place of business in this state which participates in the sale," the sale is deemed to take place where the initial order is taken. Appellant contends (J.S. 21-22) that that provision discriminates against interstate commerce because a retailer that delivered and passed title to aviation fuel at the airport would not incur the county taxes if it utilized a separate order-taking office in another county in Missouri (perhaps with a lower county sales-tax rate), whereas a retailer that delivered and passed title to aviation fuel at the airport would incur the county taxes if it utilized a separate order-taking office outside the State. The second part of this comparison, however, is hardly clear under Missouri law and, in any event, has no application to appellant. The Missouri Supreme Court had no occasion to decide where a sale would be located for purposes of the county taxes if appellant had an out-of-State office that took orders for fuel sales. There is no basis for questioning the state court's conclusion (J.S. App. 5a, 7a-8a) that all aspects of appellant's sales, including the taking of orders for fuel sales, took place within Missouri. CONCLUSION For the foregoing reasons, the appeal should be dismissed for want of a substantial federal question. Respectfully submitted. CHARLES FRIED Solicitor General WILLIAM S. ROSE, JR. Assistant Attorney General LAWRENCE G. WALLACE Deputy Solicitor General RICHARD G. TARANTO Assistant to the Solicitor General ERNEST J. BROWN Attorney MARCH 1988 /1/ This case was submitted to the Administrative Hearing Commission of the State of Missouri on an agreed Stipulation of Facts (J.S. App. 14a). We include the Stipulation of Facts as an appendix to this brief. /2/ The pipeline is owned by St. Louis Pipeline Company and operated by Amoco Pipeline Company, a wholly-owned subsidiary of Standard Oil Company (Indiana). Appellant has no equity or other ownership interest in St. Louis Pipeline Company, Amoco Pipeline Company, or Amoco. Stip. paras. 7, 8; App., infra, 2a. /3/ For purposes of the issues in this case, there is no material difference between the current versions of the relevant statutes and the versions in effect during the years at issue here. We therefore cite the current versions of the statutes. /4/ Missouri also imposes a use tax on certain goods, in the same amount as the sales tax; and it directs vendors who make sales of goods "for the purpose of storage, use or consumption in th(e) state," which is presumed from in-State delivery, to collect the use tax from purchasers of their goods. Mo. Ann. Stat. sections 144.610, 144.615, 144.620, 144.635 (Vernon 1976 & Supp. 1988). As is common throughout the Nation, this "compensating" use tax (id. section 144.600) is designed chiefly to protect the sales tax. Accordingly, no use tax on goods must be paid by persons who have paid the (seller's) Missouri sales tax; and if a lower out-of-State sales or use tax has been paid, the Missouri use tax is due only for the excess of the Missouri tax over the out-of-State tax. Id. section 144.615. /5/ Other counties are authorized to impose supplemental sales taxes of 1/4, 3/8, or 1/2%. Mo. Ann. Stat. sections 67.505 et seq. (Vernon Supp. 1987). Cities are authorized to impose supplemental sales taxes of 1/2, 7/8, or 1%. See id. sections 94.500 et seq. (Vernon 1971 & Supp. 1987). /6/ The stipulation does not specify whether the state tax paid was the sales tax or the use tax (see note 4, supra). As the Missouri Supreme Court observed (J.S. App. 3a), however, the Administrative Hearing Commission concluded that, because the sales took place in the State, the tax paid was a sales tax (J.S. App. 17a n.3). Appellant points out (Reply Br. 6 n.6) that it has always contended that the state tax it paid was the use tax and that it had no reason to challenge the contrary ruling because it would be liable in any event for the same amount. /7/ The stipulation gives numbers for the taxes and the interest for each of the two county taxes. The sum of those four figures is $103,009.53. The stipulation also gives a number for the sum of taxes and interest for the county sales tax and a number for the sum of taxes and interest for the county transportation sales tax. Those two figures add up to $104,009.53. The discrepancy results from the fact that the tax and interest figures for the transportation tax do not in fact add up to the figure given by the stipulation for their sum. /8/ The court stated, "(appellant's) equal protection argument fails for similar reasons" (J.S. App. 8a). Because appellant made no equal protection argument (J.S. 11 n.7), this statement apparently refers to appellant's due process challenge. /9/ To the extent appellant suggests that Missouri has deprived it of equal protection by discriminating on the basis of residence or State of incorporation (J.S. 21-22, citing Williams v. Vermont, 472 U.S. 14 (1985)), the premise of the suggestion is wrong: the alleged discrimination attacked by appellant (see J.S. 16-18, 21-22) turns on the location of a particular activity (taking orders for sales), not on a taxpayer's residence or State of incorporation. /10/ See also Tex. Tax Code Ann. section 151.005 (Vernon 1982 & Supp. 1988) (defining "sale" for sale-tax purposes, as relevant here, to mean transfer of title or possession); Tex. Bus. & Com. Code Ann. section 2.106(a) (Vernon 1968) (adopting U.C.C. section 2-106(1) title-passage definition of "sale"); Ill. Ann. Stat. ch. 120, para. 440 (Smith-Hurd 1974 & Supp. 1987) (defining "sale at retail" for purposes of retailer's occupation tax, as relevant here, to mean transfer of ownership or title); Ill. Ann. Stat. ch. 26, para. 2-106(1) (Smith-Hurd 1963) (adopting U.C.C. section 2-106(1)). /11/ Under U.C.C. section 2-401(1), if a contract merely requires the seller to send goods to the buyer, title passes at the time and place of shipment, not upon later delivery to the buyer. See J.S. App. 4a (quoting Missouri version of that provision). /12/ National Bellas, like Miller Bros. v. Maryland, 347 U.S. 340 (1954), which appellant also cites (J.S. 14), actually involved a use tax rather than a sales tax. Here, the county taxes at issue are sales taxes; and unlike Missouri's statewide sales tax, they are not even accompanied by a "protective" use tax. If the county taxes were use taxes, however, or if the constitutional standards applicable to use taxes applied here, appellant would clearly have no constitutional complaint. This Court in National Geographic Soc'y v. California Bd. of Equalization, 430 U.S. 551, 560-561 (1977), ruled that, when a State compels a seller to collect, at the time of sale, a use tax imposed on in-State users, the constitutional nexus requirement focuses on the connection of the seller to the State, not of particular sales to the State. In this case, nothing in the record suggests, what is certainly unlikely, that appellant did not have substantial operations in Missouri in 1978-1981, albeit unrelated to these aviation-fuel sales. If appellant had such a presence, which the sellers in National Bellas and Miller Bros. did not, National Geographic makes clear that Missouri and St. Louis County could insist that appellant collect a use tax on aviation fuel. See also General Trading Co. v. State Tax Comm'n, 322 U.S. 335 (1944); Nelson v. Sears, Roebuck & Co., 312 U.S. 359 (1941). Indeed, the validity of such a requirement would follow from appellant's concession that it is liable for the statewide use tax, because, as the dissent in the Missouri Supreme Court recognized (J.S. App. 12a), it is nexus to the State, not to any particular county, that should matter for Commerce Clause purposes. See Hillsborough County v. Automated Medical Laboratories, 471 U.S. 707, 713 (1985); Town of Lockport v. Citizens for Community Action at the Local Level, Inc., 430 U.S. 259, 269 (1977); Railroad Co. v. Peniston, 85 U.S. (18 Wall.) 5, 37 (1873); Peterman v. Coleman, 764 F. 2d 1416, 1422 (11th Cir. 1985); cf. Breard v. Alexandria, 341 U.S. 622 (1951); McGoldrick v. Berwind-White Coal Mining Co., 309 U.S. 33 (1940); Wagner v. City of Covington, 251 U.S. 95 (1919). APPENDIX