Syllabus. MICHIGAN-WISCONSIN PIPE LINE CO. v. CALVERT, COMPTROLLER OF PUBLIC ACCOUNTS, ET AL. NO. 198. APPEAL FROM THE COURT OF CIVIL APPEALS OF TEXAS, THIRD SUPREME JUDICIAL DISTRICT.* Argued January 5-6, 1954.-Decided February 8, 1954: 1. A Texas tax on the occupation of "gathering gas," measured by the entire volume of gas "taken," as applied to an interstate natural gas pipeline company, where the taxable incidence is the taking of gas from the outlet of an independent gasoline plant within the State for the purpose of immediate interstate transmission, held invalid under the Commerce Clause of the Federal Constitution. Pp. 161-170. (a) The validity of the tax under the Commerce Clause depends upon considerations of constitutional policy having reference to the substantial effects, actual or potential, of the tax in suppressing or unduly burdening interstate commerce. P. 164. (b) A tax imposed on a local activity related to interstate commerce is valid only if the local activity is not such an integral part of the flow of interstate commerce that it cannot realistically be separated from it. P. 166. (c) As here applied, the State has delayed the incidence of the tax beyond the step where production and processing have ceased and transmission in interstate commerce has begun; so that the tax here is not levied on the capture or production of the gas, but rather on its taking into interstate commerce after production, gathering and processing. Utah Power & Light Co. v. Pfost, 286 U. S. 165, distinguished. Pp. 166-169. *Together with No. 200, Panhandle Eastern Pipe Line Co. v. Calvert, Comptroller of Public Accounts, et al., on appeal from the same court; and No. 199, Michigan-Wisconsin Pipe Line Co. v. Calvert, Comptroller of Public Accounts, et al., and No. 201, Panhandle Eastern Pipe Line Co. v. Calvert, Comptroller of Public Accounts, et al., both on appeal from the Supreme Court of Texas. (d) Validation of this tax would permit a multiple burden upon interstate commerce, for if Texas may impose this "first taking" tax measured by the total volume of gas so taken, then the other recipient states would have at least equal right to tax the first taking or "unloading" from the pipeline of the same gas when it arrives for distribution; and thus in effect would be resurrected the customs barriers that the Commerce Clause was designed to eliminate. P. 170. 2. The Supreme Court of Texas "refused" applications for writs of error to review a decision of the Court of Civil Appeals which upheld the validity of a state statute challenged as violative of the Federal Constitution. By state statute and procedural rule, the refusal signified that the State Supreme Court deemed the judgment of the Court of Civil Appeals correct and that the principles of law had been correctly determined. Held: The Court of Civil Appeals was "the highest court of a State in which a decision could be had," within the meaning of 28 U. S. C. § 1257, and the appeals to this Court were properly from the Court of Civil Appeals and not from the Supreme Court of Texas. Pp. 159–160. 3. The issue of the validity of the tax was properly raised in this case. P. 165, n. 4. 255 S. W. 2d 535, reversed. The Texas Court of Civil Appeals sustained the validity of a state statute challenged as violative of the Federal Constitution. 255 S. W. 2d 535. The State Supreme Court refused writs of error. The two appellants each took appeals from both the Court of Civil Appeals and the State Supreme Court. Here the appeals from the State Supreme Court are dismissed and the judgments of the Court of Civil Appeals are reversed, pp. 160, 170. D. H. Culton and S. A. L. Morgan argued the cause for appellants. On the brief were Arthur R. Seder, Jr., Everett L. Looney, R. Dean Moorhead, Mr. Culton and Mr. Morgan for the Michigan-Wisconsin Pipe Line Company, and E. H. Lange, Gene M. Woodfin, Chas. I. Francis, Mr. Looney, Mr. Moorhead and Mr. Culton for the Panhandle Eastern Pipe Line Company, appellants. 157 Opinion of the Court. John S. L. Yost entered an appearance for appellant in Nos. 200 and 201. W. V. Geppert, Assistant Attorney General of Texas, and John Ben Shepperd, Attorney General, argued the cause for appellees. With them on the brief was William W. Guild, Assistant Attorney General. MR. JUSTICE CLARK delivered the opinion of the Court. The appellants, two natural gas pipeline companies, brought separate suits against Texas State officials, appellees here, in a state district court, seeking a determination that a Texas tax statute as applied to appellants violates the Commerce Clause of the Constitution of the United States, and seeking recovery of money paid under protest in compliance with the statute. The District Court sustained appellants' contentions and entered judgment in their favor. The Court of Civil Appeals reversed, holding that the tax statute as applied is constitutional. 255 S. W. 2d 535. The Supreme Court of Texas "refused" appellants' applications for writs of error. By state statute and procedural rule, the docket notation "refused" in denying application for writ of error signifies that the State Supreme Court deems the judgment of the Court of Civil Appeals a correct one and the principles of law declared in the opinion correctly determined. Appellants were uncertain whether appeal to this Court was properly from the Court of Civil Appeals or the Supreme Court of Texas, as "the highest court of a State in which a decision could be had" within the meaning of 28 U. S. C. § 1257. Hence each appellant appealed from each of the courts. We postponed to the hearing of the cases on the merits a determination of the jurisdictional question. 346 U. S. 805. 1 Cf. Western Union Telegraph Co. v. Priester, 276 U. S. 252 (1928). Opinion of the Court. 347 U.S. We think that appeals in these cases were properly from the Court of Civil Appeals. In American Railway Express Co. v. Levee, 263 U. S. 19 (1923), the Supreme Court of Louisiana had refused a writ of certiorari to the State Court of Appeal "for the reason that the judgment is correct." Mr. Justice Holmes, speaking for a unanimous Court, said: "... [U]nder the Constitution of the State the jurisdiction of the Supreme Court is discretionary ... and although it was necessary for the petitioner to invoke that jurisdiction in order to make it certain that the case could go no farther, .. when the jurisdiction was declined the Court of Appeal was shown to be the highest Court of the State in which a decision could be had. Another section of the article cited required the Supreme Court to give its reasons for refusing the writ, and therefore the fact that the reason happened to be an opinion upon the merits rather than some more technical consideration, did not take from the refusal its ostensible character of declining jurisdiction. Western Union Telegraph Co. v. Crovo, 220 U. S. 364, 366. Norfolk & Suburban Turnpike Co. v. Virginia, 225 U. S. 264, 269. Of course the limit of time for applying to this Court was from the date when the writ of certiorari was refused." 263 U. S., at 20–21. In Lone Star Gas Co. v. Texas, 304 U. S. 224 (1938), with the present Texas procedural provisions in effect, this Court's mandate issued to the Court of Civil Appeals in a case where the State Supreme Court had "refused" writ of error. See also United Public Service Co. v. Texas, 301 U. S. 667 (1937). Accordingly the appeals in Nos. 199 and 201, from the Supreme Court of Texas, are dismissed. We proceed to consider Nos. 198 and 200. 157 Opinion of the Court. The question presented is whether the Commerce Clause is infringed by a Texas tax on the occupation of "gathering gas," measured by the entire volume of gas "taken," as applied to an interstate natural gas pipeline company, where the taxable incidence is the taking of gas from the outlet of an independent gasoline plant within the State for the purpose of immediate interstate transmission. In relevant part the tax statute 2 provides that "In addition to all other licenses and taxes levied and assessed in the State of Texas, there is hereby levied upon every person engaged in gathering gas produced in this State, an occupation tax for the privilege of engaging in such business, at the rate of 9/20 of one cent per thousand (1,000) cubic feet of gas gathered." Using a beggared definition of the term "gathering gas," the Act further provides that "In the case of gas containing gasoline or liquid hydrocarbons that are removed or extracted at a plant within the State by scrubbing, absorption, compression or any other process, the term 'gathering gas' means the first taking or the first retaining of possession of such gas for other processing or transmission whether through a pipeline, either common carrier or private, or otherwise after such gas has passed through the outlet of such plant." It also prohibits the "gatherer" as therein defined from shifting the burden of the tax to the producer of the gas, and provides that the tax shall not be levied as to gas gathered for local consumption if declared unconstitutional as to that gathered for interstate transmission. Michigan-Wisconsin Pipe Line Company and Panhandle Eastern Pipe Line Company, appellants, are Delaware corporations and are natural gas companies holding certificates of convenience and necessity under the Natural Gas Act of 1938 for the transportation and sale 2 Tex. Laws 1951, c. 402, § XXIII. |