Vinmar, Inc. v. Harris County Appraisal District

947 S.W.2d 554, 40 Tex. Sup. Ct. J. 697, 1997 Tex. LEXIS 57, 1997 WL 336316

• Court: Texas Supreme Court
• Decided: June 20, 1997
• Docket: 95-0243
• Status: Published

Opinions

ABBOTT, Justice,

delivered the opinion of the Court,

in which GONZALEZ, CORNYN, SPECTOR and BAKER, Justices, join.

This is an appeal of a trial court’s judgment in favor of the appraisal district in a suit protesting the assessment of property taxes on goods awaiting export. Because we conclude that the tax violates the Commerce Clause of the United States Constitution, we reverse the judgment of the court of appeals and remand this case to the trial court for entry of judgment consistent with this opinion.

I

Vinmar, Inc. is a Texas corporation with its principal place of business in Houston. Upon receiving an order from a client in a foreign country, Vinmar purchases plastic resin from vendors in the United States. After Vinmar purchases the resin, it seeks the foreign import clearances, currency clearances, and letters of credit necessary to complete the transaction. The Harris County Appraisal District assessed taxes against the resin held by Vinmar in a Houston warehouse on January 1 of 1989 and 1990.

The facts in Virginia Indonesia Co. v. Harris County Appraisal Dist. and Harris County Appraisal Review Bd., 910 S.W.2d 905 (Tex.1995), cert. denied, — U.S. -, 116 S.Ct. 2523, 135 L.Ed.2d 1048 (1996) (“VICO ”), are strikingly similar to the facts in this case. In VICO, just as in this case, the Harris County Appraisal District assessed taxes against property that VICO purchased for export and temporarily stored in Harris County while awaiting import clearance and related transportation activities. In VICO, we held that the assessment of ad valorem taxes against such property violated the Import-Export Clause of the United States Constitution. Virginia Indonesia Co., 910 S.W.2d at 906, 915.

In this case, Vinmar does not assert that the tax violated the Import-Export Clause. Instead, Vinmar relies on the Commerce Clause and the Equal Protection Clause of the United States Constitution.

II

Vinmar asserts that the property tax assessed in this case violates the Commerce Clause of the United States Constitution. The United States Supreme Court set out a four-pronged test for evaluating whether a state tax complies with the Commerce Clause of the United States Constitution. U.S. Const. art. I, § 8, cl. 3. To be valid, a state tax must: 1) apply to an activity having a substantial nexus with the taxing state; 2) be fairly apportioned; 3) not discriminate against interstate commerce; and 4) be fairly related to the services provided by the state. Complete Auto Transit, Inc. v. Brady, 430 U.S. 274, 279-287, 97 S.Ct. 1076, 1079-83, 51 L.Ed.2d 326 (1977). If the tax is on foreign commerce, in addition to the Complete Auto criteria, the tax must not: 1) create a substantial risk of international multiple taxation; or 2) prevent the federal government from speaking with one voice in its regulation of commercial relations with foreign governments. Japan Line, Ltd. v. County of Los Angeles, 441 U.S. 434, 451, 99 S.Ct. 1813, 1823-24, 60 L.Ed.2d 336 (1979). In order to establish that a state tax is unconstitutional, the taxpayer need only prove that the tax fails one of the six criteria announced in Complete Auto and Japan Line. See Container Corp. of Am. v. Franchise Tax Bd., 463 U.S. 159, 175-76, 103 S.Ct. 2933, 2945-46, 77 L.Ed.2d 545 (1983).

The one-voice prong of the test used to analyze state taxes under the Commerce Clause is the same as the one-voice prong of the test used to analyze cases under the Import-Export Clause. Itel Containers Int’l Corp. v. Huddleston, 507 U.S. 60, 77, 113 S.Ct. 1095, 1105-06, 122 L.Ed.2d 421 (1993). In VICO, this Court held that an ad valorem tax assessed against goods awaiting export under the same circumstances as in this case violated the one-voice prong of the Import-Export Clause test. Virginia Indonesia Co., 910 S.W.2d at 914. Likewise, the tax in this case interferes with the federal government’s ability to speak with one voice in its regulation of commercial relations with foreign governments. See Japan Line, 441 U.S. at 449-51, 99 S.Ct. at 1822-23. Thus, we hold that the tax on Vinmar’s goods violates the Commerce Clause of the United States Constitution.¹ See Itel Containers Int’l Corp., 507 U.S. at 77, 113 S.Ct. at 1105-06; Cf. Virginia Indonesia Co., 910 S.W.2d at 915.

Accordingly, pursuant to Rule 170 of the Texas Rules of Appellate Procedure, the Court, without hearing oral argument, reverses the judgment of the court of appeals and remands the case to the trial court for entry of judgment consistent with this opinion.

1 . Because we find that the tax in question violates the one-voice prong of the Complete Auto/Japan Line test, we do not address Vinmar’s other point of error.