Tom C. Clark

“ 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. ”

“ This economic process is inherently unsusceptible of division into a distinct local activity capable of forming the basis for the tax here imposed, on the one hand, and a separate movement in commerce, on the other. It is difficult to conceive of a factual situation where the incidence of taking or loading for transmission is more closely related to the transmission itself. This Court has held that much less integrated activity is 'so closely related to interstate transportation as to be practically a part of it'. ”

“ The company produces no gas; it purchases its supply from Phillips Petroleum Company in Texas, under a long-term contract. Phillips collects the gas from the wells and pipes it to a gasoline plant, where certain liquefiable hydrocarbons, oxygen, sulphur, hydrogen sulphide, dust and foreign substances are removed preparatory to the transmission of the residue. As this residue gas leaves the absorbers it flows through pipes owned by Phillips for a distance of 300 yards to the outlet of its gasoline plant, at the boundary between property of Phillips and property of Michigan-Wisconsin. ”

“ Numerous cases have upheld state levies where it is thought that the tax does not operate to discriminate against commerce or unduly burden it either directly or by the possibility of multiple taxation resulting from other taxes of the same sort being imposed by other states. ”

“ But the processing, on which this tax is not imposed, was done by Phillips and took place prior to the taxable event of 'taking.' As for the interference of title passing, appellees readily admit this levy was designed to avoid taxing the sale; and we think that, as a basis for finding a separate local activity, the incidence must be a more substantial economic factor than the movement of the gas from a local outlet of one owner into the connecting interstate pipeline of another. ”

“ Carter & Weekes Stevedoring Co., 1947, 330 U.S. 422, 427, 67 S.Ct. 815, 818, 91 L.Ed. 993, for the gas here simultaneously enters the pipeline carrier and moves on continuously to its outside market. 'There is no break, no period of deliberation, but a steady flow ending as contemplated from the beginning beyond the state line.' United Fuel Gas Co. v. ”

“ We accept the State court's determination of the operating incidence of the tax, and we think the court has correctly stated the essential question presented. But we are unable to agree with its answer thereto or with its conclusion of constitutionality.
Appellants' business is the interstate transportation and sale of natural gas. Under the Commerce Clause interstate commerce and its instrumentalities are not totally immune from state taxation, absent action by Congress. Frequently it has been said that interstate business must pay its way, Postal Telegraph-Cable Co. ”

“ And if a genuine separation of the taxed local activity from the interstate process is impossible, it is more likely that other states through which the commerce passes or into which it flows can with equal right impose a similar levy on the goods, with the net effect of prejudicing or unduly burdening commerce. ”

“ Michigan-Wisconsin has constructed a pipeline extending from Texas to Michigan and Wisconsin. At points in these two States and in Missouri and Iowa it sells gas to distribution companies which serve markets in those areas. [3] It sells no gas in Texas. ”

“ Stone, supra; Western Live Stock v. Bureau of Revenue, supra; Edelman v. Boeing Air Transport, 1933, 289 U.S. 249, 53 S.Ct. 591, 77 L.Ed. 1155; Chassaniol v. City of Greenwood, 1934, 291 U.S. 584, 54 S.Ct. ”