Ohio Oil Company v. Conway, 281 U.S. 146 (1930)

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Ohio Oil Company v. Conway

No. 440

Argued March 4, 1930
Decided April 14, 1930
281 U.S. 146

APPEAL FROM THE DISTRICT COURT OF THE UNITED STATES

FOR THE EASTERN DISTRICT OF LOUISIANA

Syllabus

1. A Louisiana severance tax on crude petroleum at specific rates per barrel, the rates varying in accordance with a classification of the oils based on the Baume Scale of Gravity, held consistent with Art. X, § 21 of the Louisiana Constitution, which provides that such natural resources

may be classified for the purpose of taxation and such taxes predicated upon either the quantity or the value of the product at the time and place where it was severed.

P. 158.

2. The Fourteenth Amendment imposes no iron rule of equality prohibiting the flexibility and variety appropriate to schemes of state taxation. P. 159.

3. A state may impose different specific taxes on different products, and, in so doing, is not required to make close distinctions or to maintain a precise, scientific uniformity with reference to composition, use, or value. It may classify broadly the subjects of taxation if it does so on a rational basis, avoiding classification that is palpably arbitrary. P. 159.

4. In laying a graduated specific severance tax per barrel on oils sold primarily for their gasoline content, resort to Baume gravity as the basis of classification cannot be regarded as palpably arbitrary, it appearing that gravity, though not invariably accurate as a test, is generally regarded in the industry as indicative of gasoline content, and is used by the industry, including the complaining taxpayer, in fixing the prices of such oils. P. 160.

5. A graduation of the tax on this basis, which treats all oils of the same gravity alike, is not repugnant to the equal protection clause of the Fourteenth Amendment merely because the tax falls more heavily upon some oils than upon others of equal gravity due to the fact that there are various gravity schedules of prices, and that some oils are sold at flat prices. P. 160.

6. The statute in question, by graduating the tax per barrel in accordance with a classification of oils based on their Baume gravity, had the effect of including in the division of lowest tax a class of oils valuable chiefly as a source of lubricating oil, rather than of gasoline, which are tested in the industry by their viscosity and sulphur content, not by their Baume gravity, and are not sold on the latter basis. It resulted that the tax on these oils was lower in proportion to value than that imposed on other oils not so well suited for making lubricating oil. Held that the discrimination was not repugnant to the equal protection clause, since the oils especially suitable for making lubricating oil might lawfully have been classified apart for taxation, or not taxed at all, because of their distinct composition and utility (Hesler v. Colliery Co., 260 U.S. 245), and the statute was not made invalid by the failure to describe them scientifically. P. 161.

7. The state is not prevented by the federal Constitution from putting the same specific severance tax on the same sort of oils, used in the same way, merely because particular producers of such oils obtain different prices for them. P. 162.

34 F.2d 47 affirmed.

Appeal from a decree of the district court of three judges which dismissed the Oil Company’s bill seeking to enjoin the enforcement of a Louisiana tax. The case was here before on appeal from an order denying an interlocutory injunction, 279 U.S. 813.