KOSYDAR v. NATIONAL CASH REGISTER CO.
Legal provision: Article 1, Section 10, Paragraph 2: Export-Import Clause
Argument of Dwight C. Pettay, Jr.
Chief Justice Warren E. Burger: We will hear arguments next in 73-629, Kosydar against the National Cash Register Company.
Mr. Pettay, you may proceed when you're ready.
Mr. Dwight C. Pettay, Jr.: Mr. Chief Justice, and may it please the Court.
This case concerns the continuing conflict between the State’s power to tax and the prohibition from taxing exports contained in the Import-Export Clause, which is Article I, Section 10, Clause 2.
This case originated by the Tax Commissioner of Ohio issuing a tangible personal property tax assessment against National Cash Register (NCR) and issuing it against their international inventories which were located and resting in Dayton, Ohio on a tax listing date which was December 31, 1967.
The National Cash Register appealed this assessment to the Ohio Board of Tax Appeals, which is an administrative body and it did affirm the Tax Commissioner.
Upon appeal to the Ohio Supreme Court by the NCR, the court in which we considered an unprecedented decision of 5:2 overturn 100 years, this Court has carefully developed the definition of export and held that the property in question was in fact an export.
It is our contention that tangible personal property located in a state on tax listing date is subject to the State’s right to tax.
And that’s especially clear where in a situation like this the property has received something from the state for which the state can ask something in return and where no movement of any sort has occurred toward a stream of exportation.
The facts in this case basically are not in dispute.
The National Cash Register Company has its world headquarters, main production facilities and warehouse in Dayton, Ohio.
It primarily manufactures cash registers, accounting machines and data processing machines.
It markets these throughout the United States and in 124 foreign countries.
When a foreign order is placed with NCR, it is sent to the factory in Dayton where the product is manufactured.
NCR maintains no inventory of machines, capable of meeting incoming orders from foreign customers.
This is because many countries will not allow a partial shipment and because in some cases, the import licenses cannot be gotten.
After the machine is produced and inspected, it is packaged for export shipment.
The property involved in this case was specifically constructed for foreign customers, finished, crated and in storage and inventory in NCR’s warehouse awaiting foreign shipment on December 31, 1967 when Ohio personal property taxation was assessed.
So on tax listing date, which was December 31st, 1967, payment had not been made to NCR by the perspective purchasers, no export license had been issued, no letter of credit authorized, the machines were in complete control of NCR, and of most importance, no movement toward the foreign destination had occurred.
And according to NCR’s on witness, this means the items were in inventory and that is prior to when the items had been put on board, the commercial carrier had actually left the shipping dock.
Some machines have remained in storage in the warehouse awaiting shipment for up to three years.
The record does show that no machines manufactured by NCR were ever diverted or are capable of being diverted to the domestic market.
Due to special construction, the machines could not economically be converted from domestic use and sale.
The record shows that against NCR’s profit margin of about 5%, the conversion cost would be approximately 16% of the cost of the machine.
Unknown Speaker: Would those machines have any scarp value at all?
Mr. Dwight C. Pettay, Jr.: I would imagine they would show the -- the record does not show that but I’m sure they would.
It is our position that in interpreting the Import-Export Clause of the U.S. Constitution, this Court has had at least seven occasions in which to consider the question and this started in 1886 and the last one was in 1949.
And in each of these cases, the Court has taken a consistent position and that being is that there is not export until movement -- final movement does occur.
I would like very briefly to discuss three of these cases if I may, which we think represents this Court’s opinion.
The first case of importance is Coe versus Errol and this was an 1886 case.
In that case, this Court dealt with a factual situation of spruce logs, which were cut in New Hampshire and placed in a stream to be floated down the river to Maine.
They were detained in Errol, New Hampshire by little water and they were taxed there.
This Court struggled with the issue of whether the products of the state are liable to be taxed like other property in the state though intended for exportation.
And the answer was yes.
This Court held that until there is actual or final movement that the goods apart from the general mass and property of the state and are subject to taxation.
The Court also stated that the owner’s state of mind, in other words, his intent did not cause the exemption from taxation to occur.
The next important case we believe is A. G. Spalding, which this Court considered in 1923 and the reason that case was important was because Mr. Justice Holmes noted that a point must be fixed at which the export must be said to begin.
He said, “It was important to note that because in some cases, there is a point very near on one side or the other and unless the point is fixed, any determination may seem arbitrary.”
The most recent decision of this Court and one in which the facts are most similar to this case is the Empresa case in 1949.
In that case, a cement plant in California was sold to a South American Corporation for export.
An export license was issued, title passed, and a common carrier was hired to dismantle and package the plant for shipment.
The county levied a personal property tax on the parts of the plant, and it had not been shipped out of the country.
Mr. Justice Douglas held that it was taxable stating that it is not enough -- intent to export is not enough.
It is in fact the entrance of the articles into the export’s steam that marks the start of the process of exportation and he stated that nothing less would suffice.
Chief Justice Warren E. Burger: Your recital of the facts just a few minutes ago would make that case enormously distinguishable.
The cement plant could be used anywhere couldn’t it?
In any country?
Mr. Dwight C. Pettay, Jr.: Yes, it basically could Your Honor but --
Chief Justice Warren E. Burger: And you’ve just told us that there's even doubt about whether there's scrap value to this cash registers.
Mr. Dwight C. Pettay, Jr.: There's nothing in the record to indicate whether there is scrap value or not.
Chief Justice Warren E. Burger: Well, so it leaves the matter in doubt that it is indicated that they are not suitable for the American market.
Mr. Dwight C. Pettay, Jr.: That is correct, Your Honor.
They are not --
Chief Justice Warren E. Burger: But the cement plant was suitable for the American market, wasn’t it?
Mr. Dwight C. Pettay, Jr.: It may have been.
I do not know from --
Unknown Speaker: But in the cement plant, wasn’t the tax imposed only on those parts thereof up not already in the stream of commerce?
Mr. Dwight C. Pettay, Jr.: That is correct.
Unknown Speaker: Those are only part of the cement plant that’s taxed?
Mr. Dwight C. Pettay, Jr.: That is correct.
Those that had been shipped there was no tax assessed --
Unknown Speaker: Are you not relying on the Joy Oil case when you say [Voice Overlap].
Mr. Dwight C. Pettay, Jr.: Yes, we did discuss it in the brief, Your Honor.
Unknown Speaker: The part of the cement plant that wasn’t taxed in Siderurgica had actually left the country, hasn’t it?
Mr. Dwight C. Pettay, Jr.: That is correct.
There was actual movement.
It had left the country.
In this case, there has been no actual movement at all other than from the actual manufacturing facility to the storage facility, which is in the same town, Dayton, Ohio.
We contend that these cases, which represent almost 100 years of Supreme Court precedence, say that a state can tax tangible personal property which is located in that state and the export exemption only attaches when the property is exported.
And that means when it has actually began its final movement in the export stream.
Unknown Speaker: Is there any historical justification for the view that the original meaning of this clause was to prevent a second state, was only to prevent a second state from imposing tax on imports, i.e. take this case of Ohio and contiguous to Ohio and Pennsylvania.
Ohio has no access to the ocean and the seas or the international trade, Pennsylvania does.
And that the purpose was to prevent Pennsylvania for laying a tax on exports from Ohio to the ports say of Philadelphia to go overseas.
Mr. Dwight C. Pettay, Jr.: Yes Your Honor, we believe that to be true and Madison’s debate, which we mentioned in our brief state that we believe or that the intent was to ensure the free flow of goods among the states and not --
Unknown Speaker: That the seacoast states couldn’t discriminate against the interior states and thereby get a competitive advantage in international trade.
Wasn’t that the historical background of this?
Mr. Dwight C. Pettay, Jr.: Yes, I believe it to be.
We believe that the test is not whether there is certainty of export as the respondent states here.
Certainly at some time in the future is not enough.
In the case at Bar on tax listing date, the property was resting in Ohio.
It was also a part of the general mass of property in Ohio and it was receiving something from Ohio in which Ohio -- for which Ohio had a right to ask something in return.
For example, take the property that was in Ohio for three years, if respondent’s position is correct, then during each one of those three years, the property was receiving services from the State of Ohio yet since there was certainty of export that Ohio could not levy a tax on these goods and we do not believe --
Chief Justice Warren E. Burger: Well, would not that same principle that you are now arguing apply if they took these items off of the end of the production line in the factory and loaded them on trucks on that very day took them to Philadelphia or Baltimore and put them on ships?
Mr. Dwight C. Pettay, Jr.: Yes --
Chief Justice Warren E. Burger: We’ve got some protection.
Mr. Dwight C. Pettay, Jr.: Some protection but from what were saying is they get a lot more by staying in the warehouse for three years.
And during that three-year period, the services provided by the State of Ohio make it more certain that these goods will in fact be in saleable condition when their export journey actually does commence.
So there is an additional service.
Unknown Speaker: Well aren’t those services covered by the tax on the warehouse
Mr. Dwight C. Pettay, Jr.: Maybe again in part, Your Honor.
Unknown Speaker: Maybe?
Well I assume that any warehouse in Ohio is paying property taxes.
Mr. Dwight C. Pettay, Jr.: That is correct, Your Honor.
But this is also a tangible personal property tax assessment.
The question is not whether NCR has paid a great deal of taxes --
Unknown Speaker: You emphasized (Inaudible)
Mr. Dwight C. Pettay, Jr.: Certainly not, Your Honor.
We believe that policy also dictates that the Ohio Supreme Court’s decision be reversed.
The effect of recognizing an earlier point would curtail a power of the state to tax and we believe that would be in conflict with the trend of recognizing the importance of meeting state revenue needs.
There is a tremendous growing need for state services and we feel that when property is in a state and located there and is part of the general mass on tax listing date that the right should be granted to the state to tax that property.
I believe I would like to save the rest of my time for rebuttal if necessary.
Chief Justice Warren E. Burger: Very well.
Argument of Roger F. Day
Mr. Roger F. Day: Yes, Mr. Chief Justice, and may it please the Court.
I think that we agree that there was a point in time where the immunity provided by the constitution will preclude a state or locality from the levying of tax upon it.
The question is simply when that that time and if that time has arrived in this case.
I will not dwell on the facts of this case because they're entirely not disputed.
There is no controversy or whatever I think between the state and the company over the facts.
But I would like to spend a few moments in addressing myself to the question, why should physical motion be required to be shown before the immunity provided by the export clause attaches?
It’s our position that in this case, there is no need whatsoever for showing physical motion before immunity does attach.
Simply because the physical character of the goods in question demonstrates conclusively that the goods can’t go any place else but overseas.
These machines are unique, they were built pursuant to foreign orders, they were constructed to serve foreign customers, they can’t be used in the United States, so when these machines have moved to the NCR warehouse, have been packaged and crated and are stamped of their exportation destination placed upon them, they are at that moment exports in every real sense just as much as the next day when they are loaded aboard the carrier.
Now the state --
Unknown Speaker: Would that be true Mr. Day even if they were kept in the warehouse for three years in that condition?
Mr. Roger F. Day: Yes, Your Honor, I think that is true.
It has been pointed out that there are some instances where this has occurred.
Those instances are not the everyday occurrence.
I want to make that clear.
There is certainly no incentive for National Cash Register to keep its goods stored in the warehouse.
The sooner they can move them out, the sooner they can get paid.
These instances that have occurred like that have occurred not because of NCR’s desire but solely because of problems with the foreign license problem, the foreign exchange problem that prevents them from sending them.
Unknown Speaker: Well you don’t say they're not in movement.
Mr. Roger F. Day: These goods that are in question are not in movement as of tax day.
They are in the warehouse of NCR.
Unknown Speaker: But why are they not being moved?
Mr. Roger F. Day: They are there for about three reasons, Your Honor.
The shipments that are made are made of an order.
And this order maybe composed --
Unknown Speaker: The reason is because you haven’t got the money.
Mr. Roger F. Day: Well, that maybe one reason Your Honor, yes.
Another reason is we have --
Unknown Speaker: But if you have got the money, is there any other reason?
Mr. Roger F. Day: Yes, there is Your Honor.
The other reasons are these.
The goods are not -- these machines are not all produced at one time.
They are produced day by day so they have to be collected until the entire order is ready for shipment.
That’s another reason.
Another reason is --
Unknown Speaker: Well, away from these, I assume the whole order groups are still sitting there?
Mr. Roger F. Day: I’m sorry?
I didn’t understand your question.
Unknown Speaker: Well you don’t send them until you get the money do you?
Mr. Roger F. Day: On some occasions, yes.
They will be sent on open account on some instances.
On some instances, they will be sent on letters of credit --
Unknown Speaker: There are some countries you won’t send them to until you get the bank -- get the money and put the money in bank and make sure it stays there, isn’t that right?
Mr. Roger F. Day: I think that’s probably true Your Honor, yes.
Unknown Speaker: But your whole point is that they are not in transit by any stretch of imagination.
Mr. Roger F. Day: That is absolutely correct.
We do not contest that one bit.
Unknown Speaker: Right.
Mr. Roger F. Day: The question to which I want to address myself is why should motion be required?
Now the state I’m sure would concede --
Unknown Speaker: Mr. Day, in that connection, how does your case differ from the old case involving the logs that were detained up in New Hampshire on the way to Maine?
Mr. Roger F. Day: It differs in this respect, Your Honor.
They were dealing there with logs. Logs is a commodity that has a domestic use equal to a foreign use.
In short, logs can be used anywhere to make lumber.
And now in that instance like Joy Oil which involved gasoline, and like the other cases which involves goods of that type, there is no way on tax listing date that you can say for sure that those products or those goods are going to go abroad unless they have been evidenced to be in motion.
Unknown Speaker: Well, then you're placing everything on fungibility, aren’t you?
Mr. Roger F. Day: Fungibility is one word that can be used, yes.
I think more accurately, whether or not the goods have a domestic use.
Whether they are fungible or not is a crucial inquire.
Unknown Speaker: Was the cement plant part fungible?
Mr. Roger F. Day: It was not fungible, Your Honor and that’s why I alluded to the domestic use.
The Empresa case dealt with what was termed as cement plant.
That was only a convenient term of reference.
As a cement plant, it involved a whole host of things, machinery and equipments, supplies, parts and a cement plant which was in process of being dismantled.
As of tax listing day, I think the record in that case revealed that about 10% of it had been shipped.
I don’t know what that 10% was whether that was 10% in weight or value but 10% had gone
.The remaining 90% rested where it had always been and it had been used there domestically year after year.
Now my point is this, that plant had been used in the United States, it could be used again.
Unknown Speaker: You mean, the 90% of it could be?
Mr. Roger F. Day: Yes, I think it could.
10% could’ve been replaced.
The record did not show it could not be.
I wonder if the decision might not have been different in that case if 90% had gone and 10% remained.
Unknown Speaker: But 40% was crated, wasn’t it?
Mr. Roger F. Day: There was 78% and again, I don’t know of what in the Empresa case that remained either uncrated or unassembled.
There was a small part that was crated and then there was 10% that had been shipped.
Unknown Speaker: It seems to me what your argument comes down to and maybe its perfectly sound is really certainty of destination.
Mr. Roger F. Day: That is the point I think, Your Honor.
Unknown Speaker: And this sounds to me like it’s a single test rather than a double on that the old cases seem to propose.
Mr. Roger F. Day: I don’t believe that the old cases really set up a double test, Your Honor.
I think that the cases that have been cited and argued to this court show this that movement -- physical movement is one of the indicia of certainty of exportation.
How can anyone say with things like gasoline and oil or cement plant for that matter that on tax listing day, they're bound to go abroad?
They might just as well find a domestic home.
You can use gasoline, oil, cement plant, baseball bats just as well in Iowa as you can in France or Germany.
That’s not true of all of these machines here.
Chief Justice Warren E. Burger: But what you're saying really is that all of these machines were irreversibly committed to interstate commerce -- international commerce?
Mr. Roger F. Day: Your Honor, Mr. Chief Justice that’s exactly what we’re saying.
Chief Justice Warren E. Burger: And which --
Mr. Roger F. Day: They were committed irrevocably and irreversibly to the export process.
And they were just as firmly and irrevocably committed the day before they were shipped as five minutes after they might have been put on board carrier.
Unknown Speaker: How about during the period while they were being manufactured, would you say that this test would say they were exempt then?
Mr. Roger F. Day: No, Your Honor, we’ve made no claim for any goods during the course of manufacture.
Now, we have not made that claim for two reasons.
Before the goods are entirely assembled, they are just a collection of parts.
And during the course of manufacture, one part is added to another and the assemblies are put together.
So until they are completely made, they're not so distinguishable from any other machines.
That is why our claim goes only to those machines which have been fully manufactured, have been moved to the warehouse and crated and stored there awaiting the carriers’ arrival.
Unknown Speaker: With the label on?
Mr. Roger F. Day: With the label on Your Honor, yes.
Unknown Speaker: Mr. Day, before you go on, does respondent manufacture these machines only where they have specific orders for them or does it manufacture generally for inventory -- the finished goods inventory?
Mr. Roger F. Day: Mr. Justice, the record is very clear on this point.
The machines in question are manufactured solely pursuant to foreign order.
Not one of these machines is built prior to that time.
None of the machines would have existed or have not or advanced prior order.
Unknown Speaker: This is a specific order for so many machines of such and such of type.
Mr. Roger F. Day: That is correct Your Honor or more accurately a collection of machines --
Unknown Speaker: Right.
Mr. Roger F. Day: Arising from specific orders.
Unknown Speaker: And you said I think that they were crated and the destination of each crate is on the crate?
Mr. Roger F. Day: That’s correct Your Honor, they're in the warehouse, stamped and packaged.
Unknown Speaker: So you know whether it’s going to Venezuela or to Britain?
Mr. Roger F. Day: That’s correct, Your Honor.
Chief Justice Warren E. Burger: Does the record show that any of them in the past have ever been diverted and not shipped?
Mr. Roger F. Day: The record shows that every machine that has gone into the international division has without the exception found to foreign destination, without exception, I say.
There is one -- there was an instance or two where unfortunately, the original order aborted because of one reason or another.
But the company was able to find a home for those goods in another country that could accommodate them or the language was the same.
But even that is a rarity.
I think that your question raises an important point in this case.
All the prior cases have been singular incidence that is one order for a million gallons of gasoline, one order for a cement plant, one order for a thousand gallons of oil.
Here, we don’t have one order.
We have here a continuing business proposition of shipment after shipment after shipment, day after day, month after month.
And I think that this must affect the illegal conclusion.
Most certainly, if the evidence showed that only 50% of these machines actually found a foreign destination, I don’t believe it would be here today because if they all did not go, it would certainly raise a substantial question as to the remaining machines back in the warehouse.
We can’t overlook that point.
I think it’s an element of proof that’s almost conclusive.
I would like to address myself further this concept of motion.
The state argues and I expect would concede that if these goods were just simply loaded on a carrier, on tax listing day, just bringing them out there and putting them on a railroad car, a truck, maybe an airplane.
And then at that magical moment, this veil of immunity would settle over them.
I think that is a too superficial view of what immunity means here.
Most certainly, these goods are as much an export two seconds before they get on that carrier as they are two seconds afterwards.
And if they are to be diverted, I suppose NCR could order them taken off but that does not occur.
Why doesn’t it occur?
Because there's no place else for these goods to go but to the foreign destinations to serve those prior orders.
Unknown Speaker: I guess that I would agree too if you put them on the railroad warehouse, wouldn’t it?
Mr. Roger F. Day: I’m sorry sir, I didn’t understand.
Unknown Speaker: I assume both sides would agree if you put the cash register in the warehouse of the railroad.
Mr. Roger F. Day: I expect the state would concede, I would know about that without asking them.
The state argues one further question -- one further point that it alludes generally to what I call a quid pro quo argument.
The state says, “We’ve done something for you.
We should receive something in return.
Unknown Speaker: May I ask Mr. Day in that respect, is there any average time that a given machine sits there in the warehouse, does it -- is there something like an average of two months, three months, two years or something?
Mr. Roger F. Day: The record has not revealed that, Your Honor and I am unable to answer that.
Unknown Speaker: But do I understand that an order maybe for a number of different machines?
And the order all has to be shipped at once and some things are manufactured and stored but not shipped because you have to wait until the rest of the orders were manufactured, is that so?
Mr. Roger F. Day: That’s one of the reasons, yes.
Unknown Speaker: And now, and then what’s this about foreign countries sometimes then take import permits or something?
Mr. Roger F. Day: Import, yes, in order for the goods to be exported abroad, there must be an import license granted by many countries.
Unknown Speaker: Yes.
Mr. Roger F. Day: They simply will not let goods come in willy-nilly unless they approve it.
Unknown Speaker: And even though some parts there -- maybe anxious to get what they ordered from you.
They can’t until they gets the permit to bring it in, is that it?
Mr. Roger F. Day: That’s correct, Your Honor.
Unknown Speaker: And sometimes, that takes a long time, does it?
Mr. Roger F. Day: That’s correct, it does at times.
Unknown Speaker: And it’s on the average or about that or --?
Mr. Roger F. Day: I cannot answer that.
That the record does not state it and I do not know as a matter of fact.
All I know is that they try to speed up the process as much as they can.
Unknown Speaker: And is there any problem with shipping which causes delay or something?
Mr. Roger F. Day: Yes, they have problems in shipping at times.
Unknown Speaker: And then I gather there is also that Mr. Justice Marshall asked earlier sometimes problems of financing?
Mr. Roger F. Day: Yes, that is a big problem.
You cannot -- many countries in the world will not permit goods to be brought into that country unless they're sold on certain financial terms.
This is a balance of trade.
Unknown Speaker: Yes.
Mr. Roger F. Day: Balance of payments problem, that’s encountered often.
I was going to allude briefly to the state’s argument on quid pro quo, which is simply; they ought to be paid something for having done something for NCR.
Now, I don’t know for sure what that something is.
It is an argument of general governmental services by and large but we point out on our brief that the National Cash Register Company has already paid its way here.
The parts, the assemblies of these machines have been subjected to Ohio personal property tax and we have paid on those.
And we can scarcely see why the general argument that the state ought to receive money should in any way dilute the immunity granted by the constitution.
I suppose that the State of Ohio was saying that this Court should in some way weigh the export immunity as it has in the Commerce Clause area.
We do not believe that the Commerce Clause can be equated with the Export Immunity Clause simply because the import-export immunity granted is a very clear prohibition.
There is not a room for interpretation as there is in the Commerce Clause area.
I believe that the Supreme Court of Ohio put their finger on this case right on the crux of it when they said that in this case, the certainty of exportation has been fully proved.
And it’s fully equivalent to any other test this Court has used in the past whether it be delivery to a common carrier, delivered to a private carrier, or physical movement.
In short, on tax listing day, these goods were as much export as they would be at any other time.
That I think is the only question involved here.
I will not do more than allude to the national interest in exportation at this time.
I think it’s a self-evident proposition.
I do not know how much weight that should be given but if the state argues that the state’s interest in taxation is a great one, then I would submit to this court that the national interest in fostering exportation at this time is greater than it ever has been in our history.
This has been evidenced by Congressional actions, executive actions, etcetera, etcetera.
Unknown Speaker: Well, would a decision against your client in this case prevent or impede or impair exportations?
Mr. Roger F. Day: I think it might but it’s very difficult for us to prove that.
I believe that maybe this is an instance where the state should have approved this.
Who can say when a tax will become such a burden that it becomes difficult or insurmountable burden?
Any tax is an item of cost and in order to compete abroad, all of these items of cost build up to the point where ultimately, you can’t compete.
I don’t know where the point is but there will be a time when there's an additional straw will break the camel’s back.
I don’t know where it is, though.
Unknown Speaker: Thus, Mr. Day, this factor ten years hence, might cut the other way?
Mr. Roger F. Day: It might indeed.
Unknown Speaker: And you’re not suggesting that the law should changed because the factors changes?
Mr. Roger F. Day: No, Your Honor, I’m not suggesting in this case that the law should change.
In fact, our whole argument is that this case in no way cuts across any prior decisions.
The prior decisions of this Court have been fashioned for specific factual circumstances with the ball bats, with the oil, with the gasoline, those were all commodities that could be used here in the United States.
So in determining when the certainty of exportation of those goods was to be fixed, it was a very reasonable conclusion to say only upon delivery to a carrier.
Not so here, the time for fixing the immunity here is in the warehouse.
That is when they have become fixed irrevocably committed.
Unknown Speaker: Mr. Day, this is really not very relevant to this case.
But I have had some time to time discussions with some of my brothers about the syllabus rule in Ohio and my recollection is that by way -- by reason of statute in Ohio, the syllabus is the law and the only the syllabus is the law in a case in the Supreme Court of Ohio except when it’s a per curiam opinion in which cases, the whole per curiam is the law and there is no syllabus, do I -- is that is my recollection correct?
And if so is --
Mr. Roger F. Day: I think your recollection is essentially correct on that, Your Honor.
If there are no other questions, that concludes our argument.
Chief Justice Warren E. Burger: Thank you Mr. Day.
Do you have anything further counsel?
Rebuttal of Dwight C. Pettay, Jr.
Mr. Dwight C. Pettay, Jr.: Mr. Chief Justice, we believe the issue in this case is the state’s right to tax tangible personal property located within that state and if that’s the primary issue, not whether there is -- whether the test is not certainty of export.
It’s the state’s right to tax.
In that sense, I would like to quote from Joy Oil where this Court said that, “The Export-Import Clause was meant to confer immunity from local taxation upon property being exported, not to relieve property eventually to be exported from its share of the cost of local services."
And there's nothing in the record to show that these specific machines have been taxed.
They have not so that although National Cash Register is paying real property taxes and maybe paying other types of tangible personal property taxes on other things, it has not paid any taxes on the specific machines and issue here today.
Although some of them conceivably could’ve been in Ohio for several or at least for a period of time and derived services during that period of time.
Secondly, there is no evidence in the record to show what effect if any Ohio tangible personal property taxation had upon these goods in question, whether they had any effect or whatsoever on their salability or NCR’s ability to compete in the foreign market.
The amount of tax here in question today is slightly less than $50,000.00 although the actual assessment was $1 million when you reduce that by the applicable percentage, we are only talking about $50,000.00.
Unknown Speaker: Annually?
Mr. Dwight C. Pettay, Jr.: It varies from year to year.
Unknown Speaker: Well, $50,000.00 what?
Mr. Dwight C. Pettay, Jr.: It would be for this one year, 1968 additional assessment.
There was another assessment.
Unknown Speaker: How does this case arise now?
Hasn’t this been going on for sometime that the Tax Division just catch-up to it or what?
Mr. Dwight C. Pettay, Jr.: No, an assessment was made and there generally is a several year lag between when property is returned and when an audit is made by the tax commissioner staff and the various levels of litigation involved.
Unknown Speaker: But I take that NCR has been doing this for years.
I just wondered what made it important as of 1967 or whenever it was?
Mr. Dwight C. Pettay, Jr.: I believe in this specific year, National Cash Register filed what they call a 902 claim in which they asked that the international inventory be released from tangible personal property taxation based upon this issue at the tax commissioner’s level and the tax commissioner refused.
Unknown Speaker: Does that imply it was taxed before?
Mr. Dwight C. Pettay, Jr.: To the best of my knowledge, it was but there's nothing in the record to that effect.
Unknown Speaker: The case in many respects says a 1930 character to it.
It’s the kind of litigation that was fashionable then rather than now.
Mr. Dwight C. Pettay, Jr.: Very well be.
Finally, I think it’s important to note that the present test that this Court has provided for us is objective, whereas the test of certainty of export is very subjective.
We believe that contrary to respondent’s position that the -- one of the primary reasons there has been little litigation on this subject is because the test as it currently exists is objective rather than subjective.
And we believe that the test if adopted by this Court as proposed by the respondent would become a subjective test and would be much more difficult for tax personnel to administer, and also, a much more difficult for taxpayers to perceive and follow adequately.
Chief Justice Warren E. Burger: Thank you gentlemen.
The case is submitted.