/audio/cases/1958/9_19581112-argument-2.mp3 ./1958-xml/9_19581112-argument-2.xml Felix Frankfurter Carlton S. Dargusch, Sr. Charles E. Whittaker Hugo L. Black Earl Warren William J. Brennan John M. Harlan There were 2 matches for "Mr. Justice Harlan". William O. Douglas William Saxbe An advocate profile for "Mr. William Saxbe" was automatically generated because an existing match could not be found. Unknown Speaker Potter Stewart John M. Tobin An advocate profile for "Mr. John M. Tobin" was automatically generated because an existing match could not be found. Youngstown Co. v. Bowers
Argument of Carlton S. Dargusch, Sr. I'd like to infer insert the time the Brazilian or (Inaudible) wasn't standing there for an unlimited time, it was a -- it was a consumed and a replenished file -- And continue to use. -- with not more than three months -- not less than three-judge (Voice Overlap) -- Well, not less than three months supply in continuous use. In continuous use. Yes, sir. So that when they assumed it wasn't there for two years, it hadn't -- it hadn't become as it were localized there. That is right, sir. But there's some mark of it (Inaudible) might be therefore in the brief, is that possible? Yes, sir. That's possible. (Inaudible) That is right, sir. (Inaudible) as I understand it clearly (Inaudible) That is right. Some distance away to the stock bin or the stock house. And to answer the question that you propounded just before the court recess, we have raised no question as to the taxability of the ore in the stock bins and stock houses, only as to the ore that remains in the major storage pile. In this storage yard, where the ores are kept in (Inaudible) pile and is that yard continuous to the mill? In a general sense, yes, sir. Although the distance of transportation will vary anywhere from a fourth of a mile up to three miles. Well, you have many operations in the mill, was it? You don't get this back. Yes, sir. Now, your statute got (Inaudible) Yes, sir. As I said in the record, you will see the maps which show the location of the manufacturing facilities in the various storage yards. What -- where is the state statute printed in your brief on the -- this map that -- under which you have made that parameter. At the back of the -- What -- which -- what number is the (Inaudible)? Mr. Justice Black, if you'd look at page 43, the Appendix 1, you will see the general statutes of Ohio, the revised statutes which are said to delay this tax on -- on imports. Which one in particularly then? Does it delay tax on anything but import? Oh, it doesn't specify imports at all. It just says all personal property located and used in business without any specification of imports or such at all. Suppose this ore had come from some state where they have ores say like Alabama.Would it -- would the state tax cover it? Yes, sir. Would you have any question about that? Yes, sir. You -- you challenge that? Yes, sir. Under certain circumstances. Under these circumstances? Not to imports, no, sir. Well, I mean, what would be -- what would be your challenge? Our contention as to domestic ores would turn on the question of whether they were held for storage only and that we get into, in this case, in the people protection phase of it. We have not contended that -- that any ores at Youngstown, however, are excluded, but only those ores on Lake Erie docks. But that's the other branch of the case. I thought the obstruction couldn't (Inaudible) That's right, Mr. Justice Whittaker. Now, may I ask when one more thing (Inaudible) Yes, Mr. Justice Frankfurter. -- whether it's exacted or taxed? Was the tax on -- on piles that -- for all one knows may have been there for years because I take it this is the last in, first out so far as new systems (Inaudible), is it -- would it be that at the bottom it might be there forever, it might (Voice Overlap) -- It is possible. What? It is possible. Now, what I want to know is whether the tax can on any reasonable basis, it couldn't get to stockpiles there over the years rather than current use. Well, the tax is laid under the statute would apply it with the whole pile. To the whole pile? Yes, sir. Yes, but it would have to apply the stuff that you take out currently. Well, the tax does in fact, if you understand, under our type of system. In Ohio, you report your inventory on a monthly basis.So the ore that might have been in the storage pile on January 1, might very well as of February 1st have entered into the manufacturing process and had been included as a part of materials and inventory. What I want to know is whether on the January assessment basis, it might have been on board and has been there for five years. That is possible. But is the tax that was actually levied in controversy in this case attributable? Is it fairly to be attributed to piles -- the stock that has been there for five years? As I've answered the question before, I think I answered it correctly, it's attributable to the whole pile. The most recent is (Voice Overlap) -- Was the whole pile have been there five years? No, sir. All right. (Inaudible) As I understand your system in Ohio, inventories are reported at the end of each month and then the aggregates was divided by 12 and that's the amount? That's -- That is right, Mr. Justice Whittaker. I -- I didn't quite get your answer to Justice Frankfurter's question. Will you say, it could not be there for five years. What did you understand his question to -- to be and what -- what -- I didn't know I said it could not be there for five years. I said it was possible. (Voice Overlap) my question, your tax on those (Inaudible) Yes, sir. Now, what I want to know, could that whole corpus on which the fact of this case have been there five -- Not the whole corpus, no. All right. But suppose you'd have another pile, supposed you had -- instead of having one pile for each nation, you had two piles and in one pile, you -- you put -- you -- in one pile, you left there for five years. Yes, sir. The other pile, you -- you kept more or less current as you do in this one thereby moving it out through the mills. Would you claim exemption on the other pile was there for five years? Certainly. No difference between the two at all? No. In your -- in your position? That's right, sir. Yes. That's all I want to know. And you do use -- you told about each pile in your normal processes every day. That is right, sir. And that's why you answered my question that the tax couldn't have been on an order has been there for five years within -- in the entire time that you were taxed. That is right, sir. But may I ask this? Yes Mr. Justice Brennan. Is this -- did I understand your answer to Justice Whittaker that the assessment is computed on the basis of the quantity refers to some date of each month -- The last -- (Voice Overlap) -- The last date -- day of each month. The last day of each month. So that -- is that to say that the assessment in fact is not the assessment against a particular pile as of a given date, but rather a -- an assessment measured in the manner you stated on the whole years intake divided by 12 as of the quantities of different dates but the same date of each month, (Voice Overlap) -- Well, I suppose those are -- I think that's right. You take the value as of the last day of each month, add the 12 together, get the total and divide it by 12 -- by 12 to get an average inventory for the entire year. Well, what I'm -- what I'm really getting at is this. A house sits there all the time and the -- Yes sir. -- the assessment on the house, I take it, is an assessment against that particular house. Right. But you don't get that kind of assessment period, do you, against the exact quantity on hand on a given tax day. What you get is the exact quantity in the sense after all is the dollar value of the ore -- Yes. -- would reflect in turn the number of tons that were in the pile. Yes. But would this possible -- what is your tax day? Is there a tax day, an assessment day? Normally in Ohio, January first of this time. Well, now -- I might understand that it might be possible that you would have, if the assessment date is as of the first whatsoever month. You might have 11 months with something on hand, but nothing on hand on the first of January and yet have an assessment computed the amount of the year. No, no. You would have no tax. And in other words, there has to be something on hand as of the first month. That's right. If you were not a taxpayer on January first. I would have to answer your question that way. If you are not a taxpayer on January first, then there would be no averaging of the inventory. All right then. But under the decisions of our Supreme Court, you divide it by 12 as long as your in business even though you have inventory only two or three months. Well, that's what I'm getting at. So, it's not like the house, isn't it? That isn't our case. Yes. Is there any challenge on that ground? No, sir. If you have a -- if you had a thousands tons of the ore in this pile on the taxable date, but you had used a hundred thousand tons during the year from this -- from this stockpile, you would be taxed just on the thousand tons. That is right, sir. Were it complete and different, how long that pile has been there? That is right, sir. Even you know the State make a differentiation as to the length of a -- of a situation. No differentiation. Both of you agree on that? Either we agree or not, we don't make any differentiation. (Voice Overlap) -- no different than you make. No, sir. That's right. All right. My question is, the record to the fact that it -- my mind might make of it. (Inaudible) Well, even -- even more than that as I will develop -- develop my point to make it in to the argument, Mr. Justice Whittaker. I think we should come now to the matter of domestic storage that was stored on Lake Erie docks at Cleveland and Ashtabula, iron ore which had been produced in the United States and which would be ultimately transported to Youngstown but had not been so moved on tax listing day. The question we raised there is whether we are denied of the equal protection of the laws in that -- that same ore belonging to a nonresident would be exempted from taxation while our ore, of a resident, is held taxable for the year 1954. Now, coming to the argument. We start off first to the proposition, which I don't think is challenged by the State that imported goods in original packages are not taxable in Ohio. So that brings our problem down to the question as to whether punishable bulk ores are to be treated differently than packaged goods. We say of course that there can be no distinction because the ores held in the storage yard which came from the five foreign companies named were in the same form in which they were imported. (Inaudible) when you made daily use of the pile. Well, we think not and we don't believe our case was any different from the case decided by this Court in -- in 1945, the Hooven-Allison case. We don't think withdrawal of a small quantity of ore from a pile rendered the remainder of a taxable. We -- we concede in effect that when you take a portion away and take it to the stock houses or stock bin that as to that portion, there's a taxable income. Perhaps, we just don't argue the question, but as to the remainder -- (Voice Overlap) -- -- we say that taxability is not created by the removal of a part. Well -- if that is a package, how could you break it? I don't know. Otherwise then by putting (Inaudible) Maybe that shows that we ought to go unpack it into the ground. How can you deal with this (Inaudible) [Laughs] (Inaudible) Well, in that case, Mr. Justice Harlan, you had one single large package which contained a number of smaller packages and all the Court held in that case was that the opening of the larger package rendered the remaining packages were then the large package taxable. No question as to any other packages which might have been in the possession of the -- of the owner in that case. Well, within that form, the ultimate disposition by the importer would be made. Isn't that -- is that right? Correct. Yes. So we contend under the decisions of this Court, there should be no distinction drawn between packaged goods and between so-called bulk tangibles such as iron ore. The State contends and we reject of course that contention that when we add a shipment of identical ore, Brazilian ore to Brazilian ore that we have comingled, we obviously have not, because the character of that ore has not changed in any respect. The State further contends that when we withdraw a quantity that we in effect had broken the package. There are only two cases that we know of. One is the Stanton case in California cited in our brief and the other is the -- I believe South Port on their main on their main case in which the vessel itself is held to be the package. That theory has not been followed consistently by the courts in this country. After all, the package isn't -- if this happened to be a breakable entity and Chief Justice Marshall began to talk about it. But package isn't a legal conception or is it in the constitution? What's all this about? We have to find, we have to analogize all sorts of package in order to sustain your position. No. Then what is it about? What the decision that we have been arguing, this is or is what package and whether it is or isn't breakable except taking part of it? We say -- (Voice Overlap) -- -- very simply that until the ore is put to the use for which it was imported that it retains its constitutional immunity. Well, I doesn't understand that, but when -- you talk about ore being a package, my imagination -- in the limited lawyer's imagination for that. Well, Mr. Dargusch, at what point -- at what point do you concede that it loses its exemption as an import? When it is put to the use for which it was imported, which is to put the -- put in to manufacturing. Now, at what point in the putting it to be manufactured? Do you concede that moving it from the one pile to the other pile destroys the exemption? Now with that, do you mean from a -- I mean -- -- storage yard to the stock bin? To the stock bin, yes. Do -- does that break up there? Yes, sir. Is it -- do you -- or do you stand on that -- that position that that's the breaking point? No. We didn't raise that question. But -- we didn't raise that question as far as we were concerned in order to simplify this case, but only to contend that the ores in the storage piles were immune from taxation. If you were to follow literally the language of the case Hooven-Allison case, the immunity is not lost until you act upon the ore by putting it in to the manufacturing process. I would certainly agree that at that point the immunity is lost. Holding -- (Voice Overlap) -- Oh, pardon me, go ahead. Suppose it was stored for 10 years, you didn't have this date (Inaudible) Suppose, stored in 10 years and then you -- would that make any difference in your argument? No. I don't think so. Is that this case? No, sir. Well is this, this case if it is stored for the purpose of being used in the normal processes as a (Inaudible) would that be put? Oh, certainly, all ore stored will ultimately be used and that is the only purpose for which you require ore, of course. Take that distinction (Inaudible) That is right. But suppose the Youngstown Sheet Company buy a lot of ore in a cheap commodity market, a market we've had recently, and put it away. You wouldn't claim exemption from it? Just assume facilities are available (Voice Overlap) -- I -- I would -- But I don't know that metallurgically, there wouldn't be a evaporation on the -- But if I just stored imported oil and put it away. Put it away because the market, it's been low, it's been -- to buy in the market, so they stored it away. I wouldn't -- I wouldn't claim any less exemption under those circumstances or exclusion than we do it here. You wouldn't pay any less. No. Although, put it -- buy it and store it away for use (Voice Overlap) -- But the only purpose -- the only purpose it have obviously in buying the ores to use it sometime. Yes. But how do we decide these things unless we go to the purpose of this constitutional provision? This wasn't a technical clause that the framers put in, has been the purpose in our federal scheme. That's right, sir. Well, isn't that the way -- And -- -- to grant this question to find out what -- it does make to me a lot of reference whether Youngstown buys a lot of ore and puts it away for -- for indefinite future because the -- it's a cheap buy and it has facility, but still that to me is a very different thing, from restocking and currently using it in its manufacturing process. It was a very different thing to me at least. But still the ultimate purpose would be “use.” Yes, I know, but you've got value as against that the facts that the stock is still within the State and the State would need money to run it ashore. But isn't the question, when did it become a part of the general mass of the property? That is one of the issue. I know -- That is one of the issues most certainly, Mr. Justice Whittaker. (Inaudible) And that would be (Inaudible) altogether apart from [Laughs] the package, isn't it? Yes, sir. But you see, we have accepted as principles of law three things as test of when this event happened, this incident. One was when the package is broken. Two, when the property is put to the use for which it was acquired. Or third, when it is sold. Otherwise, you have great difficulty in applying any practical rule, any reasonable rule to this determination that I think is of concern to -- Has it not lost its character as an import when it is put in the yard from which they used in acquiring the old (Inaudible) We have thought not. And of course in Hooven and Allison, I quote that case again. I think its page 664. I believe the Chief Justice touched on the very point that it didn't make any difference whether the import was stored at the dock or at -- at the place where it would be ultimately used. That is a very different case (Inaudible) No, it's stored in the warehouse at the plant, sir. At the plant? Yes, sir. (Inaudible) Well then, it would depend on the place where they're stored, a constitutional question, isn't it? Well, you were drawing a distinction as to the place where it's stored. No. That's -- I'm not trying to answer your -- On a constitutional basis, do you think it's a -- that it could -- No. I said I didn't think it made any difference and I quoted the Chief Justice's remark in Hooven and Allison that it didn't make any difference whether it was at the dock or at the plant. And it doesn't make any difference to you whether it's at this particular storage place or no under those views? No, sir. No, sir. The constitutional provision itself withdrew from the jurisdiction of the State's imports. And if we are to assume that imports are to be taxable under the circumstances in which we find them here, then there is no immunity, because the -- the dock in the place of manufacturing might be coexistent. It's very possible, but there will be no amenity if the place or the storage does not have some bearing on the whole situation. We come next to the question of equal protection and contend there that -- Did you find some (Inaudible) On equal protection? The Ohio court on equal protection held that we were not entitled to the exception from taxation because we were a domestic corporation or resident that it accorded before. That was because the language of the statute, which I recounted before said this, 5701.08 you'll find at the end of your brief, Mr. Justice Whittaker, appellant's brief. The Section says in effect that all property located, all personal property located in Ohio and used in business is taxable. That includes storage in the language of the section. There is a proviso, but property belonging to a nonresident, held for storage only in a storage warehouse is not used in business within the meaning of our statute. When the Court first came to grips, the Ohio Supreme Court with that problem back in General Cigar versus Peck, 159 Ohio State and 152, there was a contention made that the exception of the property of nonresidents from taxation would operate adversely to the resident and the judge of our Court wrote the opinion, Judge Taft said that that was a matter for the General Assembly, not a matter for the Supreme Court of Ohio. That statute has subsequently been construed in two more cases. And that in general, the same -- same result reached that the storage of a nonresident is exempted from taxation, but that the storages of residents are to be included for tax purposes, specifically so held in Youngstown and in the Allied case which followed the Youngstown case. So, we do had this statute, which was in effect until September 30, 1955 which on one hand except the property of a nonresident and taxes the property of the residents. A classification based solely upon residents and having nothing whatsoever to do with the character of the property itself. Because under identical circumstances, the property of the nonresident would be exempted under the old statute and the property of the resident taxed and that's a denial of the equal protection of the law. I thought this was (Inaudible) that if there was a denial of these exemptions to residents, then they would strike down the exemption as to nonresident rather than to hold invalid the -- the residential plight on equal protection to residents. Oh, we think of course, you ought to strike the language belonging to a nonresident. But my question wasn't -- could they legally do what they (Inaudible)? Yes, as to -- as to a nonresident. So it's a valid classification. But in applying a tax under other language of the same section to the resident, they're denying the resident equal protection. There is -- There was no claim before them -- in these cases by any nonresident of the denial of equal protection, was it? There -- there is no nonresident before this Court. That's right. Then how could you quite say in denying that the statute denied you the protection on the basis that if they had this question to be raised by nonresident, they would go -- that would -- the statute was invalid as to (Inaudible) I don't get this in my head. I do not see a difference. Well, in the nonresident cases, the point was brought to the Court that this would result in the discrimination against the resident. The Court said that's a matter for the General Assembly, not for the courts. In the Allied and Youngstown cases, the Court did not grant us relief nor did it pass upon the constitutionality of the statute so far as it affected us, so as to produce the result that you indicated. Our contention quite frankly is this, that this Court could not strike down the exemptions of a nonresident because that would produce the result of levying a tax. And nonresidents in Ohio have been exempted by the language of the statute from taxation since 1932 and to and including September 13, 1955. There was an old case in this Court, 115 U.S. in which the Court said that it was not a tax levying body, that it would not levy a tax and that particularly the federal courts would found upon the levy of a tax upon the States. And that's (Inaudible) Constitution not -- the legislative power was not in the (Inaudible) That is right, sir. And anybody could strike that with the exemption statute, exempting nonresidents. Would it be -- the -- the legislature at least (Inaudible) But the Court has not held the statute unconstitutional. I know, but -- but you -- before (Inaudible) Oh, we -- we have not contend that it certainly it was unconstitutional. (Inaudible) That is right, sir. Are you saying -- did I understood to say that apart from this special exemption, nonresidents stand in separate class, is that right? No. Is that wrong? Residents and nonresidents stand alike in Ohio with respect to the personal property tax except for the exception which excludes the agricultural products and merchandise held for storage only. And that was so only to September 30, 1955. Since that time, there's another statute on the books which treats residents and nonresidents alike with respect to storage. Then what is your grievance here? Your record as Mr. Justice Whittaker pointed, therefore, you come within the taxing power to the State. That is right. But there is an exception in the statute to nonresidents. In 1954, which is the year in issue. Yes. And we were denied the same privilege because we were residents. But you have questioned this -- this claim of denial of equal protection is not available to you because they would work the statute beyond way and hold invalid insofar as it's (Inaudible) nonresident, isn't that right? No. No, the Court never said that. Didn't say what? No, sir. What you're saying is that even if the Court should say that, that wouldn't help you any, is that -- No, sir. Is that what you're saying? That's right, sir. Because in any event, that really would strike the exception down, but it couldn't impose a tax. And therefore, it goes tax free of taxation under the Ohio Legislature Act, but in the mean time, they'd come down on you. Correct. But you, yourself have no grievance except that some other people aren't included and that constitutes the unequal protection. That some other people are not included, that is right. An identical property under identical circumstance. I think that will be brought out more clearly if I -- I come to the Allied case where we have only the question of equal protection. Allied -- Allied Stores operates four department stores in Ohio, in the cities of Cleveland, Akron, Columbus and Cincinnati and each of those cities that has warehouses. They are a distance away from the stores as the stipulation will show in the record. And from time to time, goods are transported from the warehouses to the retail stores and sold from that place. Now, if Allied or the nonresidents under the law prior to September 30, 1955, that particular type of warehousing of merchandise would be exempted from taxation. But because Allied is a domestic and Ohio corporation, it is subjected to a tax. Precisely the same problem as in Youngstown, except for the difference in the activities of the two taxpayers. Suppose it was a Delaware corporation, exempted then? Not at that time. No, sir. All foreigns were treated the same. All nonresidents were treated the same. (Inaudible) business in the same way -- That is right. That is right. The only difference the statute would provide would be the difference of residents, they'd have two stores. One on one side of the street and one on the other doing the same kind of business with the same type of clientele. One would be taxable because it was a resident and the nonresident would have the exception because of it's a nonresidents. So far as the -- the State's notion of inducing nonresidents who come into Ohio, aren't that a fair classification, every state tries to attract more capital. I don't think it's a valid classification when you're taxing property to make your classification rest upon the mere matter of residents. Here are people identically situated. They having competing stores, one across the street from the other. I don't think -- Yes, but -- but there is a different relation to the State, is it not? But where is the sufficient reason, your company took out on Ohio a challenge and now a Delaware charge then from some other states. Why can't the Ohio State -- this is an inducement to get foreign capital either to stay here to expand it's business. Well, as I've said, our position simply is that it isn't a valid classification to treat, when you're taxing property to base upon the treatment of nonresidents. Why would that be any less valid than taxing property of a veteran and a non-veteran different? The same property. But you're treating everyone on that -- in the class the same, including all veterans. (Voice Overlap) I understood they were treating all here the same, nonresidents in one way and residents another. But you're taxing property and not (Voice Overlap) -- Well, what about the veterans? You're taxing property and you would -- do you say that every veterans have not -- no veteran in this State should be taxed for his home -- on his home, but everybody else does. And you -- how -- how can that become (Inaudible) unless you're going to say that one ground the State uses is better than the other? I would reserve the rest of my time. Attorney General Saxbe.
Argument of William Saxbe May it please the Court. In as much as there are two divisions here. One, regarding the imports and one regarding the equal protection, I request permission to divide the time. I will discuss the matter of the equal protection, my associate Mr. Tobin will discuss the matter of imports. Knowing your interest in the fact and the background on this, I feel it is important that I go to the background of this tax that we're discussing, the statute in regard to residents and nonresidents. Up until 1931, Ohio was part -- was known as a general tax state. At that time, they adopted the classified tax and distinguished between personal property used in business and other personal property. In other words, we have no tax upon household goods, jewelry, clothing as I know you understand many states do. We only tax personal property that is used in business. And so at that time, they proceeded to set out in a special statute which you have already observed, what's used in business meant. (Inaudible) Yes, sir. And -- no, that -- 08 was the amendment, that was later amended and that's what I will refer to. But in 1931, they passed that and there was nothing in there about a nonresident. It applied generally to every property used in business, all personal property. Ohio was an important terminal state, Cincinnati specially, tremendous warehouses, Green, it's the terminal of the Southern Railroad, the terminal of many western railroads, Green Whiskey manufactured good was in Cincinnati. Toledo is another terminal, Cleveland. So these people were being hurt and they asked that the provision be put in. I think it was authored by Robert A. Taft who was a member of the Senate at that time. It was put in to encourage business to come to Ohio. And that provision as provision as you recall says, "That merchandise or agricultural products belonging to a nonresident of this State is not used in business in this State. It held a storage warehouse for storage only." And that was for the purposes of attracting business and of course, filling the warehouse that it -- it did. Now, the Tax Commissioner in the Board of Tax Appeals for many years interpreted nonresident as meaning, a person not qualified to do business in Ohio. We have tax laws in Ohio in regard to corporations where you must commend to qualify, make yourself subject to service to the Secretary Of State or statutory agent. This was interpreted as meaning a nonresident as one not qualified to do business in Ohio. And the persons who did business in Ohio of course have to be licensed with our Secretary Of State, recognized as a corporation or an individual doing business. This proceeded for a number of years and the Tax Commissioner assessed that. A nonresident meant just that. You've heard here today of the Goodrich case. In that case which was raised in 1953, the Supreme Court of Ohio first going up to the Tax Commission. But the Supreme Court in Ohio was asked to say that nonresident in this statute meant a person who -- well, literally just a nonresident, one who was not incorporated in Ohio. And they held that and they held that Good Year stores -- Goodrich Stores in Ohio that bought merchandise in bulk and shipped it in and stored it before moving it into their stores could do that without paying tax because they were nonresidents. Naturally, this caused quite a bit of confusion in the Ohio tax picture, and this case today results from that. Change in the a law results from that which you referred to the fact 1955. There is about a dozen other cases which are pending back in Ohio. In other words, once the lid was off in this Goodrich case, then everyone scrambled to make the most out of an interpretation of a law which have been lying there quietly for 25 years, not molested by the idea that the state address was a particular thing that made them a nonresident. Well, then these dozen cases came in and the Allied case was one of those. And they said they're doing business as department stores. We're on this corner. Here is a domestic corporation on this corner. There is no difference. We claim that we are denied equal protection under the law. Now, Ohio then changed the law so that -- that it was stricken out and we're discussing now a period from about 1951 until the law was changed in 1955. We have a four-year statute, but we also have some open cases by a waiver that go longer than the four-year period. In this period of confusion has been the discussion in the center of this number of cases that I'm reading here today. Now, the assumption being that equal protection is denied, they can move directly into the idea that the only way to correct that is for Ohio to say to the residents, the domestics, "You shall receive the same question and you shall receive the same exemption as of nonresident." I might point out further that personal property tax in Ohio is a local situs tax. In other words, it is collected by the county and distributed by the county. It does not come to the State. And so, in the several counties of the State where these cases are involved, there is involved a several millions of dollars that has been withheld, determined it -- concerning a determination of this case. We had felt that the Ohio Supreme Court decision had settled it, because I differ in the opinion of my good friend General Dargusch. I do feel that our, Judge Taft, who wrote this opinion did say exactly what you suggested that if there was a discrimination that the Allied Stores were in no position to raise it. In other words, they could not benefit by raising the issue of discrimination because it meant that they would throw out the exemption granted the nonresidents by application of our statutory rule in Ohio which says that you cannot take apart a certain organic part of a -- of a statute. And in that attitude, he said this, "Ordinarily a constitutional question will not be considered unless it is necessary to consider such constitutional question in deciding the case before the Court." In our opinion, it is not necessary to consider the constitutional question raised for the taxpayer in the incident case. Because if its contention with regard to the question is sound, it necessarily leads to the conclusion that the entire proviso in subdivision A of Section 5701.08 which reads so on and so on, would be taxable because it is described by the word -- preceding words remaining in the statute and ending, “stored as merchandise.” In other words, Judge Taft said, "If I strike this entire section which was put in by amendment two years after the original statute, I would in effect put you out of court because you would have no claim to benefit by them." In other words, the Allied Stores could only bring the tax upon the nonresident. They could not remove it from themselves. That might (Inaudible) the whole statute you're talking about. Well, I don't believed so because under the statutory construction in Ohio, in our section of the revised code, it holds that a -- where a part of a statute is found unconstitutional, only the unconstitutional part can be removed or should be removed. Which is proper. That's right. And this -- (Inaudible) -- definitely is severable because it was put in two years after the original statute was written. Now, the -- Is the upshot of what you've said that the nonresident would also be taxable? That was the -- I mean, if it -- It better is. It is possible and certainly -- Judge Taft had turned out what he said. That's right. If he had rephrased that and if he hadn't held that that is on coming, that this -- that that is constitutional and therefore must be stricken. Would he have gone on and said the objection of unequal protection is gone because both now, having stricken this, both residents and nonresidents are equally taxable. Is that what I'm to incur? That was his suggestion, sir, but it was not his intention. No, no. He raised that only because he said this would be the logical conclusion of the appeal to this Court. That is your position. Yes. That's what would follow. That's your position, Mr. Saxbe. Yes, sir. Not the other way around. Not the other way around -- No, sir. -- even though that's stricken leaving the nonresident free, that's immaterial because he's not a nonresident. That is not your position. No, sir. I would like to say this, that I think that the appellants have moved too fast to the idea that this is an arbitrary discrimination. I feel that under the cases of this Court, under the cases quoted in our brief, State Board of Tax Commissioners of Indiana versus Jackson and others that the State can make discrimination. And as long as it is not completely arbitrary, I certainly feel that in 1933, when the legislature amended the original bill which established the classified personal property tax that they did so with the definite intention to attract business to Ohio warehouses and attract business to Ohio generally. Would you think that is arbitrary and the only difference is the residents on the one hand, nonresidents on the other? (Inaudible) Sir, I can only say this and that is that distinction was established by the Court and not the legislature. And once it was established by the Court, the legislature moved quickly to reaffirm their original intention. The original intention as stated by the legislature at that time and the one that stood up for 20 years was that a nonresident referred to a person not qualified to do business in Ohio. In other words, the person who was shipping stuff for storage only. Then in 1930 or 1953, when the Goodrich case was handed down by the Ohio Supreme Court. And for the first time, the Court made an artificial distinction by saying that a nonresident didn't only mean a person not qualified to do business in Ohio as the Tax Commissioner have previously determined, but it meant everyone who is a nonresident. Then the legislature moved and the present statute reads that the person who is exempted is one who moves material into Ohio for the purpose of storage and then thereafter, moves it out. So we do have the true picture today. But for the periods during which the Goodrich case covered nonresidents during -- nonresidents as declined by your Supreme Court, could take advantage of or rather insist exactly the meaning of the statute. Is that right? Yes, sir. After that period, if there is any validity to the distinction to the claim of unequal protection -- That is -- -- for that period, that claim would be valid. I agree to that. And I say this that during that period, we must fall back on the original powers of the legislature to have completely discriminate if they wanted to. In other words, if the legislature -- They denied it -- that it's a denial of equal protection. Yes. It is under our concept because we thereafter changed it. But -- I don't know if that (Inaudible) I -- They changed it -- I had first -- In those were the period -- during the period of the Supreme Court, your Supreme Court decision held this way. You can't rely on that because your Supreme Court said that's what the statute means. But, sir, I'd like to say that that was between 1953 and 1955 during which period of time there was no meaning of our legislature. It doesn't matter. But during that period, a resident can say, "I'm being discriminated again." In view of the Goodrich holding unless you justify the discrimination as being fair classification. That's right, sir. And the -- Tax here is -- is involved here. Like I say, the law was changed and became effective September 30 of 1955. Our law goes back four years in Ohio. However, there were some open years by waiver that continued further back. So I presume that it would go back as far as 1951. Now, this was not in general -- generally raised point. Most of the residents continued to pay and only a few raised it. We -- That is the -- the question here in this case (Inaudible) is the question we're just discussing, namely the claim of unequal treatment within the scope of the Goodrich case, is that before us, in the instant cases? No, sir. I don't feel it's quite like that. Here is what has happened. When the Goodrich case blew the lid off, so to speak, everyone was scrambling after a tax advantage because of this distinction. They were met head on by saying, even if this was the intent back in 1931, they could have done it because there is a reasonable distinction. In other words, a nonresident is a nonresident and you can favor him if you want his business. We have to meet that point. Yes, sir. All right. We've got to meet that. But then we proceed on further, supposed that the Court would say under the Goodrich case, this is a denial of equal protection of law and what can we do to correct that. You wind up right exactly back with Judge Taft in the Ohio case when he says, "We cannot correct this by simply taking off the tax that the Ohio residents have paid." That is not corrected. Neither can we correct it by saying that we are going to tax the nonresidents who have enjoyed the exemption. The alternative is to say that there may possibly be a denial under the Goodrich case. But I suggest to you that there is a better solution and that is to properly reconstruct the statute as it existed and before the Goodrich case. In this Court we construct an Ohio statute? I might say that in regard to the -- I must respect (Voice Overlap) -- -- to the Murray case. -- Mr. Attorney General. What about the Murray case? [Laughter] I only suggest that because I do believe that this Court can, when directly interested in making a statute workable, can bring some order out of chaos. And I think that in regard to this, we have a situation developed by dicta, so to speak, where the real intent is obscured. I wonder if you think the Chief Justice in this Supreme Court (Inaudible)[Laughter] I'm glad he is not here.[Laughter] But I don't want to -- That's what he called creative jurisprudence, isn't it? Yes, sir. I think that the wiser -- the wiser role would be to follow. The opinion of Judge Taft in this present case where he says, “We cannot proceed to deny the tax that has already been collected.” And certainly, I'm talking about domestics. We cannot take this amendment and knock out only this much of it to a nonresident of this State and that's what they suggested (Inaudible). But simply says that if we knock any of it out, we must knockout the position put in to this -- the -- Yes. -- proviso put in by the amendment of 1933. Well, tell me Mr. State General, what would -- if that was done, would there -- would that be some other provision which would subject nonresidents' property to taxation? Would that fall under 01, for example? If -- if this -- if you drop the proviso? Yes, sir, it would, because in there previously -- Unnecessary because it can't be that the -- if you delete this provision as invalid, no other provision which provides for the assessment of nonresident property as I understood it. There is a provision and a statute that would be found in the rear of our brief. I believe it's in the rear of our brief. I've put that one. (Inaudible) Is Appendix B of your adversary's brief -- It's all personal property located and used in business in this State and all domestic animals kept in the State whether or not used in business are subject to taxation regardless of the owners thereof. That's 01. That's 01. I wouldn't catch this because of the word "use" in the State. Well, that is -- (Voice Overlap) -- -- why "used", I believe, the -- you cannot strike the entire statute because "used" is necessary to point out exactly how the business or what business is used or what material as personal property is used. Would you condemn the property in storage admittedly in a public warehouse is used? It is used and we have a further distinction on that, a case, one of a dozen that I mentioned called the Grinnell case. The last one now, the 167 -- you got two Grinnell cases out there, haven't you? The Grinnell case was -- the one I'm speaking off is the first case. The first one. That is the one that points out conditions necessary for use in business. That is one of interest in regard to the or on the dock situation and has modified that which my associate will bring up. The Grinnell case has modified the considerations of the use in business, so that there would be difficulty of application in regard to the use in business against a nonresident. But I certainly have no desire to suggest that those people who have been attracted into Ohio under the exemption as put in 08 originally. Now, the tax to bring equality or so-called equality to the domestic. And isn't that what the Court -- the Ohio court view it? The Ohio court did not. They did not apply that and there has been no attempt made to proceed under that and we thought that it was a Solomon like decision that the exemption should not continue. However, it was corrected by statute. You're defending this case, are you not, on this one ground and I suppose it is and Ohio has a right if it wants to, to affect nonresidents of the State by providing that they can have storage free from taxation -- Yes. -- that other people have to pay. I -- I feel this way, Mr. Justice Black, and that is this, that we do not admit that the ruling even under the Goodrich case makes this an arbitrary distinction. We maintain and our brief points out that Ohio has the power to make a distinction in taxation even though it must live up to the rule as set down in the Goodrich case. First, you're dealing with a nonresident. You're in a better position to collect from a resident, certainly. You are desirous of attracting a nonresident and such desire has been recognized and there are other reasons that a nonresident is different. Suppose you attracted that nonresident, but then he had came in, who is not really exempted for storage tax, but every other tax for 10 years, would that violate the equal protection? I think you would have to waive that on the benefits that you received by attracting. I suppose. Does Ohio have any law like that, many of the States have? No, sir. I know they do. We -- we do not, but we do have similar circumstances where a municipality will actually build a factory and invite a man in tax free to occupy that factory. Well, haven't a great part of this country was built up on that sea of taxation? On your railroad. Immunity from taxation. And that's why I say that even if the State had -- have the worst to consider under the Goodrich decision, it still has the arbitrary -- not arbitrary, but the power (Voice Overlap) -- Is that really your answer to the contention of your adversary here? Sir? Is that really your answer to your adversary's contention? It is and I only proceed -- I'm just wondering why you throw all these in the plaintiff. There are nine members of the Court, I suppose. Yes, sir.[Laughter] I feel that that is the basic answer. And secondly, I want to say that -- And I think it's a lot better one. [Laughs] Not in the one of attempting to defend the basis on which the Ohio court put it. Well -- As I understand, what they really said was this, granted there is the unequal protection of the law, yet this domestic corporation cannot raise it or if we have the question raised here by a nonresident, we would hold the exemption invalidized to it. And that to me is not a good basis, but the one you have mentioned though I think is otherwise. I feel that that is the basis. The -- frankly, when this came out of the Ohio Supreme Court, we felt that it was a decision that would properly end this litigation. May I ask you this Mr. Attorney General, is there any light at all on whether or not this tax exemption statute under this (Inaudible) 33, was it? Yes, sir. In fact -- I'm not -- I'm talking about it. In fact, attracting nonresidents -- Yes, sir. Is -- is there any evidence? Not in the record, sir. I don't mean in the record, but in documents or in the -- I'm quite sure that there is because of our big warehousing facilities in Cincinnati and Toledo, and Cleveland. And at the same time when this new statute was passed in 1955, those same people ran the legislature to again put in the words specifically “warehousing.” And -- And Justice McKenna about that time used the phrase, a hearing from judgment by speculation and judgment by experience. So it's in fact, it has worked out so as to induce outside the property to come in. That may justify, but otherwise would be abstractive justify. Yes, sir. I think that it -- I wish that there were a material in the record. I will say directly myself that it has worked. I would like to say this before I turn over to my associate and that's this simply. We are anxious as you consider this on the grounds that Ohio has the power to make a distinction in our most important parts of our brief, point out the various opinions which bear out the power of a state to do that. Secondly, the very fact that this case was admitted to the United States Supreme Court made us more anxious to move in to the realm open if you should find that there was an arbitrary discrimination. And frankly, the arguments that I have made here in regard to this have been raised that you would not have admitted the case had there not been some danger of moving into that realm. And in as much as their entire case defended not only first upon finding an unconstitutional discrimination. But secondly, they must also find that the approach of Justice Taft was wrong. And third, you must then positively find that the only way that you can bring them relief is to legislate a tax exemption for domestics in Ohio. Now, I admit that we have gone way around behind the bar to meet the argument, but we do so simply because their arguments start there. And we must, to meet them, proceed through the obvious, to the difficult. Mr. Attorney General, may I just ask just out of curiosity. What -- what's the amended statute? What does it now provide? The amended statute, I don't know whether it has -- As to nonresident corporations. The amended statute today says that of course the same general statute apply. But, nonresidents who move goods into the State for storage or -- or warehousing and thereafter move them out of the State are exempt in taxation. And that's the limit of the -- that statute. It is limited specifically to warehousing so that it will not thereafter arise. Yes. Thank you, Mr. Attorney General. Mr. Tobin.
Argument of John M. Tobin Mr. Chief Justice, and may it please the Court. My propose to discuss only the aspect of the Youngstown Sheet and Tube case which involves the import clause. I adopt that this time the unequal protection argument which Mr. Saxbe made and the -- if the Court may recall only one equal protection argument was made in the briefs in -- in cross reference was made. The issue as we are involved with the import clause is whether or not the State of Ohio can tax this imported iron ore. The -- the facts have been stipulated as Mr. Dargusch pointed out that they are relatively simple. The Youngstown Sheet and Tube Company imports iron ore from five different foreign countries, brings this iron ore to the plant location in Youngstown and then carefully segregates each individual shipment as to the source or as to the point from which the ore originated. In other words, they will handle the Mexican iron in this manner. They will have existing at the plant the residue of a previous shipment of Mexican ore, and on top of that, they will place the just received shipment of Mexican ore. At the same time from a day to day basis, withdrawals would be made indiscriminately from this created pile. In other words, in any scoop taken from the pile, we may have some of the last received shipment and some of an earlier received shipment or earlier received shipment as far as that is concerned. In other words, there is no attempt made nor I supposed could one be made to use the ore on hand prior to using the just imported ore in consideration of the manner which they handle this ore. And your tax makes no discrimination? That's correct. Our tax is -- Covers the pile. Yes, sir. Covers the pile. It -- in effect, it does. In other words, our tax is a month end evaluation tax on the property. Well, doesn't that -- I -- I'm still a little puzzled about this. As of a given date, is that the pile as it sits in place the tax -- what -- of course, I -- the -- do you have a specific tax date as of which January 1, is that it? Yes, except that as to inventory -- Yes. -- a manufacturer is entitled to average his inventory over the 12-month basis. (Voice Overlap) -- So it doesn't really matter whether the pile on the 1st of January is very big or very small in relation to the size of the pile on the 1st of any other month of the year, does it? No, sir. As a matter of fact, if a particular shipment of ore brought in from Brazil, for example, would come in to Youngstown on the 2nd or 3rd of the month and be used up entirely before the 30th or 31st of the month, there would be no tax from that property. But the Ohio scheme of taxation is that the month end evaluations of inventory will be average throughout the year in the tax paid after the 1st of January. Is that also true in reference to taxing merchants not doing business? As to merchants? Yes, sir, it is. It's a general method that -- that you use in computing tax on changing stocks. That's correct. The Ohio tax is a tax on all personal property located and used in business in Ohio. But -- but this method of taxation may in fact tax all that came in the day before the tax incidence. That's correct. It works both ways, in other words. Now -- And -- and all that maybe taken out the day after the tax. That's correct, too. I -- I think that although this doesn't have any particular significance so far as this case is concerned, I assume that the legislative decision was that this was the most equitable way to tax inventories of manufacturers and merchants. There is no attack on that ground, is it? No, sir. There is none. The -- the case originally -- Suppose there's an attack on that ground because it's included in the whole (Inaudible). Well -- There's no -- there's no differentiation making such as my question implies. No, sir. There is none. This case was originally determined by the Ohio Board of Tax Appeals. That is the first appellate procedure in Ohio. And the Board of Tax Appeals carefully reviewed each of the authorities or perhaps in the holding, but several of the leading authorities on the question of the application of the import clause and where the Tax Appeals erroneously concluded that because this was an import and because of an analogy which the Board of Tax Appeals moved to the original package doctrine that the State of Ohio could not probably -- properly tax this ore. Did they discuss at all the time of -- locate the period, the duration of the pile? Do they make any distinction whether Ohio could tax ore that came in a day before that against ore that might be -- have been lodged there for years. No, sir. The question as posed to the Board of Tax Appeals was whether or not the State of Ohio could levy this tax at all because of the protection of the import clause. Was any contention made by the taxpayer that they couldn't tax that which was brought in the day before, but they could tax that which was brought in at some prior period? No, sir. They would not concede the taxability of any portion of the created pile in their storage yard. They did concede, however, that the ore which was withdrawn and taken to the stock houses or stock bins near the blast furnace or the open hearth furnace was taxable ore. Would they contend, Mr. Tobin, that any part of the pile should have different treatment on the whole pile until some part had been removed? I -- I am afraid that there is a basic policy in their position. Nowhere along the line so far as I know had they enlightened the State of Ohio as to what they will identify as the original package if they contend that it does apply. Supposing you forget about the taxing (Inaudible) Yes, sir, I will. As a matter of fact, I don't think we have to look to the so-called original package doctrine in order to arrive proper determination here. Much is made of the fact that bulk import can be discriminated against in favor of packaged the imports. But I can see no problem if we simply look to the purpose of the import clause which is to protect other state in effect from the levy of a tax by a seaboard state. As I understand it in the early history, the fear was that some seaboard states would make the economic development of inland states difficult by reason of laying taxes on imports that had already been taxed by the Federal Government. We have no such problem here. Suppose the import clause hasn't been restricted to that? The specific form of grievance which led to the import clause, has it? Oh, no, sir. (Voice Overlap) -- The decisions of this Court hasn't said, "We only look to whether it's a seaboard state." Oh, certainly not. Well, then -- I didn't mean to imply that. As a matter of fact and I think perhaps all of the cases that had come up were something other than import taxes by a state. I -- I can't think of any case. Let me ask you this. Suppose -- suppose this -- this -- the Youngstown people or some other manufacturers in Ohio bringing in raw materials from the out -- from foreign countries to -- to gain importation and manufacture as to use, as to have the stock brought in at short periods, say within a week of the consumption, it's deposited, comes in by train and deposit it on a pile, and is used within a week, used up. Is your question whether or not they could escape (Voice Overlap) -- What is your position? Is your position Ohio could tax that? In the abstract, that property could be taxed, yes. What do you mean “by the abstract”? I mean to say that -- I think that, taxation is a least of that structure, isn't it? I thought perhaps you were referring to the peculiar system of taxation in Ohio that is to say that on the 30th of the month. No. I'm singularly ignorant of that. I'm just assuming that all or other raw materials are brought in and are consumed after being deposited at the pile within a week of being deposited. I don't believe that the time factor is significant. Except that there is maybe one of the elements that might aid (Inaudible) whether or not the property is (Inaudible) Yes, sir. Isn't that right? Yes sir. Isn't it? Suppose it remained -- suppose it you'd count it on clause and shut it off on the sighting by the manufacturer and kept in the car which brought it in until it's -- until it's gone into the process of manufacturing. If that doesn't, a box car content? You mean, if we had a situation where they did not comingle and withdraw from one pile and -- Yes. -- as they do have. If they used it within a short time, the stuff that's in the car is undecided? I feel this way about the implications of the import clause that the key to the determination is whether or not identification of the import can be made. Now, for example, if these railroad cars were brought in from Baltimore where some of their foreign shipments are received and -- and then transport it across the country to Youngstown and kept in this railroad car so that the Youngstown Sheet and Tube Company could have -- on tax listing date point to the car and say, "That's an import." I think perhaps the import clause would protect that and I think it would not -- Will you -- will you do some -- for me a branding de facto. I hadn't realized there was any question at all this pile was unquestionably Cuban, Mexican, Liberian or -- isn't that right? That's -- that's true. Yes, sir, (Voice Overlap) -- Well, then isn't there identification of importation here? No, sir. For this reason, because -- let's take a specific example. Suppose we have a pile of Cuban iron ore consisting of a 1000 tons of ore that there is then brought in an additional 10,000 tons of Cuban ore dumped right on top of this ore pile in (Voice Overlap) -- Imported by Youngstown? Yes, sir. All right. On the following day, 500 tons were removed for use in manufacturing. Then on that following day, it is my position that the Youngstown Sheet and Tube Company cannot say that the 10,000 tons imported yesterday are -- is -- is in this pile, in this section of the pile. In other words, they can't segregate it. They can't identify it so that we can keep it separate from the general managing property. I don't -- I don't understand at all. I understood that all of it is Cuban ore. It's identified by the nature of the commodity. Yes, that's true. And the fact that somebody is taking ore doesn't lose the identification of what is left. What you're saying is that -- Well, I was -- -- once everything is put into a pile, then it's out of the package? Yes, sir. If you want to look at it that way. Is it not reimportation? That you're -- Unlike Justice Harlan, I get to -- the package seems to be quite and irrelevant and confusing, a relevant phrase in the Brown case. Why do we have to keep on talking packages when there are no packages? Oh, I -- I think there's a (Voice Overlap) -- I don't -- there's an import clause. You can't confuse the scope and purpose of that by talking about packages. The defendant talked about packages in its motions and its attack on the law business in every paragraph frankly it used. Is it your notion that I'm restricted in my putting, that was the defendant ground? No, sir. My -- my point is that -- Well, this is a constitutional question. Are we suppose to decide in it, if they haven't raised? Have they raised any question here that you ought to be able to tax on the -- or anyone, that you're to be able to tax that which came in a day before, but you can't tax that which came in a long time before, have they ever raised that? I don't believe they have. Have they -- haven't they raised though that this is all importation and it's still part of the process of importation and therefore, none of it is taxable? Yes, sir. And because I may not agree with them that none of it is taxable, are not precluded from agreeing with them that some of it is not taxable. Do you raise the question before this Court begins to try to find a state law in constitution? It should be squarely raised and it shouldn't have to hunt for it. Is that -- want to show -- do you think if the Court, to try to find new grounds that the defense didn't find to hold a state law unconstitutional? No, sir. I don't. Aren't they attacking this is as unconstitutional? It's unconstitutionally dependent on arguments or on claim. They have contended all along that the State of Ohio could not apply the general nondiscriminatory ad valorem personal property tax against their iron ore because that's generally protected by the import clause. And it occurs to me in reading over the cases that the courts have consistently made examination into whether or not the identity of the import or the integrity of the import had been maintained. Now, beginning with Brown against Maryland, there was introduced the concept of the original package doctrine. Now, as I've said before, I don't think it need be restricted by any imaginary package. I think that the important thing is whether or not the importer can identify the import. Now, whether he changed it in its form, shape, condition or extent makes no difference in my opinion because the -- if -- if the importer buys from the Federal Government a protection from state taxation by the payment of the import duty, he certainly bought a qualified right. In other words, he can maintain an original package in his -- in his warehouse so long if he does not disturb the package or so long if he does not sell it. But -- Which -- when does the package arrive? Pardon? Or the goods or the package arrived. That's correct. Now, -- The argument really is if they can rely on the construction package you can rely on a constructive regiments. Well, yes, sir. That's correct. I've cited the California case which relied upon a constructive package and a constructive breaking of the same which I think is very closely analogous to our factual situation. (Inaudible) Yes, sir. The Supreme Court of Ohio at page 25 of the record questions the application of the import clause to situations presented as this one is. Now, I personally have no question with the application, but I think that the decision of the Supreme Court was -- was sound and that they said if the protection exist, it certainly cannot extend beyond the point where the import has so acted upon the import that it has lost its identity as such. In other words, by the act of comingling previous shipments with the instant shipment and by the act of withdrawing from this created trial. Do you put -- if I may ask you this. Do you put any determinants about the language of 5701.08 as defining a reasonable termination point for the import when it says first the 01 taxes property used. 08 says that property used means when employed or utilized in ordinary operations when kept and maintained as a part of a plant capable of operation or when stored or kept on-hand as material parts, products or merchandize. Now, does -- when it's kept on-hand as a material at the plant, do -- for use at the plant, do you think Ohio thereby has reasonably codified that point at which it became a part of the local mass of property and subjected to taxation? The purpose of the importation was to have on-hand the -- I believe a three month supply of iron ore. Now, if you read the statute and try to apply it to the operation of the Youngstown Sheet and Tube Company, it can come to only one conclusion and that is their -- their operation fits within the terms of the statute so that there is a use from that point of view. And does that mark that this term, the (Inaudible) limit at which time the property will also be carried to as an import? It occurs to me that it does, yes. The only thing that could save the property from taxation at that point would be if this court were to say that the Ohio statute could not be applied not because it was unconstitutional but because the import clause of the Federal Constitution prevented the application of the Ohio statute. Do you (Inaudible) unconstitutional on that basis? I don't believe there is, sir. A claim that there's some constitutionality as a from of the denial of equal protection.That's the only thing about constitutionality to waive, isn't it? That's the other aspect of the case. Yes. That's when the claim made by Youngstown of unconstitutionality of 08? Yes, sir. It is. Mr. Tobin, I -- I don't know if I understood you correctly. Do your emphasis on the comingling of these shipments indicative that you feel that if they were not commingled, that is that a separate pile were made of each shipment as it arrived, that it would be only the individual piles that were disturbed in the sense of having some drawing from them for the use of the manufacturing practice that Ohio would be able to tax and that those that were undisturbed of the individual piles could not be taxed? I think that is the most difficult question that can be considered in connection with this problem. Certainly, under my view, if there are five piles created and only one of them is disturbed and there's no comingling withdrawal from the other four, the one disturbed here would have lost its identity as an import. I think in consideration of all of the cases in the import clause that I would have to concede that if brought to a place of storage not comingled with other previous shipments of a particular grade of ore and not disturbed by withdrawal for use that the immunity could extend to that point for those parts. No. The only purpose for bringing in this type of ore to use them in connectin with the manufacturing process and even though within the three month period, they would in fact be used in the manufacturing process. Yes, sir. The reason the question is difficult for me to answer is because I -- I see in this case three points. The termination of the foreign journey of this ore, in other words, it's arrived at its destination is the first point. The second point is the comingling with other ores of the same nature and the third is the withdraw. And the reason it's difficult is because I think the most important things are the latitude factors, the comingling and the withdraw rather than the fact that it's arrived at its destination. Well, isn't that because you felt so much out of the original packaging docked? Well, perhaps that's -- What's the source of all these original packaging? In the Brown case, there happens to be packages. The statute of Maryland was directed against importing of things in bales or packages, and the particular imported there or in packages of dry goods. But the case as it turn out, anything that has to do with packages as such has to do with the scope and purpose of the import clause. There was a package in that case. That might. (Voice Overlap) of the law. That's when cases take a word off in the opinion and I think that's the law. Yes, sir. I recognize that and I think that it's just -- if you permit me to say so, an easy way to make examination of whether they can still make identification of their import. (Inaudible) Are you referring, sir, to domestic ores? (Inaudible) Yes, sir. I would be glad to do that right now. It occurs to me that domestic ores brought in to Ohio for use in manufacturing are taxable, whether a resident purchases those for use or nonresident, except in the situation where under 5701.08, a nonresident holds this property in storage only in a storage warehouse. Now, if that property is brought to the place where this be -- is to be used in manufacturing, it cannot under the recent Grinnell decision in 167 Ohio State report be considered held for storage only. The same is true of products manufactured and kept at place where manufactured. As to the ore of the Youngstown Sheet and Tube Company, if I may be permitted, I would make one comment on the equal protection clause. Ohio has a complete system of personal property taxation. And Mr. Justice Brennan, I believe raised the question of whether or not there would be any tax against nonresidents if we struck the exemption of the proviso in 5701.08. And the answer to that is I think that the first -- that the beginning portion of that statute defines use in business is a complete definition. It says all property located and used in business in Ohio -- it says property which is kept on-hand or stored or used in the ordinary special operations of the business and so forth. I don't have it -- I don't have it before me but -- That's 08. That's 08. Yes, sir. That is the definition of use in business. Now, from that definition -- thank you -- from that definition, the legislature in 1933 saw fit to carve an exception or an exemption, and that -- the exemption referred only to nonresidents. (Inaudible) It begins with merchandise or agricultural product. Yes, sir. Is not used in business in the State if held in a storage warehouse for storage only. Now, I believe that the proviso add it as it were in 1933 is a severable part of the statute. Now, Ohio has undertaken -- the Ohio legislature has undertaken to provide the mechanism for governing situations where a court might be constrained to find a portion of a statute unconstitutional. We have a revised code section of -- Ohio Revised Code Section 1.13 says that if any statute or any part of the statute is found to be unconstitutional, that finding shall not disturb the constitutionality or the effectiveness to be given to the other portions of the statute. Are you (Inaudible) Yes, sir. (Inaudible) distance from Youngstown. Yes, sir. It is both used by a client of Youngstown within the -- a holding which give you the right to tax it under 01. Without regards to the question of residence? Yes. I see. Yes. There's no dispute that the property is located in Ohio. In Ohio (Voice Overlap) -- The question is whether or not -- But -- but not as a plant for use by a Youngstown plant or warehouse over that fuel, isn't that right? Well, I understand your question. I think the answer is that 5701.08 says when property is acquired or held as means or instruments for carrying on the business, it's used in business within Ohio. It is (Inaudible) you're saying the Supreme Court had (Inaudible) the Grinnell case? The Grinnell case involved 10 nonresident corporations who were -- On this question, stored and (Inaudible) under your Ohio Supreme Court decision, is this ore used in the business of Youngstown? Well, the question did not come up in that way in the Grinnell case. I was just saying that if we had been involved with a nonresident, the ore stored at Ashtabula for use at Youngstown would not be considered use in business because it's not at the place where it is to be used. If you're dealing with a nonresident? If we're dealing with a nonresident. Now, dealing with a resident, it is your position that it is and would not be (Voice Overlap) -- It is used in business -- Why is that? -- it was required for the purpose of carrying on the business. Yes, sir. But you do not have a determination to that effect in your interpretation of your statute. I don't -- I don't know that that has been questioned as far as a resident is concerned except in this case and on the basis of equal protection.
Rebuttal of Carlton S. Dargusch, Sr. The Court please. Mr. Dargusch. If the taxpayer Youngstown was a nonresident, it would clearly follow that the ore on Lake Eerie docks, at Cleveland and Ashtabula would've have been exempted from taxation on view of the statute. We wish to call the Court's attention to the Wheeling Steel case, 337 U.S. 562, in which this Court held that residents is not a valid basis for classification. That was a property tax case and the Wheeling Steel Corporation in that instance was a nonresident corporation of Ohio being incorporated in another state that qualified to do business in Ohio. They reiterate in connection with equal protection that the Court should not strike the exemption in 5701.08, the Court of nonresidents for the reason stated before that the Court does not have the authority to levy a tax. And the effect of course would be to levy a tax. The Attorney General recognizes that. We might have some dispute as to the period that would be covered because of many instances these cases are open for quite a few years back. The Court levying a tax only by striking the proviso and reinstate it, the rest of these taxes within the general application as to the -- Yes. -- Court decision. Yes. Yes, sir. On the import question, we have not been talking about package. They merely used the illustration of the breaking of a package as an occasion when the property would cease to be an import. We didn't want to imply that our iron ore was in any sense a package. We've been talking about form in that instance. And so long, the import is in its original form, in storage and has not been acted upon, it is our contention that the import retains its immunity under the constitution. We think it's most important that this matter of the immunity of imports continue to be one of exclusive federal jurisdiction. The founding father certainly had some purpose when they wrote the language as strongly as they did, "No State shall" except as maybe needed for its inspection laws. Absolutely necessary for that purpose, levy any tax imposed to duty on an import. We reiterate again that the mere removal of a portion of a total shipment does not render the remainder taxable. Very well.