INDIAN TERRITORY ILLUMINATING OIL CO.
v.
BOARD OF EQUALIZATION OF TULSA COUNTY
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The Supreme Court upheld Oklahoma's ad valorem property tax on crude oil stored by an oil company in state storage tanks, even though the oil had been produced from restricted Indian lands under federal approval. The Court held that while the company enjoyed immunity from taxation on its operations as a governmental instrumentality (such as taxes on leases or extraction privileges), this immunity did not extend to a non-discriminatory property tax on oil that had been segregated as the company's exclusive property after royalties were paid to the Indian lessors, as the storage and holding of the oil served only the company's private advantage rather than any federal governmental function.
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Mr. Chief Justice Hughes delivered the opinion of the Court.
These cases present the question of the validity of ad valorem, taxes upon crude oil belonging to petitioner, Indian Territory Illuminating Oil Company, and held by it in its storage tanks in Tulsa County and Payne County, Oklahoma. In each case, the tax was challenged upon the ground that the oil was exempt because in its production petitioner was operating as an instrumentality of the United States. The Supreme Court of Oklahoma sustained the taxes, 159 Okla. 15, 13 P. (2d) 585; 159 Okla. 6, 14 P. (2d) 929, and the eases come here on writs of certiorari.
The facts are shown by ¿greed statements. The oil in question was assessed under the general laws of the State for annual ad valorem taxes as a part of the personal property of petitioner within the respective counties. It constituted petitioner’s share of oil which petitioner had produced from restricted Indian lands in Seminole County, Oklahoma, under leases which had been approved' by the Secretary of the Interior pursuant to the Act of Congress of May 27, 1908, 35 Stat.
312. In the Tulsa County case (No. 356) the assessment was for the year 1929 and included 51,630 barrels of crude oil which had been produced from the restricted lands above mentioned during the period from March 31, 1927, ,to June 16, 1927. This oil on production had been commingled with oil from petitioner’s “ commercial ” or unrestricted leasehold properties in Seminole County and had been immediately piped into petitioner’s storage tanks in Tulsa County where it Nad remained. At the time of the removal of the oil, petitioner paid to the Superintendent of the Five Civilized Tribes for the lessors the agreed royalty of 12% per cent, of the gross proceeds, and the Indians owned no part of the oil in storage on January 1, 1929, the date of assessment, nor will they receive any part of the proceeds when the oil is sold by petitioner. In the Payne County case (No. 357) the question concerns 383,307 barrels of crude oil produced from the restricted lands prior to January 1, 1928 (the assessment date) and ' piped, with other oil, into petitioner’s storage .tanks in Payne County and there held.
In Jaybird Mining Co. v. Weir, 271 U. S. 609, an ad valorem tax upon ores mined under a lease, of restricted Indian land and in the bins on that land on the assessment date was held to be invalid.. The tax “was assessed on the ores in mass; and the royalties or equitable interests of the Indians had not been paid or segregated.” Id. p.
612. In these circumstances the tax was'regarded as an attempt to tax an agency of the federal government. That decision is not controlling in the instant case. Here, ’ payment had been made for the share of the Indian lessors and they had no further interest in the oil. . It had been commingled with other oil, had been transported from the restricted lands to petitioner’s storage tanks in the taxing counties, and was there held exclusively in the interest and for the convenience of petitioner. There is a recognized distinction between a non-discriminatory tax upon the property of an agent of government , albeit the property is used in, or has relation to, the business of the agency—where there is only a remote, if any, influence upon the exercise of the functions of government—and a tax which is deemed to impose a direct burden upon the exertion of governmental powers. McCulloch v. Maryland, 4 Wheat. 316, 436; Thomson v. Pacific Railroad, 9 Wall. 579, 590; Railroad Co. v. Peniston, 18 Wall. 5, 33, 36; Baltimore Shipbuilding Co. v. Baltimore, 195 U. S. 375, 382; Choctaw, O. & G.
R. Co. v. Mackey, 256 U. S. 531, 536; Willcuts v. Bunn, 282.
U. S. 216, 225, 226; Susquehanna Power Co. v. Tax Commission (No.1), 283 U. S. 291, 294; Fox Film Corp. v. Doyal, 286 U. S. 123, 130; Broad River Power Co. v. Query, ante., p.
178. In this instance, the tax is not on the oil leases (Indian Territory Illuminating Oil Co. v. Oklahoma, 240 U. S. 522, 530), or upon the privilege of extracting the oil or upon the income derived therefrom. Choctaw, O. & G.
R. Co. v. Harrison, 235 U. S. 292, 298, 299; Gillespie v. Oklahoma, 257 U. S. 501, 506. See Burnet v. Coronado Oil & Gas Co., 285 U. S. 393, 399. Such immunity as petitioner enjoyed as a governmental instrumentality inhered in its operations as such, and being for the protection of the Government in its function extended no farther than was-necessary for that purpose. The holding of the oil in question, which had been segregated and withdrawn from the restricted lands as petitioner’s exclusive property, awaiting disposition at petitioner’s pleasure, was for its sole advantage and cannot be said to be so identified with its operations .as a governmental instrumentality as to, entitle it to exemption from the general property taxes'imposed by the State in return for the protection the State afforded.
With respect to .these taxes, this oil was hi no different case from that of the other oil of petitioner with which it was commingled.
Judgments affirmed.
Cases With Similar Vibessemantic neighbors from the corpus
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James v. Dravo Contracting Co., 302 U.S. 134 (U.S. 1937)…t, 258 U. S. 219, 228. But property acquired from the Government, upon its severance, loses the immunity in the hands of the transferee. Forbes v. Gracey, 94 U. S. 762; Group No. 1 Oil Corp. v. Bass, 283 U. S. 279; Indian Territory Oil Co. v. Board, 288 U. S. 325. Dobbins v. Commissioners, 16 Pet. 435; Collector v. Day, 11 Wall. 113. But the exemption does not extend to taxes laid upon his privately [*163] owned property or a sales tax on his personal purchases, even though they be of articles he uses in co…1 / 3
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Helvering v. Mountain Producers Corp., 303 U.S. 376 (U.S. 1938)…ral taxation. This decision was distinguished in the Coronado case upon the narrow ground that under the law of Texas the leases effected a present sale to the lessee of the oil and gas in place. In Indian Territory Oil Co. v. Board of Equalization, 288 U. S. 325, the Court sustained a non-discriminatory ad valorem tax imposed by the State of Oklahoma on oil extracted from restricted Indian lands under leases approved by the Secretary of the Interior, where the oil had been removed from the lands and stored…
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Okla. Tax Comm'n v. Tex. Co., 336 U.S. 342 (U.S. 1949)…and used by him in performing services for the Federal Government is subject to state and local ad valorem taxes.18 And the oil and gas produced is, of course, subject to such taxation. Indian Territory Illuminating Oil Co. v. Board of Equalization, 288 U. S. 325. Both by the substance of the statute’s explicit provisions and by the consistent construction of the Oklahoma Supreme Court,19' that state’s so-called gross production tax in its presently applicable form is a tax on the lessee’s property used in c…1 / 3
Previewing 3 of 10 citing cases — full citator treatment, depth of discussion, and citing context are member features.
Join FLexlaw to unlock all legal intelligenceAuthorities Cited (12 total)
- M'Culloch v. The State of Md., 4 Wheat. 316 (U.S. 1819)
- Burnet v. Coronado OIL & GAS Co., 285 U.S. 393 (U.S. 1932)
- Gillespie v. State of Okla., 257 U.S. 501 (U.S. 1922)
- R.R. Co. v. Peniston, 18 Wall. 5 (U.S. 1873)
- FOX Film Corp. v. Doyal, 286 U.S. 123 (U.S. 1932)
- Choctaw v. Harrison, 235 U.S. 292 (U.S. 1914)
- Indian Territory Illuminating Oil Co. v. State of Okla., 240 U.S. 522 (U.S. 1916)
- Jaybird Mining Co. v. Weir, 271 U.S. 609 (U.S. 1926)
- Thomson v. Pacific Railroad, 9 Wall. 579 (U.S. 1869)
- Baltimore Shipbuilding & Dry Dock Co. v. Baltimore, 195 U.S. 375 (U.S. 1904)