B-15848, MAY 23, 1941, 20 COMP. GEN. 809

B-15848: May 23, 1941

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ARE. A COPY OF WHICH IS ENCLOSED. WAS CONTINUED IN FORCE AND EFFECT BY SECTION 18 OF THE ORGANIC ACT OF THE VIRGIN ISLANDS (49 STAT. 1807). SHIP DUES OF FIFTY CENTS PER TON OF CARGO DISCHARGED HAVE BEEN ASSESSED AGAINST COMMERCIAL VESSELS CARRYING CONSTRUCTION MATERIALS. WHICH WAS REFERRED TO THIS DEPARTMENT AND A COPY OF WHICH IS ENCLOSED HEREWITH. PRESUMABLY ON THE GROUND THAT THEY CONSTITUTE A TAX UPON PROPERTY OF THE FEDERAL GOVERNMENT AND ARE THEREFORE ILLEGALLY ASSESSED. IT IS THE VIEW OF THIS DEPARTMENT THAT SHIP DUES ASSESSED UNDER THE ORDINANCE OF AUGUST 6. ARE OF SUBSTANTIALLY THE SAME CHARACTER AS TONNAGE TAXES COLLECTED IN THE UNITED STATES. THEY ARE LEVIED AGAINST VESSELS ACCORDING TO THEIR BURDEN OR THE QUANTITY OF CARGO LADEN OR DISCHARGED AND DO NOT REPRESENT A TAX ON THE GOODS THEMSELVES.

B-15848, MAY 23, 1941, 20 COMP. GEN. 809

VIRGIN ISLANDS - APPLICABILITY OF LOCAL ASSESSMENT OF SHIP DUES ON GOVERNMENT-OWNED PROPERTY SHIP DUES ASSESSED BY LOCAL ORDINANCE OF THE VIRGIN ISLANDS OF AUGUST 6, 1914, ON THE BASIS OF GOODS LOADED OR UNLOADED AT THE PORTS OF ST. THOMAS OR ST. JOHN, V.I., ARE, IN EFFECT, A TAX UPON GOODS, RATHER THAN A CHARGE FOR SERVICES RENDERED, AND MAY NOT BE ASSESSED AGAINST COMMERCIAL VESSELS ON ACCOUNT OF GOVERNMENT-OWNED CARGOES DISCHARGED AT THE SAID PORTS.

COMPTROLLER GENERAL WARREN TO THE SECRETARY OF THE INTERIOR, MAY 23, 1941:

CONSIDERATION HAS BEEN GIVEN YOUR LETTER OF MARCH 27, 1941, AS FOLLOWS:

PART II, SECTION 2, OF THE ORDINANCE OF AUGUST 6, 1914, OF THE COLONIAL COUNCIL OF ST. THOMAS AND ST. JOHN, VIRGIN ISLANDS, CONCERNING CUSTOMHOUSE AND SHIP DUES IN ST. THOMAS AND ST. JOHN, PROVIDES THAT SHIPS ENTERING AND CLEARING THE PORT OF ST. THOMAS SHALL PAY CERTAIN SHIP DUES PER TON OF GOODS DISCHARGED OR LADEN. THIS ORDINANCE, A COPY OF WHICH IS ENCLOSED, WAS CONTINUED IN FORCE AND EFFECT BY SECTION 18 OF THE ORGANIC ACT OF THE VIRGIN ISLANDS (49 STAT. 1807).

PURSUANT TO THAT ORDINANCE, SHIP DUES OF FIFTY CENTS PER TON OF CARGO DISCHARGED HAVE BEEN ASSESSED AGAINST COMMERCIAL VESSELS CARRYING CONSTRUCTION MATERIALS, SUPPLIES, AND EQUIPMENT, TITLE TO WHICH HAS PASSED TO THE UNITED STATES, CONSIGNED TO THE OFFICER IN CHARGE OF CONSTRUCTION OR THE CONTRACTORS FOR USE IN CONNECTION WITH THE CONSTRUCTION BY THE NAVY DEPARTMENT OF THE MARINE AIR BASE AND NAVAL SUBMARINE BASE AT ST. THOMAS, V.I., UNDER CONTRACT NOY-3680, DATED OCTOBER 30, 1939. IN A LETTER TO THE SECRETARY OF THE TREASURY DATED OCTOBER 28, 1940, WHICH WAS REFERRED TO THIS DEPARTMENT AND A COPY OF WHICH IS ENCLOSED HEREWITH, THE SECRETARY OF THE NAVY HAS REQUESTED AN EXEMPTION FROM SUCH SHIP DUES IN THE CASE OF SUCH SHIPMENTS, PRESUMABLY ON THE GROUND THAT THEY CONSTITUTE A TAX UPON PROPERTY OF THE FEDERAL GOVERNMENT AND ARE THEREFORE ILLEGALLY ASSESSED.

IT IS THE VIEW OF THIS DEPARTMENT THAT SHIP DUES ASSESSED UNDER THE ORDINANCE OF AUGUST 6, 1941, ARE OF SUBSTANTIALLY THE SAME CHARACTER AS TONNAGE TAXES COLLECTED IN THE UNITED STATES. THEY ARE LEVIED AGAINST VESSELS ACCORDING TO THEIR BURDEN OR THE QUANTITY OF CARGO LADEN OR DISCHARGED AND DO NOT REPRESENT A TAX ON THE GOODS THEMSELVES. IN THIS CONNECTION YOUR ATTENTION IS DIRECTED TO A LETTER FROM THE SECRETARY OF THE NAVY TO THE CHAIRMAN, UNITED STATES SHIPPING BOARD, DATED AUGUST 8, 1924, A COPY OF WHICH IS ENCLOSED, IN WHICH IS STATED THAT THE--- ,PROVISIONS OF THIS LOCAL ORDINANCE SEEM TO INDICATE QUITE DEFINITELY AND CONCLUSIVELY THAT SHIPS' DUES ARE NOT A TAX BUT ARE A COMPENSATORY HARBOR CHARGE ASSESSED AND EMPLOYED FOR THE SUPPORT AND UPKEEP OF THE HARBOR AND HARBOR OFFICIALS.'

SINCE THE ACQUISITION OF THE VIRGIN ISLANDS BY THE UNITED STATES, THERE HAVE UNDOUBTEDLY BEEN NUMEROUS INSTANCES IN WHICH SUCH SHIP DUES HAVE BEEN ASSESSED AGAINST VESSELS CARRYING PROPERTY OF THE FEDERAL GOVERNMENT TO ST. THOMAS. IT IS MY UNDERSTANDING THAT THE FREIGHT CHARGES ARE INCREASED BY A CERTAIN PERCENTAGE TO COVER THE PAYMENT OF SHIP DUES BY THE CARRIER. TO MY KNOWLEDGE, THE PAYMENT OF SUCH INCREASED CHARGE HAS NEVER BEEN QUESTIONED BY THE GENERAL ACCOUNTING OFFICE.

IN VIEW OF THE POSITION TAKEN BY THE SECRETARY OF THE NAVY, YOUR DECISION IS REQUESTED, WITH THE RETURN OF THE ENCLOSURES, AS TO THE VALIDITY OF THE ASSESSMENT OF SHIP DUES UNDER THE SAID ORDINANCE AGAINST COMMERCIAL VESSELS DISCHARGING GOVERNMENT-OWNED CARGOES AT ST. THOMAS.

SECTION 2, PART II, OF THE ORDINANCE OF AUGUST 6, 1914, OF THE COLONIAL COUNCIL OF ST. THOMAS AND ST. JOHN, CONCERNING CUSTOMHOUSE AND SHIP DUES IN ST. THOMAS AND ST. JOHN PROVIDES IN PERTINENT PART:

THE DUES TO BE PAID BY SHIPS, ENTERING AND CLEARING, ARE AS FOLLOWS:

1. VESSELS OF 5 NET REGISTER TONS OR LESS, THAT DISCHARGE OR LOAD, PAY PER REGISTER TON OF ENTIRE BURDEN, ENTERING AND CLEARING TAKEN TOGETHER, 75 BIT (15 CENTS).

2. VESSELS UPWARD OF 5 BUT NOT ABOVE 20 NET REGISTER TONS, THAT DISCHARGE OR LOAD 1 TON OF GOODS, OR MORE, PAY PER REGISTER TON OF ENTIRE BURDEN, ENTERING AND CLEARING TAKEN TOGETHER, 75 BIT (15 CENTS).

3. VESSELS UPWARD OF 20 BUT UNDER 50 NET REGISTER TONS PAY PER TON OF GOODS DISCHARGED OR LADEN, 1 FR. 25 BIT (25 CENTS).

4. VESSELS OF 50 NET REGISTER TONS AND UPWARD PAY PER TON OF GOODS DISCHARGED OR LADEN, 2 FR. 50 BIT (50 CENTS).

IT IS APPARENT FROM THE ABOVE-QUOTED PROVISIONS THAT THE SHIP DUES PRESCRIBED THEREBY ARE NOT ASSESSABLE IN THE CASE OF ALL COMMERCIAL VESSELS USING THE HARBOR OF ST. THOMAS OR ST. JOHN BUT ONLY IN RESPECT TO SUCH VESSELS AS DISCHARGE OR LOAD CARGO AT EITHER OF THOSE PORTS AND THAT FACT WOULD APPEAR TO NEGATIVE ANY CONTENTION THAT THE DUES REPRESENT COMPENSATORY HARBOR CHARGES. HENCE, IT WOULD APPEAR THAT THE COLLECTION MADE IS MORE IN THE NATURE OF A CHARGE FOR THE PRIVILEGE OF LOADING OR UNLOADING CARGO RATHER THAN A CHARGE TO COVER THE COST OF THE SERVICES RENDERED OR CONVENIENCES PROVIDED. FOR A DISTINCTION BETWEEN THESE TWO CLASSES OF CHARGES ATTENTION IS INVITED TO THE CASE OF PACKET COMPANY V. KEOKUK, 95 U.S. 80, IN WHICH IT IS SAID IN PART, PAGE 84:

* * * IF THE CHARGE IS CLEARLY A DUTY, A TAX, OR BURDEN, WHICH IN ITS ESSENCE IS A CONTRIBUTION CLAIMED FOR THE PRIVILEGE OF ENTERING THE PORT OF KEOKUK, OR REMAINING IN IT, OR DEPARTING FROM IT, IMPOSED, AS IT IS, BY AUTHORITY OF THE STATE, AND MEASURED BY THE CAPACITY OF THE VESSEL, IT IS DOUBTLESS EMBRACED BY THE CONSTITUTIONAL PROHIBITION OF SUCH A DUTY. BUT A CHARGE FOR SERVICES RENDERED OR FOR CONVENIENCES PROVIDED IS IN NO SENSE A TAX OR A DUTY. * * * FURTHERMORE, IT IS NOTED THAT UNDER 3 AND 4, SUPRA, THE DUES ARE PAYABLE NOT ON THE SHIP'S TONNAGE BUT ON THE BASIS OF THE TONNAGE OF THE GOODS LOADED OR UNLOADED. CONSEQUENTLY, IT WOULD SEEM THAT SUCH SHIP DUES CLEARLY ARE TO BE DISTINGUISHED FROM THE TONNAGE TAXES OR DUTIES, WHICH ARE MEASURED BY THE INTERNAL CUBIC CAPACITY OF THE VESSEL ON WHICH THE LEVY IS IMPOSED, WITHOUT REFERENCE TO THE AMOUNT OF THE CARGO ACTUALLY CARRIED, AND ARE IN NOWISE DEPENDENT UPON THE TONNAGE OF THE CARGO THAT IS LADEN OR DISCHARGED. AS HEREINBEFORE SHOWN, THE SHIP DUES HERE IN QUESTION ARE ASSESSED ONLY IN RESPECT TO THE CARGO THAT IS LADEN OR DISCHARGED AT ST. THOMAS AND ST. JOHN AND IT IS CLEAR FROM THE PROVISIONS OF SECTIONS 2 AND 4, PART II, OF THE ABOVE-MENTIONED ORDINANCE, THAT, WITH THE EXCEPTION OF VESSELS OF 20 NET REGISTER TONS OR LESS, THE AMOUNT OF THE LEVY IS CALCULATED ON THE ACTUAL TONNAGE OF THE CARGO LADEN OR DISCHARGED UNLESS IT EXCEEDS THE NET REGISTER TONNAGE OF THE VESSEL INVOLVED.

HENCE, WHILE CAREFUL CONSIDERATION HAS BEEN GIVEN TO THE MATTERS APPEARING IN YOUR LETTER, AS WELL AS TO THOSE APPEARING IN THE LETTER DATED AUGUST 8, 1924, FROM THE SECRETARY OF THE NAVY TO THE CHAIRMAN, UNITED STATES SHIPPING BOARD, TO WHICH YOU REFER, I AM CONSTRAINED TO THE VIEW THAT THE SAID SHIP DUES ARE, IN SUBSTANCE, A TAX UPON THE PRIVILEGE OR, IN THE CASE OF THE FEDERAL GOVERNMENT, THE RIGHT OF LOADING OR DISCHARGING GOODS AT ST. THOMAS OR ST. JOHN AND, IN A SENSE, A TAX UPON THE GOODS.

IN THIS CONNECTION ATTENTION IS INVITED TO THE CASE OF TELEGRAPH COMPANY V. TEXAS, 105 U.S. 460, IN WHICH THERE WAS INVOLVED A STATUTE OF THE STATE OF TEXAS REQUIRING TELEGRAPH COMPANIES DOING BUSINESS IN THAT STATE TO PAY A TAX ON ALL MESSAGES SENT AND THE SUPREME COURT OF THE UNITED STATES, IN HOLDING THAT THE TAX WAS INVALID INSOFAR AS PRIVATE MESSAGES SENT OUT OF THE STATE OR MESSAGES SENT FOR THE FEDERAL GOVERNMENT WERE CONCERNED, SAID, IN PART:

IN CASE OF THE STATE FREIGHT TAX (15 WALL. 232) THIS COURT DECIDED THAT A LAW OF PENNSYLVANIA REQUIRING TRANSPORTATION COMPANIES DOING BUSINESS IN THAT STATE TO PAY A FIXED SUM AS A TAX "ON EACH TWO THOUSAND POUNDS OF FREIGHT CARRIED," WITHOUT REGARD TO THE DISTANCE MOVED, OR CHARGE MADE, WAS UNCONSTITUTIONAL, SO FAR AS IT RELATED TO GOODS TAKEN THROUGH THE STATE, OR FROM POINTS WITHOUT THE STATE TO POINTS WITHIN, OR FROM POINTS WITHIN TO POINTS WITHOUT, BECAUSE TO THAT EXTENT IT WAS A REGULATION OF FOREIGN AND INTER-STATE COMMERCE. IN THIS THE COURT BUT APPLIED THE RULE, ANNOUNCED IN BROWN V. MARYLAND (12 WHEAT. 419), THAT WHERE THE BURDEN OF A TAX FALLS ON A THING WHICH IS THE SUBJECT OF TAXATION, THE TAX IS TO BE CONSIDERED AS LAID ON THE THING RATHER THAN ON HIM WHO IS CHARGED WITH THE DUTY OF PAYING IT INTO THE TREASURY. IN THAT CASE, IT WAS SAID, A TAX ON THE SALE OF AN ARTICLE, IMPORTED ONLY FOR SALE, WAS A TAX ON THE ARTICLE ITSELF. TO THE SAME GENERAL EFFECT ARE WELTON V. STATE OF MISSOURI, 91 U.S. 275; COOK. V. PENNSYLVANIA, 97 ID. 566: AND WEBBER V. VIRGINIA, 103 ID. 344. TAXES UPON PASSENGER CARRIERS OF A SPECIFIC AMOUNT FOR EACH PASSENGER CARRIED WERE HELD TO BE TAXES ON THE PASSENGERS, IN PASSENGER CASES, 7 HOW. 283; CRANDALL V. STATE OF NEVADA, 6 WALL. 35; AND HENDERSON V. THE MAYOR, 92 U.S. 259. TAXES ON VESSELS ACCORDING TO MEASUREMENT, WITHOUT ANY REFERENCE TO VALUE, WERE DECLARED TO BE TAXES ON TONNAGE. STATE TONNAGE CASES, 12 WALL. 204; PEETE V. MORGAN, 19 ID. 581; CANNON V. NEW ORLEANS, 20 ID. 577; AND INMAN STEAMSHIP CO. V. TINKER, 94 U.S. 238.

THE PRESENT CASE, AS IT SEEMS TO US, COMES WITHIN THIS PRINCIPLE. THE TAX IS THE SAME ON EVERY MESSAGE SENT, AND BECAUSE IT IS SENT, WITHOUT REGARD TO THE DISTANCE CARRIED OR THE PRICE CHARGED. IT IS IN NO RESPECT PROPORTIONED ACCORDING TO THE BUSINESS DONE. IF THE MESSAGE IS SENT THE TAX MUST BE PAID, AND THE AMOUNT DETERMINED SOLELY BY THE CLASS TO WHICH IT BELONGS. IF IT IS FULL RATE, THE TAX IS ONE CENT, AND IF LESS THAN FULL RATE, ONE-HALF CENT. CLEARLY IF A FIXED TAX FOR EVERY TWO THOUSAND POUNDS OF FREIGHT CARRIED IS A TAX ON THE FREIGHT, OR FOR EVERY MEASURED TON OF A VESSEL A TAX ON TONNAGE, OR FOR EVERY PASSENGER CARRIED A TAX ON THE PASSENGER, OR FOR THE SALE OF GOODS A TAX ON THE GOODS, THIS MUST BE A TAX ON THE MESSAGES. * * *

THE VIRGIN ISLANDS ARE AN INSULAR POSSESSION OF THE UNITED STATES AND IT IS A FUNDAMENTAL PRINCIPLE THAT SUCH A POSSESSION HAS NO RIGHT, IN THE ABSENCE OF SPECIFIC STATUTORY AUTHORITY THEREFOR, TO IMPOSE ANY TAX UPON THE UNITED STATES OR THE MEANS EMPLOYED BY IT TO EXECUTE ITS CONSTITUTIONAL POWERS. THE LANGUAGE USED BY THE SUPREME COURT OF THE UNITED STATES IN ITS OPINION IN THE CASE OF DOMENECH V. NATIONAL CITY BANK, 294 U.S. 199, 204, SEEMS ESPECIALLY APPROPRIATE IN THIS CONNECTION. THAT CASE INVOLVED THE VALIDITY OF A TAX SOUGHT TO BE IMPOSED BY PUERTO RICO UPON A BRANCH OF A NATIONAL BANK ORGANIZED UNDER THE LAWS OF THE UNITED STATES AND THE COURT, IN HOLDING THAT THE TAX WAS INVALID, SAID, IN PART:

* * * PUERTO RICO, AN ISLAND POSSESSION, LIKE A TERRITORY, IS AN AGENCY OF THE FEDERAL GOVERNMENT, HAVING NO INDEPENDENT SOVEREIGNTY COMPARABLE TO THAT OF A STATE IN VIRTUE OF WHICH TAXES MAY BE LEVIED. AUTHORITY TO TAX MUST BE DERIVED FROM THE UNITED STATES. BUT LIKE A STATE, THOUGH FOR A DIFFERENT REASON, SUCH AN AGENCY MAY NOT TAX A FEDERAL INSTRUMENTALITY. STATE, THOUGH A SOVEREIGN, IS PRECLUDED FROM SO DOING BECAUSE THE CONSTITUTION REQUIRES THAT THERE BE NO INTERFERENCE BY A STATE WITH THE POWERS GRANTED TO THE FEDERAL GOVERNMENT. A TERRITORY OR A POSSESSION MAY NOT DO SO BECAUSE THE DEPENDENCY MAY NOT TAX ITS SOVEREIGN. TRUE THE CONGRESS MAY CONSENT TO SUCH TAXATION; BUT THE GRANT TO THE ISLAND OF A GENERAL POWER TO TAX SHOULD NOT BE CONSTRUED AS A CONSENT. NOTHING LESS THAN AN ACT OF CONGRESS CLEARLY AND EXPLICITLY CONFERRING THE PRIVILEGE WILL SUFFICE. * * * ALSO, SEE 9 COMP. GEN. 180; 11 ID. 254.

THERE IS NOTHING IN THE ORGANIC ACT OF THE VIRGIN ISLANDS OR IN ANY OF ITS AMENDMENTS AUTHORIZING THE ASSESSMENT OF A TAX SUCH AS THE SHIP DUES HERE INVOLVED IN RESPECT TO GOVERNMENT-OWNED GOODS THAT ARE LADEN OR DISCHARGED AT ST. THOMAS OR ST. JOHN; AND, SINCE IT APPEARS THAT THE SHIP DUES ARE LEVIED ON THE MEANS CHOSEN BY THE UNITED STATES TO PERFORM A SOVEREIGN GOVERNMENTAL FUNCTION AND HENCE, ARE, IN EFFECT, UPON THE PROPERTY OF THE UNITED STATES, IT MUST BE CONCLUDED THAT THE ASSESSMENT AND COLLECTION OF SHIP DUES IN RESPECT TO SUCH GOODS IS REPUGNANT TO THE CONTROLLING PRINCIPLE THAT A "DEPENDENCY MAY NOT TAX ITS SOVEREIGN.'

CONSEQUENTLY, IN VIEW OF THE FOREGOING, YOU ARE ADVISED THAT THERE IS NO AUTHORITY OF LAW FOR THE ASSESSMENT OF THE SHIP DUES PRESCRIBED BY THE ABOVE-MENTIONED ORDINANCE OF AUGUST 6, 1914, AGAINST COMMERCIAL VESSELS ON ACCOUNT OF THE GOVERNMENT-OWNED CARGOES WHICH ARE DISCHARGED BY THEM AT THE PORT OF ST. THOMAS.

AS REQUESTED, THE PAPERS FORWARDED WITH YOUR SUBMISSION ARE RETURNED HEREWITH.