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Borough of Edgewater v. Department of Taxation and Finance

Decided: December 13, 1946.

BOROUGH OF EDGEWATER, PETITIONER,
v.
DEPARTMENT OF TAXATION AND FINANCE, DIVISION OF TAX APPEALS, AND SOCONY-VACUUM OIL CO., INC., RESPONDENTS



On application for writ of certiorari.

For the petitioner, Milton T. Lasher.

For the respondents, J. Vincent Barnitt.

Before Justices Bodine, Perskie and Wachenfeld.

Perskie

The opinion of the court was delivered by

PERSKIE, J. The question for decision is whether the oil assessed while in the Borough of Edgewater had acquired a taxable situs therein or was still in the course of interstate commerce?

The facts are free from substantial dispute. Two assessments were levied by the local assessors against oil of Socony-Vacuum

Oil Co., Inc. (hereafter called Company), while same was in the Borough of Edgewater (hereafter called Borough). One assessment was for the year of 1943 in the sum of $26,500 and the other was for the year of 1944 in the sum of $11,000. On appeal to the Bergen County Board of Taxation, that body sustained the 1943 assessment but canceled the 1944 assessment. The Company appealed the 1943 assessment and the Borough appealed the 1944 assessment to the Division of Tax Appeals. Both appeals were heard together. The Division of Tax Appeals concluded both assessments were invalid because "the oil levied was in transit through the state and not subject to taxation in the state." Accordingly, it reversed the judgment of the Bergen County Board of Taxation which sustained the 1943 assessment, and affirmed the judgment which canceled the 1944 assessment. State Board of Tax Appeals, Socony-Vacuum Oil Co., Inc., v. Edgewater, 23 N.J. Mis. R. 199; 42 A.2d 775. The Borough seeks a writ of certiorari and has stipulated with the Company that if the writ is allowed that we consider it on the merits. In light of the federal issue involved we shall consider and determine the cause in accordance with the stipulation.

The Company owns an oil refinery situate on the East River, Kings County, New York. Prior to World War II it transported its "cracking stock," a partially refined crude oil, in tankers from the oil fields in Texas and Oklahoma to its refinery and there the "cracking stock" was fed to the Houdry catalytic plant to be manufactured into 100 octane aviation fuel. Ordinarily this stock was transported in tankers by sea to the New York refinery. But since the Company lost so many of its tankers in 1942 and 1943 as the result of attacks made upon them by enemy submarines, the Company was compelled to ship its stock by railroad in tank cars. Such cars arrived in New Jersey on the west side of the Hudson River and would thereafter be taken by car float across the river to New York. But the war greatly increased the traffic into New York Harbor, and it created a demand for car floats in excess of the number available. Thus the United States Office of Defense Transportation requested

the Company to empty the tank cars of the "cracking stock" by placing same in a tank in New Jersey so that the cars could be quickly returned to the Company's oil fields for more oil. The Company promptly complied with that request. When the crude oil arrived at its refinery in New York, the Company worked day and night to process same to produce a 100 octane fuel which, when so processed, was purchased by the United States for the use of the Army and Navy "to the exclusion of any other disposition thereof."

Accordingly, the Company in 1942 leased from Valvolene Oil Company its 550,000 barrel stationary oil tank in Edgewater with the agreement that this tank would be used exclusively by the Company for the purpose of unloading the oil into the leased tank and thus the tank cars would be free -- as already observed -- to return to the oil fields for more oil. It was further agreed that the oil in the tank would be transported in barges to New York except for small quantities which would be taken in railroad tank cars. It was estimated that about thirty tank cars a day would be required for unloading. The Valvolene Oil Company agreed to furnish those facilities. This lease was renewed for the year of 1943. Pursuant to the stated arrangements, the oil from the leased tank was transferred to the oil barges with reasonable promptness as fast as a good sized barge load could be accumulated and then it was taken to the Company's ...


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