Opposition Brief — West India Oil Co. (Puerto Rico) v. Bonet, Treasurer of Puerto Rico

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IN THE

Supreme Court of the United States

OCTOBER Lees case’ 4

No. a 26

West Inpia Or Company (Puerto Rico),

. Petitioner,

vs.

4 RaFAEL SancHo. Bonet, Treasurer of Puerto Rico,

Respondent.

Brier ror ResponpENT tn Opposition To

PeEtrrion FOR CERTIORARI

Wri Cartron Ricsy,

Attorney for Respondent.

—--ea eee

’ Grorce A, MaLcou,

Attorney General of Puerto Rico,

| NatHan R. Marcon,

Solicitor for the Department of the Interior,

Of Counsel.

Bieta OSE ore ey ae OEE

SUBJECT-INDEX

Page

Brief for Respondent in Opposition to

ee ee 1-8

Opinions of the Courts Below .................... 1

oe ess oy ay od oa ee oe hos eden 1

I 55. och nds va cae a ees 2-5

REG ger ig Pe es 2 ne a 5-6

Opinion of the Circuit Court of Appeals ........... 6-7

Brief of Authorities Appended .. 7, and Appendix I, 9-38

I oan ac ees Cas a ge cies ee a 8

NE 5 So's wep 6:5 14 a CRUE ORE LAR 9-42

Appendix I—Brief of Respondent, as Appellee in

Circuit Court of Appeals ............ 9-38

EN ed Ok tel REE ERS 9-10

Opinion of insular Supreme Court .................. 10-13

Bases of.insular Supreme Court’s Opinion .......... 13-22

EE IO ao oa ie Mas 6 a Faw Ke ge as he yao a 22-23

ER ee at ne ean geo 23, and Appendix II, 39-42

mney Of Aveumees o.oo 23

I eis i os clk soca Ns Glave Hoek HAE A 4 CHI A A 23-38

Point I—This tax on sales is an excise tax; not a tax

a a ae ge oe aie 23-26

Point II—The power of the Legislature extends to

levying an excise tex on the business ac-

tivities of a domestic corporation of Puerto

Rico, regardless of whether or not the

subject of those activities is property lo-

cated within the Territorial limits of

Puerto Rico.

Plaintiff’s deposit of the oil in a bonded

warehouse is, therefore, immaterial here,

pee Geer Fc ci eee Fey eeeye ree 27-30

Page

Point I1I—-The sales were made ‘‘in Porto Rico’’,

within the meaning of Section 62 of the

local excise law here in¥Yolved ........... 30-36

Point IV—The established rule of the respect to be

accorded to the decision of a local Terri-

torial Supreme Court, interpreting local

Territorial statutes and laws, is peculiarly

applicable here ........... ee ee. 36-38

Point V—Appellant’s other contentions are suffici-

ently answered in the opinion of the in-

sular Supreme Court ................... 38

EY Str Sc ee err La ete ee eee 38

Appendix II—Constitutional and statutory

MES fo oe Cucina) onc ager ke wn 39-42

TABLE OF CASES

American Steel & Wire Co. v. Speed, 192 U. 8.500 .... 5,20

Benitez Flores v. Llompart, 50 P. R. R. [50 P. R. Dee.

I ea fa kc SUG vice east ee et 17

Bacon v. Illinois, 227 U. 8.504 ...................... 20

Brown v. Maryland, 12 Wheat. 419 .............. ~= 2

Berman v. Gallardo (C.C.A.) 18 F. (2d) 581 .. ...... 25

Cream of Wheat Co. v. Grand Forks, 253 U. 8.325 .... 4,27

Commonwealth v. Clary,8 Mass.72................. 14

Capo v. S. A. Panzardi & Co., 44 P.R.R.225.......... 17

Diaz v. Gonzales, 261 U.S.102............... ages 23,37

De Villanueva v. Villanueva, 239 U.S.293 ........... 37

Eastern Air Trensport v. South Carolina Tax Commis-

EN EE ga dulce wa vewawapeenscssk 2s 20,22

Fort Leavenworth R. Co. v. Lowe, 114 U. 8.525... 14

General Oil Co. v. Cram, 209 U.S.211 ........ 20

Gromer v. Standard Dredging Co., 224 U. S. 362. 4, 20, 22,26

en Tire & Rubber Co. v. Gallardo (C.C.A.), 18

Gai, Cal Vs Sac 4 Gn Xs dad aee eee

Tron City Grain Co. v. Arnold, 215 Ala. 543 .......... i832

Kelley v. Rhoades, 188 U.S.1°..................... 20

Loiza Sugar Co. v. People of Puerto Rico, 57 F. (2d)

§ 6 SS xe ee te rr: 4,24,25

Lopez & Moran v. Sobrinos de Ezquiaga, 34 P.R.R.75 18

VS > A: if rrr rere 20

May v. New Orleans, 178 U.S. 496 .................. 20

McGoldrick v. Berwind-White Coal Mining Co.,

No. 475, Supreme Court, decided J-nuary 29,1940 3

McGoldrick v. Gulf Oil Corp.,

No. 473, Supreme Court, decided March 25,1940 .. 3

Mitchell v. Tibbetts, 17 Pick. 298 .................... 14 -

Newark F'ire Insurance Co. v. State Board of Tax Ap-

peals of New Jersey, 307 U.S.313 ............ 3,27,34

SURE Ws Deny Ge A ME onc nc exc eac cv cccasaies 37

Olivari v. Bartolomei, 2 Judgments of Supreme Court

¢ , . Raa Reke perry Someone 17

People of Puerto Rico v. Shell Co., 302 U.S. 253 ...... 4

People of Puerto Rico v. Rubert Hermanos, Inc.,

No. 582, Supreme Court, decided March 25,1940... 4

People v. Suarez, 51 P. R. Rep. [51 P. R. Dec. (Spanish

8 I ras Cece Pate as a tat 14

pebten v. Breage, 106.0. G. GOB . .. 2... cee. 25

Porto Rican Tax Appeals (C.C.A.), 16 F. (2d) 545 . 25

Porto Rico v. Central Los Canos, 35 P. R. Rep. 27 ..... 25

«Sancho Bonet, Treasurer of Puerto Rico v. Yabucoa

eS, Mle We Gs On goa at ce gin ns 7,38

Sancho Bonet, Treasurer v. Texas Company,

No. 132, Supreme Court, decided January 2,1940. 7

State v. Maxwell Motor Sales Corp., 171 N. W.566.... 20

Sanchez Morales & Co., Inc. v. Gallardo, (C.C.A.) 18

eS Rs ee ec c oe eee ca ee eee

State ex rel. Jones y. Mack, 62 Am. St. Rep. 811 ...... 14

Standard Oil Co. v. California, 291 U.S.242 ......... 14

Surplus Trading Co. v. Cook, 281 U.S. 647 .......... 14

Swan & Finch Co. v. United States, 190 U.S. 143 .. 4,5,19,21

Page

Susquehanna Coal Co. v. South Amboy, 228 U.S. 665 .. 50

United States v. Cornell, 2 Mason60................ 14

United States v. Unzeuta, 281 U.S.188 ............. 14

United Artists Corp. v. Taylor, 7 N. E. (2d) 254 ...... 19

Welck v. Lahart, 122 Minn. 482 ..................... 32

Wheeling Steel Corp. v. Fox, 298 U.8.193 ........... 34

West India Oil Co. v. Gallardo, 6 F. (2d) 523... ..... 20,21

OTHER AUTHORITIES

Commentaries on the Spanish Civil Code:

BO Mamrens, pm. GP COE OG.) . ... i cee 17

ee I a i ee we cc ketenes 17

Dictionary of the Spanish Language ................ 18

22 Ops. Atty. Gen. (U.S.) 152 (1898) ............... 14,30

55 Corpus Juris 530-542, 562 ....................4.. 18

er I I i ci ee ds ea cae s shee’ 32

STATUTES

ConsTITUTION :

Me oe bikes heed he eres 14

Ce RA a cs cece Appendix, 39

FEDERAL:

Organic Act for Puerto Rico, Act of March 2, 1917.

errs epee eer peer ee Be Appendix, 39

yy eee pee ee nc eee 4, and Appendix, 39

RC MRCS he ee pe cies 23, and Appendix, 39

eee eee 28-29, 21, and Appendix, 40

eS oe 24, and Appeadix, 40

Secs. 25 and 37 ............... 28, and Appendix, 40

Tariff Act of 1930, Act of June 17, 1930. )

Ws WE fore sae cas 13, 29, 30, and Appendix, 41

ee See eye AP actu cas Appendix, 41-42

Puerto Rico:

Internal Revenue Law of Puertc Rico, as amended

by Act No. 17 of June 3, 1927; Laws of 1927,

Special Session, pp. 458-486.

Ree 2, 5, 6, 9, et seq., and Appendix, 42

: Page

ES a ce, 9, and Appendix, 42

‘Excise Tax Law of Porto Rico’’, as amended Au-

gust 27, 1923 [Par. 14; Sec. 20], Laws of 1923,

ee ra area ae 24

Eo eo, ea a's Cb Nahe 25

ict No. 47, of August 25, 1931

’

IN THE

Supreme Court of the United States

OCTOBER TERM, 1939

No. 782

WEstT Inpia Om Company (Puerto Rico),

Petitioner,

Vs.

RaFraEL Sancuo Bonet, Treasurer of Puerto Rico,

Respondent.

Brier ror REsPoNDENT IN Opposition To

PETITION FOR CERTIORARI

OPINIONS OF THE COURTS BELOW

The opinion of the insular District Court of San Juan

(‘‘Statement of Facts, Opinion and Judgment’’, R. 15-22)

is not officially reported. The opinion of the Supreme Court

of Puerto Rico, reversing the District Court and upholding

the tax in question (R. 33-49), is reported in 54 P. R. Dee.

732 [Spanish edition, Advanee Sheets, July 1, 1939]. It has

not yet appeared in the English edition of the Puerto Rico

Reports. The opinion of the Circuit Court of Appeals, af-

firming that of the insular Supreme Court (R. 55-59), is

reported in 108 F. (2d) 144.

JURISDICTION

Jurisdiction exists in this Court under Section 240(a) of

the Judicial Code, as amended by the Act of 7 13,

1925, c. 229, 43 Stat. 938.

QUESTION PRESENTED

The question is whether Puerto Rico may validly levy

against a domestic corporation of the Island, organized

under its insular corporation iaws, its excise tax,}

‘fqn the sale of any articles the object of commerce,

* * and at the time of the sale in Puerto Rico, a tax

of twe (2) per cent on the price or value of the daily

sales of such articles, whether such sales are for cash

or on credit, which tax shall be paid at the end of each

month by the person making such sale’’,

on account of sales of oil made in Puerto Rico by the local

corporation, The West India Oil Company (P.R.), to Ameri-

can steamship companies for use in the propulsion of their

ships plying between Puerto Rico and mainland ports, and

consummated by pumping the oil at San Juan into the

steamships out of ‘‘bonded tanks’’ where the company had

been holding it in storage [indiscriminately for sale and

delivery either in foreign commerce or for local consump-

tion in the Island, or for consumption, as in the present

case, by American flag vessels in their voyages between

the Island and the mainlaud|. It appears that the company

had brought the oil from Aruba, Dutch West Indies, to

Puerto Rico, where it had stored it in warehonses owned

by the coma but which had been bonded by the Federal

government #1 the company’s request; and the particular

oil sold for particular usages, as, for example, for local

consumption or, as here, for the propulsion of ships to the

mainland, was not segregated from the mass in the tanks,

until it was pumped out at the company’s request under the

supervision of the Federal officials.

The Federal customs duties are remitted on oil tht. sold

for the propulsion, of the ships between the Island and the

mainland.”

1 Section 62 of the Internal Revenue Act of Puerto Rico

as arnended by Act. No. 17 of June 3, 1937; Appendix II,

infra, p. 42.

2 Sec. 309, 46 Stat. 590.

The insular District Ceurt of San Juan thought the in-

sular excise tax could not validly be levied on the com-

pany’s act of selling the oil under these circumstances. The

Supreme Court of Puerto Rico, however, took a different

view. It reversed the District Court, and sustained_the tax.

The Circuit Court of Appeals agreed with the insular Su-

preme Court, and likewise sustained the tax. The company

has brought this petition for certiorari, urging substantial-

ly the same contentions as in the lower courts. Respondent

believes that the insular Supreme Court and the Circuit

Court of Appeals were right; that the tax was validly

levied against this domestic corporation in ihe Island as an

excise tax on this business activity of selling the oil within

Puerto Rico; and that the petition for certiorari should be

denied.

A. This case does not deal with foreign commerce, nor

with sales of oil to ships for their propulsion in foreign

commerce or to foreign countries. It is not within the doc-

trine of McGoldrick v. Gulf Oil Corporation, No. 473 at the

present term, decided March 25, 1940; but, on the contrary,

is ruled by McGoldrick v. Berwind-White Coal Mining Co.,

No. 475 at the present term, decided January 29, 1940,° in

connection with Newark Fire Insurance Co. v. State Board

* Since it deals only with sales for propulsion of ships in

interstate commerce between the Island and the mainland;

and not at all with foreign commerce; and the sale in

Puerto Rico and delivery to the American ships for con-

sumption in domestic commerce between the Island and the

mainland removed the oil from the stream of foreign com-

merce, and mingled it with the mass of the company’s

property held for sale in whe Island, and the imposition

of the excise tax on the company’s activity in making the

sale results in no practical disadvantage whatever in the

carrying on of interstate commerce between the Island and

the mainland; but, on the contrary, the exemption of this

of Tax Appeals of New Jersey, 307 U.S. 3138, 318, 322, 323-

324, and Cream of Wheat Co. v. Grand Forks, 253 U. S.

325, 328, et seq.;* Gromer v. Standard Dredging Co., 224

U. 8. 362, and Loiza Sugar Co. v. People of Puerto Rico,

57 F. (2d) 705, 706 [C.C.A.-I], certiorari denied, ibid, Loiza

Sugar Co. v. Puerto Rice, 287 U. S. 632;° People of Puerto

Rico v. Shell Co., 302 U. S. 253, and People of Puerto Rico

v. Rubert Hermanos, Inc., No. 582 at the present term of

this Court, decided March 25, 1940;* Swan & Finch Com-

local company from paying the excise tax on making sales

of oil it had brought in from a foreign country [Aruba] and

was holding for sale in the Island would work a plain dis-

crimination against companies bringing oil to the Island

from the mainland for such sales [jas for example, from

Texas], and would place the dealers in Texas oil or other

mainland oils at a distinct disadvantage in competing for

this interstate trade; and would moreover violate the re-

quirement of the Congress in the Organic Act for Puerto

Rico [Sec. 2, infra, Appendix II, p. 39] ‘‘That the rule

of taxation in Puerto Rico shall be uniform’’.

‘The power of the Legislature extends to levying an ex-

cise tax on the business activity of a domestic corporation

of Puerto Rico, regardless of whether or not the subject

of those activities is properly located within the territorial

limits of Puerto Rico; so that it is really immaterial here

whether the oil while deposited by the petitioner in the

bonded warehouse, subject to joint supervision with the

Federal authorities, is to be regarded as pro tanto with-

drawn from the territorial jurisdiction of Puerto Rico.

* That this tax on the domestic company’s act of making

the sale is an excise tax upon this business activity of this

local domestic corpcration.

‘That the Legislature of Puerto Rico, as the delegate

of the Congress, possesses all local legislative powers [in-

cluding the taxing power], except as expressly limited by

act of Congress; and that it is no objection to the exercise

of such local legislative powers that the Congress may it-

self have legislated in the same field.

pany v. United States, 190 U. S. 143, 1457; and American

Steel & Wire Co. v. Speed, 192 U. S. 500, 518-5228

STATEMENT

Petitioner’s ‘‘Summary Statemen)”” (Petition, p. 3) and

also its statement of the ‘‘Questions Presented’’ (Petition,

pp. 2-3) are incomplete, and somewhat inaccurate. Peti-

tioner omits essential facts; viz. that:

A.—The sales were made in Puerto Rico [and not in

New York, or elsewhere] as was correctly held by the Su-

preme Court of Puerto Rico, in construing, as a matter of

local law, the requirement in this local taxing statute |Sec-

tion 62 of the local Internal Revenue Act of Puerto Rico,

supra], and affirmed by the Circuit Court of Appeals [infra,

pp. 6-7].

B.—The sales were made wholly for propulsion of ships

in domestic commerce, in voyages between the Territory of

7 That fuel oil delivered to ships for use in their propul-

sion between the Territory of Puerto Rico and the main-

land was not an ‘‘export’’, nor used in foreign commerce ;

but that, as the Court of Appeals correctly said in the pres-

ent case (R. 58-59; 108 F. (2d) 144, 147):

‘‘But the fuel oil was not destined for a foreign port.

As stated in Swan & Finch Company v. Uniied States,

190 U. S. 143, ‘whatever primary meaning may be in-

dicated by its derivation, the word ‘‘export’’ as used in

the Constitution and laws of the United States, general-

ly means the transportation of goods from this to a

foreign country.’ We do not regard the oil put aboard

for consumption at sea as ‘exports’ within the meaning

of Section 3 of the Organic Act of Puerto Rico.’’

® Property held in storage awaiting sale becomes a part

of the common mass of property in the State [Territory].

Puerto Rico and the mainland; and not at all for any for-

eign voyages, or for foreign commerce in any respect.®

OPINION OF THE CIRCUIT COURT OF APPEALS

As above stated, the Circuit Court of Appeals upheld the

opinion of the Territorial Supreme Court, which had up-

held the tax. It is believed that the Circuit Court of Ap-

peals was right, for the reasons stated in its opinion (R.

59-59, supra; 108 F. (2d) 144). Moreover its decision af-

firming the determination of the insular Supreme Court

construing the phrase ‘‘at the time of the sale in Puerto

Rico’’ contained in the local insular statute [Section 62 of

the insular Internal Revenue Law; Appendix II, infra, p.

42], and holding that within the meaning of that i-

sular statute the sales involved in the present case were

made in Puerto Rico (and not in New York, or elsewhere),

is in accordance with the established rule of the respect to

®It is true that the ‘‘stipulation’’ prior to the trial

(R. 14) spoke of delivery of the oil

r ‘to ships plying between Puerto Rico and ports of

the United States and between Puerto Rico and foreign

ports”’;

but upon the trial the only witness called was the Petitioner-

company’s own witness, its assistant manager, Mr. Charles

H. Lee, Jr. (R. 23-31), and Mr. Lee testified that the oil in

question was all delivered for use in the propulsion of ships,

in voyages between the Island and the United States main-

land. His testimony is, on direct examination (R. 24):

“‘Q. 9. Does the West India and its predecessor in

Puerto Rico have a bonded tank for fuel oil? A. Yes,

sir.

‘*Q. 10. When was that tank bonded? A. In December,

1932.

**Q. 11. What is the exact date? A. December 3.

‘*Q. 12. What was that tank bonded for? A. To

store fuel oil, which is used largely by the steamers

plying between Puerto Rico and the States’’.

be accorded to decisions of the local Territorial Supreme

Court construing local Territorial law. Sanchc Bonet,

Treasurer v. Yabucoa Sugar Co., 306 U. S. 505; Sancho

Bonet, Treasurer v. Texas Company, No. 132 at the present

term of this court, decided January 2, 1940.

BRIEF OF AUTHORITIES APPENDED

We venture to append here, in support of our position

and of the opinion of the Circuit Court of Appeals, a copy

of our brief in the present case in the Circuit Court of

Appeals [Appendix I, infra, pp. 9-38], dealing with the

same questions which petitioner raises here, as it did in

that court and in the insular Supreme Court. ,

And again on cross-examination (R. 28):

‘*X-Q. 50. Where was the oil delivered? A. It was

delivered from the tanks in our plant to the bunkers

of the steamers.

*«X-Q. 51. Where are those tanks located? ... In Puer-

ta de Tierra.

‘*X-Q. 52. Here in San Juan? A. Yes, sir.

**X-Q. 53. And the delivery of the 46 million gallons

to which the complaint refers, was made in San Juan,

Puerto Rico? A. Yes, sir.

“X.Q. 54. And the fuel oil delivered to those ships, was

used by then: in their trips between ports of Puerto Rico and

the United States? A. Yes, sir.

“X-Q. 55. This oil was not to be used during trips to other

countries? A. No, sir.

‘*X-Q. 56. And the oil was not brought from Aruba

in transit to other countries? A. No, sir.

‘*X-Q. 57. Does this mean that the 46 million gallons

of oil were drawn from the tanks that the company

has in that manner... ? A. Yes.

**X-Q. 58. But the oil was not given away gratis?

A. No, sir.

eo 59. Then, how was it delivered? A. The oil was

sold.’’

CONCLUSION

The petition presents no question of importance not al-

ready settled by this Court. The decision of the Circuit

Court of Appeals, affirming that of the insular Supreme

Court, was right; and should not be disturbed. The petition

for certiorari should be denied.

Respectfully submitted,

~ _Wittum Carrron Ricsy,

Attorney for Respondent.

Grorcrk A. Ma.coLm,

Attorney General of Puerto Rico,

NatHan R. Marco.p,

Solicitor for the Department of the Interior,

Of Counsel.

APPENDIX I

BRIEF OF RESPONDENT, AS APPELLEE IN CIRCUIT

COURT OF APPEALS

STATEMENT

' This was a petition (‘‘ Amended Petition’’, R. 1-6) in the

insular District Court for the District of San Juan, Puerto

Rico, brought by the West India Oil Company (P. R.), a

corporation of Puerto Rico, the appellant here, against the

Treasurer of Puerto Rico, the appellee here, for a declara-

tory judgment. The gist of the prayer (R. 5-6) is that Sec-

tions 62 and 16(a)' of the Internal Revenue Law of Puerto

Rico be so interpreted as not to authorize the imposition

of the insular two percent ad valorem sales tax ‘‘on the fuel

oil ported by the plaintiff for use on the high seas, as

described in paragraph four of this complaint’’ [R. 2-3],

or, in the alternative,

‘‘that if Sections 62 and 16(a) tend to authorize the

fixing and collection of the two percent ad valorem tax

on the fuel oil drawn from bonded tanks under the jur-

isdiction of the Federal Government, for re-shipment

_and use on the high seas, then that such provisions are

null and void in so far as they tax the fuel oil exported

for use in the high seas’’.

The insular District Court entered judgment in favor of

the plaintiff (‘‘Statement of Facts, Opinion, and Judg-

ment’’; R. 15-22) interpreting the insular statute substan-

tially in accordance with plaintiff’s contention (‘‘Judg-

ment’’, R. 21).

Section 16(a) is not really involved. The tax is levied

solely under Section 62. (Treasurer’s Answer, Par. 3, R.

10; Opinion of insular Supreme Court, R. 34.)

The insular Supreme Court reversed the District Court

(‘‘Opinion’’, R. 33-49; Judgment, R. 49-50), and upheld the

tax. The plaintiff company appeals.

OPINION OF THE SUPREME COURT

The Supreme Court’s opinion, delivered by Mr. sustice

TRAVIESO, concisely states the case as follows (‘‘Opinion’’,

supra, R. 33-35; Italics are those of the court ttself) :

‘*This suit was filed under the provisions of Act No.

47 of April 25, 1931, to obtain a declaratory judgment

in regard to the rights of the litigants.

**The plaintiff, the West India Oil Company (P. B.),

is a domestic corporation engaged in importing, pur-

chasing and selling oil and products derived from the

same. In connection with said business and to facilitate

the sale and delivery of said products to purchasers,

the plaintiff set up and maintained a bonded tank in

the City of San Juan, Puerto Rico, in keeping with the

Federal statutes (46 Stat. 743; 19 U.S. C. A., see. 1555) ;

said tank was used to receite and deposit fuel oil

brought from foreign countries to Puerto Rico. The

oil thus deposited remains in the tank for an unde-

termined period of time until it is (a) re-exported to

a foreign country; or (b) delivered to the steamers

that purchase it to be used as fuel for their engines;

or (c) delivered to purchasers for use in Puerto Rico.

While it remains in the bonded tank, the oil is under

the control of the Customs Service of the Federal Gov-

ernment.

‘“‘From December 1932, through August 1935, the

plaintiff corporation drew about 46,000,000 gallons of

fuel oil from said bonded tank and delivered them to

the steamers which had purchased it for ise in their

trips to the Continent? ind to foreign cou: ries. ‘

‘“‘The Treasurer of Puerto Rico maintains that the

oil thus delivered to said steamers in Puerto Rico is

subject to a tax of 2 percent ad valorem, which in the

2 Id est, the United States mainland.

present case amounts to $26,500, more or less. To im-

se said tax the Treasurer relies on the provisions of

Sec tion 62 of the Internal Revenue Act of Puerto Rico,

as it was amended by Act No. Ww of June 3, 1927, which

reads as follows:

‘Section 62. There shall be levied and collected,

once only, on the sale of any articles the object of

commerce, not taxed under Section 16 of this Act

or exempted from taxation as provided in Section

83 of the same, and at the time of sale in Porto

Rico, a tax of two (2) percent on the price or value

of the daily sales of such articles, whether such

sales are for cash or credit, which tax shall be

paid at the end of each month by the person mak-

mg such sale.’ (Italics supplied.)

‘‘The plaintiff corporation maintains that Section 62,

supra, is not applicable to the oil taken out of the tank

and delivered to the steamers, for the following rea-

sons:

‘*Ist. Because said oil never enters into Puerto Rico

nor does it become property within the territory, since

said tank is somewhat in the nature of a taz-free zone,

not subject to the control of the Insular Government,

but under the exclusive cortrol of the Federal Govern-

ment, said oil never being subject to the tax laws of

Puerto Rico.

‘*2nd. Because the tax imposed would be an export*®

tax, prohibited by Section 3 of the Organic Act of

Puerto Rice.

‘*3rd. Because said tax is a direct burden on inter-

state and foreign commerce and as such is not included

in the powers of the Insular Legislature.

‘‘4th. Because the fuel oil was still in foreign com-

merce when it was delivered to the steamers for use

on the high seas.

* Erroneously printed ‘import”” in the transcript of the

record here (R. 34).

‘‘The District Court of San Juan decided that said

oil had never acquired a taxable situs in Puerto Rico

and therefore rendered judgment in favor of plaintiff,

The defendant appealed. He alleges that the District

Court has erred specifically in upholding each of the

four reasons set forth by the plaintiff corporation

against the imposition of the tax; and has committed

a fifth error, in awarding costs to plaintiff.

‘“‘To complete the above findings of fact we should

state that according to the testimony of Mr. Lee, assist-

ant manager of the plaintiff corporation, the contracts

for the sale of oil are signed in New York by the steam-

ship company and the Standard Oil Company of New

York; the latter notifies the plaintiff corporation that

said contracts have been signed and the oil is delivered

by said corporation to any ship of the purchaser steam-

ship line that requests it. Mr. Lee also testified that

when a delivery of oil is to be made, the plaintiff notifies

the customs office, which inspects the valves of the tank

to see that the seals have not been broken and super-

vises the delivery, and notes the amount delivered;

that the bills and payments are made in New York; that

when the oil comes from Aruba the amount to be used

locally is nowhere stated, nor the amount that is to be

delivered to the ships, nor the amount that is to be re-

exported, but that it all comes together and is thus

deposited in the tanks; that the tanks are situated in

the Ward Puerto de Tierra, of San Juan; that when

delivery of the oil is made to the ships the contract of

sale is entered into in New York, but the oil is de-

livered in San Juan.’’

The contention last noticed in the above quotation, that

the sales must be considered as, in legal effect, made in New

. York rather than in Puerto Rico, together with the four

contentions listed in the four numbered paragraphs earlier

in the Supreme Court’s opinion (ante, pp. 11), are sub-

stantially the same contentions that appellant now presents

here .{‘‘Errors Relied Upon and Appellant’s Position,

Further on in its opinion the insular Supreme Court

found (R. 40):

“The complainant corporation has not considered it neces-

sary to show us copies of the contracts entered into in New

York between it and the steamship companies. In fact, it has

not even referred to said contracts in its amended

petition. The fact of the existence of said contracts

was first brought forth in the testimony of Mr. Lee,‘

to which we have referred. And if we accept said

testimony in its entirety, the only thing that we can

get out of it is that they were simply contracts entered

into and signed in New York for the sale of a cer-

tain amount of fuel oil situated in Puerto Rico,“™

which was to be taken irom the tanks of the corpora-

tion, measured and delivered at the dock in Puerto Rico

to the ships of the purchasers when these should re-

quest it.’’ (Emphasis supplied)

BASES OF INSULAR SUPREME COURT’S OPINION

The bases of the insular Supreme Court’s opinion (R. 35-49) may

be summarized as follows:

1. The lower court (the insular District Court of San

Juan) was in error in considering the bonded tank belong-

ing to this private corporation as ‘‘a tax-free zone or a

Federal Zone and as such as beyond the control or juris-

diction of the Insular Government, merely because employ-

ees of the Federal Government supervise and inspect the

deposit and withdrawal of the fuel oil’’. Such a privately

owned tank, although it has been designated as a ‘‘bonded

warehouse’’ under Section 555 of the United States Tariff

Act of 1930 [Appendix II, infra, p. 41] is not United States

my Mr. Lee’s testimony in question and answer form; R.

“(*) May have been simply contracts for the steamship

companies’ ‘‘requirements’’ over a period of time.

Government land subject exclusively to federal jurisdiction,

as is a militarv reservation or other reservation to which

the Federal Gx vernment has acquired title with the consent ~

of the State legislature so as to vest exclusive jurisdiction it

the federal Government under the Constitution [ Art. I, See.

8, Cl. 17]. No such question arises here.®

Arter examining [R. 36-38] decisions relating to federal

jurisdiction over military and other federal reservations,

and as to other federally owned property [Surplus Trading

Co. v. Cook, 281 U. S. 647; Commonwealth v. Clary, 8 Mass.

72; Mitchell v. Tibbetts, 17 Pick. 298; United States v. Cor-

nell, 2 Mason 60, Fed. Cas. No. 14,867; State ex rel. Jones v.

Mack, 62 Am. St. Rep. 811; Ft. Leavenworth R. Co. v. Lowe,

114 U. S. 525; United States v. Unzeuta, 281 U. S. 138;

Standard Oil Co. v. California, 291 U. S. 242; People v.

Suarez,51 P. R. Rep. .... (51 P. R. Dec. 903, Spanish edi-

tion, not yet published in English)], the insular Supreme

Court concludes (R. 38-39) :

‘* After a thorough study of the above cited cases we

feel bound to declare untenable the contention that a

bonded tank belonging to and constructed on private

property in Puerto Rico of a corporation, is a tax-free

zone or Federal property, ¢ver which the Insular Legis-

lature has no jurisdiction whatsoever, for the only rea-

son that employees of the Customs Service control and

inspect the movement of the fuel oil deposited in said

tank to facilitate the business of the corporation.’’ ®

2. The court then points out (R. 39) that the question

5 Appellant really admits this, in its brief in this court

[Brief, p. 11]. It makes no attempt, in this court, to defend

the opinion of the District Court in this respect. All that

part of appellant’s contentions in the insular courts appears

now to be abandoned in this court.

* Confer 22 Ops. Atty. Gen. [U. S.] 152 [1898].

r decision is not whether the insular Legislature has pow-

to impose a tax on fuel oil while deposited in bond in the

nks of the West India Oil Co.; that there is no allegation

the plaintiff’s complaint of the Treasurer havjng ever

ied to impose any such tax; but that the question for

cision is simply (R. 39):

‘*Ts the Treasurer of Puerto Rico legally authorized

to impose and collect the 2 percent tax provided for by

Section 62, supra’’ [Sec. €2, Internal Revenue Law of

Puerto Rico], ‘‘on the price of the fuel oil that the

plaiytiff corporation hound itself to sell by a contract

entered into in New York, which oil was to be deliv-

erea’’ [and actually was delivered] ‘‘at the dock in

Puerto Rico by pumping it from the tanks to the ships

of the purchaser corporations?’’

nd that the question depends for its solution on the inter-

‘etation of the phrase used in that section of the statute

{ppendiax II, infra, p. 42], ‘‘at the time of sale in Puerto

ico’’. [Spanish: ‘‘al tiempo de verificarse la venta en

uerto Rico’’; Laws of 1927, at pp. 473-475].

3. The court says (R. 39) further:

‘‘We accept as an indisputable premise that the fuel

oil is an article of commerce the sale of which if it is

consummated in Puerto Rico is subject to the payment

of the tax. And if,the other premise, that is that the

sale of the oil wag consummated in Puerto Rico, is

established, we would be forced to the inevitable conclu-

sion that the Treasuxer was correct in applying the

statute to it.’’ ‘

The court then (R. 39-40) states the appellant corpore -

on’s contention that:

‘‘as the contract of sale was entered into, the bills made

and the oil paid for in New York, the sale must be con-

sidered consummated in New York and not in Puerto

Rico; and that the fact that at the moment when the

sale was carried out the oil was in Puerto Rico, where

PS a en. eee ee

delivery was made to the purchaser, does not authorize

the Treasurer to impose the 2 percent tax on said sale.”’

And, after stating the Treasurer’s contrary contention

that, for the purposes of this tax, ‘‘a sale is consummated

where the delivery of the thing sdld is made’’, and after

commenting on the fact that this plathtiff corporation ‘‘has

not considered it necessary to show us copies of the con-

tracts between it and the steamship companies’’ and ‘‘In

fact, it has not even referred to said contracts in its amended

petition’’ [R. 40, quoted ante, p. 13], and, after pointing

out that, as above quoted (ante, p. 18) even the fact of

the existence of those contracts was first brought out in the

testimony of Mr. Lee, the court proceeds (R. 40-41): \

‘‘And if we accept said testimony’’ [of Mr. Lee] a in

its entirety, the only thing that we can get out of it is

that they were simple contracts entered into and signed

in New York for the sale of a certain amount of fuel

oil situated in Puerto Rico, which was tc be taken from

the tanks of the corporation, measured and delivered .

at the dock in Puerto Rico to the ships of the purchasers

when these should request it.

‘We have no doubts that the contracts between the

oil corporation and the steamship companies were per-

fected from the moment they were signed in New York,

the contracting parties having agreed as to the thing

object of the contract and as to the purchase price,

without requiring the previous delivery of one or the

other. Section 1339 of the Civil Code, 1930 ed. The

agreement in regard to the object and the purchase

price is sufficient to constitute a valid contract of saie

binding as betwecn the purchaser and the vendor, the

former having an action to demand the delivery of the

thing‘sold to him and the latter to claim the payment of

the price agreed upon.

‘‘However, we are not trying to determine the rights

and obligations as between the purchas2r and the ven-

dor, but the obligation that a vendor who consummates’”’

[Spanish: ‘‘vertfica’’; 54 P. R. Dec., at p. 742; Advance

Sheets, July 1, 1939] ‘‘a sale of an object of commerce

within the limit of a state enters into with a third party,

the state.

‘‘Manresa, in his Commentaries to the Spanish Civil

Code, in dealing with the perfection and the consumma-

tion of a contract of sale says as follows:

‘From the moment of agreement, and without

any otier requisite, the contract, we repeat, is

perfected and the obligations of the parties arise;

but the transmission of the property does not exist

until the thing has been delivered. ‘The delivery of

the thing refers to the consummation; the section

which we are studying merely states the moment

in which the contract is perfected .. .

We said that the generally accepted rule sustains

the doctrine ot the transmission of the property

merely by resgre Sm and without the necessity of

the previous delivery of possession, and that, on

the contrary, our code still requires said requisite

to consider the preperty transmitted.’ [Italics

are the court’s] 10 Manresa, page 60, 2d ed.

‘‘And the Commentator Scaevola says:

‘All these considerations lead us to declare as a

consequence that the transmission of the title of the

thing sold from the vendor to the purchaser takes

effect at the time when the contract is consummated

and not simply when tt is perfected.’ [Italics are

the court’s] 23 Seaevola, 318.

‘<The same doctrine has beer upheld by this court in

Olivari v. Bartolomei, 2 Judgments of the Supreme

Court of Puerto Rico 79; Capo v. S. A. Panzardi & Co.,

44 P. R. R. 225; and Benitez Flores v. Llompart, 50

P.R.R.....’’ [50 P. R. Dec. (Spanish Ed.) 679] ‘‘See:

Section 549 of the Civil Code, 1930 ed.’’

After citing (R. 41-42) decisions in a number of the States

along the same lines as the Puerto Rico law, the Court

adds (R. 42-43):

‘‘In the present case the title or right of property

could not be transmitted to the purchaser until the oil was

taken from the tank, measured and delivered to the ships.

cs i

' 18

‘But the acceptance of the delivery order will not transfer

the property if something remains to be done, such as

weighing or measuring, to identify the goods or ascertain

the quantity sold.’ 55 C. J. 562. See pages 530-542.

“*See: Iron City Grain Co. v. Arnold, 215 Ala. 543, 112

So. 123. Lopez & Moran v. Sobrinos de Ezquiaga,

34 P. R. R. 75.

“In accordance with the authorities cited we must arrive at

the conclusion that the contract or promise of sale entered into

in New York was not consummated until the oil was extracted

from the tank, measured and delivered to the ships in their

tanks. (Emphasis supplied)

Quoting from definitions in the ‘‘ Dictionary of the Span-

ish Language’’ the court (R. 43) overrules the plaintiff’s

contention that the provision in Section 62 of the statute

that the tax is to be imposed and collected ‘‘at the time of

sale in Puerto Rico’’ [‘‘al tiempo de verificarse la venta

en Puerto Rico’’; cf., ante, p. 15] means ‘‘when the contract

was entered into or perfected’’, rather than when the sale

is consummated by delivery. The court holds that the lan-

guage of the statute refers to the ‘‘carrying out or accomp-

lishment of an act’’, and concludes its discussion of this

part of the case by saying (R. 43):

‘“We are, therefore, of the opinion, and we so de-

cide, that in providing in Section 62, supra, that the

2 percent tax shall be imposed and collected ‘at the time

of sale [‘‘de verificarse la venta’’] in Puerto Rico’ and

that said tax shall be paid ‘by the person making such

sale’, the legislator had the intent to and meant to im-

pose ‘the.tax at the place of and at the moment when the

sale was consummated by the delivery to the purchaser

of the thing sold, without taking the manner of paying

the purchase price into consideration, since the tax is

made applicable to all sales whether ‘for cash or on

credit’. To sustain the opposite would be to make the

evasion of the tax a simple matter, in New York as

well as in Puerto Rico,.since the courts of that state

have held that the tax may not be levied when the thing

object of the contract is delivered out of the city of

New York even though the contract is entered into or

signed in said city. Umited Artists Corporation v.

Taylor, 7 N. E. (2d) 254, 273 N. Y. 334, affirming 248

App. Div. 207.’’

3. The court overrules [R. 44 (‘‘2’’)] the plaintiff cor-

poration’s contention that the tax levied by the Treasurer

on oil delivered to the ships for their own consumption,—

[mostly at least to American flag ships plying between

Puerto Rico and the United States mainland in the coast-

wise shipping trade between United States ports, San

Juan and New York cr Baltimore or others],—is an ‘‘ex-

port duty’’ prohibited by Section 3 of the Organic Act

(Appendix II, infra, p. 39). The court, in holding that such

delivery of oil to the ships, to be consumed in their own

propulsion, is not an ‘‘export’’, within the meaning ot Sec-

tion 3 of the Organic Act, and in overruling plaintiff’s con-

tention that it is then ‘‘still in foreign commerce when it

was delivered to the ships to be used on the high seas’’,

points out that the ordinary meaning of the word ‘‘export’’

as used in the Constitution and laws of the United States

is ‘‘the transportation of goods from this country to a

foreign country’’, and quotes what the United States Su-

preme Court said in Swan and Finch v. United States, 190

U. S. 143, 145:

‘‘Tt cannot mean simply a carrying out of the coun-

try * * * . Nor would the mere fact that there was no

purpose of return justify the use of the word ‘export’.

Coal placed on a steamer in San Francisco to be con-

sumed in propelling that steame, to San Diego" would

never be so designated. Another country or Séate as the

intended destination of the goods is essential to the

idea of exportation.’’ (Italics supplied)

4. Replying to plaintiff’s invocation of the ‘‘commerce

_ "(Oil pumped into a steamer in San Juan to be consumed

in propelling that steamer to New York].

clause’’ of the Constitution, and its contention that the levy

of this tax on the oil delivered in Puerto Rico to the ships to

be consumed in their own propulsion [between San Juan

and other United States ports,mostly mainland ports] ‘‘con-

stitutes a direct burden on interstate and foreign com-

merce’’ and therefore that the Legislature of Puerto Rico

‘‘has no authority to impose said tax’’, the court, without

reference to the fact that the ‘‘commerce clause’”’ is not

applicable to Puerto Rico, which is not one of the States of

the Union,’ overrules piaintiff’s contention (R. 44-46

[‘‘3’’], and holds that the imposition of this excise tax on

this domestic corporation of Puerto Rico, vpon its sales to

these ships of oil for their own consumption, is not a direct

burden on interstate or foreig commerce, within the deci-

sions of the United States Supreme Court [Kelley v.

Rhoades, 188 U. 8.1; American Steel & Wire Co. v. Speed,

192 U. S. 500, 518-522; General Oil Co. v. Crain, 209 U. S.

211; Susquehanna Coal Co. v. South Amboy, 228 U. S. 665;

Bacon v. Illinois, 227 U. S. 504; Brown v. Maryland, 12

Wheat. 419; May v. New Orleans, 178 U. S. 496; Gromer v.

Standard Dredging Co., 224 U. S. 362; and Eastern Air

Transport v. South Carolina Tax Commission, 285 U. S.

147, 150-153 ; together with the Minnesota decision in State

v. Maxwell Motor Sales Corp., [Minn.], 171 N. W. 566], and

the decision of this court in the case a su this corpora-

tion’s predecessor and the Treasurer of-Puerto Rico, West

India Oil Co. v. Gallardo, 6 F. (2d) 523.

The court (R. 45-46) quotes from the opinion in American

Steel & Wire Co. v. Speed, supra, 192 U. S. 500, 518-522,

where a New Jersey corporation manufacturing wire, nails,

etc., in factories in various States, chose the city of Mem-

phis, Tennessee, as its distribution point, to facilitate sales

and deliveries of its products, and it appeared that upon ar-

® That the commerce clause is not applicable to Puerto

Rico, see: Lugo v. Suazo, 59 F. (2d) 386, 390, decided by this

court on June 7, 1932.

riving at Memphis its products were deposited in the ware-

house of a transportation company that delivered them to

the persons to whom the New Jersey corporation sold them.

Tennessee levied a tax on such products, and the corpora-

tion refused to pay it, claiming that the goods were in Ten-

nessee only ‘‘in transit’’ to be delivered to its customers,

and that the tax was in violation of the commerce clause.

The Puerto Rico Supreme Court quotes (R. 46) the language

of the United States Supreme Court upholding the validity

of that tax, saying (192 U.S. at pp. 518-519; R. 46):

‘‘With these facts in hand we are of opinion that the

court below was right in deciding that the goods were

not in transit, but, on the contrary, had reached their

destination at Memphis, and were there held in store

at the risk of the Steel Company, to be sold and deliv-

ered as_contracts for that purpose were completely

consummated.’’ (Italics supplied)

5. The insular Supreme Court concludes (R. 48-49):

‘‘ Applying the rules established in the cases we have

cited to the facts in the present case, we must neces-

sarily hold that when the importer took from the bond-

ed tank a certain number of gallons of oil and delivered

them to a ship at the dock in Puerto Rico, to consum-

mate a sale already agreed upon, said sale was subject

to the tax levied by Section 62 of the Internal Revenue

Law, supra; that the oil thus sold, extracted and deliv-

ered by the importer lost its character as an import

and came into Puerto Rico as an object of commerce

and from that moment on was subject to the insular

fiscal jurisdiction (West India Oil Co. v. Gallardo, 6 F.

(2d) 523) ; that the fact that the oil has been delivered

to a ship which is going to use it in its trips in interstate

or international commerce does not make the oil an

export, since said product was not consigned to any

foreign or national port (Swan & Finch Co. vs. United

States, supra); that the mere purchase of supplies or

equipment which are to be used in a business in inter-

state commerce does not so confound said purchase with

that business as to exempt it from the payment of the

tax levied by the insular law equally on all sales car-

ried cut or consummated within its jurisdiction (East-

ern Air Transport v. Tax. Comm., 285 U. S. 147); and

finally that as the delivery of the oil was made at the

wharf, in the San Juan harbor, the sale was cénsum-

..ated within the fiscal jurisdiction of Puerto Rico and

was, therefore, subject to the payment of the 2 percent

tax, which being a sales tax is in the nature of an excise

tax and not a property tax. (Gromer v. Standard

Dredging Co., 224 U. S. 362).

‘*Since no violation of a Federal statute has been

invoked which would give ships engaged in interstate

commerce the privilage of buying, or oil corporations,

of selling, within the limits of a state, objects of com-

merce, without having to pay the local excise taxes

on sales carried out within the limits of the state, we

must hold that the West India Oi! Company is legally

bound to pay the sum claimed by the appellant Treas-

urer. To decide otherwise would be to make the act

discriminatory against the other merchants engaged

in the same business.”’

APPELLEE’S POSITION

This appellee, the Treasurer of Puerto Rico, believes that

the tax is validly imposed under Section 62 of the Internal

Revenue Law of Puerto Rico, and that the judgment of

th> insular Supreme Court upholding it should be affirmed,

substantially on the same grounds stated in the opinion of

that court; and also, particularly, in so far as that opinion

decides that, under the laws of Puerto Rico, the sales in

question were to be considered as sales made in Puerto

Rico, and not as made in New York, on the further ground

that that decision is an interpretation and application by

the local Territorial Supreme Court of the local Territorial

statutes relating to sales, primarily of certain sections of

the local Civil Code of Puerto Rico directly derived from

the Spanish Civil Code, and of applicable civil law doc-

trines and commentaries, and is therefore peculiarly within

the reason of the established rule that an interpretation

of local Territorial statutes by the local Territorial Su-

preme Court should not be disturbed unless ‘‘clearly erron-

eous’’; and that the ruling of the local Supreme Court in

the present case is certainly not ‘‘clearly erroneous’’, but,

to the contrary, is wholly reasonable and clearly right in

itself.

STATUTES

Applicable constitutional and statutory provisions, fed-

eral and Puerto Rican, are in Appendix II, infra, pp. 39-42.

SUMMARY OF ARGUMENT

The argument is summarized in the Subject-Index at

the beginning of this brief. As above indicated (ante, p. 22)

it runs, in general, along the lines of the opinion of the

insular Supreme Court, and in addition it relies upon the

established rule of the respect to be accorded to a decision of

a local Territorial Supreme Court interpreting and apply-

ing local statutes, particularly when, as here, those statutes

are not derived from common law sources, byt from Spanish

civil law sources. [See particularly Diaz * Gonzalez, 261

U. S. 102, 105-106]

ARGUMENT .

POINT I .

This tax on sales is an excise tax; not a tax on property.

A. It is not a property tax; not a tax levied on any prop-

erty; although its amount is measured by the value of the

property sold. /t 1s, however, a true excise tax levied on the

privilege of conducting the business activities of the tax-

payer,—in the present case, business activities of this do-

mestic corporation of Puerto Rico, organized there under

the local corporation laws.

B. It rests upon the authority given the Legislature by

the Congress, by Section 3 of the Organic Act (inf~a, p. 39)

to lay ‘‘internal revenue’’ taxes, coupled with the provi-

sion in Section 9 of the Organic Act (Appendix II, infra,

_ p. 40) that the federal ‘‘internal revenue laws’’ do not run

\ to Puerto Rico.

C. It is of the same category as the similar excise tax

levied on the privilege of carrying on the business

activity of manufacturing sugar in the island [Par. 14,

Sec. 20, ‘‘Excise Tax Law of Porto Rico’’, as amended

August 27, 1923, Laws of 1923, Spec. Sess. Act No.

1, pp. 2, 4], which assessed ‘‘a manufacturing charge

of four (4) cents on each hundred-weight of sugar

manufactured or produced’’,—likewise a charge or tax

on the business activity, although measured in that in-

stance by the amount of the sugar produced, as it is here

by the amount of business done, the amount of the sales.

This court, in sustaining the sugar manufacturing charge,

expressly called attention to the fact that it is an exctse tax

on the business activity of producing sugar, and not at all

a property tax on the sugar itself; and, consequently, held

it payable by a manufacturer carrying on that activity, and

measured by the entire amount of sugar he’ produced,

despite the fact that some of the sugar may have been ex-

ported and thereby expressly exempted from property tazes

on the sugar itself; and that such exportation of the sugar

and consequent exemption of the sugar itself from the prop-

erty tax did not at all operate to reduce or to change the

measure of the excise tax laid on the business activity of

producing it; and, hence that the excise tax must be paid

as measured by the full amount of the sugar manufactured,

regardless of any property tax exemption as to the ex-

ported sugar. This court there said (Lotza Sugar Co. v.

People of Porto Rico, 57 F. (2d) 705, 706, March 22, 1932):

‘*{4] The tax authorized by paragraph 14 of sec-

tion 20 as amended is clearly an excise tax on the manu-

facture of sugar, and inyterms imposed on the factory

or manufacturer. As originally enacted, though it was

undoubtedly intended as an excise tax, it was literally

imposed on the article manufactured, produced, or con-

sumed. In effect, however, it was an excise tax on the

manufacture of swear. Patton v. Brady, 184 U. S. 608,

618, 22 S. Ct. 493, 46 L. Ed. 713; Porto Rican Taz Ap-

peals (C.C. A.) 16 F. (2d) 545, 549; Sanchez Morales

& Co., Inc. v. Gallardo (C.C. A.) 18 F. (2d) 550; Ber-

man v. Gallardo (C.C.A.) 18 F. (2d) 581; Goodyear

Tire & Rubber Co. v. Gallardo, (C.C. A.) 18 F. (2d)

926.

‘*Section 43 of the Act provides: ‘That articles sub-

ject to taxation in accordance with the provisions of

this Act shall be exempt from taxation when exported

from Porto Rico, after such regulations have been com-

plied with, entries made and such bond furnished as

the Treasurer of Porto Rico may prescribe.

‘‘Lest paragraph 14 of section 20, as originally en-

acted, should be construed to ‘mpose a tax on sugar

as property, and by reason of the exemption on ex-

ported articles under section 43 of the act, no, or lit-

tle, revenue would be derived therefrom, we think the

Legislature at the special session, by the amendment

to paragraph 14, undertook to make it clear that it was

not the intent to impose a tax on sugar as a distinct

article or item, but an excise on its manufacture.’’

Certiorari was denied by the United States Supreme

Court. Loiza Sugar Co. v. Porto Rico, 287 U. S. 632.

In the Loiza Sugar case, supra, this court further noted

(57 F’. (2d) 705, at p. 706), with relation to its decision that,

as above quoted,

‘it was not the intent’’ [of the Legislature] ‘‘to im-

pose a tax on sugar as a distinct article or item, but

an excise tax on its manufacture’’,

that such was likewise the doctrine of the insular Supreme

Court, that (ib., p. 706)

‘‘The Supreme Court of Puerto Rico has so con-

strued the law in People of Porto Rico v. Central Los

Cantos, supra’’ [35 P. R. Rep. 27, 30-32].

26 4

D. Such is likewise the holding of the insular Supreme

Court in the present case with regard to the business ac-

tivity here taxed under Section 62 of the local Puerto Rican

‘Internal Revenue Law, which levies the tax ‘‘on the sale’’,

—a tax which the insular Supreme Court expressly calls

(R. 49) in ~ concluding part of its opinion, as above quoted

(ante, p. 22)’:

“a sales tax is in the nature of an excise tax and not a prop-

$62) tax. (Gromer v. Standard Dredging Co., 224 U.S.

362)’’.

EK. It necessarily follows that this sales tax, being not

at all a tax on the oil as property, but, instead, a tax on this

corporation’s privilege of conducting the business activity

of selling,—it is realty wholly immaterial to its validity,

or in measuring its amount: (a) what the situs of the prop-

erty sold was at the time of the sale; (b) whether [as this

court expressly held in the Loiza Sugar case as above

quoted ; ante, pp. 24-25] the property sold, or some portion

of it, was to be exported, or was actually exported, either

afterwards, or immediately; or (c) whether the property

or some part of it was in transit in interstate commerce,

or in foreign commerce, at the time of the sale, or whether

it had already come to rest in Puerto Rico and become

mingled with the mass of the property in that Territory.’

None of those things have anything to do with the Legis-

lature’s power to levy this excise impost on this business

activity of making sales, carried on by this creature of the

Legislature itself,—this domestic corporation chartered

under the laws of Puerto Rico, and dwelling there.

* As the insular Supreme Court correctly holds that it

actually had, and was no longer ‘‘in transit’’ in foreign

commerce (R. 44-49; ante, pp. 19-22).

ee ee ee ee ee ee ee. ae |

————— rr EL |

POINT II *

The power of the Legislature extends to levying an excise tax

m the business activities of a domestic corporation of Puerto Rico,

egardless of whether or not the subject of those activities is prop-

tty located within the Territorial limits of Puerto Rico.

Plaintiff’s deposit of the oil in a bonded warehouse is, therefore,

mmaterial here, for any purpose.

The excise is levied upon the exercise of the privilege

ranted the company by the Insular Government, by its

harter, of carrying on this business.

A. In this respect this excise tax on sales made by the

ompany,—on its exercise of the privilege granted by its

harter of carrying on this business activity, measured by

| percentage of the total business done,—is analogous to a

orporation tax or a franchise tax measured by the total

mount of the corporation’s assets or the total amount of

ts business transactions, which the chartering State has

he power to impose on its domestic corporations, and to

issess in accordance with the amount of the corporation’s

otal assets, or total business done, including assets and

usiness transactions located or done in other States, out-

ide of the territorial jurisdiction of the chartering State.

Vewark Fire Insurance Co. v. State Board of Tax Appeals

f New Jersey, 307 U. 8. 313, 318, 322, 323-324; Cream of

Vheat Co. v. Grand Forks, 253 U..8. 325, 328, et seq.

B. Hence the only question to be considered here, with

eference to the place where the sales were made, is not

, question of the power of the Legislature, but is only a

juestion of whether these particular sales fall within the

imitation which the Legislature itself has voluntarily

laced upon the imposition of the tax, by the limiting pro-

rision in Section 62 of the statute, providing for the impo-

ition of the tax only

‘fon the sale * * *, and at the time of sale in Porto

Rico’’ (Appendiz II, infra, p. 42),

ee, nee ete ee bh te. ee ee

‘ 28

which manifestiy requires that the ‘‘sale’’ must have been

made within the territofial limits of Puerto Rico.

C. Of course it is manifest,—and our »pponents do not

question,_-that the definition of the word ‘‘sale’’ [sPanisq,

‘al tiempo de verificarse lu venta en Puerto Rico’’; ante,

p. 15], as thus used by the local Legislature of Puerto

Rico in relation to these local taxes [and particularly in

applying it, as here, in relation to a local domestic corpora-

tion of Puerto Rico], is the definition of ‘‘sale’’ recognized

by the local law.

D. It follows that the crucial question is whether or not,

under the local laws of Puerto Rice, the sales of the oil

here in question are to be considered as ‘‘sales’’ made ‘‘in

Puerto Rico’’, or as sales made elsewhere. The local Ter-

ritorial Supreme Court, interpreting the local laws, has

held that they were made in Puerto Rico.

E. ‘‘In Porto Rico’’, as used in this local statute of the

Legislature, manifestly meens within the territorial juris-

dtction within which, under the Organic Act [Secs. 25, 37]

the Legislature has been granted, as the delegate of the

Congress, ‘‘all local legislative powers’’. The scope of that

territorial jurisdiction is defined by the Congress by the

first section of the Organic Act (Appendix IJ, infra, p. 39)

to extend te

‘the Island of Porto Rico and to the adjacent islands

me ig to the United States, and waters of those

islands.’’ ,

And by Sections 7 and 8 of the Organic Act (Appendiz II,

infra, p. 40) the jurisdiction of the insular Legislature is

likewise extended over [among other things]:

‘‘ali the harbor shores, docks, slips, reclaimed land,

* * * not heretofore reserved by the United States for

public purposes*’’ (Sec. 7) * * *,

and over

‘‘the harbor areas and navigable streams and bodies

of water and submerged land underlying the same in

and around the Island of Porto Rico and the adjacent

islands and waters, now owned by the United States

and not reserved by the United States for public pur-

poses®’’ (Sec. 8) ° °.

F. The designation by the customs authorities, at the

request of the private owner of a warehouse, of such ware-

house [primarily for the convenience of the private owner

in carrying on his business} as a ‘‘bonded warehouse’’,

under the federal tariff laws [‘‘Tariff Act of 1930’ as

amended, Act of June 30, 1930, c. 497, Title IV, Sec. 555,

46 Stat. 590, 743; 19 U. S. Code, Par. 1555], plainly does

not at a!l amount to a reservation of such warehouse ‘‘by

the United States for public purposes’’ within the mean-

ing of Sections 7 and 8 of the Organic Act, supra, in any

such sense as to withdraw the warehouse from the local

territorial jurisdiction granted to the insular Legislature

and to the insular Government by Section 1 of the Organic

Act, or to withdraw tu2 warehouse from the operation of

the insular laws. It does not place it within the category of

‘military reservations’’ conveyed to the United States,

with the express consent of the State legislature in each

instance [or, in Puerto Rico, upon an express ‘“‘legislative

grant’’ by the Legislature; Organic Act, Sec. 7, supra; Ap-

pendix II, infra, p. 40], over which the federal Government

exercises ‘‘exclusive jurisdiction’’. Nothing of that kind is

here involved. The decision of the insular Supreme Court

on this point was ciearly right. [Opinion, R. 35-39; ante,

pp. 10-13].

With regard to such a ‘‘bonded warehouse’’, instituted

* No such federal reservation is here involved in any way.

as such at the request of a private owner, the Attorney

General of the United Statese ruled, years ago, under the

federal statutes then in effect, substantially the same, in

this respect, as the present statute [Rev. Stats. Secs. 2958,

2959, and 2960, of which the present Section 555 of the

Tariff Act of 1930, supra, is the lineal descendant, through

Section 555 of Title IV of the Act of September 21, 1922, c.

356, 42 Stat. 858, 976],—and the ruling appears to have

stood unquestioned administratively ever since,— that, as

it is digested in the notes to this section in the annotated

edition of the United States Code [19 U. S.C. A. Par. 1555,

foot-note ‘‘3’’, p. 1060]:

‘<The private rights of the warehouseman and those

having relations with him as such are in no wise af-

fected by this joint custody, providing the rights of

the government in and about the collection of its

customs are not interfered with.’’ [(1898) 22 Ops.

Atty. Gen. 152].

G. It follows that, —in so far as concerns the meaning

of the place limitation used by the Legislature in Section

62, supra, limiting the Treasurer, in his computation for

the purpose of measuring the amount of the excise tax to

be levied on this corporate activity, to counting only sales

‘‘in Porto Rico’’,—thai a sale, even if made within such

a bonded warehouse, could still be counted as a sale made

within the territorial legislative jurisdiction of Puerto Rico,

and so ‘‘in Porto Rico’’, within the meaning of the Legis-

lature in this statute.

H. But the point is really immaterial here. It does not

appear that any of these sales were really made within the

bonded warehouse.

POINT III

The sales were made “in Porto Rico”, within the meaning of Sec-

tion 62 of the local excise law here involved.

A. The ruling of the insular Supreme Court to this effect

[R. 39-43; ante, pp. 11, 12, 14-18] was clearly right.

B. Manifestly, as above pointed out (ante, Point II—C,

p. 28], the question of whether the sales are to be con-

sidered as having taken place in Puerto Rico, or, as the

appellant contends [Brief, ‘‘Point I1’’, pp. 27-30] in New

York, is to be decided in accordance with the local law of

Puerto Rico. The Legislature in enacting *1is Section 62

cf this local statute must be deemed to have intended to use

this word ‘‘sale’’® in the sense, and with the meaning

attributed to it by the local laws.

C. The insular Supreme Court holds, that under the lo-

cal law of Puerto Rico, in accordance with the applicable

sections of the local Civil Code [Civil Code of Puerto Rico,

Edition of 1930, Secs. 1339, 549, derived from the Spanish

Civil Code], and with the comments of recognized authorita-

tive commentators on the Spanish code [Manresa,Scaevola],

and with earlier decisions of the Supreme Court of Puerto

Rico itself, the ‘‘sales’’ of the oil here involved did not

take place, or become completed, until their ‘‘consumma-

tion’’ by taking ‘he oil from the tank, measuring it, and

delivering it to the ships,—all of which was done in Puerto

Rico; and that, accordingly, these sales are to be considered,

under the local law of Puerto Rico, as made in Puerto Rico,

and not in New York.

D. This ruling of the«insular Supreme Court is likewise

in accordance with decisions in various States of the Union,

as the insular Supreme Court points out in its opinion (R.

41-42; and decisions there cited).

E. It is also in accordance with authorities cited by the

appellant itself in its brief here (Appellant’s Brief, pp.

19-22).

One of the recognized essentials, in order that the trans-

action may become a ripened ‘‘sale’’,—as contradistin-

19 Spanish edition, ‘‘al tiempo de verificarse la venta’’;

Laws of 1927, at pp. 473-475; ante, p. 15.

guished from an executory contract to sell,—is that the

goods sold shall have been so definitely identified, marked,

or separated jrom the mass, that they can be recognized,

definitely, at once, as having become the property of the

vendee ;—for example, so definitely segregated and identi-

fied that they can be made the subject of a writ of replevin,

or be claimed by the vendee as his property as against

creditors of the’ vendor.

This established rule is recognized in authorities quoted

in appellant’s brief.

Thus, for example, in appellant’s quotation (Brief, p

19) from Corpus Juris (55 C. J., Sec. 534, p. 535) it is

said:

‘“Where there is an unconditional contract for the

sale of specific goods * * *,’? (Emphasis supplied)

And again, in appellant’s quotation (Brief, p. 19) from

the Minnesota court’s opinion in Welck v. Lahart, 122 Minn.

432, 436, the language is:

‘‘Presumptions. In the case of a sale of specific goods,

that is, goods that are specified at the time the contract is

made, the presumption is * * *’’. (Emphasis supplied)

And again in appellant’s quotation (Brief, pp. 19-20)

from Iron City Grain Co. v. Arnold, 215 Ala. 543, 544, the

wording is:

‘Where the goods sold are in the possession of the

seller, and are definitely ascertained and agreed upon—

remaining to be done to determine their price, quantity

or identity * * *’’, (Emphasis supplied)

In other words, the goods must be so identified, in order

to make a completed ‘‘sale’’, that, as said above, the vendee,

in case of necessity, could sue out a writ of replevin and

could put his finger on the particular goods, and say to the

sheriff: ‘‘This is my property’’, without anything further

having to be done in order to mark or identify the particu-

lar goods as those sold.

F. Nothing of the kind took place here. There is neither

allegation nor proof that it did; no attempt whatever, in

New York, to identify any particular oil as the oil sold; no

sale of any particular cargo of any particular ship; no sale

of any particular drums or containers marked or identified

in any way. No segregation whatever was attempted in

making the contracts in New York. The plaintiff West India

Oil Company brought the oil in bulk from Aruba, indiscrimi-

nately, and put it all together in the same tank, and drew

from the tank indiscriminately, for local consumption in

Puerto Rico, for export to foreign countries, or for delivery

to ships for the latter’s own use under these contracts made

in New York. There was no kind of identification in New

York of any particular oil that any particular steamship

company purchaser was to get under its contract; and no

kind of identification at all, until one of its ships turned up at

San Juan and asked for so much oil, which was then drawn

from the mass in the tank, measured, and pumped into the

eship. Until the moment that it actually flowed out of the

tank, that particular oil was no more allocated to that par-

ticular steamship company purchaser than was any other

part of the mass of the oil in the tank. If another ship had

turned up first, belonging to another line holding one of

these New York contracts, then the oil would have gone to

that ship; and if that ship’s demands, and local demands

on the oil, had emptied the tank, then the other ship, when

it came along, would hAve had no possible right to claim that

that particular oil belonged to it, or to replevin it from

the ship or the local purchaser that had actually got posses-

sion of it. =

The contracts in New York appear, in effect, to have been

just like what the wheat brokers call a ‘‘sale’’ of fifty thou-

sand bushels af wheat in the Chicago wheat pit; not at all an

actual sale of ‘any particular wheat that the purchaser can

identify as his and take away, but only a right to have that

much wheat delivered to him out of the mass in a grain ele-

vator,—provided that much grain is there when the pur-

chaser calls for it, and has not first been delivered to some-

body else. That is not a completed sale of any particular

article. It is a contract, a breach of which gives rise to an

action for damages.

G. The essential element of the vendor’s consent to these sales

was likewise given in Puerto Rico, and not in New York.

This plaintiff company is a Puerto Rico corporation,

having its principal office in San Juan. That is its domicile.

‘*There it must dwell’’. Newark Fire Ins. Co. v. State Board

ef Tax Appeals of New Jersey, supra, 307 U. S. 313, 318;

May 29, 1939. There its offices and officers are; and there

its board of directors meets. It claims no office elsewhere,

no ‘‘commercial domicile’’ in New York or anywhere else

outside of Puerto Rico at which a part of its business may be

said to have become ‘‘localized’’, such as, for example, the ~

Wheeling Steel Corporation of Delaware had established in

West Virginia. [Wheeling Steel Corp. v. Fox, 298 U. 8.

- 193, 211-215.] This appellant is a corporation of Puerto

Rico, pure and simple. Its corporate acts are performed

there. There, and there alone, its board meets and acts.

There, and there alone, can it give its consent to a sale, or °

to any other contract. iv.

I. Its purpose, for which it is chartered, and the business

in which it engages, as alleged in its bill of complaint (Par.

1; ; R. 1-2), is ‘‘importing, purchasing and selling oil’’. rr 1s

noe AN ‘‘aGENOY’’ comPANY. It buys and sells oil on its own

account. There is no suggestion in this record that it has

any charter power to act as agent for others, or that it

does so."

11 There is no basis whatever in the record for appellant’s

suggestion (Brief, p. 22) that in this case, the ‘‘person mak-

ing the sale’’ within the meaning of Section 62 of this

Puerto Rican sta‘ute, ‘‘was the Standard Oil Co. = New

—_— —_ -—- a

J. Since this appellant corporation, acting at its domicile

in Puerto Rico, authorized the contracts to be made in New

York on its behalf by its agent there, the Standard Oil Com-

Jersey at its office in New York City’’ or that appellant

‘“but acted as a mere agent of the seller to

effect delivery of the thing sold.’’

Whatever this appellant company’s relations with the

Standard Oil Company may be, they are, not shown in this

record. But there is no suggestion whatever, in the record, that

the oil belonged in any way to the Standard Oil Company, or that

this appellant West India Company was the Standard Oil Company’s

agent. Nothing of that kind. The allegations (Par. 1, B. 1-2;

Par. 4, R. 2-3) and the proof (Lee; R. 24), are just the

other way around; that this West India Company is in

business for itself, and that the contracts of sale are made

for it by the Standard Oil Company in New York, the latter

company apparently acting as the agent of the West India

Company. Mr. Lee testified (R. 29) with relation to the

former ‘‘ West India Oil Company’’, that such former com-

pany was an agent of the ‘‘West India Oil Company of New

Jersey’’. But there is no evidence anywhere,—as there is

no allegation,—either that this present appellant company,

or the former company, was ever an agent of the Standard

Oil; nor is there anything whatever indicating this present

appellant company’s relations with the Standard Oil. There

is Just this bare statement by Mr. Lee (R. 24):

‘*Q. 15. Please explain to the court the procedure used

in making those sales and deliveries? A. The contract

is signed in.New York between the steamship company

and the Standard Oil Company of New York; we re-

ceive in Puerto Rico notice of said contracts and we

‘deliver the oil to any steamer belonging to the com-

, pany which entered into such contract.”’

The necessary conclusion is that indicated in the opinion

of the insular Supreme Court (R. 33, 35, 40; ante, pp. 2,

4,5), that it was the Standard Oil Company that was act-

ing in New York as the agent of this appellant,—the Stand-

ard negotiating there, on behalf of this appellant, with the

steamshiv companies, for the sale of this appellant’s oil in

Puerto Rico.

pany, for the sale of its oil, it is evident that the original

motivation of the contracts, the acts that set them in mo-

tion, the directions or the consent to them on behalf of the

selling party,—the vendor’s part in the ‘‘meeting of the

minds’’,—was in each case the action of this appellant

Puerto Rico corporation, at its ‘‘principal office’’ in San

Juan, either by its board of directors or by its executive

officers—[appellant has not seen fit to tell us how],—initi-

ating the sale [or else ratifying it] by giving appropriate

directions to its agent, the Standard Oil Company in New

York.

The agent carried out the directions, contracts were made

in New York with steamship companies, in accordance with

this appellant West India Company’s directions, and the

ships, from time to time, came to San Juan and asked for

so much oil, which was then measured out (and thus, for the

first time, identified), and delivered to them.

K. All of the essential steps of the sale were thus taken in

San Juan: The initial consent or direction for it; the mea-

suring out and identifying the oil when the particular ships

came to the port; and the actual delivery there in the port

of San Juan. [ And, also, although it is immaterial here, the

proceeds must ultimately, necessarily, have come back to

this appellant West India Company at its ‘‘principal of-

fice’’ in San Juan, even if the collections were made on its

behalf by its agent, the Standard Oil Company, in New

York. j

There can be no question of the correctness of the hold-

ing of the insular Supreme Court that these were ‘‘sales”’

in Puerto Rico; not in New Yo-k.

POINT IV ’

The established rule of the respect to be accorded to the decison

of a lccal Territorial Supreme Court, interpreting local Territorial

statutes and laws, is peculiarly applicable here. «

A. As above pe eat (ent, pp. 16-17, 18-19) the insu-

lar Supreme Cou: “mination that these were sales in

Puerto Rico, rath. t= New York, is based directly

upon the insular cou.t's interpretation of sections of its

local Civil Code, derived from the Spanish code, and of

the text of authoritative commentators on the Spanish

code,—that is to say, upon civil law sources, rather than

on English common law sources.

B. Under these circumstances what was said by mr.

JUSTICE HOLMES in delivering the opinion of the court in

Diaz v. Gonzales, supra, 261 U. S. 102, 105-106, is directly

applicable here:

‘‘The court has stated many times the deference due

to the understanding of the local courts upon matters

of purely local concern. It is enough to cite De Villa-

nueva v. Villanueva, 239 U. S. 293, 299. Nadal v. May,

233 U.S. 447, 454. This is especially true in dealing with

the decisions of a Court inheriting and brought up

in a different system from that which prevails here.

When we contemplate such a system from the outside

it seems like a wall of stone, every part even with the

others, except so far as our own local education may

lead us to see subordinations to which we are accus-

tomed. But to one brought up within it, varying em-

phasis, tacit assumptions, unwritten practices, a thou-

sand influences gained only from life, may give to the

different parts wholly new values that logic and gram-

mar never could have got from the books. * * *. Our

appellate jurisdiction is not given for the purpose of

remodelling the Spanish American law according to

common law conceptions except so far as that law has

to bend to the expressed will of the United States.

The importance that we attribute to these considera-

tions led to our granting the writ of certiorari and

requires us to reverse the judgment below.’’

C. The rule as to the respect to be paid to the decisions of

the local Supreme Court interpreting local statutes and

laws was recently strongly reaffirmed by the United States

Supreme Court with relation to decisions of the Supreme

Court of Puerto Rico and Puerto Rican tribunals generally.

The Court said, in Sancho Bonet, Treasurer of Puerto Rico

vs. Yabucoa Sugar Company, 306 U. S. 505, 509-510:

‘‘ And this Court has declared its unwillingness to over-

rule Puerto Rican tribunals upon matters of purely

local concern or to decide against the local understand-

ing of a local matter, not believed by this Court to be

clearly wrong; and a disposition to accept the con-

struction placed by a local court upon a local statute,

and to sustain such a construction in the absence of

clear or manifest error..

«<* * * Orderly deveiopment of the government of

Puerto Rico as an integral part of our governmental

system is well served by a careful and consistent ad-

herence to the legislative and judicial policy of de-

ferring to the local procedure and tribunals of the

Island.’’ [And see also the cases there cited (foot-notes,

pp. 509-510].

POINT V

Appellant’s other contentions are sufficiently answered in the

opinion of the insular Supreme Court (R. 44-49; ante, pp. 18-19,

with comments in our footnotes).

The rulings of the insular Supreme Court on those points

were plainly correct, for the reasons stated in its opinion,

upon which we here rely.

CONCLUSION

The judgment of the insular Supreme Court was correct and

should be affirmed.

Wituum Cartrron Ricsy,

Atiorney for Appellee.

B. Fernanvez Garcn,

Attorney General of Puerto Rico,

NatHan R. Marcotp,

Solicitor for the Department of the Interior,

Of Counsel.

APPENDIX II

CONSTITUTION :

Article IV, Section 3, Clause 2:

The Congress shall have Power to dispose of and

make all needful Rules and Regulations respecting the

Territory or other Property belonging to the United

States.

FEDERAL :

The Organic Act for Puerto Rico, Act of March 2, 1917,

ec. 145, 39 Stat. 951:

[Sec. 1] That the provisions of this Act shall apply

to the Island of Porto Rico and to the adjacent islands

belonging to the United States, and waters of those

islands; * * °.

Sec. 2. That no law shall be enacted in Puerto Rico

which shal! deprive any person of life, liberty, or prop-

erty without due process of law, or deny to any person

therein the equal protection of the law. * * *

That the rule of taxation in Puerto Rico shall be

uniform.

Sec. 3.—-(As amended by Act of Congress, approved

March 4, 1927.)—That no export duties shall be levied

or collected on exports from Porto Rico, but taxes and

assessments on property, income taxes, internal reve--

nue, and license fees, and royalties for franchises,

privileges, and concessions may be imposed for the

purposes of the insular and municipal governments,

respectively, as may be provided and defined by the

Legislature of Porto Rico; * * *

And it is further provided, That the internal-revenue

taxes levied by the Legislature of Porto Rico in par-

suance of the authority granted by this Act on articles,

goods, wares, or merchandise may be levied and col-

lected as such legislature may direct, on the articles

subject to said tax, as soon as the same?are manufac-

tured, sold, used, or brought into the island; Provided,

That no discrimination be made between the articles

imported from the United States or foreign countries

and gimilar articles produced or manufactured in Porto

Rico. The officials of the Customs and Post Services of

the United States are hereby directed to assist the

appropriate officials of the Porto Rican government

in the collection of these taxes.

=_—sS

Sec. 7. That all property which may have been ac-

quired in Porto Rico by the United States under the

cession of Spain in the treaty of peace * * *, ali property

which at the time of the cession belonged, under the

laws of Spain then in force, to the various harbor works

boards of Porto Rico, all the harbor shores, docks, slips,

reclaimed lands, and all public lands and buildings not

heretofore reserved by the United States for public

purposes, is hereby placed under the control of the~

Government of Porto Rico, to be administered for the

benefit of the people of Porto Rico; and the Legislature

) of Porto Rico shal! have authority, subject to the limi-

tations imposed upon all its acts, to legislate with re-

spect to all such matters as it may deem advisable:

; Provided, That the President may from time to time,

in his discretion, convey to the people of Porto Rico

such lands, * * * * . And he may from time to time accept

: by legislative grant from Porto Rico any lands, build-

ings, or other interests or property which may be

needed for public purposes by the United States.

OS ee

Sec. 8. That the harbor areas and navigable streams

and bodies of water and ‘submerged land underlying

the same in and around the Island of Porto Rico and

é the adjacent islands and waters, now owned by the

United States and not reserved by the United States

for public purposes be, and the same are hereby, placed

under the control of the Government of Porto Rico, to

be administered in the same manner and subject to

same limitations as the property enumerated in the pre-

ceding section: * ** .

Sec. 9. That the statutory laws of the United States

not localiy inapplicable, except as hereinbefore or here-

inafter otherwise provided, shall have the same force

and effect in Porto Rico as in the United States, except

the internal-revenue laws: * * * .

Sec. 25. That all local legislative powers in Porto

Rico, except as herein otherwise provided, shall be

vested in a Legislature * * * designated ‘‘the Legisla-

ture of Porto Rico’’.

Sec. 37. That the legislative authority herein pro-

vided shall extend to ail matters of a legislative char-

acter not locally inapplicable, * * * .

Tariff Act of 1930, Act of June 17, 1930, c. 497, 46 Stat.

590, 743, Secs. 555, 556, Title IV, p. 743; 19 U. S.

Code, Pars. 1555 and 1556:

See. 555. Bonded Warehouses.

Buildings or parts of buildings and other inclosures

may be designated by the Secretary of the Treasury as |

bonded warehouses for the storage of imported mer-

chandise entered for warehousing, or taken posses-

sion of by the collector, or under seizure, or for the

manufacture of merch«ndise in bond, or for repacking,

sorting, or cleaning of imported merchandise. Such

warehouses may be bonded for the storing of _such

merchandise only as shall belong or be consigned t6

the owners or proprietors thereof and be known as

private bonded warehouses, or for the storage of im-

ported merchandise generally and be known as public

bonded warehouses. Before any imported merchandise

not finally released from customs custody shall be

stored in any such premises, the owner or lessee thereof

shall give a bond in such sum and with such sureties as

may be approved by the Secretary of the Treasury to

secure the Government against any loss or expense

.. connected with or arising from the deposit, storage,

or manipulation of merchandise in such warehouse.

Except as otherwise provided in this Act, bonded

warehouses shall be used solely for the storage of im-

ported merchandise and shall be placed in charge of a

proper officer of the customs, who, together with the

proprietor thereof, shall have joint custedy of all mer-

chandise stored in the warehouse; and all labor on the

merchandise so stored shall be performed by the owner

or proprietor of the warehouse, under supervision of

the officer of the customs in charge of the same, at the

expense of the owner or proprietor. The compensa-

tion of such officer of the customs and other customs

employees appointed to supervise the receipt of mer-

chandise into any such warehouse and deliveries there-

from shall be reimbursed to the Government by the

proprietor of such warehouse.

Sec. 556. Same—Regulations for Establishing.

The Secretary of the Treasury shall frcm time to

ce ee) a ae eS a ee

time establish such rules and regulations as may be

necessary for the establishment of bonded warehouses

and to protect the interests of the Government in the

conduct, managemeni, and operation of such ware-

houses and in the withdrawal of and accounting for

merchandise deposited therein.

PUERTO RICO:

Internal Revenue Law of Puerto Rico, as amended by

Act No. 17 of June 3, 1927; Laws of 1927, Special

. Session, pp. 458-486.

Sec. 62. There shall be levied and collected, once

only, on the sale of any article the object of commerce,

not taxed under Section 16 of this Act or exempted

from taxation as provided in Section 83 of the same,

and at the time of sale in Porto Rico, a tax of two (2)

~per cent on the price or value of the daily sales of such

articles, whether such sales are for cash or on credit,

which tax shall be paid at the end of each month by the

person making such sale. (pp. 472-474).

Sec. 16 (a). There shall be levied and collected, once

only, on all articles included in section 62 of this Act,

a tax of two (2) per centum ad valorem, as provided in

section 4 hereof, when said articles are mannfactured,

produced or introduced in Porto Rico for domestic use

or consumption; but payment shall be made before

said articles are withdrawn from the factory or from

the custody of the post office or customs authorities,

or from the express or steamship agencies, in such

manner as the Treasurer of Porto Rico may by regula-

tion prescribe (p. 484).

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.