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United Air Lines, Inc. v. Mahin, 410 U.S. 623, 93 S.Ct. 1186, 35 L.Ed.2d 545

Facts

United Air Lines purchased aviation fuel from a supplier for delivery from Indiana to its storage facilities in Illinois, where it was held for use in both interstate and intrastate operations. The Illinois Department of Revenue had previously allowed a temporary-storage exemption for fuel not consumed in Illinois, but in 1963, it changed its interpretation to tax all fuel loaded onto aircraft in Illinois. United challenged this new interpretation, arguing it violated both state and federal law.

Since 1953, United has purchased aviation fuel from a supplier for delivery from the supplier's Indiana facilities. This fuel is utilized by United in its extensive operations out of O'Hare and Midway airports in the Chicago area of Illinois.

Issue

Did the Illinois use tax, as applied to aviation fuel stored in Illinois and loaded onto aircraft for interstate flights, impose an unconstitutional burden on interstate commerce?

Did the Illinois use tax, as applied to aviation fuel stored in Illinois and loaded onto aircraft for interstate flights, impose an unconstitutional burden on interstate commerce?

Rule

The Illinois use tax statute defines 'use' to include the exercise of any right or power over tangible personal property, and the taxable event is determined to be the storage or withdrawal from storage rather than consumption.

The Illinois use tax was applied to appellant's aviation fuel stored in the State and loaded aboard its aircraft there and consumed in interstate flights.

Analysis

The court applied the rule by determining that the Illinois Supreme Court's interpretation of the use tax as taxing storage rather than consumption was reasonable and did not violate the Commerce Clause. The court noted that the tax was imposed on the storage of fuel in Illinois, which is constitutionally permissible, and distinguished this from taxes on consumption that would directly burden interstate commerce.

The Supreme Court of Illinois upheld that construction and application of the use tax against the claim that it violates the Commerce Clause, saying that United's storage becomes something more than temporary storage for safekeeping ‘prior to its use solely outside of Illinois.’

Conclusion

The U.S. Supreme Court vacated the judgment of the Illinois Supreme Court and remanded the case for further proceedings, indicating that the Illinois court should reconsider the temporary-storage provision without the constraints of federal compulsion.

The judgment of the Supreme Court of Illinois is vacated and the case is remanded to that court for further proceedings.

Who won?

The State of Illinois prevailed in the case as the U.S. Supreme Court upheld the Illinois Supreme Court's interpretation of the use tax, affirming that it did not impose an unconstitutional burden on interstate commerce.

The Supreme Court of Illinois upheld the state tax as currently applied, concluding that it did not impose an unconstitutional burden on interstate commerce.

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