Ashland Oil & Refining Co. v. Department of Revenue, – Case Brief Summary (Kentucky)

In Ashland Oil & Refining Co. v. Department of Revenue, Ky., 256 S.W.2d 359 (1953), the defendant company maintained its principal place of business in Boyd County and operated a fleet of boats and barges on the Ohio and Mississippi rivers. In 1951, Greenup County "assessed against Ashland the value of an undivided portion of its fleet . . . based upon the ratio between the number of miles of river traveled by the taxpayer's fleet bordering Greenup County and the total number of such miles bordering other counties in Kentucky. " Ashland, 256 S.W.2d at 359.

The Court framed the issue as follows:

The sole question presented . . . is whether the boats and barges operated by Ashland have a taxable situs in Boyd County . . . or whether the value of such property may be taxed on a pro rata basis in a number of Kentucky counties through which the boats and barges pass. Id.

In arguing that Ashland's fleet could be taxed on a pro rata basis, the Department of Revenue relied on Reeves v. Island Creek Fuel & Transportation Co., 313 Ky. 400, 404 and 405, 230 S.W.2d 924, 927 (1950) and asserted that the fleet was not permanently located in Boyd County.

The Court disagreed.

In the Reeves case . . . the principal question decided was that the continuity and consistency of the presence of the vessels in Kentucky waters were sufficient to establish a tax situs in Kentucky. Such situs, however, was of only 94.6% of the value of the property, that being the aliquot part of the route regularly traveled in Kentucky between the taxpayer's ports in Huntington and Cincinnati. Having determined that Island Creek's boats and barges had a taxable situs in Kentucky, and there being no single county in Kentucky having superior rights over any other county, the Court was faced with the necessity of providing a formula for dividing jurisdiction among the several taxing districts which the river route bordered. This it did on the basis of the ratio which the number of miles bordering each county bore to the total number of miles in Kentucky. This solution was reached as the only workable and convenient method of allocating the tax where no one county had established or could claim superior rights as against other taxing districts, and was justified by the Court's drawing an analogy to the numerous Supreme Court cases which upheld the right of the individual States to tax the aliquot portion of personal property passing through those States in more or less regular fashion. We think the Reeves opinion clearly indicates an intention to limit this method of apportionment to those cases where it is impossible to assign a situs at large to the property in its entirety. There, it was said:

"Following this concept there seems to have evolved the idea of estimating, by some reasonable method of aliquot division, the situs of any particular part of a mass of property whenever the mass is being used in interstate business and it is impossible to assign a situs at large to it in entirety."

In considering the extent to which the settled rule in Kentucky was overruled by the Reeves case, it is well to keep in mind the rule that an opinion will not be construed as overruling all former precedents and establishing a principle never before recognized unless expressed in plain and explicit terms. In the present case, it is possible under well-settled rules to assign a situs at large to appellant's property in its entirety. This situs is the domicile of the taxpayer.

There is no statutory authorization for allocating tangible personal property of a resident taxpayer among several counties and taxing districts where the property has acquired no permanent situs in a county other than the residence of the taxpayer, except with respect to a franchise company under the provisions of KRS 136.120 and 136.170. If an apportionment method is desirable to the time-honored procedure which has been followed in the past, it is a matter for legislative rather than administrative or judicial correction. Ashland, 256 S.W.2d at 361.