Petitioner Polar Tankers, Inc., whose vessels transport crude oil from the Alaskan Port of Valdez to refineries in other States, challenged an ordinance that imposes a personal property tax on certain boats and vessels. This municipal ordinance, which was enacted in 1999, contained exceptions that, in effect, limited its applicability to large oil tankers. Polar Tankers, Inc., a subsidiary of ConocoPhillips Company, appealed the Alaskan Supreme Court’s decision to the U.S. Supreme Court, arguing that the tax was unconstitutional under Art. I, §10, cl. 3, which forbids a State without the Consent of Congress, [to] lay any Duty of Tonnage.
Justice Breyer, delivering the opinion of the U.S. Supreme Court, held that Valdez’s tax violated the Tonnage Clause and was therefore unconstitutional. The Tonnage Clause was intended to prevent certain States from obtaining certain “geographical vessel-related tax advantages.” Polar Tankers, Inc., v. City of Valdez, Alaska. 557 U.S. ___ (June 15, 2009). The Court reasoned that the prohibition against tonnage duties embraced all taxes and duties which operate to impose a charge for the privilege of entering, trading in, or lying in a port.
Upon review of the facts, the Court decided that Valdez’s ordinance applied exclusively to large vessels such as oil tankers seeking to enter, trade in or lay in the Port of Valdez, but not to other forms of personal property. Moreover, the tax was closely correlated with cargo capacity. In order to fund services by taxing ships, a State must also impose similar taxes upon other businesses; Valdez failed to satisfy this requirement to equally tax other business property. Based on these findings, the Court, in a 7-2 decision, held that a tax on “boats and vessels of at least 95 feet in length that regularly use the City’s port” was injurious to the interests of other states and violated the Tonnage Clause. Id at 557 U.S. ___ (June 15, 2009).
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