## Facts

- Tennessee imposed an excise (“privilege”) tax on gasoline stored in the state and withdrawn for use there.
- Nashville, Chattanooga & St. Louis Railway Company imported gasoline into Tennessee from out of state, stored it in Tennessee tanks, and withdrew it to fuel interstate train operations.
- The railroad filed an action under Tennessee’s Uniform Declaratory Judgments Act seeking a declaration that the tax was unconstitutional as applied to its operations.
- The railroad alleged the tax burdened interstate commerce in violation of the Commerce Clause and was discriminatory or arbitrary in violation of the Fourteenth Amendment.
- Tennessee courts upheld the tax on the merits, and the railroad sought review in the U.S. Supreme Court.

## Issues

1. Whether a state-court declaratory judgment proceeding can present a justiciable “case or controversy” within the Supreme Court’s appellate jurisdiction.
2. Whether Tennessee’s excise tax on gasoline storage and withdrawal, as applied to gasoline imported and used by an interstate railroad, violates the Commerce Clause.
3. Whether the tax violates the Fourteenth Amendment by unconstitutional discrimination or deprivation of property without due process.

## Decision

- The Supreme Court held the declaratory judgment proceeding presented a justiciable case because it involved an actual, adversarial dispute and produced a binding adjudication of asserted rights.
- The Court affirmed the judgment upholding the tax.
- The Court ruled the tax did not violate the Commerce Clause because it applied to a local incident (storage/withdrawal after shipment had ended), not to interstate transportation itself.
- The Court ruled the tax did not violate the Fourteenth Amendment because the state’s tax classification was not arbitrary and did not deny due process.

## Legal Principles

- Article III justiciability turns on the substance of the proceeding and the binding effect of the judgment on contested rights, not the procedural label “declaratory.”
- A declaratory judgment may constitute an exercise of judicial power even without coercive relief, so long as there is a concrete, adversarial controversy capable of final adjudication.
- State procedural innovations do not block Supreme Court review of federal questions when the state proceeding retains the essentials of an adversary case and reaches a final determination.
- A nondiscriminatory state excise on local storage and withdrawal of goods may be valid even when the goods were imported in interstate commerce, if the taxable incident occurs after interstate transit has ended.
- Differential tax treatment among business classes does not violate equal protection or due process absent arbitrary classification or confiscatory effect.

## Conclusion

The Court recognized that an adversarial state declaratory judgment action can present a justiciable case for federal review and upheld Tennessee’s gasoline storage-and-withdrawal excise as a permissible tax on a local activity that neither directly burdened interstate commerce nor violated the Fourteenth Amendment.


Nashville, Chattanooga & St. Louis Ry. Co. v. Wallace, 288 U.S. 249 (1933)