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JDS Realty Corp. v. Government of Virgin Islands and Leroy A. Quinn

argued: April 30, 1987.

JDS REALTY CORPORATION, FORMERLY KNOWN AS WEST INDIES CORPORATION
v.
GOVERNMENT OF THE VIRGIN ISLANDS AND LEROY A. QUINN, DIRECTOR OF INTERNAL REVENUE, APPELLANTS



On Appeal from the District Court of the Virgin Islands, St. Thomas, D. Civ. No. 81-183.

Author: Seitz

Before: Seitz, Higginbotham, and Rosenn, Circuit Judges.

SEITZ, Circuit Judge.

The Government of the Virgin Islands appeals the final order of the district court denying its motion for reconsideration of the order granting summary judgment to plaintiff JDS Realty Corporation (JDS). This court has jurisdiction under 28 U.S.C. §§ 1291, 1294 (1982).

I.

JDS is a Virgin Islands corporation engaged in the wholesale distribution of liquor, cigarettes, perfumes, and drugs. At least some of its products are imported. In 1980 JDS filed a letter with the Virgin Islands Commissioner of Finance, seeking a refund of the excise taxes it had paid from 1977 to 1980 on goods it imported. After JDS's request was denied it filed this action with the district court to recover the payment of taxes.

the excise tax then in effect provided:

All persons, partnerships, firms, corporations or other business associations, excepting those especially taxed or excluded, importing goods, merchandise or commodities into the Virgin Islands for personal use or disposition in the course of trade or business or for processing, manufacturing or other business purpose shall pay an excise tax on the value of said goods, merchandise or commodities . . . .

33 V.I.C. § 42(a)(1967).*fn1 JDS alleged that this tax violated the commerce and import/export clauses of the United States Constitution,*fn2 and the equal protection clause as applied to the Virgin Islands by the Revised Organic Act of 1954, 48 U.S.C. § 1561 (Supp. 1987).

The district court granted JDS's motion for summary judgment, finding that the excise tax violated both the commerce clause and the import/export clause. See JDS Realty Corp. v. Government of the Virgin Islands, 593 F. Supp. 199 (D.V.I. 1984). First, the court held that the two constitutional provisions apply to the Virgin Islands absent an affirmative statement by Congress to the contrary. Second, it found that Congress had not authorized the Territory to impose a tax that violated either clause. Finally, it concluded that the excise tax violated both clauses of the constitution. The Virgin Islands appealed this ruling; this court dismissed the appeal for lack of appealable order. 770 F.2d 1071 (3d Cir. 1985).

The district court thereafter denied JDS's request for a refund. The court concluded that the evidence demonstrated that JDS had passed the cost of the excise tax to its customers and therefore it was not entitled to a refund. That determination is the subject of a separate appeal by JDS.

The Virgin Islands filed a motion for reconsideration, arguing that the court erred in holding the excise tax unconstitutional. In addition, the Virgin Islands contended that JDS did not have standing to bring this action in light of the district court's conclusion that JDS had not borne the burden of the tax. The court denied the motion. This appeal followed.

II.

The Virgin Islands presents four arguments on appeal.*fn3 First, it argues that the district court erred in concluding that the commerce clause and the import/export clauses apply to the Virgin Islands. Second, the Virgin Islands asserts that Congress has provided authorization for the challenged tax. Third, it contends that the excise tax was not an impermissible burden on interstate commerce. Finally, it argues that the court erred in ...


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