Opinion
No. 34974.
April 27, 1942. Suggestion of Error Overruled June 8, 1942.
APPEAL from the chancery court of Hinds county, HON. V.J. STRICKER, Chancellor.
Watkins Eager, of Jackson, for C.I.T. Corporation.
The tax is not an excise tax but a property tax and, therefore, illegal for lack of uniformity.
Mississippi Code of 1930, Sec. 3121; Mississippi Constitution of 1890, Sec. 112; Mississippi Constitution, Sec. 181; Laws of 1912, Chs. 112, 113, 120; Laws of 1924, Secs. 1, 2, 3, Ch. 129; Laws of 1940, p. 95; Laws of 1940, Ch. 110, p. 93; Adams v. Kuykendall, 83 Miss. 571, 35 So. 830; Adams v. Mississippi State Bank, 75 Miss. 701, 23 So. 395; American Manufacturing Co. v. St. Louis, 250 U.S. 450, 63 L.Ed. 1084; Adams v. Mortgage Co., 82 Miss. 263, 34 So. 482; Barnes v. Jones, 139 Miss. 675, 103 So. 773; Chicago, R.I. P.R. Co. v. Robertson, 122 Miss. 417, 84 So. 449; Hattiesburg Grocery Co. v. Robertson, 126 Miss. 34, 88 So. 4; Hawkins v. Mangrum, 78 Miss. 97, 28 So. 872; Jackson Fertilizer Co. v. Stone, 173 Miss. 183, 162 So. 170; Knox v. Dantzler Lumber Co., (Miss.), 108 So. 290; Knox v. Southern Paper Co., 143 Miss. 870, 108 So. 288; Reed Bros. v. Board of Supervisors of Lee County, 126 Miss. 162, 88 So. 504; State ex rel. Knox v. G., M. N.R. Co., 138 Miss. 70, 104 So. 689; Southern Package Corporation v. State Tax Commission, 174 Miss. 212, 164 So. 45; Thompson v. Kreutzer, 112 Miss. 165, 72 So. 891; Thompson v. McLeod, 112 Miss. 383, 73 So. 193.
If the act of the Mississippi legislature shall be held to be a privilege tax, then the same is void and unenforceable, violating the Fourteenth Section of the Bill of Rights of the State of Mississippi, as well as the Fourteenth Amendment to the Constitution of the United States.
Mississippi Constitution, Sec. 112; Acts of Mississippi Legislature of 1912, Ch. 141; Laws of 1924, Ch. 189; Laws of 1940, Ch. 110; Adams, State Revenue Agent, v. Mississippi Lumber Co., 84 Miss. 23, 36 So. 68; Ballard v. Mississippi Cotton Oil Co., 81 Miss. 507, 34 So. 533; Chalker v. Ry. Co., 249 U.S. 522, 63 L.Ed. 748; City of Vicksburg v. Mullane, 106 Miss. 199, 63 So. 412; Hartford Steam Boiler Insurance Co. v. Harrison, 81 L.Ed. 1223, 301 U.S. 459; Johnson v. Long Furniture Co., 113 Miss. 373, 74 So. 283; Louisville Gas E. Co. v. Coleman, 277 U.S. 32, 72 L.Ed. 770; Lowry v. City of Clarksdale, 154 Miss. 155, 122 So. 195; Postal Telegraph Co. v. Robertson, 116 Miss. 204, 76 So. 560; Quaker City Cab Co. v. Pennsylvania, 277 U.S. 389, 72 L.Ed. 927; Railroad Co. v. Moss, 60 Miss. 641; Rodge v. Kelly, 88 Miss. 209, 40 So. 552; Royster Guano Co. v. Virginia, 253 U.S. 412, 64 L.Ed. 989; Sorenson v. Webb, 111 Miss. 87, 71 So. 273; Southern Ry. Co. v. Green, 216 U.S. 400, 54 L.Ed. 536; W.A. Frost v. Corporation Commission, 278 U.S. 515, 73 L.Ed. 483.
The act prohibits appellant from passing on to its customers any part of the tax.
Laws of 1936, Ch. 155; Adams v. Standard Oil Co., 97 Miss. 879, 53 So. 692; Notgrass Drug Co. v. State, 175 Miss. 358, 165 So. 884; State ex rel. Rice v. Allen, 180 Miss. 659, 177 So. 763.
This provision is inseparable from the remainder of the act.
Williams v. Standard Oil Company of Louisiana, 73 L.Ed. 287, 278 U.S. 235; Wolff Packing Co. v. Court of Industrial Relations, 67 L.Ed. 1103, 262 U.S. 532.
If the tax in question is held to be a privilege or excise tax, all doubts must be resolved in favor of the taxpayer and liability may not be imposed unless the same is free from doubt.
Pan-American Petroleum Corp. v. Miller, State Tax Collector, 154 Miss. 565, 122 So. 393; State ex rel. Attorney-General v. Miss. P. L. Co., 161 Miss. 839, 138 So. 567; Texas Company v. Wheeless, 85 Miss. 799, 187 So. 880.
Assuming the tax in question to be a privilege tax, the transactions involved were had outside of the State of Mississippi, and if the statute should be construed and enforced as to impose liability upon the C.I.T. Corporation, appellee, therefor, such statute would violate the Fourteenth Amendment to the Constitution of the United States as well as the Fourteenth Section of the Bill of Rights of the State of Mississippi.
The taxing power of a state may not extend beyond the boundaries of the state.
Mississippi Code of 1880, Sec. 497; Laws of 1940, Ch. 110, Sec. 5; Adams v. Mortgage Co., 82 Miss. 263, 34 So. 482; C.I.T. Corporation v. Stuart, 185 Miss. 140, 187 So. 204; City Sales Agency v. Smith, 126 Miss. 202, 88 So. 625; Dodds v. Pyramid Securities, 165 Miss. 269, 147 So. 328; Independent Linen Service Co. v. State ex rel. Attorney-General, 169 Miss. 62, 152 So. 647; Item Co. v. Shipp, 140 Miss. 699, 106 So. 437; Long Beach Canning Co. v. Clark, 141 Miss. 177, 106 So. 646; Morrison v. Guaranty Mortgage Trust Co., 191 Miss. 207, 199 So. 110; North American Mortgage Co. v. Hudson, 176 Miss. 266, 168 So. 79; Peterman Construction Co. v. Blumenfeld, 156 Miss. 55, 125 So. 548; Refrigeration Discount Corporation v. Turley, 189 Miss. 880, 198 So. 731; State of Mississippi v. Smith, 68 Miss. 79, 8 So. 294; Swing v. Brister, 87 Miss. 516, 40 So. 146; Wiley Electric Co. v. Electric Storage Battery Co., 167 Miss. 842, 147 So. 773; Yellow Mfg. Acceptance Corp. v. American Oil Co., 191 Miss. 757, 2 So.2d 834.
The mere fact that a corporation is engaged in business in the state and conducts certain business in the state does not subject to the laws of the state business carried on out of the state. If the act should be so construed, the same would violate the Fourteenth Amendment to the Constitution of the United States, as well as the Bill of Rights of the State of Mississippi.
Mississippi Code of 1880, Sec. 497; Allgeyer v. State of Louisiana, 165 U.S. 517, 41 L.Ed. 823; Connecticut General Life Ins. Co. v. Johnson, 303 U.S. 77, 82 L.Ed. 673; First National Bank of Boston v. Maine, 284 U.S. 312, 76 L.Ed. 213; Gulley, State Tax Collector, v. C.I.T. Corporation, 168 Miss. 268, 150 So. 367; Hans Rees' Sons, Inc., v. N.C., 283 U.S. 123, 75 L.Ed. 879; James v. Dravo Contracting Co., 302 U.S. 134, 82 L.Ed. 155, 114 A.L.R. 318; New York Life Ins. Co. v. Dodge, 246 U.S. 257, 62 L.Ed. 772; New York Life Ins. Co. v. Head, 234 U.S. 149, 58 L.Ed. 1259; People's Tobacco Co. v. American Tobacco Co., 246 U.S. 79, 62 L.Ed. 587; Singer Mfg. Co. v. Adams (C.C.A. 5), 165 F. 877; St. Louis Cotton Compress Co. v. Arkansas, 260 U.S. 346, 6 L.Ed. 297; State v. Smith, 68 Miss. 79, 8 So. 294.
A state may not exact as a condition of a corporation doing business within its limits that its rights secured by the Constitution of the United States may be infringed.
Adams v. Mortgage Co., 82 Miss. 263, 34 So. 482; American Mfg. Co. v. St. Louis, 63 L.Ed. 1084; A. P. Tea Co. v. Grosjean, 301 U.S. 412, 81 L.Ed. 1193; A.H. Stone, Comm., v. Interstate Natural Gas Co. (C.C.A. 5), 103 F.2d 544; Foster-Fountain Packing Co. v. Haydel, 73 L.Ed. 147, 278 U.S. 1; Hanover Fire Ins. Co. v. Carr, 272 U.S. 494, 71 L.Ed. 372; Jackson Fertilizer Co. v. Stone, 173 Miss. 183, 162 So. 170; Marshall v. Grimes, 41 Miss. 27; Mathison v. Brister, 166 Miss. 67, 145 So. 358; McGoldrick v. Berwind-White Coal Co., 84 L.Ed. 565; McGoldrick v. Gulf Oil Corp., 84 L.Ed. 536; Miller v. Sherrard, 157 Miss. 124, 126 So. 903; Money v. Wood, 152 Miss. 17, 118 So. 357; Nelson v. Sears, Roebuck Co., 85 L.Ed. 1145; Smith v. Chickasaw County, 156 Miss. 171, 125 So. 96; Southern Natural Gas Co. v. Alabama, 81 L.Ed. 970; Southern Package Corp. v. State Tax Commission, 174 Miss. 212, 164 So. 45; State v. Gilmer Grocery Co., 156 Miss. 99, 125 So. 710; State v. Smith, 68 Miss. 79, 8 So. 294; Terrall v. Burke Construction Co., 257 U.S. 529, 66 L.Ed. 352; Tradesmen's National Bank v. Oklahoma Tax Comm., 84 L.Ed. 947; Wisconsin v. J.C. Penney Co., 85 L.Ed. 267; Yellow Mfg. Acceptance Corporation v. American Oil Co., 191 Miss. 757, 2 So.2d 834; "History of the American People" by Woodrow Wilson, Volume III, p. 54.
Greek L. Rice, Attorney-General, by Geo. H. Ethridge, Assistant Attorney-General, J.H. Sumrall, of Jackson, and R.W. Heidelberg, of Hattiesburg, for A.H. Stone, Chairman State Tax Commission.
This brief is to apply to all corporations, or persons, doing business at offices located in the state and also offices located outside the state.
All constitutional rights are subject to reasonable regulation by the legislature. All the provisions of Chapter 110, Laws of 1940, must be considered in the light of these principles. The state may tax any right or privilege that is given by state law, or which may be necessary to be enforced by the state. Having this power to tax for the use of its laws and courts, the legislature may enact such laws as are reasonable regulations to pay the expenses of the state government. The legislature may define words and phrases contrary to dictionary or the common law.
Mathison v. Brister, 166 Miss. 67, 145 So. 358; Stone v. International Gas Co. and International Gas Co. v. Stone, 103 F.2d 544 (affirmed 84 L.Ed. (U.S.) 442, 308 U.S. 5); Southern Nat. Gas Co. v. Ala., 301 U.S. 148, 81 L.Ed. 970; Wisconsin v. J.C. Penney Co., 85 L.Ed. (advance) 222; McGoldrick v. Berwind-White Coal Co., 309 U.S. 70, 84 L.Ed. 565; McGoldrick v. Gulf Oil Corp., 84 L.Ed. 536, 309 U.S. 2, 60 S.Ct. 375; Am. Mfg. Co. v. St. Louis, 63 L.Ed. 1084; Nelson, State Tax Comm., v. Sears, Roebuck Co., 85 L.Ed. 522 (advance); Tradesmen's Nat. Bk. v. Okla. Tax Comm., 309 U.S. 560, 60 S.Ct. 688.
On the contention that Chapter 110, Laws of 1940, violates Sec. 112 of the Mississippi Constitution of 1890, we answer that Sec. 112 of the Constitution only applies to ad valorem taxes and not to excise, or privilege, taxes.
See State v. Gulf, M. N.R. Co., 138 Miss. 70, 104 So. 689; Southern Package Corp. v. State Tax Comm., 174 Miss. 212, 164 So. 45; Notgrass Drug Co. v. State ex rel. Rice, 175 Miss. 358, 165 So. 884; Jackson Fertilizer Co. v. Stone, 173 Miss. 183, 162 So. 170; American Mfg. Co. v. St. Louis, 250 U.S. 450, 39 S.Ct. 522, 63 L.Ed. 1084; Hattiesburg Grocery Co. v. Robertson, 126 Miss. 34, 88 So. 4 (certiorari denied, 67 L.Ed. 475).
It was contended in the court below that because banks, state and national, were excepted from the tax imposed by Chapter 110, Laws of 1940, and that merchants selling from their regular stocks and taking securities on tangible personal property located in Mississippi were exempt from the tax, that said Chapter 110, Laws of 1940, was unconstitutional and void. We contend that banks are subject to many restrictions and burdens and are affected with a public use which takes them out of ordinary businesses and subjects them to many regulations and exempts them from many regulations on that account; that merchants who sell in the regular business as merchants and take such securities as are taxed in Chapter 110, Laws of 1940, pay tax upon their stocks and property in such business make a subject of reasonable and valid classification and that the act, Chapter 110, Laws of 1940, is a valid law and the classification does not violate the Fourteenth Amendment of the United States Constitution.
Bank of Magnolia v. Pike County, 111 Miss. 857, 72 So. 697; First Nat. Bank v. Harrison County, 157 Miss. 197, 127 So. 686 (affirmed by U.S. Supreme Court, 248 U.S. 546, 63 L.Ed. 414); Union Bk. Tr. Co. v. Phelps, 288 U.S. 181, 77 L.Ed. 687; U.S. Sup. Ct. Digest (L.C.P. Co. edition) "Taxation," key No. 16-22; Welch v. Henley, 305 U.S. 134, 59 S.Ct. 121, 83 L.Ed. 37, 118 A.L.R. 1142; 102 A.L.R. 541; Coca-Cola Co. v. Skillman, 91 Miss. 677, 44 So. 985; Singer Sewing Machine Co. v. Brickell, 233 U.S. 304, 34 S.Ct. 493, 58 L.Ed. 974; Johnson v. Long Furniture Co., 113 Miss. 373, 74 So. 283; Mayor Bd. of Aldermen of City of Vicksburg v. Streckfus Steamers, 167 Miss. 856, 150 So. 215.
It is our contention that the legislature has very large power and discretion to classify property for taxation.
Any classification upon reasonable distinctions is valid.
On the subject of classification see United States Digest of the Supreme Court decisions (L.C.P. Co. Edition), title "Taxes," key No. 16-22, Miss. Anno. Digest, West Pub. Co., new edition, "License," key No. 7 (4); Vol. 43, New Federal Digest, "License," 7 (4) 529-532; Miss. Digest, "License," key No. 7(4); 16 C.J.S. 1062-1067; ib. p. 1068, Sec. 529, (b) to (d); Rottchaefer's Constitutional Law, p. 660, sub-title "Classification."
The complainant in the court below contended that the tax imposed by Chapter 110, Laws of 1940, is confiscatory; that if upheld it would destroy a legitimate business. It is our contention that such is not a fact; that the business is quite lucrative, as shown by the amount of tax reported, but if it was so excessive as to make the business unprofitable that would not avoid the statute. The question is one primarily for the legislature.
Stone v. Rogers, 186 Miss. 53, 189 So. 810; Mathison v. Brister, 166 Miss. 67, 145 So. 358; Garbutt v. State, 116 Miss. 424, 77 So. 189; Fox v. Standard Oil Co., 294 U.S. 87, 79 L.Ed. 780; Hudson v. Stuart, 166 Miss. 339, 145 So. 611; Sperry Hutchinson Co. v. Mellon (W. Va.), 71 S.E. 91, 34 L.R.A. (N.E.) 433.
The complainant argued in the court below that Chapter 110, Laws of 1940, violated the State and Federal Constitution because access to the courts of the state was denied and that was a denial of due process of law and the equal protection of the law. The state has throughout its history denied access to the courts to foreign corporations who failed to comply with statutory requirements and this power was upheld many years ago.
Code of 1892, Sec. 3401; Potts v. Stewart, 49 Miss. 749; Anding v. Levy, 57 Miss. 51, 34 Am. Rep. 435; Decell v. Lewenthall, 57 Miss. 331, 34 Am. Rep. 449; Deans v. Robertson, 64 Miss. 195, 1 So. 159; Pollard v. Phoenix, 63 Miss. 244, 56 Am. Rep. 805.
The complainants have not yet been denied access to the courts but are now in court by their own initiative.
Wiley Electric Co. v. Electric Storage Battery Co., 167 Miss. 842, 147 So. 773; Douglas v. N.Y.N.H. Hartford R.R. Co., 279 U.S. 377, 73 L.Ed. 747.
On complainant's contention that prohibiting the finance companies from passing the tax imposed by the statute to the dealer or the consumer violates the constitution, it is our view that all contracts are subject to reasonable regulations by the legislature and that it may validly require taxes to be paid by those upon whom they are laid and prohibit them contracting with others to pay for them. Many frauds have been perpetrated on the government by means of requiring the seller to pay the tax which should be paid by the buyer under the law or vice versa.
Hartford A. I. Co. v. Natchez Inv. Co., 155 Miss. 31, 119 So. 366; Notgrass Drug Co. v. State, 175 Miss. 358, 165 So. 884; State ex rel. Rice v. Allen, 180 Miss. 659, 177 So. 763; 16 C.J.S. 615, Sec. 210.
On the contention of the complainants that if certain provisions of Chapter 110, Laws of 1940, are void, the whole act is void, we regard all the provisions of Chapter 110, Laws of 1940, as valid legislation, fully within the power of the legislature, but should we be mistaken, then the act itself declares in Sec. 12 thereof that the unconstitutionality of one section, or a part, shall not affect the remainder. The courts will observe the wishes of the legislature and give effect.
Enochs v. State ex rel. Roberson, 133 Miss. 107, 97 So. 534; Williams v. Standard Oil Co., 278 U.S. 235, 73 L.Ed. 287; Lacey v. State ex rel. Morgan, 187 Miss. 292, 192 So. 576; Hill v. Wallace, 259 U.S. 44, 66 L.Ed. 822, 42 S.Ct. 453; Am. Express Co. v. Beer, 107 Miss. 528, 65 So. 575; Adams v. Standard Oil Co., 97 Miss. 879, 53 So. 692.
The statute taxes a privilege of "doing business" in the state as therein defined. It is measured by the value of securities on tangible personal property. It reasonably classifies retail sales from wholesale sales. It is our view that there is a difference between wholesale and retail business which justifies different rates of tax for the privilege of doing such business.
Roseberry v. Norsworthy, 135 Miss. 845, 100 So. 514; Adams v. Y. M.V.R. Co., 75 Miss. 275, 22 So. 824; Gandy v. Public Service Corp., 163 Miss. 187, 140 So. 687; In re Validation of Hancock County Bonds, 184 Miss. 727, 184 So. 815.
The buying and selling of notes and securities is not interstate commerce. It was contended in the court below that the purchase through the medium of the United States mail by the offices of the complainant located outside the state was a tax on interstate commerce. The statute does not in terms tax interstate commerce but taxes the privilege of having security on tangible personal property located in the state, having the protection of the state laws and officers, and rights enforcible in the state court. It is further our contention that the buying and selling of notes do not constitute interstate commerce. The chancellor held, as we understand, that the buying of such notes, or securities, so secured, constituted interstate commerce. We submit that such holding was error.
Hemphill v. Orloff, 277 U.S. 537, 72 L.Ed. 978; Blumenstock Bros. v. Curtis Publishing Co., 252 U.S. 436, 64 L.Ed. 649; People of New York v. Reardon, 204 U.S. 152, 51 L.Ed. 415, 9 Ann. Cas. 737; Ware et al. v. Mobile County (Ala.), 209 U.S. 405, 52 L.Ed. 855, 14 Ann. Cas. 1031 and case note; International Text Book Co. v. Peterson, 133 Wis. 302, 14 Ann. Cas. 965.
Argued orally by W.H. Watkins, for appellant, and by R.W. Heidelberg, J.H. Sumrall and Geo. H. Ethridge, for appellee.
This case is governed by Stone, Chairman, v. General Contract Purchase Corporation, 193 Miss. 301, 7 So.2d 806, this day decided. Consequently, the decree of the court below will be affirmed insofar as it denies the appellant a recovery herein, and will be reversed insofar as it awards the appellant a recovery and its bill praying therefor will be dismissed.
So ordered.
I concur in the result reached herein, but upon the grounds set forth in the concurring opinion in Stone v. General Contract Purchase Corporation, 193 Miss. 317, 7 So.2d 806, this day decided.
Griffith, J., concurs in the foregoing statement.
Affirmed by U.S. Supreme Court, 87 L.Ed. 23.