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In Phillips v. South Carolina Tax Commission, 195 S.C. 472, 12 S.E.2d 13, 15, this Court, considering the term "residence" in connection with the payment of state income tax, stated: "Manifestly the word `residence' is a general term susceptible of varying interpretations.
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15178
December 9, 1940.
Before LIDE, J., Jasper, June, 1940. Affirmed.
Action by H.W. Phillips against the South Carolina Tax Commission to recover income taxes paid under protest. From a judgment for plaintiff, defendant appeals.
The order of Judge Lide requested to be reported follows:
The South Carolina Tax Commission assessed the plaintiff in the sum of $501.73 for additional income taxes for the years, 1934 to 1937, inclusive; and this amount was paid under protest. Thereafter and within due time this action was brought to recover the taxes so paid. After issue was joined the facts involved in the controversy were agreed upon, and an agreed statement of facts was signed by counsel for the respective parties, upon which the cause was heard before me on April 16, 1940, while I was presiding in the Fourteenth Circuit; and after argument of counsel was taken under advisement. In addition to the oral arguments very helpful briefs were filed by counsel for the respective parties.
The plaintiff, H.W. Phillips, was reared in the State of Virginia, his father, who was a lumberman, having a home in Suffolk. In 1912 the plaintiff married and lived in Suffolk, Va., from that time until 1916, in which year he and his associates purchased certain timber in Jasper County, South Carolina, sufficient for a five-year operation. Since then he has from time to time been interested in or engaged in the sawmill or lumber business in South Carolina, but not continuously, and in connection with this business he has lived for a part of each year at or near Hardeeville in Jasper County.
The plaintiff, however, has kept a furnished apartment in Suffolk, Va., and he and his wife have lived there during a portion of each year. In addition to taxes on his property there, he has paid his poll tax and his income tax to the State of Virginia (exclusive of income earned in South Carolina), as well as a capitation tax to the City of Suffolk, during the period involved in this litigation. His wife, Mrs. Em Jones Phillips, has also paid such taxes in Virginia. It should be stated here that it was agreed that the final decision in this case should be binding on Mrs. Phillips.
The plaintiff has during the period involved in this litigation retained his citizenship in the State of Virginia, and he and his wife have been duly registered in Nansemond County and have voted in most of the primary elections held in that State since 1916, and have never registered or voted in South Carolina. In addition to the furnished apartment in Suffolk the plaintiff in 1929 purchased a farm in Nansemond County, Virginia, for the purpose of establishing a permanent country home thereon, and this farm is still owned by him and his wife, and the annual tax is duly paid thereon.
In 1919 the plaintiff built a home near Asheville, N.C., and since 1919 the plaintiff and his family "have lived a part of each year at Suffolk, Virginia, and near Asheville, North Carolina, and Hardeeville, South Carolina, and have spent about six months of each of the years at Hardeeville, South Carolina".
The foregoing recital is based upon the agreed statement of facts, to which reference should, of course, be had for further details, but it is apparent from what has been said that the domicile of plaintiff was and still is in the State of Virginia.
During the years in question and prior thereto the plaintiff has filed his income tax return annually with the South Carolina Tax Commission, but only included therein money actually earned by him within this State, having omitted from these returns any income, interest and dividends, received during this time from investments or any other source in other states. The remainder of his income not reported in South Carolina was reported in Virginia each year, and Mrs. Phillips also made a separate return to the State of Virginia; and Mr. and Mrs. Phillips have paid such income taxes to the State of Virginia, including property taxes on intangibles.
The South Carolina Tax Commission, having concluded that the plaintiff was chargeable by the State of South Carolina on account of his entire net income, including interest and dividends, wherever the same arose, and that such interest and dividends were subject both to the normal tax and the intangible tax imposed by the 1933 amendment to the income tax laws of this State, because he was residing in South Carolina, made the assessment which resulted in this litigation.
Section 2437, Code of 1932, imposes an income tax "upon every individual residing in the State of South Carolina", and further provides that this tax shall be levied, collected and paid annually with respect to the entire net income of the taxpayer. This section is a part of the income tax law of the State to which there have been amendments from time to time, including the amendment above referred to, but the pertinent language of this section has not been changed. And the question involved in the instant case is whether the plaintiff comes within the statement above quoted, that is to say, is he an "individual residing in the State of South Carolina"; is he or was he a resident of the State of South Carolina? The preceding section, to wit, 2436, contains the definition of each of a number of words and phrases used throughout the income tax Act, but contains no definition whatever of the words "residing", or "resident", or "residence".
Manifestly the word "residence" is a general term susceptible of varying interpretations. Its precise meaning is dependent upon the explanatory context; and with reference to statutory enactments would be governed by the legislative intent or purpose. But since the word might be literally construed to mean living in the State temporarily or transitorily as well as permanently obviously it should be given some definite construction, having in mind a fair and impartial imposition of the income tax burden; which was doubtless the legislative intention.
The word "residence" is defined in 54 C.J., 705-706, as follows: "An ambiguous, elastic, flexible, or relative term, which, notwithstanding numerous definitions are to be found in the books, is difficult of precise definition, as it has no fixed meaning applicable alike to all cases, but instead is used in different and various senses, and has a great variety of meanings and significations, because its meaning is variously shaded according to the variant conditions of its application. Also its meaning often depends upon the subject-matter and connection in which it is used, and the sense in which it should be used is controlled by reference to the object; hence it may be given a restricted or enlarged meaning, considering the connection in which it is used."
As shown by the foregoing quotation, the word is "ambiguous, elastic, flexible or relative", and its many shades of meaning would include a very temporary or transient residence as well as the most permanent abode. But a distinction has long been made between actual residence and legal residence. In the quite recent case of Roof v. Tiller, 195 S.C. 132, 10 S.E.2d 333, opinion filed April 3, 1940, the Court quotes with approval a definition of residence where a distinction is recognized between legal and actual residence. And as stated in 17 Am. Jur., 596, "The phrase `legal residence' is sometimes used as the equivalent of domicile"; and it seems to me that in connection with the matter of the assessment of an income tax no sound distinction can be drawn between "legal residence" and "domicile".
The term "domicile" means the place where a person has his true, fixed and permanent home and principal establishment, to which he has whenever he is absent, an intention of returning. The true basis and foundation of domicile is the intention, the quo animo, of residence. Bradley v. Lowry, Speers, Eq., 1, 39 Am. Dec., 142.
As the Court said in this case of Riddle v. Reese, 53 S.C. 198, 31 S.E., 222, 223, "The question of a person's place of residence is to be determined by his own intention, accompanied by his own voluntary act".
In the case of Barfield v. Coker Co., 73 S.C. 181, 53 S.E., 170, 171, the Court said: "One of the essential elements to constitute a particular place as one's domicile or principal place of residence is an intention to remain permanently, or for an indefinite time, in such place." It will be observed that the Court here treats domicile as being substantially the same as principal place of residence or legal residence. The same rule is indicated in the cases of Sample v. Bedenbaugh, 158 S.C. 496, 155 S.E., 828, and St. Clair v. St. Clair, 175 S.C. 83, 178 S.E., 493.
The term "residence" has been construed by the Courts in many connections, and its meaning in one relation would not be the same as that in another. We are here concerned of course with its meaning in relation to the imposition of an income tax. As I have already stated, the plaintiff has his domicile in the State of Virginia, or phrasing it a little differently, he has his legal residence in the State of Virginia. The lumber or timber business to which he has devoted most of his business life is essentially transient in character, depending upon the supply of available timber, which is cut out in the course of a few years, and his stay in South Carolina from time to time in connection with this business, while extending over a considerable period, has been of a temporary nature, and has never been coupled with any intention of making South Carolina his home or to abandon his domicile in Virginia, where he continues to live a portion of each year. If he is considered under these circumstances as a legal resident of South Carolina and so brought within the terms of the income tax Act, he has become subject to double taxation. In other words, he is taxed on the same income both in the State of South Carolina and in the State of Virginia. It seems to me that such a construction certainly ought not to be adopted, in the absence of language so clear as to make it imperative. And if it had been the intention of the Legislature to give so broad a meaning to the word "residing" or the word "residence", I think these words would have been defined along with the others mentioned in Section 2436. See the case of Hadden v. South Carolina Tax Commission, 183 S.C. 38, 190 S.E., 249, wherein it is held that any substantial doubt must be resolved against the government in favor of the taxpayer. Moreover the provisions of Section 2439 may be construed to indicate the legislative intent against the principle of double taxation, that is, taxation on the same income by more than one state.
I believe the following quotation from 61 C.J., 511-512, is an accurate general statement of the law relating to the meaning of the term "residence" in a taxing statute:
"The question as to the meaning of the term `residence', where the construction of a taxing statute is involved, is to be determined in the light of the legislative purpose and the context. According to some cases, `residence', within the meaning of such a statute, is the place where the taxpayer lives and where he claims that his home or domicile is, a place of abode as distinguished from a temporary sojourn or from a temporary residence; and it has been held that an `inhabitant' of a state means something more than a person who has a mere temporary residence. While it has been held that a statutory provision that a person shall be taxed where he resides does not mean where he resides for purposes of voting, it has been laid down broadly that the residence required to make one liable for a personal tax is precisely the same in kind as that which will entitle such person to vote in a particular place. A statute providing that moneys and credits shall be listed and assessed where the owner `lives' has been construed to mean where the owner has his residence. While there is authority for the view that `residence' for purposes of taxation is not necessarily synonymous with `domicile', nor `resident' synonymous with `inhabitant' and it has specifically been stated that, within the meaning of some taxing statutes, `residence' is the place of actual abode and not an established domicile or home which one expects to return to and occupy at some future time, it is usually recognized that the terms `residence', `resident', `reside', and the like, `inhabitancy' or `inhabitant', and `actual place of abode,' are equivalent in substance to the term `domicile', `having a domicile', or `one domiciled', and the like. So also the terms `resident' and `inhabitant', and `residence' and `inhabitancy', have been regarded as synonymous. While intent is an element in fixing a person's domicile, or residence, in order to fix domicile or residence for purposes of taxation, there must be a union of such intent and actual residence." (Italics added.)
It will be observed from the foregoing quotation that it has been laid down broadly that residence for the purpose of voting is the same in kind as that required to make one liable for a personal tax, although there is authority contra; hence it is pertinent to consider that the right of suffrage under our State Constitution is made dependent upon residence in the State for a certain length of time. And in the case of Clarke v. McCown, 107 S.C. 209, 92 S.E., 479, 480, the Court said: "The residence of a person is a mixed question of law and fact; and the intention of that person with regard to the matter is deemed the controlling element of decision."
As shown in the agreed statement of facts, neither the plaintiff nor his wife has ever voted in the State of South Carolina, or ever had the intention of acquiring the right to vote here. And it should be noted from the above case that the term "residence" as used in our constitution with reference to the right to vote evidently has substantially the same meaning as "domicile"
I have not overlooked the case of Cummings v. Wingo, 31 S.C. 427, 10 S.E., 107, 110, cited by counsel for the Tax Commission, which holds that residence and citizenship "are entirely different things," but that decision relates solely to the statute and rule of Court permitting security for costs to be required from non-residents; and there is no reference to what constitutes domicile or legal residence.
As will be seen by reference to an annotation in 82 A.L. R., 982, on the subject of inhabitancy or residence within provisions of income tax law as equivalent of domicile, there is a dearth of cases directly in point. This annotation includes an interesting quotation from an article by Professor Lowndes of the Georgetown Law School, in 6 Temple Law Quarterly, 486, a portion of which is as follows:
"We have seen that, as a matter of power, the presence of the taxpayer within the taxing state, without more, enables the State to tax him * * *. What degree of permanency the connection between the taxing State and the taxpayer must possess to justify the imposition of an income tax is a problem which can only be suggested with no attempt at solution. Most income tax statutes use the term `residence,' but `residence' is a slippery word. Will such a tax require domicile or is residence really sufficient? The divergence between residence and domicile is very unfortunate. Suppose that a man is resident in one state but domiciled in another during the year in which income is earned. Is he taxable in both states? If he is taxable in only one, which will this be? * * * A decent regard for the hard lot of the taxpayer affords strong reason for urging that an income tax should not be imposed on the taxpayer apart from his domicile."
Professor Lowndes also calls attention to the fact that there is a holding that the federal income tax may be sustained on the basis of residence in a case decided by the Circuit Court of Appeals for the second circuit, to-wit, Bowring v. Bowers, 24 F.2d 918, 922, certiorari denied. But an examination of that case will show that it rests upon the long continued construction which had been adopted by the Treasury Department, the ruling of which is quoted in the opinion of the Court. This ruling defines residence in language quite appropriate to the definition of domicile, but it goes further and says that for the purpose of the income tax an alien who is permanently located in the United States and has his principal business establishment there, and is there permanently occupied or employed, will be held a resident of the United States, "even though his domicile may be without the United States." Indeed, it occurs to me that such a broad construction of the term "residence" might perhaps be justified with reference to an alien, although not to a citizen of another State. Moreover, the Court adverts to the fact that the hardship of double taxation would have been prevented if Great Britain, the country of which the plaintiff in that case was a citizen, had allowed the citizens of the United States residing there a credit of taxes paid by them in the United States upon their taxes paid in Great Britain; but that there had been no such reciprocal legislation.
It will be of interest to observe that in the opinion delivered in this case by Circuit Judge Augustus N. Hand reference is made to the New York income tax law which defines a resident as "any person domiciled in the State of New York, and any other person who maintains a permanent place of abode within the state, and spends in the aggregate more than seven months of the taxable year within the state." But even if this language had been contained in our statute the plaintiff would not have come within its terms, as the agreed statement of facts shows that the plaintiff and his family have lived in South Carolina "about six months of each year."
In the Virginia case of Talley v. Commonwealth, 127 Va., 516, 103 S.E., 612, it is held that the statute of that state relating to taxes upon intangible property, which used the word "residing," refers to domicile, and that the right of assessment for taxation depends upon domicile. The Court calls attention to the fact that the words "domicile" and "residence" are not interchangeable words or words of equivalent meaning because a man can have but one domicile at one and the same time although he may have several residences; yet domicile is held to be the basis of such taxation, notwithstanding the use of the word "residing."
The case of Dunn v. Trefry, 260 F., 147, in which the Circuit Court of Appeals of the first circuit construed the Massachusetts law, is very nearly in point here both on the law and the facts, except that the statute used the word "inhabitant" instead of "resident." Domicile was there held to be the controlling factor.
While it is my opinion that the agreed statement of facts shows clearly that the plaintiff and his wife have their domicile in the State of Virginia, there are two circumstances contained in the agreed statement which counsel for the Tax Commission argues tend to refute the claim that their domicile is actually in Virginia, and these circumstances are the following:
(1) Mrs. Phillips has long been a member of the Board of Trustees of Hardeeville School District in Jasper County and for several years has been chairman of the board. This circumstance could have little or no significance for of course the law is clear that except in certain unusual circumstances the domicile of the husband is the domicile of the wife. Colburn v. Holland, 14 Rich. Eq., 176; Cone v. Cone, 61 S.C. 512, 39 S.E., 748. But aside from that Mrs. Phillips has undertaken this work merely out of a spirit of good will toward the community where she spends a part of her time and as an opportunity to render a somewhat difficult public service without compensation. However, it is quite obvious that she is not legally qualified to hold the position for the reason that no person shall be elected or appointed to any office in this State unless he or she possesses the qualifications of an elector (Art. 17, Section 1, Constitution of 1895), and Mrs. Phillips has never been a qualified elector.
(2) The plaintiff has one son who attended school for a time at Asheville, N.C., and was graduated at the Hardeeville High School, after which he became and now is a student at The Citadel, being registered there as a resident of Hardeeville, S.C. and it appears that the fees for resident students at The Citadel are less than for non-residents. This young man was born in Hardeeville and when he entered The Citadel his application was made from that place, "and nothing whatever came up about his or his father's residence." I do not think this minor circumstance is of any special significance, and it is certainly not sufficient to indicate an intention on the part of the plaintiff to abandon his domicile in the State of Virginia. Nor is there any evidence that there was any intention on his part to get the benefit of any reduction in fees, or indeed that the matter was ever brought to his attention.
In this connection I may say that a careful scrutiny of the entire record in the case convinces me that there has never been any time the slightest intention on the part of the plaintiff to evade the tax laws of this State, or even to avoid their application, which would of course be legitimate. On the contrary, it is manifest that the course pursued by the plaintiff throughout the whole period was taken in the utmost good faith without any thought of selecting a domicile or residence in a particular State for tax purposes; but having paid taxes on the identical income in question to the State of Virginia, where he has his bona fide domicile, he contends that he should not now be required to pay taxes thereon to the State of South Carolina.
My conclusion is that the word "residing" as used in the income tax acts refers to legal residence in this State which is equivalent to domicile, and that the legal residence or domicile of plaintiff being in the State of Virginia, and not in this State, the sum paid by him by way of income tax, under protest, should be refunded, the same having been illegally collected. It is, therefore, ordered, that the defendant, South Carolina Tax Commission do issue its order to the state treasurer to refund to the plaintiff, H.W. Phillips, the said taxes in the sum of Five Hundred and One and 73/100 ($501.73) Dollars, paid under protest as aforesaid.
Messrs. John M. Daniel, Attorney General, and Claude K. Wingate, for appellant, cite: As to citizenship and residence being synonymous terms: 18 How., 137; 97 U.S. 648; 109 U.S. 278; 121 U.S. 253; 10 S.E., 110; 136 A., 102; 157 N.E., 275; 2 S.W.2d 654; 214 N.W., 536; 306 U.S. 59. Residence: 235 U.S. 561; 35 S.C. 164; 21 Wall., 350; 22 L.Ed., 584; 252 F., 910; 43 So., 923; 99 N.E., 173; 84 N.E., 950; 306 U.S. 398.
Mr. H. Klugh Purdy, for respondent, cites: Construction of tax statutes: 183 S.C. 38. Residence: 181 N.E., 178; 82 A.L.R., 977; 157 N.E., 275; 52 A.L.R., 1386; 110 So., 539; 101 S.E., 232; 61 S.C. 512; 10 Rich. Eq., 176.
December 9, 1940. The opinion of the Court was delivered by
The facts which gave rise to this controversy are well stated in the order and judgment of the trial Judge which will be reported.
After careful consideration of appellant's exceptions and the briefs and arguments of counsel this Court is satisfied with the disposition of the issues made below, and the judgment is affirmed.
MR. CHIEF JUSTICE BONHAM and MESSRS. JUSTICES CARTER, BAKER and FISHBURNE concur.