Opinion
6 Div. 929.
February 7, 1924.
Appeal from Circuit Court, Tuscaloosa County; Henry B. Foster, Judge.
Harwell G. Davis, Atty. Gen., and O. B. Cornelius, Asst. Atty. Gen., for appellants.
Solvent credits are exempt from taxation; yet, in arriving at the amount of capital actually employed in business, the value of the solvent credits must, in effect, be assessed to the extent necessary to supply the difference, if any, between the value of the average stock of goods, wares and merchandise on hand during the preceding year and the capital actually employed in the business. State v. Seals Piano Co., 209 Ala. 93, 95 So. 451.
Brown Ward, of Tuscaloosa, and Rushton, Crenshaw Rushton, of Montgomery, for appellee.
There is no tax imposed by law upon either solvent credits or capital employed in business. Acts 1919, p. 282, § 2 (a); Meriwether v. Garrett, 102 U.S. 472, 26 L.Ed. 197; Perry County v. Railroad Co., 58 Ala. 546; Calhoun Co. v. Woodstock Iron Co., 82 Ala. 157, 2 So. 132; State v. Board of Rev., 73 Ala. 65; Vines v. State, 97 Ala. 73; McLendon v. State, 179 Ala. 61, 60 So. 392, Ann. Cas. 1915C, 691.
The appeal is by the state.
The question pertains to the collection of the state's revenues. The trial was before the court, without a jury. The facts on which the case was tried were agreed upon by counsel.
In Ex parte State, 206 Ala. 575, 90 So. 896, the respective taxable interests in personal property in which the vendor retains a conditional title were declared. Acts 1919, p. 283, § 2.
In State v. Seals Piano Co., 209 Ala. 93, 95 So. 451, it is declared that —
"When the title to some substantial interest in property is vested in one person, and the general title in another, the interests are taxable separately. Ashe-Carson Co. v. State, 138 Ala. 108, 35 So. 38. The act is entirely clear to the effect that no stock of goods, wares, and merchandise is to be assessed for taxation at less than the capital actually employed in the business. * * * We do not understand that the amount of capital assessed to appellee included anticipated profits."
And capital actually employed in that business — the business of such conditional sales contracts — is there defined to be "that part of the assets of the company, including profits already earned (if reinvested), which, at the period of assessment, is used by it in the conduct of its business for the purpose of deriving profit therefrom," and it was held that "the company's interest in outstanding lease-sale contracts at the time of the assessment under review was capital within the purview of section 5, supra." This element of taxable property not exempt was differentiated from solvent credits as such that were exempt by the statute as follows:
"Being at once solvent credit and capital actually employed in business, it appears from the plain language of the revenue act that, while not in general taxable as solvent credit, in the particular circumstances indicated by subsection (d) of section 5 the value of such outstanding interest must be assessed for taxation, in effect, to the extent necessary to supply the difference, if any, between the value of the average stock of goods, wares, and merchandise on hand during the preceding year and the capital actually employed in the business."
The pertinent provisions of the statute, subsection (d) section 5, General Acts 1919 page 285, are as follows:
" All stocks of goods, wares and merchandise, the assessment to be on the average amount on hand during the preceding year, but the amount so assessed shall in no case be less than the capital actually employed in the business, and this shall include all goods, wares and merchandise kept on plantations or elsewhere, or by railroad companies or manufacturing companies, or other associations, companies or persons, for sale or to be dealt out to laborers or employees for profit, or on account of their wages, and shall include all goods, wares and merchandise offered for sale by any person commencing business, subsequently to the first day of October of a current year, but in such case the tax shall be apportioned according to the date at which the business was commenced, so that if commenced after the first day of January, the tax shall be three-fourths of the tax for the whole year; if commenced after the first day of April the tax shall be one-half of the tax for the whole year; provided that the assessment herein provided for shall not include products raised on the farms in the hands of the original producers. If the person, association or corporation carrying on such business shall fail to make return of the amount of stock as provided by law, or if the county tax assessor is not satisfied with the return made, in order to make proper assessment, he shall have the right to demand a copy of the last inventory made of such stock of goods, and may also by inquiry of persons believed to have knowledge of the subjects, obtain information as to the probable average amount of such stock, and from such information may assess the same upon his best judgment." (Italics supplied.)
Section 2, of the act supra, among other things, exempts:
"All bonds of the United States and of this state, * * * all mortgages, together with the notes, debts and credits secured thereby on real and personal property situated in this State which mortgages have been filed for record and the privilege tax paid thereon; all money on deposit in any bank or banking institution in this State and all solvent credits." (Italics supplied.)
The quære may be made, under this tax statute (that is, strictly construed against the taxing power, State v. Roden Coal Co., 197 Ala. 407, 73 So. 5): Are the words "capital actually employed in the business" the equivalent of the words "net worth of the business," if effect be given to the plain intent of the statute when considered as a whole? State v. Seals Piano Co., 209 Ala. 93, 95 So. 451; Sunflower Lbr. Co. v. Turner Supply Co., 158 Ala. 191, 48 So. 510, 132 Am. St. Rep. 20; Mutual Life Ins. Co. v. Allen, 166 Ala. 159, 51 So. 877. They are not.
These words ("capital actually employed") were used in subsection (d), section 5, of the statute, supra, in their natural and ordinary signification and in the generally accepted sense. They have application to all of the properties and moneys set apart from other uses and invested or employed in the operation of the business with a view to income or profit therefrom. Bailey v. Clark, 21 Wall. (88 U.S.) 284, 22 L.Ed. 651; Terre Haute I. R. Co. v. State, 159 Ind. 438, 65 N.E. 401, 404, 408. It follows that the respective withdrawals from the business by the two Burchfields, aggregating the sum of $101,000, are held not to be capital actually employed in said business within the statute construed.
In one of the briefs of appellees' counsel is the admission that under the Seals Piano Co. Case, supra, solvent credits (though generally exempt from taxation) "can be taxed to some extent, provided the cash actually employed in the business of a concern is in excess of the average amount of stock on hand in such business." They, however, ask a reconsideration of the decision rendered in the Seals Piano Co. Case, to the end, as they say, that "full force and effect" be given to "all of the provisions and subsections of the revenue act of 1919," under the maxim ut res magis valeat quam pereat — that the thing may rather have effect than be destroyed. Simonds v. Walker, 100 Mass. 113; National P. Bank v. Lougee, 108 Mass. 373, 11 Am.Rep. 367. It is a rule of statutory construction that if two provisions of a statute are in conflict — inconsistent and irreconcilable — the legislative intent must be found, if possible, from the whole act, considering its history, nature, purpose, etc., and having in mind that such statutes are construed in favor of the taxpayer. Sutherland's Stat. Const. §§ 364, 441. If the conflict is irreconcilable and not to be determined by other rules that obtain, the statutory rule — as to the last legislative expression — may be resorted to. 6 Ann. Cas. 860; 19 Ann. Cas. 149; 25 R. C. L. 1011. Though, this rule is not often resorted to, since the conflict is usually determinable by other rules that have application.
We have declared, in State v. Seals Piano Co., supra, as to the two provisions of the statute before us, that the maxim general-ibus specialia derogant obtained, as to the facts before the court, and as to the provisions of subsection (d) of section 5 of the Revenue Act. In that case the special or unusual character of the business of selling musical instruments on contracts retaining title thereto was the subject of consideration, and the relation of such properties so contracted for sale as a part of the "stock in trade" and the capital actually engaged in the conduct of that business. See Singer Mfg. Co. v. County Com. of Essex County, 139 Mass. 266, 1 N.E. 419.
Under the facts before us, as to the conduct of the business by the Burchfields, there is a field of operation for the exemption of "all solvent credits" (section 2[a], Gen. Acts, 1919, p. 283), and the taxation of all "goods, wares and merchandise," and the assessment thereof "to be on the average amount on hand during the preceding year, but the amount so assessed shall in no case be less than the capital actually employed in the business." Section 5, subsec. (d). (Italics supplied.) The latter was for the information of the taxing authorities of the county and state as to the "probable average amount of such stock," that a final "proper assessment" might be made by the exercise of the "best judgment" of the official charged by law with this duty. As having application to such a business as that conducted during the year in question by appellees, the words "capital actually employed" mean the properties, moneys, and choses in action that were actually employed in the business, and their solvent credits, if the same were also actually employed in the business. Under such construction the merchant is not taxed indirectly on his solvent credits as such, and thereby on the "net earnings" of the business, but only when such merchant makes such choses in action and solvent credits do service in the business as a part of its "capital actually employed" in its operation within the tax year.
The argument is made by appellees' counsel that said provision of the statute — "but the amount so assessed shall in no case be less than the capital actually employed in the business" — is within the condemnation given statement in Board of Assessment v. Alabama Co., 59 Ala. 551, 556. That is to say, that the instant provision of the statute does more than provide a uniform rule of taxation (Const. § 217) in exact proportion to the value of such property (Coast. § 211) within the rate fixed by the Constitution (§ 214) for ascertaining the value of the property of the class sought to be made the subject of taxation. In that case it is said:
"The statute under consideration passes beyond providing a mere rule for ascertaining the value of the property of railroad companies. The value of such property can in no event be assessed at less than a sum which, at 8 per cent. per annum, would produce its annual net earnings. If its net earnings, ascertained in the mode prescribed, will not produce a sum at 8 per cent. per annum, equal to the value of the road as otherwise shown, then the assessment of taxes must be on such value. In the one case, the income of the property furnishes a conclusive standard of value; in the other it is wholly discarded. The Legislature has not power to declare the value of property, and then assess taxes upon it as of that value; nor has it the power to assume and declare that the net income or earnings of property is an unerring test of its value. The value of the property, considering the uses for which it is employed, and the profit which may be derived from it, may be ascertained under rules which the Legislature may prescribe. The value must be ascertained, and taxes assessed upon it. It is not competent for the Legislature to declare that any species of property is of a particular value, because of its income, or to declare that the income alone shall be considered in determining its value. If the rule prescribed for the assessment of taxes on the property of railroads was applied to the assessment of the property of individuals, the violation of the Constitution would not be doubted. Two planters own adjoining plantations of equal fertility, and of equal value in all respects; the one, by his skill, industry, economy, and prudence, derives a net income, which, if regarded as 8 per cent. per annum on the value of his plantation, would produce a sum exceeding its actual value; in the market it would not command such value; an artificial value would thus, by legislative enactment, be imparted to his plantation, and his thrift and industry be converted into a subject of taxation. The other could be taxed on the value of his plantation, though, from the want of skill or thrift, so far from deriving an income, he had in its cultivation been involved in debt. We cannot read the Constitution without a conviction that its purpose is to free property from all arbitrary and artificial taxation — to limit the Legislature to a specified rate of taxation on its value. The limitation would be in vain, if the Legislature could prescribe a standard of value.
"* * * We are bound to declare the Constitution does not authorize the Legislature to prescribe or declare an arbitrary or artificial value of the property of individuals or corporations, and assess taxes on such valuation. This is attempted by the statute prescribing the rule by which the board of assessment was governed. The assessment is consequently invalid — an excess of authority by the board."
If the principle announced in this last case be applied to the instant provision of the statute, the latter offends no organic law, if its words, "but the amount so assessed shall in no case be less than the capital employed in the business," are given the ordinary meaning we have indicated. When they are understood to have been so employed in the statute, they are within legislative authority in the prescription of rules for obtaining the tax valuation of the character, of property being dealt with, and this is done with uniformity and within the limits of the Constitution tax rate.
It may be further observed that the other counsel for appellees concedes that the conclusion reached in State v. Seals Piano Co., 209 Ala. 93, 95 So. 451, that goods sold, but title retained, were still taxable as a part of the stock of goods on hand was correct, "but some of the reasons given unnecessary to support the holding, and are entirely at variance with State v. Alabama, etc., Co.," supra. To this last statement, as the statute is construed and must be applied to the facts of the case before us, we have indicated our disagreement.
No arbitrary or artificial value of property is applied by the trial court under the statute, and the judgment is affirmed.
On complainants' evidence it was found as a matter of fact that the "capital actually employed" in appellees' business for the tax year in question was equal to or not in excess of the "average amount" of such stocks, goods, wares, and merchandise, "on hand during the preceding" tax year.
Affirmed.
ANDERSON, C. J., and SOMERVILLE and BOULDIN, JJ., concur.