Opinion
No. 34590.
April 28, 1941. Suggestion of Error Overruled September 22, 1941.
LICENSES.
Under statute imposing privilege tax upon manufacturer measured by certain percentage of gross proceeds and providing that in computing amount of tax levied there shall be exempt from gross income or gross proceeds so much thereof as is derived from sales to the United States, gross proceeds of sales to the United States of lumber manufactured to specifications for portable or prefabricated houses could be included in determining manufacturer's gross proceeds for measuring the manufacturer's privilege tax (Laws 1934, chap. 119, sec. 2-b, as amended, and sec. 2-h).
APPEAL from the circuit court of Hinds county, HON. J.F. BARBOUR, Judge.
J.H. Sumrall, of Jackson, for appellant.
He who claims an exemption from taxation must establish his right thereto by a statute, the words of which are too plain to admit of argument. If any doubt arises from the words used in the statute as to whether or not an exemption is granted, this doubt must be resolved against the exemption.
Miller v. Lamar Life Ins. Co., 158 Miss. 753, 131 So. 282; Barnes v. Jones, 139 Miss. 675, 103 So. 773, 43 A.L.R. 673; Teche Lines v. Bd. of Sup'rs, Forrest County, 165 Miss. 594, 142 So. 24; Adams County v. Nat. Box Co., 125 Miss. 598, 88 So. 168; Magnolia Bldg. Loan Assn. v. Miller, 155 Miss. 498; Stone v. Interstate Natural Gas Co., 103 F.2d 544, on certiorari affirmed 307 U.S. 620, 83 L.Ed. 1499.
An occupation tax measured by gross income is not invalid where imposed by a state upon a contractor with the United States as laying a direct burden on the Federal Government, even though the imposition of the tax may increase the cost to the Government of the work contracted to be done.
Compress of Union v. Stone, 188 Miss. 49, 193 So. 329.
In the two cases decided by this court — Jackson Fertilizer Co. v. Stone, 173 Miss. 183, 162 So. 170, 171, and Southern Package Corporation v. State Tax Commission, 174 Miss. 212, 164 So. 45 — the identical statute was under consideration that is involved in the imposition of the tax which was collected in this case and collected on the same basis as the tax in each of said cases, to-wit, the tax for the privilege of manufacturing; and the only difference between the case at bar and the two cases referred to, previously decided by this court, is that, in said Fertilizer Company case and Southern Package Corporation case, the immunity from taxation was claimed on either the ground that the sale of the commodity manufactured was made in interstate commerce, and therefore not subject to taxation, or that intrastate sales of the products were expressly exempted from taxation by the provisions of Sub-section (m) of Section 4 of the Sales Tax Law.
There was no contention on the part of the taxing authority that any right existed in the state to impose taxes on interstate sales, or to impose taxes for the privilege of selling upon products of either of the two plants in the State of Mississippi. The granting of an exemption on sales of such commodities was so positive in the statutes granting such exemption that no question could arise as to whether or not the statute granted the exemption. But even under such circumstances, the court very positively held that each of said manufacturing plants was liable for the tax imposed upon Section 2-b solely because the tax was clearly imposed on the privilege of operating a manufacturing plant in this state, without reference to what disposition was made of the product.
The case at bar involves the exact imposition of the tax under the same section for the privilege of manufacturing, but the sale of the product of such plant is not expressly exempted by any statute; and the sole basis for claiming the exemption from the tax imposed in the instant case is that because Section 2-h exempts from taxation all sales of any tangible property made to the Federal Government or the State of Mississippi, then the fact that the product of this manufacturing plant was sold to the Federal Government and an exemption granted on the sale of tangible property to the Federal Government can be invoked to prevent the application of Section 2-b, which imposes a tax solely on the privilege of manufacturing, without reference to what disposition is made of the product.
The language of Section 2-h, when construed as applying to all the sections of the law imposing taxes, which must be done if a construction is adopted which does not confine its application to the tax imposed on the single privilege of selling tangible property, then the fact that the section authorizes an exception in the report of any taxpayer of the amount of tax levied under "this act," which would mean every section of this act, and including both the terms "gross income of the business," or "gross proceeds of sales, as the case may be," would result in granting an exemption to every person whose "gross income of the business" or "gross proceeds of sales" were derived from the Federal Government or the State of Mississippi, its departments or institutions.
When such a construction is adopted, with its resulting consequences, then there arises at once to deny the correctness of such construction the rule laid down by the Supreme Court of the United States in James v. Dravo Construction Company, 302 U.S. 134, in which the Supreme Court of the United States held that the mere fact that a contractor performing work for the Federal Government and the gross proceeds of his business was derived exclusively from the Federal Government, did not render said contractor exempt from the tax imposed on the naked privilege of contracting when the tax was imposed on the privilege of contracting, even though measured by the gross income of the business which is derived exclusively from the United States Government.
T.J. Wills, of Hattiesburg, for appellee.
In computing the amount of tax levied under this act, there shall be excepted from the gross income of the business, or the gross proceeds of the sales, as the case may be, so much thereof as is derived from sales to the United States Government or the State of Mississippi, its departments and institutions, or from business which the State of Mississippi is prohibited from taxing under the Constitution of this state or the Constitution of the United States.
Sec. 2-h, Chap. 119, Laws of 1934.
It is true that the one-fourth of one per cent is a manufacturer's tax and under the decisions of our State Supreme Court and of the Supreme Court of the United States the Legislature was not required by constitutional limitation to exclude, when computing the tax, the amount derived from the sales to the United States Government. The answer, however, is that by Section 2-h they did exclude it. They didn't say that as to the sales under Section 2-c the amount received from the United States Government should be excluded. The Legislature said that in computing the tax levied under the act. The act is from Section 1 to Section 23, inclusive, and every tax levied within those limitations is included by the Legislature when they said in computing the amount of tax levied under this act there shall be excepted from the gross income of the business, or the gross proceeds of the sales, as the case may be, so much thereof as is derived from sales to the United States Government.
The Legislature could have included in the manufacturer's tax, in computing it, the sums of money derived from the United States Government. They did not do it, and why? If agriculture was to be balanced with industry, then industry must be encouraged. The Legislature desired that the industries in Mississippi should not have the slightest handicap in submitting their bids and obtaining the awards for the furnishing of the United States Government with the houses, lumber, and such other commodities as Mississippi could furnish and of which the United States Government might be in need.
The cases of Jackson Fertilizer Company v. Stone, 173 Miss. 183, and Southern Package Corporation v. State Tax Commission, 173 Miss. 212, have no application here. Paragraph (m) of Section 4, Chapter 119, Laws of 1934, exempts sales of fertilizers, seeds, boxes and crates used in preparing agricultural products for market. It does not exempt manufacturers of fertilizer from paying the one-fourth of one per cent manufacturer's tax.
Compress of Union v. Stone, 188 Miss. 49, is easily distinguishable for the reason that Section 2-b of the act provides that in obtaining the amount of the tax due the gross proceeds derived from the sale of the article shall be used and multiplied by the one-fourth of one per cent manufacturer's tax levied. Section 2-h of the act provides that this amount to be multiplied by the tax rate shall be excepted and excluded from it so much as the amount derived from the sales to the United States Government. In the compress case, there was no sale to the United States Government. A sale means the transfer and passage of title, for a consideration, from one to another. The compressing of the cotton for the Commodity Credit Corporation was a labor service, for which the charge was made.
Argued orally by J.H. Sumrall, for appellant, and by T.J. Wills, for appellee.
Appellee, which was plaintiff in the trial court, brought suit to recover tax in the sum of $2,111.15, paid upon demand of appellant under section 2-b of Ch. 119, Laws of 1934, Ch. 158, Laws of 1936, and Ch. 113, Laws of 1938, which provides for a privilege tax upon a manufacturer, such as appellee, of one-fourth of one per cent of the "value of the . . . commodities, manufactured . . . or prepared for sale, as shown by the gross proceeds derived from the sale thereof by the manufacturer. . . ." The tax demanded by appellant was computed upon the amount of the proceeds of sales to the United States of lumber manufactured to specifications for portable or prefabricated houses. Appellee contends that the gross proceeds of such sales should have been excepted from the amount used as the multiplicand, which is to be multiplied by the tax rate of one-quarter of one per cent. The authority for this exception is sought in section 2-h of the act, which is as follows: "In computing the amount of tax levied under this act, there shall be excepted from the gross income of the business, or gross proceeds of sales, as the case may be, so much thereof as is derived from sales to the United States government . . ."
In Jackson Fertilizer Co. v. Stone, 173 Miss. 183, 162 So. 170, 171, the taxpayer claimed exemption from tax as a manufacturer of fertilizers under a section of the act here involved, which exempted from the provisions thereof "sales of all fertilizers, seeds, boxes and crates used in preparing agricultural products for market." In Southern Package Corp. v. State Tax Commission, 174 Miss. 212, 164 So. 45, exemption was claimed as a manufacturer of boxes and crates used in preparing agricultural products for market. In Compress of Union v. Stone, 188 Miss. 49, 193 So. 329, the exemption from liability for the manufacturer's tax was sought to be based upon the fact that part of the gross income of the manufacturer was "derived from sales to the United States government." In Aponaug Mfg. Co. v. State Tax Commission, 1 So.2d 763, this day decided, exemption from similar liability is asserted on the ground that the goods manufactured are sold in interstate commerce, thereby subjecting them to additional sales tax in the state to which they are delivered. In these cases, neither the ultimate disposition of the manufactured products nor the existence of exemptions affecting liability for tax upon the sales thereof was held to affect liability for the privilege tax as a manufacturer. The gross income of the business or the gross proceeds of the sales remains the basis upon which to compute this tax, whether computed from sales in interstate commerce, sales of products exempt from sales taxes, popularly so-called or sales to the United States government, even though the gross income derived from such sales may be exempt from a tax thereon as sales.
This case was tried upon an agreed statement of facts and the refund of the tax paid by appellee was ordered. We find this to be error. Appellee is liable for the tax.
Reversed, and judgment here for appellant.