197 P. 495 (Okla. 1921), 11194, In re Skelton Lead & Zinc Co.'s Gross Production Tax for 1919

Docket Nº:11194.
Citation:197 P. 495, 81 Okla. 134, 1921 OK 121
Opinion Judge:HARRISON, C.J.
Party Name:IN RE SKELTON LEAD & ZINC CO.'S GROSS PRODUCTION TAX FOR 1919.
Attorney:Vern E. Thompson, of Miami, for plaintiff in error. S. P. Freeling, Atty. Gen., and C. W. King, Asst. Atty. Gen., for defendant in error.
Case Date:April 05, 1921
Court:Supreme Court of Oklahoma
 
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Page 495

197 P. 495 (Okla. 1921)

81 Okla. 134, 1921 OK 121

IN RE SKELTON LEAD & ZINC CO.'S GROSS PRODUCTION TAX FOR 1919.

No. 11194.

Supreme Court of Oklahoma

April 5, 1921

Syllabus by the Court.

Under chapter 39, Sess. Laws Ex. Sess. 1916: "The Oklahoma gross production tax, imposed on oil and gas [lead and zinc] producing companies, was intended as a substitute for the ad valorem property tax." Shaffer v. Carter, 252 U.S. 37, 40 S.Ct. 221, 64 L.Ed. 445.

The "gross production tax" levied under chapter 39, Sess. Laws Ex. Sess. 1916, is a "property tax" purely, and is levied in full and in lieu of all other taxes, state, county, township, district, and municipal.

Under chapter 39, Sess. Laws Ex. Sess. 1916, plain and adequate provision is made for lowering the rate of "gross production tax" so that it will exactly conform to the general ad valorem rate of "property tax" upon other property in the state.

Under article 10, § 6, of the Constitution of this state, and under section 7303, Rev. Laws 1910, all such property as may be exempt by reason of treaty stipulations between the Indians and the United States or by federal laws is expressly exempt from taxation by the state.

Under chapter 39, Sess. Laws Ex. Sess. 1916, the royalties due the Indians from oil, gas, and mineral leases under federal supervision and upon restricted lands are not made taxable and are not taxed by the state.

Under said chapter 39, the value of an oil, gas, or mineral lease, as such, upon restricted lands and under federal supervision, is not to be considered and is not considered as an element of value in making up the assessment rolls.

The provisions, in section 1, c. 39, Sess. Laws Ex. Sess. 1916, requiring oil, gas, and mineral lessees to report the value of leases to the State Auditor, apply to such leases only as are not on restricted lands nor under federal supervision, and are not intended to apply and do not apply to leases on restricted Indian lands under federal supervision.

The "gross production tax" provided for in chapter 39, Sess. Laws Ex. Sess. 1916, is not an "occupation tax."

The tax imposed by chapter 39, Sess. Laws Ex. Sess. 1916, is not upon a federal agency, nor upon the right to exercise or operate a federal agency, but is upon the lessees' individual private property.

"Occupation taxes" and "property taxes" are clearly distinct from each other in both species and function, distinctly different in object, purpose, and mission.

The primary purpose, mission, or function of an "occupation tax" is to regulate and control a given occupation or class of business.

The only mission or function of a "property tax" is to raise revenue; when the revenue is collected, its mission is fulfilled.

The basis of authority for an "occupation tax" lies in the police power, and its validity depends upon the extent of police power to regulate and control a given subject.

The basis of authority for the "property tax," for necessary revenue, lies in the inherent power of government itself, and its validity is determined, not by the question of power to levy, but by statute and constitutional provisions, which limit and equalize the rate, and governing the manner of valuation and assessment.

A state has no power to regulate or control the exercise of a federal agency; hence it has no power to impose an "occupation tax" upon the right of exercising a federal agency.

A state has inherent power to raise the necessary revenue for state government; hence it has power to impose an "ad valorem tax" upon all property which must look to the state for protection and which the state is obligated to protect.

Under our dual system, the state and federal governments are mutually dependent upon each other, and equally so; the exercise of the proper functions of each being essential to that of the other, and the proper operation of both being essential to the existence of our dual scheme of government.

The provision in chapter 39, Sess. Laws Ex. Sess. 1916, for the payment of a sum equal to 1 1/2 per cent. of the gross value of lead and zinc products, is merely a means or measure adopted by the Legislature for ascertaining the fair cash value of the mills, plants, machinery, equipments, and other property used in the operation thereof, as a going concern.

The mills, plants, machinery, equipments, and all other property, being exclusively the private property of the lessee, and having a situs within this state, and not being exempt by law, are subject to state taxation, and the "gross production tax," being merely a measure for ascertaining the fair cash value of such property, is a valid tax.

Appeal from State Board of Equalization.

Proceeding to impose a gross production tax on the property of the Skelton Lead & Zinc Company. From an order of the State Board of Equalization overruling a protest, the corporation appeals. Affirmed.

Kane and Miller, JJ., dissenting.

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Vern E. Thompson, of Miami, for plaintiff in error.

S. P. Freeling, Atty. Gen., and C. W. King, Asst. Atty. Gen., for defendant in error.

HARRISON, C.J.

This case is here upon appeal from an order of the State Board of Equalization overruling protest of Skelton Lead & Zinc Company against payment of its "gross production tax."

The order appealed from was made upon an agreed statement of facts in substance as follows: That the taxes for 1919 amounted to $2,033.56; that they were estimated upon the value of gross production of lead and zinc from protestant's mines; that the mines were operated under leases upon restricted lands of the Qaupaw Indians, said leases having been made under authority of the act of Congress approved June 7, 1897 (30 Stat. 72); that most of said leases were upon lands belonging to allottees that had been adjudged incompetent, but some were upon lands whose owners had not been so adjudged; and that should a distinction be made between the lands of competents and those of incompetents, as to their liability for taxation, the taxes, then, should be calculated accordingly.

It was also agreed that the lead and zinc company had erected on said lands a number of concentrating plants (five, it appears from the protest filed), in each of which plants there had been installed machinery and devices for the purpose of hoisting, smelting, and cleaning the ores produced from the mines; that said plants, machinery, and equipments were necessary in order to produce said ore and prepare same for market, and were used exclusively for such purpose; and that no ad valorem tax had been paid on said plants, equipment, etc., for said year.

It was further agreed that said statement of facts be submitted to the Board of Equalization for a final decision: (1) As to whether or not the ore from said leases or any of same is subject to the gross production tax; (2) whether or not the concentrating plants and machinery and equipment are subject to an ad valorem tax.

It appears that no ad valorem tax had been levied on any of said property. Protestant claims that the plants, machinery, and devices are not subject even to an ad valorem tax, and that the ores produced are not subject to a gross production tax; that the plants, machinery, and other tangible effects, being necessarily used in the operation of leases under federal supervision, are federal instrumentalities, and therefore not subject even to an ad valorem tax; and that the gross production tax is an occupation tax, and that the ores obtained, being the products of a federal agency, are not subject to an occupation tax.

These two propositions, however, are assigned as follows: (1) Are the improvements, the plants, and machinery upon, and the ore obtained from, leases belonging to allottees who have been adjudged incompetent subject to either an ad valorem or a gross production tax; (2) are the improvements, the plants, and machinery upon, and the ore obtained from, leases belonging to allottees who have not been adjudged incompetent subject to either an ad valorem or a gross production tax.

In this connection, we take occasion to say, in justice to protestants and to the counsel who briefed the case, that these questions are submitted with utmost fairness and frankness, without attempt to distort or evade the real provision of statutes, and without resort to subterfuge in their argument.

As to whether there may be or should be a distinction made between the two classes of allottees as to liability for taxes is not necessary to determine. The tax is not levied upon anything belonging to either class of Indians, nor anything in which either class of Indians or the government has any ownership, or over which either exercises any control.

Article 10, § 6, of the state Constitution, expressly exempts all "such property as may be exempt by reason of treaty stipulations, existing between the Indians and the United States government, or by federal

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laws." Section 7303, Rev. Laws 1910, subd. 8, expressly exempts all "such property as may be exempt by reason of treaty stipulations, existing between the Indian and the United States government, or by federal laws." Section 1, c. 39, Session Laws Ex. Sess. 1916, the statute under which the tax in question was levied, expressly exempts all "such royalty interests as are exempted from taxation under the laws of the United States."

Hence the statute does not impose either an ad valorem or a gross production tax upon any of the property of the Indians, nor upon the royalties due them from the lessees.

As we interpret the statute, it seeks merely to levy a property tax upon the lessees' individual personal property...

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