Artophone Corp. v. Coale

• Decision Date: 22 November 1939
• Docket Number: 36439
• Citation: 133 S.W.2d 343,345 Mo. 344
• Parties: The Artophone Corporation, a Corporation, Appellant, v. Ralph W. Coale, Assessor of the City of St. Louis; Forrest Smith, State Auditor and William F. Baumann, Collector of the City of St. Louis
• Court: Missouri Supreme Court

133 S.W.2d 343

345 Mo. 344

The Artophone Corporation, a Corporation, Appellant, v. Ralph W. Coale, Assessor of the City of St. Louis; Forrest Smith, State Auditor and William F. Baumann, Collector of the City of St. Louis

No. 36439

Supreme Court of Missouri

November 22, 1939

Appeal from Circuit Court of City of St. Louis; Hon. John W Joynt, Judge.

Reversed and remanded (with directions).

Lewis Rice, Tucker, Allen & Chubb, Robert T. Burch and Philip A. Maxeiner for appellant.

(1) Under the plain and unambiguous language of the statute the appellant was entitled to compute its net income by the method of allocation set forth in the statute. (a) The statute will be construed according to its plain and unambiguous terms. State ex rel. Koeln v. Lesser, 237 Mo. 310, 141 S. W., 888; Converse v. Northern Pac Ry. Co., 2 F.2d 959; Leavell v. Blades, 237 Mo. 700, 141 S.W. 893; State ex rel. Liggett & Myers Tobacco Co. v. Gehner, 316 Mo. 1075, 292 S.W. 1028; State ex rel. Koeln v. S.W. Bell Tel. Co., 316 Mo. 1008, 292 S.W. 1037. (b) Section 10115, Revised Statutes 1929, provides that corporations may elect to compute the portion of income from all sources in this State according to the statutory method of allocation. Sec. 10115, R. S. 1929; Underwood Typewriter Co. v. Chamberlain, 254 U.S. 113, 65 L.Ed. 165; State ex rel. Koeln v. Lesser, 237 Mo. 310, 141 S.W. 888. (c) The sales made by the appellant to purchasers in states other than Missouri were transactions partly within this State and partly without this State. Jones, Commentaries on Evidence (2 Ed.), p. 4358; Scott v. Waggoner, 45 Mont. 536, 139 P. 454, L. R. A. 1916C, 494; 3 Bouvier's Law Dictionary, p. 3307; Ritchie v. Hayward, 71 Mo. 562; Barnard v. Weaver, 224 S.W. 153; Slack v. Whitney, 231 S.W. 1062; Esbensen v. Hover, 3 Colo.App. 467, 33 P. 1008; Watts v. Gantt, 32 Neb. 869, 61 N.W. 104; 17 Fletcher, Cyclopedia Corporations (Perm. Ed.), sec. 8403; Chuse Engine & Mfg. Co. v. Vromania Apart. Co., 154 Mo.App. 153, 133 S.W. 624; International Textbook Co. v. Gillespie, 220 Mo. 397, 129 S.W. 922; Thurman v. C., M. & St. P. Ry. Co., 254 Mass. 569, 151 N.E. 63, 46 A. L. R. 563; International Harvester Co. v. Kentucky, 234 U.S. 579, 58 L.Ed. 1479; Felt & Tarrant Mfg. Co. v. Gallagher, 83 L.Ed. 361; Bass, Ratcliff and Gretton v. State Tax Comm., 266 U.S. 271, 69 L.Ed. 282; Butler Bros. Shoe Co. v. U.S. Rubber Co., 156 F. 1. (2) Every aid to construction of the statute supports the language of the statute and the right of the appellant to use the statutory method of allocation in computing the amount of its taxable income. (a) The legislative history of the statute. Laws 1917, p. 524; Laws 1919, p. 718; Laws 1927, p. 475; Laws 1929, p. 423; Graham Paper Co. v. Gehner, 332 Mo. 155, 59 S.W.2d 49; Adams Mfg. Co. v. Storen, 304 U.S. 311, 82 L.Ed. 1369. (b) The statute, being a revenue law, must be construed strictly in favor of the taxpayer. State ex rel. Kansas City L. & P. Co. v. Smith, 111 S.W.2d 515; State ex rel. Ford Motor Co. v. Gehner, 325 Mo. 24, 27 S.W.2d 3; State ex rel. Compton v. Buder, 308 Mo. 253, 271 S.W. 770; State ex rel. Am. Central Ins. Co. v. Gehner, 315 Mo. 1126, 280 S.W. 417; State ex rel. Natl. Life Ins. Co. v. Hyde, 292 Mo. 342, 241 S.W. 399; Converse v. Northern Pac. Ry. Co., 2 F.2d 960. (c) The statute having been interpreted by the administrative officer charged with the enforcement of the act to permit allocation under the facts here involved and the act having been reenacted by the Legislature in the light of that interpretation, the interpretation should receive great weight. State ex rel. Gass v. Gordon, 266 Mo. 394, 181 S.W. 1016; State ex rel. Hanlon v. Maplewood, 231 Mo.App. 739, 99 S.W.2d 143; Williams v. Williams, 325 Mo. 963, 30 S.W.2d 71; State ex rel. Barrett v. First Natl. Bank, 297 Mo. 397, 249 S.W. 619, affirmed 263 U.S. 640; State ex rel. Union E. L. & P. Co. v. Baker, 316 Mo. 853, 293 S.W. 401; New England Mut. Life Ins. Co. v. Reece, 169 Tenn. 84, 83 S.W.2d 238; Walker v. United States, 83 F.2d 103.

Roy McKittrick, Attorney General, and Russell C. Stone, Assistant Attorney General, for respondent.

(1) The power of the State to impose a tax on incomes is limited to subjects within its jurisdiction. Hans-Rees Sons v. North Carolina, 283 U.S. 123, 75 L.Ed. 879; Shaffer v. Carter, 252 U.S. 37, 64 L.Ed. 445; Surplus Trading Co. v. Cook, 281 U.S. 647, 74 L.Ed. 1091; James v. Dravo Contracting Co., 302 U.S. 134, 82 L.Ed. 155; M'Culloch v. Maryland, 4 L.Ed. 607, 4 Wheat. 316; Brown v. Maryland, 12 Wheat. 419, 6 L.Ed. 678; Cleveland, Painesville & Ashtabula Railroad Co. v. Pennsylvania, 82 U.S. 300, 21 L.Ed. 179; State ex rel. Manitowoc Gas Co. v. Wis. Tax Comm., 152 N.W. 849, 161 Wis. 111; Secs. 10115, 10117, R. S. 1929; Laws 1931, pp. 365, 367; Piedmont & Northern Ry. Co. v. Query, 56 F.2d 172; Standard Oil Co. v. Thoresen, 29 F.2d 708; Palmolive Co. v. Conway, 43 F.2d 226. (2) The Missouri Income Tax Act imposes a tax on general corporations, both domestic and foreign with respect to incomes arising from sources within the State. (a) Statutory construction. Allen v. Morsman, 46 F.2d 893; State ex rel. Ford Motor Co. v. Gehner, 325 Mo. 29, 27 S.W.2d 3; State ex rel. Western Union Telegraph Co. v. Markway, 110 S.W.2d 1118, 341 Mo. 976; In re Clark Estate, 194 S.W. 54, 270 Mo. 351; State ex rel. Union E. L. & P. Co. v. Baker, 293 S.W. 399, 316 Mo. 853; Graves v. Purcell, 85 S.W.2d 543, 337 Mo. 574; State ex rel. v. Daues, 14 S.W.2d 1001, 321 Mo. 1126; Cummins v. K. C. Pub. Serv. Co., 66 S.W.2d 925, 334 Mo. 672. (b) Sources in this State. Secs. 10115, 10117, R. S. 1929; Laws 1931, pp. 365, 367; Funk & Wagnalls' New Standard Dictionary; Webster's New International Dictionary; 58 C. J., sec. 1, p. 811; Holmes on Federal Taxes (6 Ed.), 396; State ex rel. Manitowoc Gas Co. v. Wis. Tax Comm., 152 N.W. 848, 161 Wis. 111; U.S. Glue Co. v. Oak Creek, 153 N.W. 241, 161 Wis. 211, 62 L.Ed. 1135; Compania General De Tabacos v. Collector of Internal Revenue, 73 L.Ed. 704, 279 U.S. 306, 49 S.Ct. 304; Montag Bros. v. State Revenue Comm., 179 S.E. 563, 50 Ga.App. 660; Commissioner of Internal Revenue v. East Coast Oil Co., 85 F.2d 322; Ingram v. Bowers, 47 F.2d 925; Wilcox v. County Commrs., 103 Mass. 544; State ex rel. v. Daues, 14 S.W.2d 1001, 321 Mo. 1126. (3) Historical considerations support respondents' view that appellant may not allocate its income under stipulation of facts. (a) History of the Income Tax Act. Ludlow-Saylor Wire Co. v. Wollbrinck, 205 S.W. 196, 275 Mo. 339; Lawrence v. Miss. State Tax Comm., 286 U.S. 276, 76 L.Ed. 1102, 52 S.Ct. 566; James v. Dravo Contracting Co., 302 U.S. 134, 82 L.Ed. 155; Sec. 13106, Laws 1929, p. 424; Stouffer v. Crawford, 248 S.W. 585; Graham Paper Co. v. Gehner, 59 S.W.2d 49, 332 Mo. 155. (b) Transactions of appellant only produce income in this State. People ex rel. Woolworth's Estate v. State Tax Comm., 192 N.Y.S. 774, 200 A.D. 287; Cunningham v. Sizer Steel Corp., 1 F.2d 337; In re Goetz's Will, 75 N.Y.S. 751, 71 A.D. 272; Underwood Typewriter Co. v. Chamberlain, 254 U.S. 113, 65 L.Ed. 165, 41 S.Ct. 45; Compania General De. Tabacos v. Collector of Internal Revenue, 73 L.Ed. 704, 279 U.S. 306, 49 S.Ct. 304; Sec. 10135, R. S. 1929; U.S. Glue Co. v. Oak Creek, 153 N.W. 241, 161 Wis. 211, 62 L.Ed. 1135.

Cobbs, Logan, Roos & Armstrong, Borders, Warrick & Hazard, David Baron, Wm. F. Fahey, A. B. Frey, E. A. B. Garesche, Nagel, Kirby, Orrick & Shepley, Sullivan, Reeder & Finley, Karal A. Korngold, Allen C. McReynolds and John C. Vaughan, amici curiae.

(1) The taxpayer is entitled to allocate its gross income to determine the amount of net income subject to tax in the manner in which it was done in this case. Section 10115 paragraph third, Revised Statutes 1929, as amended, Acts 1931, page 365. (2) In view of the claim of the State Auditor, that allocation by this taxpayer is not permissible under this law, it is the function of the court to determine and arrive at the intention of the Legislature. When this cannot be done from the language of the Legislature alone, the court is under a duty to determine the intention from surrounding circumstances as the history of previous legislation upon the same subject, the stated purposes of the act in the title thereof, contemporaneous construction placed upon the act by the administrative officials charged with the duty of its administration; the construction placed upon the act by the practice of taxpayers acquiesced in by the administrative officials; the implied interpretation of the act by administrative officials as evidenced by their practice in applying the terms of the act; and the fact that the Legislature, with knowledge of such construction, has legislated with reference to the same general subject matter without changing the terms of the act. No citations are given to this general point, as we assume that such citations are necessary as they are the statement of general principles repeatedly applied in this State. (3) While, and because, the power of the Legislature to tax is practically unlimited, taxing statutes are strictly construed in favor of the taxpayer and the fact that a particular property, income or privilege is taxed, must appear clearly in the taxing statute. State ex rel. Ford Motor Co. v. Gehner, 27 S.W.2d 1; State ex rel. Natl. Life Ins. Co. v. Hyde, 241 S.W. 396, 292 Mo. 342; State ex rel. American Central Ins. Co. v. Gehner, 280 S.W. 416; State ex rel. Koeln v. Lesser, 237 Mo. 310, 141 S.W. 888; Converse v. Northern Pac. Ry. Co., 2 F.2d 959. (4) The title of a statute of Missouri is considered a part of the act and must be considered in construing it. Betz v. Columbia Tel. Co., 24 S.W.2d 224; Glaser v. Rothschild, 221 Mo. 180; Williams v. St. L.-S. F. Ry. Co., ...