Barnsdall Refineries, Inc. v. Okla. Tax Comm'n
| Decision Date | 19 February 1935 |
| Docket Number | Case Number: 25181 |
| Citation | 171 Okla. 145,1935 OK 150,41 P.2d 918 |
| Parties | BARNSDALL REFINERIES, Inc., et al. v. OKLAHOMA TAX COMMISSION et al. |
| Court | Oklahoma Supreme Court |
¶0 Licenses - Excise Tax of One-Eighth of Cent Per Barrel on Oil as Applied to Production From Osage Indian Lands Held Unauthorized State Tax on Governmental Instrumentality.
The excise tax of one-eighth of one cent per barrel on oil levied by chapter 132, S. L. 1933, when applied to oil produced from lands of the Osage Indian Tribe in Osage county, Okla., by lessees operating under leases executed by and with the approval of the Secretary of the Interior of the United States, is an unauthorized state tax on a federal governmental agency or instrumentality, and is beyond the authority of the state.
Original action by Barnsdall Refineries, Inc., et al. to enjoin the Oklahoma Tax Commission and the Sheriff of Osage County from collecting an excise tax of one-eighth of one cent per barrel on oil produced from lands of the Osage Tribe of Indians. Injunction granted.
James B. Diggs, Joe Dickerson, R.W. Garrett, Wm. H. Zwick, and L.G. Owen, for plaintiffs.
C.W. King and A.L. Herr, for defendants.
¶1 The plaintiffs, holding governmental leases properly executed by and with the approval of the Secretary of the Interior of the United States, are producing crude oil from the lands of the Osage Tribe of Indians in Osage county, Okla. They seek to enjoin collection of the tax sought to be collected on such oil pursuant to the provisions of chapter 132, S. L. 1933. The contention of the plaintiffs is that the leases held by them are instrumentalities employed by the United States government for the development and use of Osage lands for the benefit of the Osage Tribe of Indians, and are governmental agencies or instrumentalities; that no tax thereon may be imposed by the state of Oklahoma without the consent of the United States government; that the tax in question is an excise tax; that no consent has been given by the United States government to the levy and collection of such tax; and that therefore such tax may not be levied and collected on such oil produced from Osage lands.
¶2 The defendants maintain that the tax in question is an additional gross production tax, and is therefore authorized by the Act of Congress of March 3, 1921, sec. 5, 41 Stat. at Large, 1250, which act authorizes the state of Oklahoma to levy and collect a gross production tax on oil and gas produced in Osage county, Okla.
¶3 It is now beyond question that the oil leases held by the plaintiffs are governmental instrumentalities, and that the state of Oklahoma may not impose any tax thereon without the consent of the United States government. Carter Oil Co. v. Oklahoma Tax Commission, 166 Okla. 1, 25 P.2d 1092; Choctaw, O. & G. R. Co. v. Harrison, 235 U.S. 292, 59 L.Ed. 234; Indian Territory Illuminating Oil Co. v. Oklahoma, 240 U.S. 522; Howard v. Oklahoma Oil Companies, 247 U.S. 503, 62 L.Ed. 1239; Large Oil Co. v. Howard, 248 U.S. 549, 63 L.Ed. 416; Gillespie v. Oklahoma, 257 U.S. 501, 66 L.Ed. 338; Jaybird Mining Co. v. Weir, 271 U.S. 609, 70 L.Ed. 1112. And it seems to be conceded by the defendants that this tax could not be levied and collected without the consent of the United States government.
¶4 In 1916 the state Legislature adopted the gross production tax law carried forward as section 12434, O. S. 1931, providing in substance for the collection of a gross production tax equal to three per centum of the gross value of the production of oil and gas, with provision in the act (sec. 12445, O. S. 1931) for the expenditure of the funds realized from that tax for current expenses of the state government, in aid of common schools of the county where the oil and gas are produced, and in aid of the construction of permanent roads and bridges of the county where the oil and gas are produced.
¶5 It was then held by the courts (see above authorities) that this tax could not be collected on oil produced from the Osage Indian lands for lack of consent thereto on the part of the United States government.
¶6 Thereafter, on March 3, 1921, the Congress adopted a permissive act (41 Stat. at Large, 1250), providing as follows:
¶7 Since that act of Congress became effective the state has collected upon oil produced in Osage county, Okla., the gross production tax provided for in section 12434, O. S. 1931.
¶8 In 1933 the State Legislature adopted House Bill No. 481, chapter 131, S. L. 1933, referred to as the "Proration Law," and having for its purpose the prevention of waste of crude petroleum and natural gas, and providing in partial substance that whenever the full production of any common source of supply of oil in this state can only be obtained under conditions constituting waste, then any person having the right to drill into and produce oil from any such common source of supply should only take therefrom such proportion, or his proper portion of the oil, that may be produced therefrom without waste (sec. 4). This act created the official machinery for its enforcement, and provided for the appointment of various salaried officials, and authorized the expense incident to the many details of the enforcement of the law in these regards. The same Legislature adopted House Bill No. 483, chapter 132, Sess. Laws 1933, entitled "An Act levying an excise tax of one-eighth of 1 cent per barrel on petroleum oil produced in the state of Oklahoma, subsequent to the passage and approval of this act," and the body of the act levied such an excise tax, and provided for its collection, and provided in substance that the funds derived from the levy and collection of that tax should be deposited in the state treasury to the credit of a special and distinct fund to be known as "The Proration Fund," and to be expended for salaries, supplies, and expenses as fixed and authorized by the provisions of House Bill No. 481, the "Proration Law" above referred to.
¶9 Under the provisions of this act, this tax is levied only for the period of time from the effective date of the act in 1933 to June 30, 1935. It is that tax of one-eighth of one cent per barrel on oil that is here under consideration.
¶10 In considering this cause, and at the outset, we are met with the question whether this tax of one-eighth of one cent per barrel is or is not an "excise tax." It was denominated an "excise tax" by the Legislature in the body of the act levying the tax and in the title thereto, and while the designation of a tax is not necessarily controlling as to what is the nature and character of the tax, yet this tax is not in any manner based upon the value of the oil taxed, applying alike to the most valuable barrel of oil as to the least valuable barrel. This tax is small in amount, and to exist for a limited time only, and for the benefit of a special fund or purpose as distinguished from a general purpose. It therefore bears all the earmarks of an excise tax as distinguished from a property tax, and we conclude that it is in truth and in fact what the Legislature designated it to be, that is, an "excise tax." Patton v. Brady, 184 U.S. 608, 46 L.Ed. 713; Flint v. Stone Tracy Co., 220 U.S. 107, 55 L.Ed. 389.
¶11 But it is the contention of the defendants that, whether this tax is determined to be an excise tax or not, it is levied upon the gross production of oil, and is but an additional gross production tax and within the permissive act of Congress above referred to.
¶12 Having concluded that this tax is an excise tax, and it not being contended that there is any specific consent to the levy and collection of an excise tax, we must determine whether this tax is consented to by the Act of Congress of March 3, 1921, consenting to the levy and collection of a state gross production tax.
¶13 Since the adoption of the legislative act of 1916, the three per centum tax thereunder levied and collected has been commonly known and referred to as the "gross production tax." That act provides specifically that the tax therein levied shall and should be "in full and in lieu of all taxes by the state, counties, cities, towns, townships, school districts, and other municipalities, upon any property rights attached to or inherent in the right to said minerals, upon leases," etc. O. S. 1931, sec. 12434. That act also provided that the funds collected should be distributed and expended for the three. purposes heretofore stated. O. S. 1931, sec. 12445.
¶14 This one-eighth of one cent tax is levied on each barrel of oil without regard to the value of the oil taxed. It is not a per centum tax, as...
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