Baton Coal Co. v. Battle

• Decision Date: 21 March 1967
• Docket Number: No. 12590,12590
• Citation: 153 S.E.2d 522,151 W.Va. 519
• Court: West Virginia Supreme Court
• Parties: BATON COAL COMPANY, v. G. Thomas BATTLE, State Tax Commissioner.

Page 522

153 S.E.2d 522

151 W.Va. 519

BATON COAL COMPANY, v. G. Thomas BATTLE, State Tax Commissioner.

No. 12590.

Supreme Court of Appeals of West Virginia.

Submitted Jan. 24, 1967.

Decided March 21, 1967.

Syllabus by the Court

1. A Pennsylvania corporation, engaged in the business of furnishing managerial services and advice to coal mining companies from its offices and place of business in Pittsburgh, which owns no property and has no place of business in West Virginia, but which, pursuant to a contract, furnishes managerial services and advice to a company engaged in the operation of a coal mine in West Virginia, is not engaging or continuing in business 'within this State' within the purview of Code, 1931, 11--13--2 and 11--13--2h, as amended, and is not subject to taxation under that statute, notwithstanding the fact that some of its officers and agents, all residents of Pennsylvania, come into this state from time to time as an incident of furnishing the managerial services and advice, where it appears that the activities of such officers and agents while physically present within this state constitute a relatively minor part of the overall managerial services and advice furnished to the West Virginia coal mining company.

2. As a general rule, statutes imposing taxes are construed strictly against the taxing authority and liberally in favor of the taxpayer.

Spilman, Thomas, Battle & Klostermeyer, Robert S. Spilman, Jr., Charleston, for appellant.

C. Donald Robertson, Atty. Gen., Marshall G. West, Louise M. Barr, Asst. Attys. Gen., Charleston, for appellee.

CALHOUN, President:

This case is before the Court on appeal by Baton Coal Company, a Pennsylvania corporation, from a final judgment of the Circuit Court of Kanawha County by which that court sustained an assessment by the State Tax Commissioner of taxes, of a type sometimes referred to as business and occupation taxes, against Baton Coal Company for the tax years 1959--63, inclusive, levied pursuant to Code, 1931, 11--13--2 and 11--13--2h, as amended, amounting to $7,455.71, plus penalties in the sum of $2,572.95.

On this appeal, Baton Coal Company, which may be referred to hereafter in this opinion merely as Baton or as the taxpayer, contends that the nature of its business operations during the years in question was such that it was not subject to the tax or any part of the tax assessed against it; that the imposition of the tax creates an unconstitutional burden on interstate commerce; that, even if it is subject to taxation under the statute, the tax should be apportioned on the basis of the proportionate part of its activities performed within the State of West Virginia; and that, in any event, the penalty was improperly imposed.

The case was appealed to the circuit court and heard by it without a jury pursuant to the provisions of Code, 1931, 11--13--8, as amended. While testimony of two witnesses for the taxpayer was taken at the bar of the court, supplemented by numerous exhibits which were filed in connection with the testimony, there is no substantial dispute in relation to any material facts. The case was submitted for decision in this Court on the record made in the trial court and on briefs and oral argument of counsel.

The pertinent part of the statute pursuant to which the tax and penalties were imposed, Code, 1931, 11--13--2 and 11--13--2h, is as follows:

'(2) There is hereby levied and shall be collected annual privilege taxes * * *.

'(2h) Upon every person engaging or continuing within this state in any service business or calling not otherwise specifically taxed under this law, there is likewise hereby levied and shall be collected a tax equal to one and five one-hundredths per cent of the gross income of any such business.'

Baton Coal Company, having its principal office and place of business in Pittsburgh, is engaged in the business of furnishing managerial services and advice to coal mining companies in Pennsylvania and in West Virginia. During the tax years in question, it managed the operations of three companies in Pennsylvania and one in West Virginia. The West Virginia company was Joanne Coal Company, a West Virginia corporation, engaged in the operation of a coal mine at Rachel in Marion County. This company will be referred to sometimes hereafter in this opinion merely as Joanne. The tax in question was levied on the gross earnings of Baton from managerial services and advice furnished to Joanne.

Charles B. Baton, a mining engineer residing in Pittsburgh, is the sole owner of George S. Baton and Company, a consulting engineering firm, having its principal place of business in Pittsburgh. This firm was employed by Baton from time to time in connection with its management of the Joanne coal mining operations.

All the stock of the Joanne corporation is owned by Sharon Steel Company, a Pennsylvania corporation, with its principal place of business at Sharon, Pennsylvania. Five officers of Sharon Steel Company were directors of Joanne. Additional directors of Joanne were Charles B. Baton and Robert Clark, who were president and sales manager, respectively, of Baton. Four officers or employees of Baton were made officers of Joanne so that they might sign checks and other papers at Baton's office in Pittsburgh in connection with the management of the coal mining operations of Joanne in West Virginia, but none of them received any compensation from Joanne.

By a written contract executed March 1, 1957, renewed on May 12, 1960, and renewed again on September 1, 1962, Baton agreed to manage the 'business transactions and affairs' of Joanne. The contract, negotiated and executed at Sharon, Pennsylvania, provided that Baton should hire and...