Bedford v. Colorado Nat. Bank of Denver, 14405.

• Decision Date: 17 April 1939
• Docket Number: 14405.
• Parties: BEDFORD, State Treasurer, v. COLORADO NAT. BANK OF DENVER.
• Court: Colorado Supreme Court

91 P.2d 469

104 Colo. 311

BEDFORD, State Treasurer, v. COLORADO NAT. BANK OF DENVER.

No. 14405.

Supreme Court of Colorado, En Banc.

April 17, 1939

Rehearing Denied May 29, 1939.

Error to District Court, City and County of Denver; Robert W Steele, Judge.

Proceeding under the Uniform Declaratory Judgments Act, '35 C.S.A c. 93, §§ 78-92, by Homer F. Bedford, as Treasurer of the state of Colorado, against the Colorado National Bank of Denver, a national banking association, to obtain a judicial declaration that the state has the power to compel national banks to collect and remit service taxes upon depository services performed by such banks to the public, in compliance with the Public Revenue Service Tax Act of 1937, Laws 1937 p. 1144. To review an unsatisfactory decree after plaintiff's demurrer to defendant's answer was overruled, plaintiff brings error.

Reversed and remanded, with instructions to sustain demurrer and for further proceedings according to law.

BURKE and KNOUS, JJ., dissenting.

Byron G. Rogers, Atty. Gen., and Elmer P. Cogburn, Asst. Atty. Gen., for plaintiff in error.

Bartels, Blood & Bancroft, of Denver, for defendant in error.

OTTO BOCK, Justice.

This action was brought by plaintiff in error under the Uniform Declaratory Judgments Act, '35 C.S.A., chapter 93 sections 78-92, to obtain a judicial declaration that the state has the power to compel national banks to collect and remit service taxes upon depository services performed by such banks to the public, incompliance with the Public Revenue Service Tax Act of 1937 (S.L.1937, c. 240, p. 1144).

Upon the filing of an amended petition defendant in error answered, to which answer plaintiff in error demurred. The demurrer was overruled. It was previously agreed that the party against whom the ruling on demurrer was made would stand upon such ruling. Plaintiff in error made that election and the court decreed, 'That all services performed by defendant in operating safety deposit boxes and vaults are exempt from taxation' under the Public Revenue Service Tax Act, supra. Reversal of that decree is sought here, and the assignment of errors, in substance, raises two questions, namely: (1) Upon whom is the service tax imposed, the party rendering the service or the one who uses it? (2) Does the requirement to collect and remit the tax upon depository services constitute a burden upon, or an interference with, the proper functions of a national bank as a governmental agency?

Reference will hereinafter be made to plaintiff in error as treasurer and to defendant in error as the bank.

It may be conceded that if the bank is the party upon which the tax is solely imposed, then the act as to national banks would be contrary to the federal statutes (U.S.Revised Statutes, § 5219, 12 U.S. C.A. § 548), and invalid. The pertinent provisions are:

'The legislature of each State may determine and direct, subject to the provisions of this section, the manner and place of taxing all the shares of national banking associations located within its limits. The several States may (1) tax said shares, or (2) include dividends derived therefrom in the taxable income of an owner of holder thereof, or (3) tax such associations on their net income, or (4) according to or measured by their net income, provided the following conditions are complied with:

'1. (a) The imposition by any State of any one of the above four forms of taxation shall be in lieu of the others, except as hereinafter provided in subdivision (c) of this clause.'

This section was intended to protect capital invested in national banks from unfriendly discrimination by the states in the exercise of the taxing power. Adams v. Nashville, 1877, 95 U.S. 19, 30, 24 L.Ed. 369, 22 Am.Rep. 430; Mercantile National Bank v. City of New York, C.C., 1886, 28 F. 776, affirmed, 1887, 121 U.S. 138, 7 S.Ct. 826, 30 L.Ed. 895; Roberts v. American National Bank of Pensacola, 1929, 97 Fla. 411, 121 So. 554; Des Moines National Bank v. Fairweather, 1923, 263 U.S. 103, 106, 44 S.Ct. 23, 68 L.Ed. 191; Minnehaha National Bank v. Anderson, D.C., 1924, 2 F.2d 897.

It heretofore has been determined that a state can only tax a national bank with the consent of Congress and not otherwise. First National Bank of Guthrie Center v. Anderson, 269 U.S. 341, 46 S.Ct. 135, 70 L.Ed. 295, and numerous other authorities. Section 5219, supra, furnishes the exclusive authority governing state taxation as to national banks. Bank of California v. Richardson, 248 U.S. 476, 39 S.Ct. 165, 63 L.Ed. 372.

Whether this principle of implied constitutional immunity from the taxation of national banks has been modified, when a nondiscriminatory tax is levied on the safety deposit box service performed by such banks, by recent opinions of the Supreme Court of the United States in Graves v. People ex rel. O'Keefe, 59 S.Ct. 595, 83 L.Ed. 927, 120 A.L.R. 1466, and in State Tax Commission v. Van Cott, 59 S.Ct. 605, 83 L.Ed. 950, is not necessary for us to determine. According to the views therein expressed, the trend is definitely to narrow implied constitutional intergovernmental immunity.

Before discussing the assignment of errors, we direct our attention to section 4(a) of our service tax act, which provides, in effect, that a bank must procure a license to conduct a safety deposit box business, and conducting such a business without procuring the necessary license constitutes a misdemeanor. Excepted from this provision are persons who hold licenses under any other statute and those performing services of a professional, technical or scientific nature. It is conceded that the bank is authorized under its federal charter to do a safety deposit box business. The state, therefore, cannot require it to take out this license or collect the fee therefor from the bank. Bank of California v. Portland, 157 Or. 203, 69 P.2d 273, 275, 115 A.L.R. 676; Austin v. Seattle, 176 Wash. 654, 30 P.2d 646, 93 A.L.R. 203; City of Shelbyville v. Citizens Bank of Shelbyville, 272 Ky. 559, 114 S.W.2d 719. Section 4(a), supra, does not contemplate the licensing or collection of the fee therefor from all persons performing and collecting taxable services under the act. In so far as this section is concerned, if applied to national banks, it would, under the above authorities, be invalid. No attempt is made in the instant case to enforce it. In fact, the treasurer says that no license fees are demanded from the bank. The validity of this section of the act, however, does not affect other portions thereof as applied to the bank. Section 22 declares it as the legislative intent that it would have passed the act irrespective of the fact that any one or more sections be declared invalid. It may be assumed, therefore, that the bank is not required to comply with section 4(a) of the act.

Our first concern under the assignment of errors is whether the service tax involved here is imposed upon the bank and whether it bears this tax burden. We think not.

In our determination of this question it is necessary that we quote certain pertinent portions of the act, as follows:

'Section 2. (c) The term 'services rendered or performed' shall mean all acts or services rendered, furnished or performed for a valuable consideration by any person engaged in any business or occupation hereinafter designated and defined, when said act or service is rendered, furnished or performed for the ultimate user thereof. The term 'user' shall mean the person for whom or for whose benefit services are rendered or performed.

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'(e) The term 'taxpayer' shall mean any person obligated to account to the state treasurer for taxes collected or to be collected or due the state under the terms of this act.

'(f) The term 'tax' means either the tax payable by the person procuring or for whose benefit a service is rendered or performed subject to tax, or the aggregate amount of taxes due from the person rendering, performing or furnishing services during the period for which he is required to report his collections, as the context may require.

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'(h) * * * taxes paid on gross taxable services represented by accounts found to be worthless and actually charged off for income tax purposes may be credited upon a subsequent payment of the tax herein provided, but if any such accounts are thereafter collected by the taxpayer, a tax shall be paid upon the amounts so collected.'

'Section 5. From and after the effective date of this act there is hereby levied and imposed upon the services specified in this act and measured by the amount paid therefor and there shall be collected and paid:

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'(c) A tax equivalent to two (2) per cent of the value of services rendered or performed by any person engaging or continuing in any of the following businesses: * * * banks, finance companies, trust companies and depositories.'

'Section 6. Every person rendering or performing services shall be liable and responsible for the payment of the entire amount of the said two (2) per cent tax imposed and payable upon his total taxable services rendered or performed, and shall, Before the fifteenth day of each month make a return to the state treasurer for the preceding calendar month, and remit all taxes collected and due the state from him, to the state treasurer, less three (3) per cent thereof to cover the expense of the person rendering or performing services in the collection and remittance of said tax. * * *

'(b) Persons rendering or performing services shall, as far as practicable, add the tax imposed under this act, or the average equivalent thereof, to the value of services or charges showing such tax as a separate and distinct item and when added such tax shall constitute a part...