Brady v. Getty Oil Co.
| Decision Date | 26 September 1979 |
| Docket Number | No. 51438,51438 |
| Citation | 376 So.2d 186 |
| Parties | Charles R. BRADY, Jr., Chairman, Mississippi State Tax Commission v. GETTY OIL COMPANY. |
| Court | Mississippi Supreme Court |
William N. Lovelady, Jr., James H. Haddock, Joe D. Gallaspy, Jackson, for appellant.
Gerald, Brand, Watters, Cox & Hemleben, Walker L. Watters, Justin L. Cox, William S. Painter, Jackson, for appellee.
Before SMITH, LEE, and BOWLING, JJ.
LEE, Justice, for the Court:
The State Tax Commission, State of Mississippi, (Tax Commission) made an assessment against Getty Oil Company (Getty) for sales taxes in the amount of thirty-five thousand two hundred sixteen dollars seventeen cents ($35,216.17). A hearing was held before the Board of Review for reconsideration of the assessment, and it was approved. On January 19, 1977, Getty petitioned the Tax Commission for a review before the Full Commission. The Tax Commission affirmed the assessment on June 8, 1977. Thereupon, Getty paid the tax under protest and filed a bill of complaint in the Chancery Court of the First Judicial District of Hinds County, Mississippi (Honorable James Arden Barnett presiding), seeking a refund of the taxes. After hearing, the chancellor entered a decree December 4, 1978, ordering the said taxes and interest be refunded to Getty.
The Tax Commission appeals and assigns four (4) errors in the judgment of the trial court. Three (3) of the assigned errors overlap, but the questions presented are: (1) whether or not the gross proceeds received by Getty from oil field services rendered as co-owner/operator for other co-owners of various oil and gas properties throughout the state are subject to Mississippi sales tax under Mississippi Code Annotated Section 27-65-23 (1972); (2) whether or not Getty is chargeable with sales taxes on only those activities wherein a profit was made, or whether the tax is properly levied on the gross proceeds derived from a particular activity regardless of the profit factor; (3) whether a subactivity within the framework of a taxpayer's main business activity may be subjected to the Mississippi sales tax, particularly here, where Getty performs oil field services which are taxable under Section 27-65-23, but where Getty's main business activity is that of exploring for, producing and marketing oil and gas, and (4) whether or not the promulgation of Rule 72 of Mississippi's Sales and Use Tax Rules and Regulations by the Chairman of the State Tax Commission to establish a clear policy with regard to the taxability of oil field services so rendered, was a proper interpretation of the legislature's intent in taxing all "services performed in connection with geophysical surveying, exploring, developing, drilling, producing, distributing, or testing of oil, gas, water and other mineral resources."
During the period of the assessment, from November 1, 1975 through September 30, 1976, Getty engaged in the business of the exploration, production and marketing of gas, oil and other mineral resources within and without the State of Mississippi. It had entered into approximately thirty-five (35) joint operating agreements with co-interest owners in various oil and gas well units throughout the state. Getty was permitted to charge the other co-owners for their proportionate share of the cost incurred in providing oil field services, including a reasonable fee for supervision. Those are the charges and fees on which the Tax Commission has levied the tax.
There are three (3) sections of the sales tax statute which are pertinent to the present case and which must be considered in order to determine whether Getty is a business operating under, and covered by, said sections. Mississippi Code Annotated Section 27-65-9 (1972) defines "business" as follows:
Mississippi Code Annotated Section 27-65-13 (1972) provides for the levy of the tax:
"There is hereby levied and assessed, and shall be collected, privilege taxes for the privilege of engaging or continuing in business or doing business within this state to be determined by the application of rates against gross proceeds of sales or gross income or values, as the case may be, as provided in the following sections."
The "sections" referred to in Section 27-65-13 above are six (6) in number and, among them is Mississippi Code Annotated Section 27-65-23 (1972), which provides:
Getty contends that it has made no profit on the activity of operating the co-owner/operator business of providing oil field services in producing and marketing the oil and gas; that the co-owners have simply reimbursed it pro rata for expenses incurred; that it has paid substantial severance taxes in the developing and producing of oil, gas and other minerals; and that the legislature did not intend that the sales tax in question be imposed on such operations. Getty further contends that its primary business is the finding, developing and marketing of oil, gas and minerals, not to engage in providing oil field services.
The thirty-five operations in which Getty engages as a co-owner/operator are those wherein Getty owns the greatest interest. It admits that, if an independent operator contracted to perform the same work which Getty does, the tax would be properly imposed. Getty argues that, under the Unitization Act in Mississippi, pooling is required, the co-owner/operator relationship is necessary under such act, and, there again, the legislature did not intend that a sales tax be levied for something it was required to do by law.
The purpose of the Unitization Act was to facilitate the production of oil, gas and minerals in an efficient, less costly and less wasteful manner. We may assume the oil and gas industry was influential in the enactment of such legislation, since it is recognized that the statute is beneficial to that industry.
We again refer to Section 27-65-9 which defines "business" as meaning "All activities or acts engaged in . . . For benefit or advantage, either direct or indirect, and not exempting activities in connection therewith." (Emphasis added).
Getty argues that its main business is discovering, producing and marketing oil, gas and minerals and that its services as an operator in conjunction with co-owners is incidental to its main business, that it is not permitted to make a profit on said operation, and makes none. It says that, therefore, its relationship with the other co-owners is an activity which the legislature did not intend to impose a sales tax on. However, Getty receives a benefit in its operation as co-owner/operator in that it is able to develop, produce and market oil, gas and minerals in an efficient operation, which involves less expense and less waste to it. That benefit and advantage comes within the definition stated above.
In Bank of America National Trust & Savings Assn. v. State Board of Equalization, 209 Cal.App.2d 780, 26 Cal.Rptr. 348 (1963) the court considered a use tax assessment upon a bank's sale of personalized checks to its customers where the taxpayer complained that it was not in the business of selling checks but was merely rendering a service to its customers, the said service resulting in a loss to the bank. The court stated:
"We must next determine whether the Bank was 'engaged in the business' of making sales of said checks as that term is used in section 6015, subdivision (b). As defined in section 6013 ' "Business" includes any activity engaged in by any person or caused to be engaged in by him with the object of gain, benefit, or advantage, either direct or indirect.' The Bank urges that it was not in the business of selling checks but was merely rendering banking services. The term 'business' must be interpreted, however, in the light of the foregoing statutory definitions. (Market St. Ry. Co. v. Cal. St. Bd. Equal., 137 Cal.App.2d 87, 95, 290 P.2d 20.) Accordingly, it is not used in the commercial sense nor is it necessarily restricted to a commercial enterprise. It is not necessary, moreover, that the main business of the one who sells be that of making of retail sales, or for that matter, that the sales in question occur in the regular business of the seller. (Bigsby v. Johnson, 18 Cal.2d 860, 118 P.2d 289; Market St. Ry. Co. v. Cal. St. Bd. Equal., supra). . . .
The fact that the Bank's activities with respect to these checks were carried on at a loss is not relevant to the determination of the question because it is not required that the sales be made with the intention of making a profit. As said in Market St. Ry. Co., 'The criterion expressed in the statute is "gain, benefit, or advantage," not "profit." ' (Page 95 of 137 Cal.App.2d, 290 P.2d page 25) (Citing Union League Club v. Johnson, 18 Cal.2d 275, 115 P.2d 425, where sales by a nonprofit corporation were held to be taxable notwithstanding its activities were carried on at a loss.) There can be no question here that the sale of the checks had for their objective a benefit and advantage to the Bank in...
To continue reading
Request your trial
-
City of Belmont v. Miss. State Tax Comm'n
... ... See Brady v. Getty Oil Co., 376 So.2d 186, 191 (Miss.1979) ... This Court has held the following: ... Under all constitutional governments recognizing three ... ...
-
State Tax Com'n v. Earnest
... ... This conclusion was not explained, and the chancellor offered no definition of his own. In Brady v. Getty Oil Company, 376 So.2d 186, 190 (Miss.1979), this Court recognized that administrative agencies are called upon to interpret the laws ... ...
-
Mississippi State Tax Com'n v. Vicksburg Terminal, Inc., 07-CA-59509
...shall be considered business engaged in, taxable in the class in which it falls." [emphasis supplied]. See Brady v. Getty Oil Co., 376 So.2d 186 (Miss.1979). The chancellor also found difficulty with the fact the fee collected is based upon quantities delivered to jobbers after storage, i.e......
-
McGowan v. Marx
... ... In the case of Brady v. Getty Oil Co., 376 So.2d 186 (Miss.1979), this Court was faced with a question not unlike the instant case. In Getty, this Court held that the ... ...