Century Distilling Co. v. Defenbach

• Decision Date: 16 January 1940
• Citation: 99 P.2d 56,61 Idaho 192
• Parties: Century Distilling Company, A Corporation, Respondent, v. Byron Defenbach, As Tax Commissioner Of The State Of Idaho, Appellant.
• Court: Idaho Supreme Court

99 P.2d 56

61 Idaho 192

Century Distilling Company, A Corporation, Respondent, v. Byron Defenbach, As Tax Commissioner Of The State Of Idaho, Appellant.

Supreme Court of Idaho

January 16, 1940

TAXATION-INCOME TAX-INTERSTATE COMMERCE-"DOING BUSINESS"-LIQUOR CONTROL ACT-ACTION AGAINST STATE-UNIFORM DECLARATORY JUDGMENT ACT.

1. Where action taken or threatened by an officer is alleged to be in violation of plaintiff's rights, either because of misconstruction or misapplication by officer of a statute, or on account of alleged unconstitutionality of statute, the action is not an "action against the state" for maintenance of which state's consent is necessary, but is an action against the individual because of his lack of power or authority.

2. The Declaratory Judgment Act relating to construction of statutes comprehends action to determine a nonresident's obligation to pay tax on net income with relation to business transacted under the Liquor Control Act. (I. C. A., sec 61-2401 et seq.; Sess. Laws, 1933, chap. 70, sec. 2; 1935 chap. 103.)

3. Action for declaratory judgment by foreign corporation against state tax commissioner to determine corporation's obligation to pay tax on net income with relation to its business transacted under the Liquor Control Act was not an "action against the state" for maintenance of which state's consent was necessary. (I. C. A., sec. 61-2401 et seq.; Sess. Laws, 1933, chap. 70, sec. 2; 1935, chap. 103.)

4. Where, pursuant to agreement with Liquor Control Commission Illinois corporation shipped liquors into state for storage in warehouse from which liquors were withdrawn on requisition of commission, the title remaining with the corporation until liquors were withdrawn and tested by the commission, on delivery to warehouse the shipments were severed from "interstate commerce," as regards whether corporation was under obligation to make return and pay tax on net income. (I. C. A., sec. 61-2401 et seq.; Sess. Laws 1935, chap. 103; U.S. C. A., Const., art. 1, sec. 8, cl. 3.)

5. Where, pursuant to agreement with Liquor Control Commission Illinois corporation shipped liquors into state for storage in warehouse from which liquors were withdrawn on requisition of commission, the title remaining with the corporation until liquors were withdrawn and tested by the commission, the liquors when stored in warehouse became part of the mass of taxable property within state. (Sess. Laws, 1935, chap. 103.)

6. The Liquor Control Act authorizes the Liquor Control Commission to purchase alcoholic liquors from distillers within the state and also from manufacturers beyond the state, making the purchase either in the state where manufactured or after shipment to Idaho under permit. (Sess. Laws, 1935, chap. 103, sec. 7 (a, i); sec. 8, subd. 2 (1); secs. 19, 29.)

7. Where, pursuant to agreement with Liquor Control Commission, Illinois corporation shipped liquors into state for storage in warehouse from which liquors were withdrawn on requisition of commission, the title remaining with the corporation until liquors were withdrawn and tested by the commission, the corporation was "doing business" in the state and was under obligation to make return and pay tax on net income, notwithstanding Liquor Control Commission was the only possible purchaser of the liquors. (I. C. A., secs. 29-501, 61-2401 et seq.; Sess. Laws, 1935, chap. 103.)

APPEAL from the District Court of the Third Judicial District, for Ada County. Hon. Charles F. Koelsch, Judge.

Action for declaratory judgment under provisions of chapter 70, Session Laws 1933, to determine respondent's obligation to make return and pay tax on net income, with relation to its business transacted under the Liquor Control Act, chapter 103, 1935 Session Laws.

From judgment restraining and enjoining tax commissioner from levying and collecting an income tax upon respondent, this appeal is taken. Reversed.

J. W. Taylor, Attorney General, R. W. Beckwith, E. G. Elliott, Lawrence B. Quinn and D. W. Thomas, Assistant Attorneys General, for Appellant.

The state cannot be sued under the Declaratory Judgment Act, chapter 70, 1933 Session Laws, and any action brought under said statute against an officer of the state in his official capacity is an action against the state. (Hollister v. State, 9 Idaho 8, 71 P. 541; Howard v. Cook, 59 Idaho 391, 83 P.2d 208; Thomas v. State, 16 Idaho 81, 100 P. 761; State v. State Board of Education, 33 Idaho 415, 196 P. 201; Davis v. State, 30 Idaho 137, 163 P. 373, Ann.Cas. 1918D, 911; State v. National Surety Co., 29 Idaho 670, 161 P. 1026.)

A state may tax net income of a foreign corporation doing business within its taxing jurisdiction and may include therein a portion of such net income arising from interstate commerce properly apportionable to the state. (U. S. Glue Co. v. Oak Creek, 247 U.S. 321, 38 S.Ct. 499, 62 L.Ed. 1135, Ann.Cas. 1918E, 748; Maxwell v. Kent-Coffey Mfg. Co., 204 N.C. 365, 168 S.E. 397, 90 A.L.R. 476; affirmed 291 U.S. 642, 54 S.Ct. 437, 78 L.Ed. 1040; Shaffer v. Carter, 252 U.S. 37, 40 S.Ct. 221, 64 L.Ed. 445; Travis v. Yale & Towne Mfg. Co., 252 U.S. 60, 40 S.Ct. 228, 64 L.Ed. 460.)

Where goods are brought into the state in interstate commerce and stored in state, interstate commerce ceases when goods are unloaded and stored for sale within state and immunity from state tax is then lost. (Nashville C. & St. L. R. Co. v. Wallace, 288 U.S. 249, 53 S.Ct. 345, 77 L.Ed. 730; Gregg Dyeing Co. v. Query, 268 U.S. 472, 52 S.Ct. 631, 76 L.Ed. 1232, 84 A.L.R. 831; Sonneborn Bros. v. Keeling, 262 U.S. 506, 43 S.Ct. 643, 67 L.Ed. 1095; United States v. Pacific Forwarding Co., 8 F.Supp. 647.) Ralph R. Breshears and Dean Driscoll, for Respondent.

Suits against state officers under the provisions of the Declaratory Judgment Act to obtain declaratory relief from a statute alleged to be unconstitutional are properly maintainable. (Nashville, Chattanooga & St. Louis Ry. Co. v. Wallace, 288 U.S. 249, 53 S.Ct. 345, 77 L.Ed. 730; Borchard, Declaratory Judgments, 348, 559; Gully v. Interstate Natural Gas Co., 82 F.2d 145; Johnson v. Diefendorf, 56 Idaho 620, 57 P.2d 1068; Reed v. Bjornson, 191 Minn. 254, 253 N.W. 102; First Security Bank v. Enking, 54 Idaho 735, 35 P.2d 266.)

The power of the state to tax is limited to persons, property and business within the state, the respondent, a foreign cor- poration, is not engaged in doing business in Idaho, and the state cannot tax the income of a foreign corporation derived wholly from interstate commerce. (Dahnke-Walker Milling Co. v. Bondurant, 257 U.S. 282, 42 S.Ct. 106, 66 L.Ed. 239; Belle City Mfg. Co. v. Frizzell, 11 Idaho 1, 81 P. 58; art. 1, sec. 8, U.S. Const.; Alpha Portland Cement Co. v. Massachusetts, 268 U.S. 203, 45 S.Ct. 477, 69 L.Ed. 916; Cleveland etc. R. R. Co. v. Pennsylvania, 15 Wall. 300, 21 L.Ed. 179.)

The fact that plaintiff's merchandise is stored in warehouses selected, designated and controlled by the Idaho Liquor Commission pending withdrawal by the commission, does not constitute doing business in Idaho. (Dozier v. Alabama, 218 U.S. 124, 30 S.Ct. 649, 54 L.Ed. 965; Vermont Farm Mach. Co. v. Hall, 80 Or. 308, 156 P. 1073; Marshall Milling Co. v. Rosenbluth, 231 Ill.App. 325; Thomas Mfg. Co. v. Thede, 186 Ill.App. 248.)

All contracts for the sale of plaintiff's merchandise are made outside the state of Idaho. (Caldwell v. North Carolina, 187 U.S. 622, 23 S.Ct. 229, 47 L.Ed. 336; secs. 62-203, 62-308, I. C. A; Buhl Hwy. Dist. v. Allred, 41 Idaho 54, 238 P. 298; In re Leterman, Becher & Co., Inc., 260 F. 543, 171 C.C.A. 327.) Statement.

This action was commenced under the provisions of chapter 70 of the Session Laws of 1933 and known as the Uniform Declaratory Judgment Act, for the purpose of securing a declaratory judgment, with reference to plaintiff's duty to file an income tax return, under the Property Relief Act of 1931 (Title 61, chap. 24, I. C. A.). The trial court rendered and entered judgment in favor of the plaintiff, restraining the defendant from enforcing collection of the tax demand, and from such judgment the tax commissioner appealed.

The plaintiff in the lower court, respondent here, Century Distilling Company, is an Illinois corporation having its principal place of business at Peoria. The transactions which give rise to this suit are the result of various and sundry sales of alcoholic liquors made by respondent to the Idaho Liquor Control Commission. For convenience we will hereafter refer to respondent as the Distilling Company and to the Idaho Liquor Control Commission as the Commission.

The state tax commissioner, appellant herein, has taken the position and insists that the Distilling Company is liable to the state for an income tax (under Title 61, chap. 24, I. C. A.), for the reason, as he alleges, that the Distilling Company has been "doing business" in this state by reason of its various and sundry sales of alcoholic liquors to the commission; and that those sales took place in the state of Idaho and were intrastate business. (See sec. 29-501, I. C. A.) On the other hand, the Distilling Company contends that all the business it has transacted with the commission was transacted at Peoria in the state of Illinois; and that the shipments were wholly and exclusively interstate business.

The facts of the case are stipulated and the material parts thereof are as follows:

"That the plaintiff, Century Distilling Company, is now and was at all times mentioned in the amended complaint on file herein a corporation organized and existing under and by virtue of the laws of the State of Illinois with its office and principal place of business at Peoria in the State of Illinois, and is now and at all times mentioned in said amended...