Coleman v. Trunkline Gas Co., 38755

• Decision Date: 02 March 1953
• Docket Number: No. 38755,38755
• Citation: 63 So.2d 73,218 Miss. 285
• Parties: COLEMAN, Attorney General, v. TRUNKLINE GAS CO.
• Court: Mississippi Supreme Court

Page 73

63 So.2d 73

218 Miss. 285

COLEMAN, Attorney General, v. TRUNKLINE GAS CO.

No. 38755.

Supreme Court of Mississippi.

March 2, 1953.

J. H. Sumrall, Jackson, J. P. Coleman, Atty. Gen., Jackson, for appellant.

Avery & Putnam, R. H. & J. H. Thompson, Jackson, Maxwell Bramlette, Woodville, M. M. Roberts, Hattiesburg, Lyell & Lyell, Jackson, Brunini, Everett, Grantham & Quinn, Vicksburg, Vinson, Elkins & Weems, Houston, Tex., W. O. Crain, Shreveport, La., Stone Wells, Houston, Tex., E. D. Adams, Houston, Tex., M. E. Newcomer, Cleveland, Ohio, Jones & Stratton, Brookhaven, Wm. A. Dougherty, New York City, Watkins & Eager, Jackson, James B. Henderson, Houston, Tex., Pat F. Timmons, Houston, Tex., for appellee.

HALL, Justice.

Appellee owns and operates a pipe line used for the transportation of natural gas from McAllen, Texas, through the states of Louisiana, Arkansas, Mississippi, Tennessee, Kentucky, and Illinois, terminating near Tuscola, Illinois. It is operating pursuant to the Federal Statute, 15 U.S.C.A. Secs. 717-717w, and holds a certificate of public convenience and necessity from the Federal Power Commission. After construction of its pipe line it began the transportation of gas on October 1, 1951. It does not buy, sell, produce or distribute gas in Mississippi, and all of its operations are wholly and exclusively in interstate commerce.

By Chapter 410, pages 679-680, Laws of Mississippi of 1952, the Legislature amended Section 34, Chapter 138, Laws of 1944, so as to levy a privilege tax of $75 per mile on each person operating a pipe line in or through this State measuring between twenty and twenty-six inches in diameter. Appellee owns 147.21 miles of such line. On August 1, 1952, the State Tax Commission made a tentative assessment against appellee in the amount of $11,040.75 privilege tax on the operation of said line and gave notice to appellee that said assessment would be made final within thirty days thereafter. On August 25, 1952, appellee filed its protest and objections to said assessment and on September 2, 1952, the Tax Commission denied the protest and objections and made the assessment final, adjudging, however, that all facts stated in the objections were correct. Those facts were as above stated and in addition thereto that appellee's 1952 ad valorem taxes on said line amounted to $144,150, its franchise tax amounted to $4,711.50, and its state income tax based on its net earnings in proportion to its flow of business through Mississippi, amounted to $21,477.

From the final order of the Tax Commission appellee appealed to the Circuit Court of Hinds County which held that the imposition of the privilege tax on purely interstate business is violative of the Commerce Clause of the Federal Constitution and therefore void. From the judgment of the Circuit Court the Attorney General, representing the State of Mississippi, appeals to this Court.

The sole question presented is whether the State may validly exact a privilege tax from a person or corporation engaged solely and exclusively in interstate business.

There can be no question that the tax here involved is strictly a privilege tax. The title to Chapter 410, Laws of 1952, is 'An Act to amend section 34, chapter 138, Laws of 1944, so as to increase the privilege tax on pipe line companies' etc. Chapter 138, Laws of 1944, which was amended by the 1952 Act is entitled 'An Act to revise the privilege tax code of Mississippi * * * and to impose privilege taxes on certain businesses in the state of Mississippi.' Section 27 of said Chapter 138 provides 'There is hereby imposed and levied and shall be collected annual privilege taxes, in addition to any and all other taxes imposed by law upon the persons, firms, co-partnerships, associations, or corporations, for the privilege of carrying on and continuing the businesses, activities, and exercising powers and rights under the laws of the state of Mississippi, which said tax shall be levied and collected as herein provided.' Then follow several sections imposing privilege taxes on various public utilities. Section 34, which was amended by the 1952 Act, imposes a privilege tax on pipe line companies. Section 35 provides 'Each person required by the foregoing eight sections to pay a privilege tax for doing business in this state' shall file with the Tax Commission an application, etc.

It is clear from the foregoing that the tax with which we are dealing is purely a privilege tax levied for the privilege of doing business in this State. The broad terms of the 1944 Act taxed all pipe lines regardless of whether they are engaged in interstate or intrastate business. It is significant to observe that under the 1944 Act the Tax Commission made no effort to collect a privilege tax from pipe line companies engaged exclusively in interstate business. The 1944 Act is almost an exact rescript of Section 163, Chapter 88, Laws of 1930, under which the State levied a privilege tax upon the interstate pipe line operations of Interstate Natural Gas Company, Inc. The enforcement of that levy was enjoined by the District Court of the United States from which action the Tax Commission appealed to the Supreme Court of the United States, and in a very short opinion that Court held that the tax is invalid as a burden upon interstate commerce. See State Tax Commission v. Interstate Natural Gas Company, Inc., 284 U.S. 41, 52 S.Ct. 62, 76 L.Ed. 156. In view of that decision it is readily understandable why the State Tax Commission made no effort to tax interstate pipe line companies under the 1944 Act.

In an apparent effort to circumvent the effect of the numerous decisions of the United States Supreme Court which have condemned such taxes, the 1952 Legislature enacted the aforesaid Chapter 410 which again levied a privilege tax 'Upon each person operating a pipe line in or through this state or engaged in transporting in or through this state crude oil, liquid petroleum products, and natural or artificial gas through pipes or conduits' but the Act went further and stated that this tax is 'for the privilege of exercising or enjoying such right and power in this state, and for the privilege of enjoying and receiving the benefit and protection of the government and laws of this state'. The 1952 Act also defined the term 'pipe line' as applying 'to both interstate and intrastate trunk lines'. Examining the 1930 law it appears that it applied to both interstate and intrastate lines without specifically mentioning both and the tax was levied for the privilege of exercising or enjoying the right and power of operating pipe lines in or through this State. The only thing added by the 1952 law was a statement that the tax is 'for the privilege of enjoying and receiving the benefit and protection of the government and laws of this state'.

It must be remembered that the protest avers and the order of the Tax Commission finds as a fact that appellee herein is paying to the State a franchise tax of $4,711.50. That tax is imposed by Section 9314, Code of 1942, in the amount of $1.50 on each $1,000 or fraction thereof of the value of the capital used, invested or employed within this State, which section specifically states 'It being the purpose of this section to require the payment of a tax by all organizations not organized under the laws of this state, measured by the amount of capital or its equivalent, for which such organization receives the benefit and protection of the government and laws of the state.' (Emphasis supplied.) It is significant to note that the franchise tax is levied solely for the privilege of receiving the benefit and protection of the government and laws of this State and that Chapter 410, Laws of 1952, is likewise for the privilege of 'enjoying and receiving the benefit and protection of the government and laws of this state'. The only difference between the 1952 Act and the law imposing a franchise tax is that the 1952 Act adds the word 'enjoying.' By payment of the franchise tax the appellee has, in effect, purchased the right to receive the benefit and protection of the government and laws of this State. The tax sought to be imposed by the 1952 law is for identically the same privilege and does not confer upon appellee a single right or benefit which it has not already obtained by the payment of its franchise tax, its ad valorem tax and its income tax on its earnings in propertion to its investment in and its flow of business through Mississippi. Payment of the franchise tax conferred upon appellee the right to receive from the State the protection of its local activities in mantaining, keeping in repair, and in manning the facilities of its system through the State, the right to acquire rights of way by eminent domain or private purchase, protection by the State against acts of vandalism, and, in fact, every other right which it enjoys.

In McGoldrick v. Berwind-White Coal Mining Co., 309 U.S. 33, 60 S.Ct. 388, 393, 84 L.Ed. 565, 128 A.L.R. 876, numerous types of state taxation are discussed, some of which are held not to violate the Commerce Clause of the Constitution and some of which are held to be in direct violation thereof. In the latter class are privilege taxes such as are sought to be imposed by our House Bill No. 34. In discussing these taxes the Court said: 'Certain types of tax may, if permitted at all, so readily be made the instrument of impeding or destroying interstate commerce as plainly to call for their condemnation as forbidden regulations. Such are the taxes already noted which are aimed at or discriminate against the commerce or impose a levy for the privilege of doing it * * *.' (Emphasis supplied.)

In the case of Spector Motor Service v. O'Connor, 340 U.S. 602, 71 S.Ct. 508, 512, 95 L.Ed. 573, it was said: 'This Court heretofore has struck down, under the Commerce Clause, state taxes upon the privilege of carrying on a business that was exclusively...