Compress of Union v. Stone

• Decision Date: 29 January 1940
• Docket Number: 34011
• Citation: Compress of Union v. Stone, 188 Miss. 49, 193 So. 329 (Miss. 1940)
• Court: Mississippi Supreme Court
• Parties: COMPRESS OF UNION v. STONE, CHAIRMAN OF TAX COMMISSION

193 So. 329

188 Miss. 49

COMPRESS OF UNION v. STONE, CHAIRMAN OF TAX COMMISSION

No. 34011

Supreme Court of Mississippi, Division A

January 29, 1940

Suggestion Of Error Overruled April 8, 1940.

APPEAL from the circuit court of Newton county HON. PERCY M. LEE Judge.

Action by Compress of Union against A. H. Stone, Chairman, State Tax Commission, to recover amount of privilege taxes paid under protest. From judgment sustaining demurrer and dismissing the cause, the plaintiff appeals. Affirmed.

Affirmed.

Flowers Brown & Hester, F. W. Bradshaw, and Robert Burns, Jr., all of Jackson, for appellant.

At various place in the act creating the Commodity Credit Corporation and in the acts providing for its operation and functions, it is declared that the same is an agency of the government and as such, it would seem that no question could exist as to its being identical with the United States Government. The Attorney-General, in the argument below admitted that the Commodity Credit Corporation was an agency of and identical with the United States and that the court should consider the case exactly the same as if the compression and storage charges on which the sales tax is claimed had been collected directly from the United States Government.

The amount claimed as tax in this suit, being 2% of storage and compression charges received by appellants from Commodity Credit Corporation for a given period, is not valid because Commodity Credit Corporation is identical with the United States Government, and Section 2-h of Chapter 119, Laws of 1934, as amended, excepts such charges from liability for this tax.

It is our contention that the word "sales" as used in Section 2-h of Chapter 119 of the Laws of 1934 as amended has a general meaning and that it embraces and includes sales of all kinds, sales of physical properties, sales of storage space, and sales of service such as that rendered in compressing cotton. Cotton is stored for a given period of time, and a stipulated charge is made for the space occupied by a bale of cotton for a given period of time. A bale of cotton occupies a given number of square feet of warehouse space when placed in storage, and the charge made is at a given rate per month. In other words, the warehouseman sells to the person who places the cotton in storage a given number of square feet of space for each bale of cotton held in storage at a specified rate per month.

"Sale" is defined in the New Century Dictionary as, "The act, or an act, of selling." The word is also defined in Webster's International Dictionary (2 Ed.), as "Act of selling."

It is clear that the Legislature intended to give to the word "sales" as used in Section 2-h of the Act, a general meaning, because it provides that every closed transaction constitutes a sale. If the Legislature had not intended to give to the word "sales" a general meaning, the term "gross income of the business" would not have been inserted in Section 2-h of the Act.

It is common knowledge, and the court will take judicial notice of the fact, that the sales tax is a consumers' tax. It was never the intention of the Legislature that the sales tax should be paid by the party making the sale but that it should be passed on to the consumer. That is, that the consumer should be required to pay the tax. It is also common knowledge that the sales tax is passed on to the consumer, that the consumer pays the tax, and the court will take judicial notice of this fact. And this is in accord with the legislation purpose. The court will recall the discussion that occurred in the Legislature concerning the sales tax when the passage of the law was being debated and it was generally declared by the proponents of the law and by the then governor of the State of Mississippi that it was understood to be in its operation a consumer's tax and that the amount thereof should be charged against the consumer in every transaction in which a sales tax was due to be paid. The Legislature had this in mind in the passage of Section 2-h of Chapter 119 of the Laws of 1934 as amended. They realized that a sales tax could not be validly imposed on sales to the United States Government, and it was for this reason that such sales were excepted from the tax by this section of the Act. And under the law, insofar as the legal effect is concerned, there is no distinction between sales of physical properties and other sales to the government, sales of space and sales of service. The legislative purpose was to except all sales to the United States Government from imposition of the tax.

We are confident the court will hold that the word "sales" as used in Section 2-h of the Act in question embraces and includes sales of storage and compression facilities of warehouses and that under this section the appellant was not required to pay sales tax on the amount received from Commodity Credit Corporation as storage and compression charges covering cotton which Commodity Credit Corporation had stored with and had compressed by appellant during the period in question, but if we should be mistaken in this, we think appellant is relieved from such tax under the last clause of the section which excepts from the tax those transactions and that business which the state is prohibited from taxing under the Constitution of this State, or the Constitution of the United States.

We most earnestly urge the court to give to Section 2-h of Chapter 119 of the Laws of 1934, as amended, the construction which will exempt the business thus transacted between appellant and the government, as most clearly appears was the intention of the Legislature. The Legislature knew it could not tax the government and did not attempt to do so. The Legislature excepted all sales to the government from liability for the tax. It would be folly to say that Section 2-h of the Act intended to exempt a sale of a bale of cotton to the government from the tax, but that charges collected as storage for the bale of cotton from the government would not be exempt from the tax. This is the effect of the construction contended for by appellee in the court below and is the effect of the construction given to Section 2-h of the Act by the court below.

The Act of Congress creating and controlling the operation of Commodity Credit Corporation provides that it shall be immune from all forms of taxation by the states and other governmental sub-divisions, except as to real estate owned by it and prevents the collection of the tax involved in this suit (See Public Act No. 442 of the 75th Congress, 52 U.S. Statutes at Large, Chapter 44, p. 107). But it would be immune from such taxation without this declaration in the Federal Act, as stated by our court in Parker v. Mississippi State Tax Commission, 177 So. 567.

And a state cannot tax the instrumentalities of a federal agency, or the agency itself, indirectly or under color of a subterfuge, as was held by the United States Supreme Court in Federal Land Bank v. Crosland, Judge of Probate, 67 L.Ed. 703, 261 S.Ct. 372.

Callam County v. U.S. 263 U.S. 341, 68 L.Ed. 328, 44 S.Ct. 121.

In Panhandle Oil Company v. Mississippi, 277 U.S. 218, 72 L.Ed. 857, 48 S.Ct. 451, it was held that the State of Mississippi could not impose a tax measured by the quantity sold upon the privilege of one of its citizens of selling gasoline to the federal government for use of its Coast Guard or Veterans' Hospital.

Graves v. Texas Co., 298 U.S. 393, 80 L.Ed. 1236, 56 S.Ct. 818; Indian Motorcycle v. U.S. 283 U.S. 570, 75 L.Ed. 1277, 51 S.Ct. 601; Western Union Telegraph Co. v. Texas, 105 U.S. 460, 26 L.Ed. 1067.

The Mississippi Sales Tax Law was passed at the 1932 session of the Legislature. The act was subsequently amended at the 1934, 1936 and 1938 sessions of the Legislature. The Sales Tax Token Law was passed at the 1936 session of the Legislature. The exceptions, or exemptions, as now made and granted in Section 2-h of Chapter 119 of the Laws of 1934, as amended, are in substantially the same form as they originally appeared in the Act when first passed. The decision of the United States Supreme Court in the case of Panhandle Oil Company v. State of Mississippi, 277 U.S. 218, 72 L.Ed. 857, 48 S.Ct. 451, was rendered May 14, 1928, and the law as there declared was in full force and effect and in the minds of the Legislature at the time the original Sales Tax Law was passed. This is significant on the construction of Section 2-h, Chapter 119 of the Laws of 1934, as amended, because the Legislature knew that it was unlawful to attempt to impose a tax, either directly or indirectly, and regardless of the name given to the tax, on the United States Government, or on the transactions in which it participated. And it was because of this that the exceptions were made in that section of the Law. There is no escape from this proposition. It is clear that the Legislature wanted to except and exempt transactions such as are involved in this case. And the Legislature having desired to make the exception and grant the exemption in accordance with existing law, this purpose of the Legislature ought not to be defeated by attempting to give a construction to the statute which is not justified.

J. A. Lauderdale, Assistant Attorney-General, for the appellee.

Section 2-h, Chapter 119, Laws of 1934, as amended, does not authorize or permit appellant to deduct from its gross income the amount received by it from the Commodity Credit Corporation, an agency and instrumentality of the United States Government.

Graves v. N. Y., 83 L.Ed. 577.

We conclude that the Commodity Credit Corporation is the same as and identical with the United States Government.

Appellant seems to concede that the statute levying the tax is broad enough to and...