Consolidated Coal Co. v. State

• Decision Date: 30 June 1938
• Docket Number: 3 Div. 248.
• Citation: 183 So. 650,236 Ala. 489
• Parties: CONSOLIDATED COAL CO. v. STATE.
• Court: Alabama Supreme Court

183 So. 650

236 Ala. 489

CONSOLIDATED COAL CO. v. STATE.

3 Div. 248.

Supreme Court of Alabama

June 30, 1938

Rehearing Denied Oct. 6, 1938.

Appeal from Circuit Court, Montgomery County; Walter B. Jones Judge.

Appeal to the circuit court by the Consolidated Coal Company opposed by the State of Alabama, from an assessment made by the State Tax Commission fixing a franchise tax. From a decree sustaining the assessment, defendant appeals.

Affirmed.

Coleman Spain, Stewart & Davies and J. S. Mead, all of Birmingham for appellant.

A. A. Carmichael, Atty. Gen., and Walter J. Knabe, Asst. Atty. Gen., for appellee.

BOULDIN Justice.

The franchise tax upon foreign corporations authorized by Section 232 of the Constitution of Alabama "based on the actual amount of capital employed in this state," and levied by the General Revenue Law of 1935 (Acts of 1935, p. 387, Sec. 318) upon foreign corporations "doing business in this State," is an excise tax for the privilege of exercising corporate functions in Alabama, measured by the actual amount of capital employed in Alabama in the exercise of such corporate functions, capital employed in a business for which the corporation was created and has its existence as a corporate entity.

It is not the qualifying fee, or fee for an annual permit, paid as a condition to its right to do business in Alabama. This is a distinct charge under the provisions of Section 315, page 385, of the Revenue Act of 1935. Neither is it the license or privilege tax imposed for the doing of a specified business, payable alike by persons or corporation. Section 329, page 392, Revenue Act of 1935.

This franchise tax on foreign corporations is not a property tax, nor a tax on the privilege of owning property in Alabama, without more. The values of property in Alabama may become material in ascertaining the amount of capital employed in Alabama; capital employed in the corporate business in Alabama conducted for gain or profit in the exercise of its corporate functions. The extent of corporate business, whether profitable or unprofitable, is immaterial. Is the corporation engaged in business in Alabama an intra-state business, exercising its corporate functions? If so, it is liable for a franchise tax.

The amount of the tax is $2 per $1,000 on the actual amount of capital employed in the corporate business in Alabama.

If a foreign corporation has qualified to do business in Alabama, this is prima facie evidence that it is doing business and subject to a franchise tax. Section 318, p. 388, Revenue Act of 1935.

The foregoing statement of the nature and measure of the franchise tax on foreign corporations is but a summation of many decisions of this court, several quite recently considered dealing elaborately with the application to differing states of fact. State v. Pullman-Standard Car Mfg. Co., 235 Ala. 493, 179 So. 541; State v. Southern Natural Gas Corporation, 233 Ala. 81, 170 So. 178; Southern Natural Gas Corporation v. State of Alabama, 301 U.S. 148, 57 S.Ct. 696, 81 L.Ed. 970; Wisconsin Coosa Co. v. State, 231 Ala. 543, 165 So. 838; State v. National Cash Credit Ass'n, 224 Ala. 629, 141 So. 541; Investors' Syndicate v. State, 227 Ala. 216, 149 So. 83; State v. Anglo-Chilean Nitrate Sales Corporation, 225 Ala. 141, 142 So. 87; Ellis v. Handley Mfg. Co., 214 Ala. 539, 108 So. 343; State et al. v. Burchfield Bros., 211 Ala. 30, 99 So. 198.

Appellant, Consolidated Coal Company, is a Delaware Corporation, organized in 1927 for the purpose of mining and marketing coal, with specified powers in the prosecution of such business, which, for present purposes, includes the power to own coal properties, operate mines, and to lease their coal lands and mining equipment, for operation on a royalty basis.

In 1927 this corporation, after qualifying to do business in Alabama, purchased a large tract of coal lands, with miners' villages, machinery and appurtenances thereon, in Walker County, Alabama.

For the calendar year, 1936, the company made return to the Tax Commission of "Real Estate, Plant and Equipment, etc.," "Assets segregated to Alabama," "$1,081,804.74."

This return disclaimed liability for a franchise tax on the ground that it has not engaged in business in Alabama during the tax year; that it had leased its properties in Alabama until December 1, 1940, to Cane Creek Coal Mining Co., which does business in Alabama and has paid an Alabama franchise tax for the tax year. The Tax Commission assessed a franchise tax against appellant for $2,163.60, based on value of Alabama assets above shown.

On appeal, the cause was tried in the court below on an agreed statement of facts.

From a judgment sustaining the assessment by the State Tax Commission this appeal is prosecuted.

The agreed statement of facts disclosed a lease of these mining properties to Cane Creek Coal Mining Co., on a royalty basis, with differentials as to coal mined with the aid of the lessor's mining equipment.

Mining operations are conducted wholly by the lessee, also a foreign corporation. With much detail the statement of facts shows a careful avoidance of any corporate business or activity in Alabama by the parent company; and that the lessee, a distinct corporate entity qualified to do business in Alabama, and paying a franchise tax to the State, conducts all corporate business in Alabama even to the keeping of books for the lessor, by one of the lessee's employees, showing the state of accounts between lessor and lessee, as well as the lessor's expenditures for taxes and insurance on its properties, the record of its mortgage indebtedness, and the record of its capital assets and capital stock. This bookkeeping consumes about...