Federal Land Bank of Saint Paul v. DeRochford

• Decision Date: 15 July 1939
• Docket Number: 6550
• Court: North Dakota Supreme Court

287 N.W. 522

69 N.D. 382

THE FEDERAL LAND BANK OF SAINT PAUL, a Body Corporate, Appellant, v. LEO DeROCHFORD, a Sole Trader, Doing Business under the Name and Style of Molly's Service Station, and Berta E. Baker, as State Auditor of the State of North Dakota, Respondents

No. 6550

Supreme Court of North Dakota

July 15, 1939

Rehearing Denied August 11, 1939.

Rehearing Denied Aug. 11, 1939.

Syllabus by the Court.

1. The imposition by a state of a license tax for the privilege of engaging in business as a dealer in motor vehicle fuel measured by the quantity of motor vehicle fuel sold including gasoline sold to a Federal Land Bank for the operation of its automobiles, does not operate as an unconstitutional interference with, or burden upon, the Federal Government or its instrumentalities.

2. In computing the amount of license tax of a dealer in motor vehicle fuel in North Dakota, all motor vehicle fuel used or sold by him must be considered, including motor vehicle fuel which he has sold to a Federal Land Bank.

From a judgment of the District Court of Burleigh County, Jansonius, J., the plaintiff (The Federal Land Bank of Saint Paul) appeals.

Action by the Federal Land Bank of St. Paul against Leo De Rochford, doing business under the name and style of Molly's Service Station, and Berta E. Baker, as State Auditor of the State of North Dakota, for a declaratory judgment adjudicating and determining whether, in computing the amount of tax against a dealer in motor vehicle fuel, the fuel sold to the plaintiff should be included or excluded. From an adverse judgment of the district court, the plaintiff appeals.

Judgment affirmed.

George F. Shafer and John Thorpe (Peyton R. Evans, Gerald E. Lyons and Robert J. Barry, of counsel) for appellant.

The Federal Land Bank of St. Paul is an instrumentality of the Federal Government. Smith v. Kansas City Title & T. Co. 255 U.S. 180, 65 L. ed. 577, 41 S.Ct. 243; Federal Land Bank v. Priddy, 295 U.S. 229, 79 L. ed. 1408, 55 S.Ct. 705.

To use the number of gallons sold the United States as a measure of the privilege is in substance and legal effect to tax the sale. And that is to tax the United States -- to exact tribute on its transactions and apply the same to the support of the state. Panhandle Oil Co. v. Mississippi, 277 U.S. 216, 72 L. ed. 857, 48 S.Ct. 451, 56 A.L.R. 553.

The very term "exempt from taxation" means exempt from all burdens arising from taxation. Asplund v. Alarid, 29 N.M. 129, 219 P. 786.

The states cannot exercise the right of taxation in respect to any of the instrumentalities which the general government may create for the performance of its constitutional functions. Austin v. The Aldermen, 7 Wall. (U.S.) 695, 19 L. ed. 224; New York ex rel. Rogers v. Graves, 299 U.S. 401, 81 L. ed. 306, 57 S.Ct. 269.

In the absence of any statutory enactment with regard to the taxation of Federal land banks, the states have no power to impose any form of taxation upon them. Owensboro Nat. Bank v. Owensboro, 173 U.S. 664, 43 L. ed. 850, 19 S.Ct. 537; Bank of California v. Richardson, 248 U.S. 476, 63 L. ed. 372, 39 S.Ct. 165.

Alvin C. Strutz, Attorney General, and T. A. Thompson and B. F. Tillotson, Assistant Attorneys General, for respondent.

Government instrumentalities are not in all cases exempt from taxation. Sargent County v. State, 47 N.D. 561, 182 N.W. 270; North Dakota v. Olson, 33 F.2d 848.

A government may not depart from functions essentially governmental in character and enter into fields of business inherently private in their nature, and yet demand protection from taxation behind a shield of implied immunity. Clinto v. State Tax Commission (Kan.) 71 P.2d 857; Metcalf & Eddy v. Mitchell, 269 U.S. 514, 70 L. ed. 384, 46 S.Ct. 172.

It is impossible, by definition, to delimit "delegated powers" or "essential governmental duties." Controversies involving these terms must be decided as they arise, upon consideration of all the relevant circumstances. Helvering v. Therrell, 303 U.S. 218, 82 L. ed. 758, 58 S.Ct. 539; Allen v. University of Georgia, 304 U.S. 439, 82 L. ed. 1448, 58 S.Ct. 980.

Federal land banks, although concededly Federal instrumentalities, possess also some of the characteristics of private corporations. Federal Land Bank v. Priddy, 295 U.S. 229, 79 L. ed. 1408, 55 S.Ct. 705; Federal Land Bank v. Gaines, 290 U.S. 247, 78 L. ed. 301, 54 S.Ct. 168; Union Joint Stock Land Bank v. Kissane, 277 Mich. 668, 270 N.W. 178; Rose v. Union Joint Stock Land Bank, 278 Mich. 188, 270 N.W. 180.

A corporation cannot escape state taxation merely because it was created by the Federal Government, unless it is really an agency or instrumentality for the exercise of the constitutional powers of the United States. 2 Cooley, Taxation, 4th ed. § 613; State v. Thos. Cruse Sav. Bank, 21 Mont. 50, 52 P. 733; Thomson v. Union Pacific R. Co. 9 Wall. (U.S.) 579, 10 L. ed. 792.

Municipal governments have two classes of powers, one governmental, the other business. In the exercise of the latter they are governed by the same rules as individuals or private corporations. 2 Words & Phrases, 2d Series, 768; Baltimore Nat. Bank v. State Tax Commission, 297 U.S. 209, 80 L. ed. 586, 56 S.Ct. 417; Brooklyn Ash Removal Co. v. United States, 10 F.Supp. 152; Higdon v. Lincoln Joint Stock Land Bank, 223 Iowa 57, 272 N.W. 93.

The exemptions of sovereignty extend no further than the attributes of sovereignty. 33 C.J. 281.

When Federal property is placed in a private enterprise for gain, the immunity (from state taxation) has no application. 61 C.J. 361.

State taxation of the instruments or agencies of the Federal Government is not objectionable if it does not impair their usefulness or efficiency or hinder them from serving the government as they were intended to serve it. 61 C.J. 372.

Christianson, J. Nuessle, Ch. J., and Burr, J., Swenson and Grimson, Dist. JJ., concur.

OPINION

CHRISTIANSON

The laws of North Dakota require each dealer "in motor vehicle fuel" to file with the state auditor a certificate showing that he is engaged in such business. Initiated Measure, Laws 1927, p. 549, § 4. They make it unlawful to engage in business in North Dakota "as a dealer, unless such dealer is the holder of an unrevoked license issued by the state auditor to engage in such business." Laws 1935, chap. 172.

They require "each and every dealer in motor vehicle fuel" to render to the state auditor, not later than the 15th day of each calendar month, "a sworn statement of the number of gallons of motor vehicle fuel sold or used by him or them during the preceding calendar month." Laws 1929, chap. 166, § 2. They provide that:

"Said dealer shall pay a license tax of three cents per gallon on all motor vehicle fuel used and sold by him other than such fuel sold by him or them, in the original packages as above specified, and shall have the option of paying said tax of three cents per gallon on all motor vehicle fuel sold by him or them, in the state, in the original packages in which the same was imported as above specified.

"Whenever any sale is made by a dealer of motor vehicle fuel in the original packages in which the same was imported as above specified, such dealer shall deliver to the purchaser thereof an invoice of such motor vehicle fuel, stating the name and address of the purchaser, the quantity and kind of fuel sold, and whether or not said dealer assumes and agrees to pay the license tax on said fuel above specified, and such dealer shall transmit to the state auditor at the same time he shall render the statement above specified, duplicate copies of all such invoices issued and delivered by him during the period covered by such statement." Laws 1929, chap. 166, § 2.

"Any person, firm or corporation who shall purchase or receive any motor vehicle fuel from any dealer in this state in the original package in which the same shall have been imported, and upon which fuel the said dealer shall not have assumed to pay the tax as provided in this act, shall, on the 15th day of each month render to the state auditor the same statement required of the dealer by § 2 hereof, and at the same time shall remit and pay to said state auditor a license tax of two cents per gallon on such motor vehicle fuel, upon which the dealer has not assumed the tax." Initiated Meas. Laws 1927, pp. 547, 550, § 8.

"Every dealer paying such license tax or being liable for the payment thereof, shall be entitled to charge and collect the sum of three cents per gallon, on such motor fuel sold by him, as a part of the selling price thereof." Laws 1929, chap. 166, § 3.

"That any person or persons, firm or corporation who shall buy or use any motor vehicle fuel as defined in this Act, for the purpose of operating and propelling stationary gas engines tractors used for agricultural purposes, motor boats, airplanes or aircrafts, or who shall purchase or use any of such fuel for lighting, heating, cleaning or dyeing or other commercial use of the same, except motor vehicles operated upon any of the public highways or streets in this state, on which motor fuel tax imposed by this Act has been paid, shall be reimbursed and repaid the amount of such tax paid by him on presentation to the state tax commissioner, on a form prescribed by the state tax commissioner, of a sworn statement setting forth. . . . Application for refunds or repayments shall not be made oftener than at the beginning of the quarter of each calendar year. . . . The state auditor shall furnish the tax commissioner with the information relating to the collection of the motor vehicle fuel tax and the tax commissioner shall withhold approval of any refund or repayment until the state auditor shall certify to the tax commissioner that...