Flynn v. State Tax Comm'n

• Decision Date: 06 January 1934
• Docket Number: No. 3925.,3925.
• Parties: FLYNN, WELCH & YATES, Inc.,v.STATE TAX COMMISSION et al.
• Court: New Mexico Supreme Court

38 N.M. 131

28 P.2d 889

FLYNN, WELCH & YATES, Inc.,

v.STATE TAX COMMISSION et al.

No. 3925.

Supreme Court of New Mexico.

Jan. 6, 1934.Rehearing Denied Jan. 31, 1934.

Appeal from District Court, Santa Fé County; Otero, Judge.

Suit by Flynn, Welch & Yates, Inc., against the State Tax Commission and Byron O. Beall and others, as members thereof, for an injunction. From an order restraining defendants from enforcing or attempting to enforce the provisions of a statute, defendants appeal.

Reversed and remanded, with directions.

Power of taxation is inherent in state, and may generally be exercised through Legislature without let or hindrance, except as limited by Constitution. Const. art. 8, § 1.

E. K. Neumann, Atty. Gen., and Frank H. Patton, Asst. Atty. Gen., for appellants.

Hervey, Dow, Hill & Hinkle and J. D. Atwood, all of Roswell, and J. O. Seth and E. R. Wright, both of Santa Fé, for appellee.

SADLER, Justice.

The appellants, state tax commission, and Byron O. Beall, Prager Miller, and D. E. Rodriguez, constituting the personnel of said commission, upon this appeal seek to overthrow an injunction order issued against them by the district court of Santa Fé county restraining the enforcement of chapter 72 of the New Mexico Session Laws of 1933, commonly designated as the Severance Tax Law. The act, as shown by its title, purports to levy an “excise tax” upon oil and gas severed from the soil of this state, provides for the collection of the tax, its distribution, stipulates penalties for the violation thereof, and declares it an emergency measure.

The appellee, a corporation, movant for the injunction below, by its complaint alleged itself to be the owner of eighteen producing oil wells in Eddy county, N. M. The complaint thus discloses that it will be injuriously affected by the enforcement of the act if, as it contends, the same is unconstitutional. The validity of the act is attacked in the complaint upon the ground that the measure is not, as its title would indicate, an excise tax, but, on the contrary, a property tax on oil and gas, and as such void because not levied in proportion to the value thereof. If this contention be correct, the judgment of the lower court should be affirmed.

It is also shown by the complaint that, within ninety days after adjournment of the eleventh state Legislature, which enacted said measure, a petition calling for a referendum upon said law bearing the signatures of 25 per cent. of the qualified electors of three-fourths of the counties in the state was filed in the office of the secretary of state, thereby, as appellee contends, suspending the operation of same pending a vote at the general election in November, 1934. If appellee be correct in this contention, the judgment of the lower court must likewise be affirmed.

The appellants interposed a demurrer which, so far as here material, is based upon the following grounds, to wit: (1) That the act assailed discloses on its face that it imposes an excise tax; (2) that the emergency declaration attached thereto stating it is necessary for the preservation of the public peace, health, or safety conclusively establishes said measure as one excluded from the referendum; (3) that the act itself discloses another ground of exemption from the referendum, in that it is one providing for the maintenance of the public schools.

The court overruled the demurrer, and, the appellants electing to stand upon the same, an order was entered restraining them from enforcing, or attempting to enforce, the provisions of the act assailed. It is from such order that this appeal is prosecuted.

[1] We have already held in Todd v. Tierney, 38 N. M. -, 27 P.(2d) 991, which opinion but recently has been handed down, that the filing with the secretary of state of a referendum petition bearing the required 25 per cent. of the signatures of the qualified electors of the state does not have the effect of suspending the operation of a law already in effect by reason of an emergency clause attached thereto, even though the law should be one subject to a referendum. In so far, therefore, as the judgment of the trial court enjoining the enforcement of said act may rest upon the conclusion that the act in question was suspended of effective operation by the filing of said petition, it is wanting in proper support to sustain it.

[2] The result of the decision in Todd v. Tierney, supra, is that the question of the referable character of a given act is not determined the one way or the other by its designation as an emergency measure. Hence, if we should consider untenable the objection urged against validity of the act upon constitutional grounds, it becomes apparent that the question of its referable character need not now be determined. We therefore pass immediately to a consideration of the constitutional question presented by appellee.

The law in question was enacted as House Bill No. 153, known as chapter 72, New Mexico Session Laws of 1933. It was approved March 8, 1933, and by virtue of the emergency declaration attached thereto became effective on such date and remains in effect, if constitutional. In other words, the filing of the referendum petition alleged in the complaint did not have the effect to suspend operation of the law.

[3][4][5] The title under which the measure was passed is as follows: “An Act to Levy an Excise Tax Upon Oil and Gas Severed From the Soil of This State; Providing for the Collection Thereof; Providing for the Distribution of the Proceeds Thereof; Providing for Penalties for the Violation of This Act, and Declaring an Emergency.”

If our decision of the matter were to be concluded by the legislative declaration in the title upon the nature of the tax, we might well rest from our labors at this point by holding it to be an excise tax and valid. But “the name by which the tax is described in the statute is, of course, immaterial. Its character must be determined by its incidents.” Dawson v. Kentucky Distilleries & Warehouse Co., 255 U. S. 288, 41 S. Ct. 272, 274, 65 L. Ed. 638; Educational Films Corp. v. Ward, 282 U. S. 379, 51 S. Ct. 170, 75 L. Ed. 400; Gregg Dyeing Co. v. Query, 286 U. S. 472, 52 S. Ct. 631, 76 L. Ed. 1232, 84 A. L. R. 831. We therefore turn to an analysis of the body of the act for the purpose of ascertaining the nature of the tax imposed.

Sections 1 and 2 of the act read as follows:

“Section 1. That for the year 1933, commencing April 1, 1933, and for each subsequent year, taxes are hereby levied upon the oil and gas severed from the soil of this State.

“Such taxes shall be paid by the owner or proportionately by the owners thereof at the time of severance, and shall become due and payable quarterly as herein provided, and shall operate as a first lien on such oil and gas, which lien shall follow such products into the hands of third persons, whether in good or bad faith, and whether same shall be found in a manufactured or unmanufactured state.

“Sec. 2. Taxes, as levied by Section 1 of this Act, shall be predicated upon the quantities severed from the soil of this State, and shall be paid at the following rates:

“(a) (1) On oil of 28 gravity and below, two (2) cents per barrel of 42 gallons.

“(2) On oil above 28 gravity and not above 50 gravity, four (4) cents per barrel of 42 gallons.

“(3) On oil above 50 gravity, six (6) cents per barrel of 42 gallons.

“(b) (1) On gas, one-tenth (1/10) of one (1) cent per thousand cubic feet, measured at ten (10) ounce pressure.”

Section 3 provides for quarterly collection of the tax imposed, and directs the distribution thereof.

Sections 4 and 5 provide:

“Sec. 4. Every person, firm, corporation or association of persons, severing oil and/or gas from the soil of this State shall, within fifteen (15) days after the expiration of each quarter annual period expiring, respectively, on the last day of March, June, September and December of each year, file with the State Tax Commission a statement under oath, on forms prescribed by said Commission, of the business conducted by such person, firm, corporation or association of persons, during the last preceding quarter annual period, showing the kind and gross quantity of gas and/or oil so severed or produced, the names of the owner or owners at the time of severance, the portion owned by each, the location of each place or places where same was severed from the soil, and such other and necessary information pertaining thereto as the State Tax Commission may require for the enforcement of this Act. At the same time of rendering such reports to the State Tax Commission, each person, firm, corporation or association of persons, shall concurrently file a duplicate thereof with the County Treasurer of the county where said gas and/or oil was taken or severed from the soil; and shall pay therewith a tax upon the gross quantity of such gas and/or oil severed, computed at the rate applying thereto as provided in Section Two (2) of this Act; Provided, however, that the gross quantity of oil and/or gas shall be computed as that total amount actually severed, less the amount thereof due the United States of America or the State of New Mexico, as the case may be, for and as royalty payments.

“Sec. 5. Except as otherwise provided in this Act, the making of such reports, and the payment of said taxes, shall be by those actually engaged in the operation of severing, whether it be the owner of the soil, or another severing from the soil of another, or the owner of any such gas and/or oil severing same from the soil of another.

“The reporting tax payer shall collect or withhold out of the value of the oil and/or gas severed, the proportionate parts of the total tax due by the respective owners of the severed products at time of severance.”

The remaining sections of the act need not be set out or discussed in detail. In a general way they are largely concerned in furnishing assurance that the act of severance shall...