Fontenot v. John I. Hay Co.

• Decision Date: 12 December 1955
• Docket Number: No. 41858,41858
• Citation: 84 So.2d 810,228 La. 1031
• Parties: Rufus W. FONTENOT, Collector of Revenue, State of Louisiana v. JOHN I. HAY COMPANY.
• Court: Louisiana Supreme Court

Page 810

84 So.2d 810

228 La. 1031

Rufus W. FONTENOT, Collector of Revenue, State of Louisiana v. JOHN I. HAY COMPANY.

No. 41858.

Supreme Court of Louisiana.

Dec. 12, 1955.

Rehearing Denied Jan. 16, 1956.

Lemle & Kelleher, Harry B. Kelleher, Thomas F. Jordan, New Orleans, for defendant-appellant.

George C. Gibson, Baton Rouge, for appellee.

MOISE, Justice.

John I. Hay Company appeals from an adverse judgment.

The proceedings were summary. The rule was made absolute.

Rufus W. Fontenot, Collector of Revenue, State of Louisiana, instituted these proceedings under the provisions of Title 47, Section 1574, of the LSA-Revised Statutes of 1950. He sought to enforce collection of income taxes for the years 1947, 1948, 1949 and 1950, allegedly due the State of Louisiana by John I. Hay Company on that part of its net income attributable to interstate business done or performed within the State of Louisiana. The aggregate claim, for taxes, interest and attorney fees, was fixed at the sum of $11,638.32.

Appellant contends that these taxes violate the interstate commerce clause of the Constitution of the United States, Article 1, § 8, Clause 3, the due process clause of the Louisiana Constitution of 1921, Article 1, § 2, and the due process clause of the Constitution of the United States as found in the Fourteenth Amendment.

A stipulation of facts was filed, which, in substance, recites that John I. Hay Company is incorporated under the laws of the State of Delaware and licensed to do business only in the States of Delaware and illinois; that it operates as a common carrier in the interstate transportation of commodities generally between ports and points on the Illinois Waterway, the Mississippi River below and including Cap au gris, Missouri, the Ohio River between Rosiclaire, Illinois and its confluence with the Mississippi River, the Tennessee River between Gilbertville, Kentucky and its confluence with the Ohio River, and the Gulf Intracoastal Waterway in Louisiana and Texas as far west as Houston, Texas and Brownsville, Texas; that it brings cargoes into and through Louisiana and takes cargoes out of Louisiana; that none of its shipments originate and terminate in the State of Louisiana; and that an office is maintained in Louisiana and employees are present in this State.

The State rests its case not only on the law, but also on the method of apportionment. Defendant admits that the apportionment made is correct--if the taxes can be constitutionally imposed. There is no doubt that the power to regulate interstate commerce is vested solely in the Federal Government under Article 1, § 8, Clause 3, of the Constitution of the United States of America. But, do these taxes, as administered and applied, constitute an actual regulation of interstate commerce? We believe that they do not constitute a regulation of interstate commerce. Louisiana Income Tax Laws are applicable to the defendant, for the reason that the taxes sought to be collected were imposed upon that part of defendant's net income attributable to its interstate business done or performed within the borders of the State of Louisiana.

The constitutional authorization for income taxes is found in Article X, § 1, of the LSA-Constitution of 1921, and provides in part:

'Equal and uniform taxes may be levied upon net incomes * * *'

Dart's Statutes of 1939, Section 8587.1, reads:

'There shall be levied, collected and paid for each taxable year a tax upon the net income of residents and nonresidents, estates, trusts, domestic and foreign corporations, as hereinafter provided * * * Foreign Corporations shall be taxed on net income from sources within the state, * * *.'

These taxes, we believe, are imposed on the net income from sources within the State.

Dart's 8587.7 defines 'net income' as follows:

'Net income means the gross income computed under Section 8(8587.8), less the deductions allowed by Section 9(8587.9).'

Dart's 8587.34(b), providing for taxes from sources partly within and partly without the State of Louisiana, reads:

'Nonresident individuals and foreign corporations: In the case of a non-resident individual or foreign corporation, items of gross income, expenses, losses and deductions, from whatever source received or incurred, not otherwise exempted by this act, shall be included in the taxpayer's return; but, for the purpose of this act, the amount of tax shall be computed only upon the net income earned within or derived from sources within this state. In arriving at the net income earned within or derived from sources within the State of Louisiana, items of gross income, expenses, losses and deductions, not otherwise exempted by this act, shall be allocated or apportioned to sources within or without the State of Louisiana, under the rules and regulations prescribed by the supervisor * * * Gains profits, and income from:

'(1) Transportation or other services rendered partly within and partly without the State of Louisiana shall be treated as derived from sources within and partly from sources without the State of Louisiana, * * *.'

The Louisiana Revised Statutes of 1950 are essentially the same as the above quoted.

Since the statutes declare that the income shall be treated as derived from sources within and partly from sources without the State of Louisiana, certainly that part of defendant's income which is earned within and derived from sources within the State must subject defendant to a net income tax. Defendant does not carry a load from New Orleans, Louisiana to Houston, Texas gratis, nor does it only charge to carry a load from the Louisiana state border to Houston; it charges for the whole trip. Therefore, every part of the charge on loads in Louisiana is in payment of the transportation in Louisiana. Furthermore, to make this concept perfectly clear, defendant has stipulated that these taxes are correctly computed if they can be constitutionally imposed.

A careful analysis of the complexities of the various decisions rendered by the United States Supreme Court will show us the right. The greatest exponent of the United States Constitution was Chief Justice Marshall, but, even as great as he was, we cannot apply the principles of his time to these times. In our modern times, the United States Supreme Court must be controlled by the aspirations and changes of the present. At the time our greatest Chief Justice held sway, there was no such thing as an income tax, and we cannot pinpoint all of his magnificent rulings to cases that come under his day and time.

Along the same line of thought, in discussing the commerce clause of the Federal Constitution, Article 1, § 8, we find the following pronouncement of the United States Supreme Court in the case of Freeman v. Hewit, 329 U.S. 249, 67 S.Ct. 274, 276, 91 L.Ed. 265, to be pertinent here:

'The power of the States to tax and the limitations upon that power imposed by the Commerce Clause have necessitated a long, continuous process of judicial adjustment. The need for such adjustment is inherent in a federal government like ours, where the same transaction has aspects that may concern the interests and involve the authority of both the central government and of the constituent States.

'The history of this problem is spread over hundreds of volumes of our Reports. To attempt to harmonize all that has been said in the past would neither clarify what has gone before nor guide the future. Suffice it to pay that especially in this field opinions must be read in the setting of the particular cases and as the product of preoccupation with their special facts.'

Shadows must not be mistaken for substance when we consider a claim of immunity from taxation. The tax here sought to be summarily collected is not in form nor in substance a tax on interstate commerce; nor is it a tax on gross income; nor is it a franchise tax. It is imposed only after defendant has ascertained all of its profits, all of its losses, and all of its expenses in the conduct of its business within the State of Louisiana. If there should be no income earned within the State, the defendant could not be taxed. In the case of State v. Albert Mackie Co., 144 La. 339, 80 So. 582, 584, the pronouncement of our own Court is in accord with the views here expressed. It states:

'* * * It is well settled that a state tax that affects interstate or foreign commerce only incidentally and not directly, as, for example, a tax upon property that is used in such commerce, or a tax upon net incomes or profits that have been derived from such commerce, or a fixed tax levied upon a local business without discriminating against interstate business, is not repugnant to the commerce clause of the federal Constitution (article 1, § 8). * * *'

In the case of United States Glue Co. v. Town of Oak Creek, 247 U.S. 321, 38 S.Ct. 499, 501, 62 L.Ed. 1135, the United States Supreme Court went on to say:

'* * * in Peck & Co. v. Lowe * * * 247 U.S. 165, 38 S.Ct. 432, 62 L.Ed. 1049, we held that the Income Tax Act of October 3, 1913, c. 16, * * * when carried into effect by imposing an assessment upon the entire net income of a corporation, approximately three fourths of which was derived from the export of goods to foreign countries, did not amount to laying a tax or duty on articles exported within the meaning of article 1, § 9, cl. 5, of the Constitution. The distinction between a direct and an indirect burden by way of tax or duty was developed, and it was shown that an income tax laid generally on net incomes, not on income from exportation because of its source or in the way of discrimination, but just as it was laid on other income, and affecting only the net receipts from exportation after all expenses were paid and losses adjusted and the recipient of the income was free to use it as he close, was only an indirect burden.

'* * * A tax upon the net profits has not the same deterrent effect since it does not arise...