Frazier v. State Tax Commission

Decision Date14 June 1937
Docket Number3 Div. 221
Citation175 So. 402,234 Ala. 353
CourtAlabama Supreme Court

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

Bill for declaratory judgment by J.B. Frazier against the State Tax Commission. From a decree in favor of respondent complainant appeals.


Mooneyham & Mooneyham, of Montgomery, for appellant.

A.A Carmichael, Atty. Gen., B.W. Simmons, Asst. Atty. Gen., H.L. Anderton, of Birmingham, E.C. Boswell, of Geneva, and L.H. Ellis, of Columbiana, for appellee.

Benners, Burr, McKamy & Forman and Frontis H. Moore, all of Birmingham, amici curiae.

THOMAS Justice.

The question for decision is presented under the declaratory judgment act. Gen.Acts 1935, p. 777.

The question presented for decision is whether the classification employed in section 4, subsection (k) of the Sales Tax Act (Gen.Acts 1936-37, Ex.Sess., pp. 125, 128, approved February 23, 1937) is reasonable, and not arbitrary, discriminatory, or offensive to section 22, article 1, and section 217, article 11, of the Constitution of Alabama, or the Fourteenth Amendment to the Constitution of the United States.

The rules that obtain as to constitutional construction need not be repeated at this time. They have been frequently stated in the decisions. Jefferson County v. Busby, 226 Ala. 293, 148 So. 411; Union Bank & Trust Co. v. Phelps, 228 Ala. 236, 153 So. 644.

It is insisted that the statute as construed and enforced in the administration by the taxing authorities of the state constitutes a denial of the equal protection of the law. Yick Wo v. Hopkins, 118 U.S. 356, 373, 6 S.Ct. 1064, 30 L.Ed. 220, 227; Bailey v. State of Alabama, 219 U.S. 219, 31 S.Ct. 145, 55 L.Ed. 191; Bailey v. State, 158 Ala. 18, 48 So. 498; Warrior Water Co. v. Long, 218 Ala. 125, 117 So. 656.

It is declared by this and the federal courts that reasonable classifications must be employed in statutes and ordinances or the same will offend the appropriate provisions of organic law. That is to say, that the lawmakers are free to create classes upon whom the taxing power may be levied, and the only uniformity requisite is that subjects of the same class are made to bear equally and uniformly the burden imposed. Western Union Telegraph Co. v. State Board of Assessment, 80 Ala. 273, 280, 60 Am.Rep. 99; Hill v. Moody, 207 Ala. 325, 93 So. 422; Warrior Water Co. v. Long, 218 Ala. 125, 117 So. 656; Woco Pep Co. v. City of Montgomery, 213 Ala. 452, 105 So. 214; Republic I. & S. Co. v. State, 204 Ala. 469, 86 So. 65; State v. Alabama Educational Foundation, 231 Ala. 11, 163 So. 527; Singer Sewing Mach. Co. v. Brickell, 233 U.S. 304, 34 S.Ct. 493, 58 L.Ed. 974; American Sugar Ref. Co. v. Louisiana, 179 U.S. 89, 21 S.Ct. 43, 45 L.Ed. 102.

The distinction between property and excise or license taxes is well understood. Phoenix Carpet Co. v. State, 118 Ala. 143, 151, 22 So. 627, 72 Am.St.Rep. 143; Hale v. State, 217 Ala. 403, 116 So. 369, 58 A.L.R. 1333; Warrior Water Co. v. Long, 218 Ala. 125, 117 So. 656; Lee v. State Tax Commission, 219 Ala. 513, 123 So. 6.

This court in construing exemption statutes observed on the authority of Southern Ry. Co. v. St. Clair County, 124 Ala. 491, 27 So. 23, 27:

"The tax imposed by the statute is levied by the proper authorities of the county of St. Clair on property situated in the county devoted to the better maintenance of the public schools of the county, and is not, in any proper sense (excepting that authority for its imposition is derived from the general assembly), a state tax, though it may aid in the maintenance of the state system of public schools. Neither counties nor municipalities have an inherent power of taxation. Whatever of power they may have, is of legislative delegation; and upon them, in the absence of special constitutional restriction, the general assembly may confer the taxing power in such measure as it deems expedient,--'in other words, with such limitations as it sees fit as to the rate of taxation, the public purposes for which it is authorized, and the objects (the persons and property) which shall be subjected to taxation.' 2 Dill Mun.Corp. § 740. Hamilton v. Pullman Car & Mfg. Corp., 231 Ala. 7, 163 So. 329.

Adverting to the act in question, the body of the act is embraced in and reasonably connected with the comprehensive title employed. The title is as follows:

"An Act to further provide for the general revenue of the State of Alabama, and to repeal an Act entitled, 'To be entitled an Act to amend an Act entitled, "An Act to provide for the general revenue of the State of Alabama, approved July 10, 1935," by adding Schedule 155.4A and Schedule 155.4B to Section 348 of said Act, approved December 17, 1936.' "

It is recited in section 1 of the act, subsections (h) and (i), as follows:

"(h) The term 'wholesale sale' or 'Sale at Wholesale' means a sale of tangible personal property by wholesalers to licensed retail merchants, jobbers, dealers, or other wholesalers for resale and does not include a sale by wholesalers to users or consumers not for resale. The terms 'wholesale sale' shall include a sale of tangible personal property or products to a manufacturer mine, quarry operator, or compounder which enters into and becomes an ingredient or component part of the tangible personal property or products which he manufactures and machinery used in such compounding, mining, quarry operator, manufacturing, or processing.
"(i) The term 'sale at retail' or 'retail sale' shall mean all sales of tangibles personal property except those above defined as wholesale sales. The quantities of goods sold or prices at which sold are immaterial in determining whether or not a sale is at retail, except as herein expressly provided. Sales of building materials to contractors, builders, or landowners for resale or use in the form of real estate are retail sales in whatever quantity sold. Sales of tangible personal property or products to manufacturers, quarry, mine operators or compounders, which are consumed by them in manufacturing, mining, quarrying or compounding and do not become an ingredient or component part of the tangible personal property manufactured or compounded are retail sales."

The clauses levying and enforcing an excise tax are as follows:

"There is hereby levied, in addition to all other taxes of every kind now imposed by law, and shall be collected as herein provided, privilege or license tax against the person on account of the business activities and in the amount to be determined by the application of rates against gross sales, or gross receipts, as the case may be, as follows: (a) Upon every person, firm or corporation engaged or continuing within this State in business of selling at retail any tangible personal property whatsoever, including merchandise and commodities of every kind and character, (not including, however, bonds or other evidences of debt or stocks) an amount equal to two per cent of the gross proceeds of sales of the business, except where a different amount is expressly provided herein. ***"

"If any person, on or after the passage of this Act, shall engage in or continue in any business for which a privilege tax is imposed by Section 2 of this Act, as a condition precedent to engaging or continuing in such business, he shall apply for and obtain from the Commission a license to engage in and to conduct such business for the current tax year upon the condition that he shall pay the taxes accruing to the State of Alabama under the provisions of this Act, provided, however, that no license shall be issued under the provisions of this Act to any person who has not complied with the provisions of this Act, and no provision of this Act shall be construed as relieving any person from the payment of any license or privilege tax now imposed by law."

This statute was recently construed in F.A. Doby et al. v. State Tax Commission (Ala.Sup.) 174 So. 233.

The exemptions contained in the act are defined or specified in section 4, and, among other things, it is declared:

"There are, however, exempted from the provisions of this Act: *** (k) Amounts received by manufacturers, compounders, processers, producers, miners, and quarries from sales to consumers in carload lots or in larger quantities except as otherwise expressly provided in Section 1 of this Act."

The pleader avers that "By the terms of said subsection (k) a manufacturer is permitted to sell to the consumer in car load lots without payment of the tax as provided for in said Act, and, therefore, subsection (k) in exempting sales in car load lots from the tax discriminates against complainant in that he is required to pay the tax on purchases made for consumption or for resale due to the fact that such purchases are in less than car load lots."

It is further averred that "In the event it is held by the Court that said exemptions provided for in said subsection (k), aforesaid, is not invalid and void, for and on account of being discriminatory, or for other reasons, then in that event manufacturers, compounders, processers, producers, miners and quarriers, can and will purchase products other than those they manufacture, compound, process, produce, mine and quarry, and sell them in car load lots, and claim and obtain exemptions under said subsection (k) and thus be in competition with orator in and about his business of selling his products as aforesaid, and complainant contends that the State Tax Commission is in error in limiting said exemptions to products manufactured, compounded, processed, produced, mined and quarried by the person or persons claiming said exemptions."

The question arises does subsection (k) of section 4 of the Act of ...

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