General Shoe Corporation v. Stokes
| Citation | 181 S.W.2d 146 |
| Parties | GENERAL SHOE CORPORATION v. STOKES, Com'r of Finance and Taxation, et al. (2 Cases). SAME v. McCANLESS, Commissioner, et al. (6 Cases). |
| Decision Date | 10 June 1944 |
| Court | Supreme Court of Tennessee |
Appeal from Chancery Court, Davidson County; Wm. J. Wade, Chancellor.
Suits by General Shoe Corporation against Walter Stokes, Jr., Commissioner of Finance and Taxation and against George F. McCanless, Commissioner etc., to recover excise taxes paid under protest. From adverse decrees, the complainant appeals.
Affirmed.
Bass, Berry & Sims and Cecil Sims, all of Nashville, for complainant-appellant.
William F. Barry, Sol. Gen., of Nashville, and Thomas H. Malone, III, Asst. Atty. Gen., for defendant-appellee.
The complainant, General Shoe Corporation seeks to recover herein from the Commissioner of Finance and Taxation a part of excise taxes paid by it for several years, the portion sued for having been paid under protest. From an adverse decree of the chancellor the complainant appeals.
The complainant is a Tennessee corporation manufacturing shoes in ten plants. Eight of these plants are located in Tennessee, one in Kentucky, and one in Georgia. The general office is in Nashville.
Section 1316 of the Code, as amended, levies an excise tax on the net earnings of corporations "from business done within the state" and provides:
We do not understand that complainant criticizes this formula in its general application. It is apparently fair and a similar formula has been frequently approved by the courts.
The complainant insists first, as applied to it, that the Commissioner misconceived the provisions of the statute in determining the amount of the tax, and, second, that the Commissioner's application of the statute to the facts of complainant's case brings the statute in conflict with Section 8 of Article 1 of the Tennessee Constitution and the Fourteenth Amendment to the Federal Constitution.
The criticism is directed at the method by which the Commissioner fixed the second ratio in the formula. The ratio between the total cost of manufacturing "within the state" and the total cost of manufacturing "within and without the state."
Complainant offered proof that 51% of its manufacturing cost was for raw material, leather, etc., and that 97% of this raw material was purchased in Massachusetts. It is conceded that the cost of raw material is a part of manufacturing cost but it is said that 97% of that cost was incurred without the State. The Commissioner, however, charged the cost of raw material used within the State, wherever purchased, as a part of the cost of manufacturing within the State.
Deducting from the cost of manufacture in Tennessee the cost of the material so used but purchased out of the State lowers the second ratio of the formula and results in allocating 42% of complainant's net profits to this State. Including in the cost of manufacture in Tennessee the cost of raw material purchased out of the State raises the second ratio of the formula and results in 56% of complainant's net profits being allocated to this State. The latter result was reached by the Commissioner.
Complainant's theory that the cost of 97% of the raw material, nearly all bought in Massachusetts, should be classed as cost of manufacturing without the State seems rather fanciful. It allocates manufacturing cost to a State where complainant has no factory, does no manufacturing, has no place of business and pays no taxes. If, however, we eliminate the cost of raw material purchased out of Tennessee from the cost of manufacturing in Tennessee, complainant still fails to show that more than a fair proportion of its net profits have been taxed by this State and we think that complainant has failed to show that the tax levied against it is arbitrary and violates its constitutional rights.
If the method of allocation used by the Commissioner is fairly calculated to assign to Tennessee that portion of the net income reasonably attributable to the business done in this State, no constitutional right of the complainant is infringed. Butler Bros. v. McColgan, 315 U.S. 501, 62 S.Ct. 701, 86 L.Ed. 991; Ford Motor Co. v. Beauchamp, 308 U.S. 331, 60 S.Ct. 273, 84 L.Ed. 304; Bass,...
To continue reading
Request your trial
-
American Bemberg Corporation v. Carson
...of these statutory formulas, and it is insisted that the Chancellor erroneously held that the decision of General Shoe Corporation v. Stokes, 181 Tenn. 286, 290, 181 S.W.2d 146, established the validity of these formulas. It is insisted that that decision furnishes no such authority since i......
-
R. J. Reynolds Tobacco Co. v. Carson
...... warehouses originate from the home office of the corporation". in North Carolina, which approves all credit to customers. . . \xC2"... the decision of this Court in Sealed Power Co. v. Stokes, 174 Tenn. 493, 127 S.W.2d 114, was erroneously. held by the Chancellor ... it was not to be taken as general authority, and was to be. strictly confined to its own facts, and in ...v. Oak Creek, 247 U.S. 321,. 38 S.Ct. 499, 62 L.Ed. 1135; General Shoe Corp. v. Stokes, 181 Tenn., 286, 181 S.W.2d 146. . . ......
-
R. J. Reynolds Tobacco Co. v. Carson
...... orders to the warehouses originate from the home office of the corporation in North Carolina, which approves all credit to customers. ...v. Stokes, 174 Tenn. 493, 127 S. W.2d 114, was erroneously held by the Chancellor to ..., (July 1938) was unpublished because it was not to be taken as general authority, and was to be strictly confined to its own facts, and in ...v. Oak Creek, 247 U.S. 321, 38 S.Ct. 499, 62 L.Ed. 1135; General Shoe Corp. v. Stokes, 181 Tenn., 286, 181 S.W.2d 146. It is ......
-
Crane Co. v. Carson
...... consolidated causes were filed by Crane Company, an Illinois corporation, against the Commissioner of Finance and Taxation, to recover alleged[191 ... The taxpayer was engaged in the wholesale, drygoods and general merchandise business, purchasing from manufacturers and others, and ...v. McColgan, supra, as it was applied by Judge Green in General Shoe Corp. v. Stokes, 181 Tenn. 286, 181 S.W.2d 146, to our own franchise and ......