Gulf Oil Corp. v. Morrison, 1857
| Decision Date | 05 March 1958 |
| Docket Number | No. 1857,1857 |
| Citation | 120 Vt. 324,141 A.2d 671 |
| Parties | GULF OIL CORPORATION v. Leonard W. MORRISON, Commissioner of Taxes. |
| Court | Vermont Supreme Court |
Edmunds, Austin & Wick, Burlington, Irving H. Bull, New York City, for plaintiff.
Frederick M. Reed, Atty. Gen., Stephen B. Richardson, Deputy Atty. Gen., for defendant.
Before CLEARY, ADAMS, HULBURD, and HOLDEN, JJ., and BARNEY, Superior Judge.
This is a petition brought by the Gulf Oil Corporation for review of a determination made by the Commissioner of Taxes with respect to the Vermont franchise tax assessed against the Corporation for the calendar year 1954. The petitionee demurred to the petition. The demurrer was sustained by the county court and the cause passed to this Court pursuant to V.S. 47 § 2124. The facts set forth in the petition, including 'Exhibit A' attached thereto, are as follows:
During the calendar year 1954 the Gulf Oil Corporation, a corporation organized and existing under the laws of the State of Pennsylvania and authorized by the commissioner of foreign corporations of the State of Vermont to engage in the business of marketing petroleum and petroleum products in Vermont, was engaged in that business. During that year the petitioner engaged in no other business in Vermont, but did engage in extensive business operations outside Vermont, both in the United States and foreign countries. During the calendar year 1954, the petitioner received dividends from various United States corporations totalling $149,494,490 in addition to its other income. It also received dividends from various foreign corporations totalling $20,478,991. These dividends were received from shares of stock owned by the petitioner in the other corporations, and $165,709,950 of the dividends were received from subsidiaries wholly owned by the petitioner. None of the corporations from which the petitioner received dividends did any business in Vermont, owned any property in Vermont, or paid any salaries or wages for services performed in Vermont, and no activity on the part of any of these corporations had any relationship either to the petroleum or petroleum products marketed in Vermont or to the marketing thereof.
In its 1954 Vermont franchise tax return the petitioner claimed a deduction for dividends received from United States corporations of $118,639,082 provided for by the 1954 Internal Revenue Code of the federal government, 26 U.S.C.A. § 1 et seq. The petitioner reported an allocation factor of .003378, which produced taxable income in Vermont of $69,936 according to the petitioner's computations, and on this income the petitioner paid its tax of $2797.44. The Commissioner of Taxes of Vermont disallowed the deduction of $118,639,082 and assessed an additional franchise tax of $16,030.53, which the petitioner paid under protest.
The petitioner argues that the Vermont franchise tax law, V.S. 47 § 949 et seq., as it has been interpreted and applied to the petitioner by the Commissioner of Taxes, is unconstitutional under the due process clause of the fourteenth amendment of the Constitution of the United States, because the amount of the petitioner's net income allocated to Vermont, to the extent that it reflects approximately $574,000 (.003378 of $169,973,471) of dividends received by the petitioner from various United States and foreign corporations, is out of all appropriate proportion to the business transacted by the petitioner in Vermont, and has no relationship either to the privilege granted by Vermont to the petitioner to transact the business of marketing petroleum and petroleum products in Vermont or to any function actually performed by the petitioner in Vermont.
At the time the tax became due those portions of the Vermont statutes which are material were as follows: V.S. 47 § 950 provided: 'For the privilege of exercising its franchise in this state in a corporate or organized capacity * * * and, for the privilege of doing business in this state, every foreign corporation liable to tax shall annually pay to this state a franchise tax to be measured by its net income to be computed, in the manner hereinafter provided, at the rate of four per cent upon the basis of its net income as herein computed for the next preceding income year.' V.S. 47 § 951 provided:
'In special cases where, in the judgment of the commissioner, such application of the above factors does not result in fair and equitable allocation to the state, such net income shall be allocated in accordance with rules and regulations prescribed by the commissioner.'
V.S. 47 § 949 VII provided: "Net income' means the total net income for the income year, as defined under the Internal Revenue Code of the United States in effect June 1, 1947.' Under the Internal Revenue Code of the United States in effect June 1, 1947, no deduction for dividends was permitted. The Internal Revenue Code as it existed at that time provided for a credit against net income, after net income had been determined. It was only after the enactment of the Internal Revenue Code of 1954 that a deduction was authorized under the federal law. Title 26, section 26(b)(1), and Title 26, section 243(a), of the Internal Revenue Code of 1939 and 1954, United States Code Annotated.
The petitioner asserts its claim of violation of the Constitution of the United States is supported by Hans Rees' Sons, Inc., v. State of North Carolina, 283 U.S. 123, 51 S.Ct. 385, 75 L.Ed. 879; Connecticut General Life Ins. Co. v. Johnson, 303 U.S. 77, 58 S.Ct. 436, 82 L.Ed. 673, and People ex rel. Alpha Portland Cement Co. v. Knapp, 230 N.Y. 48, 129 N.E. 202. In the Rees case the court held that the statutory method, as applied to the appellant's business, operated unreasonably and arbitrarily, in attributing to North Carolina a percentage of income, 85% out of all appropriate proportion to the average income, 25%, having its source in that State. The state statute designated the tax as an income tax and the allocation formula took into account only assets of the corporation. In the Connecticut General Life Insurance Co. case the statute taxed the gross premiums received on the company's business done in California but the tax assessed included premiums on policies effected in Connecticut. The facts and the State statute there considered were so different that the case does not control the case now under consideration. That is also true of People ex rel. Alpha Portland Cement Co. v. Knapp. Although that case supports the petitioner's contention, the Court there held that the tax imposed was a tax upon income and that the method of apportionment was arbitrary and unreasonable.
In Union Twist Drill Co. v. Harvey, 113 Vt. 493, 508-511, 37 A.2d 389, this Court held our tax to be for the privilege of doing business here and not to be a direct tax on income; that what is required is that a formula of...
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Mobil Oil Corporation v. Commissioner of Taxes of Vermont
...the Commissioner followed F. W. Woolworth Co. v. Commissioner of Taxes, 130 Vt. 544, 298 A.2d 839 (1972), and Gulf Oil Corp. v. Morrison, 120 Vt. 324, 141 A.2d 671 (1958). App. to Juris. Statement 6a-7a, 9a-11a. He also rejected, for lack of proof, Mobil's petition for modification of the a......
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...itself." Id. 335 A.2d at 311-12. F. W. Woolworth Co. v. Commissioner of Taxes, 133 Vt. 93, 328 A.2d 402 (1974); Gulf Oil Corp. v. Morrison, 120 Vt. 324, 141 A.2d 671 (1958). The commission did not levy a tax upon the income of the dividend-paying corporations; rather, it levied a tax upon A......
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F. W. Woolworth Co. v. Director of Division of Taxation of Dept. of Treasury, A--133
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Mobil Oil Corp. v. Commissioner of Taxes
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