Gulf Refining Company of Louisiana v. McFarland
| Decision Date | 30 April 1923 |
| Docket Number | 25892 |
| Citation | 154 La. 251,97 So. 433 |
| Court | Louisiana Supreme Court |
| Parties | GULF REFINING CO. OF LOUISIANA v. McFARLAND, Supervisor of Public Accounts |
Rehearing Denied July 11, 1923
Appeal from Twenty-Second Judicial District Court, Parish of East Baton Rouge; H. F. Brunot, Judge.
Suit by the Gulf Refining Company of Louisiana against W. N McFarland, Supervisor of Public Accounts. From a judgment for defendant, plaintiff appeals.
Affirmed on rehearing.
D Edward Greer, of Houston, Tex., and J. S. Atkinson and Frederick E. Greer, both of Shreveport (C. C. Bird, of Baton Rouge, of counsel), for appellant.
A. V. Coco, Atty. Gen., Harry P. Sneed, of New Orleans, and Thigpen, Herold & Lee, of Shreveport, for appellee.
Hampden Story, of Shreveport, for Texas Co.
O'NIELL, C. J. ST. PAUL, J. concurring.
O'NIELL, C. J.
This suit is an attack upon the constitutionality of Act 140 of 1922, levying a tax of 3 per cent. on the gross market value of the production of all mineral oil and natural gas produced in the state. The production of mineral oil and natural gas from lands either owned or held under lease by the plaintiff here is an important part of the company's business. The company is therefore liable for the tax if it is valid. The district court decided that it was valid, and plaintiff has appealed.
Appellant's main complaint is that the tax exceeds the limit of 5 1/4 mills, fixed by section 3 of article 10 of the Constitution, viz.:
"The rate of state taxation on property for all purposes shall not exceed, in any one year, five and one-quarter mills on the dollar of its assessed value."
Defendant's answer to the proposition is that this is a severance tax, not a tax "on property," but a tax on the right to sever or produce the property, and that the authority of the Legislature to levy a severance tax, eo nomine, was conferred by section 21, and therefore was not controlled or prevented by section 3, of article 10 of the Constitution. Section 21 declares:
The language of Act 140 of 1922 is:
"That, for the year 1923, and for each subsequent year, taxes as authorized by section 21 of article 10 of the Constitution of 1921, are hereby levied upon all natural resources severed from the soil or water," etc.
The tax levied upon the production of oil and gas is "three per centum (3%) of the gross market value of the total production thereof." And the act declares that, for the purposes of the act, the gross market value of the product or natural resource shall be taken in its unmanufactured state, as of the time when and at the place where it was severed or taken from the soil or water.
If the statute did not in terms refer to section 21 of article 10 of the Constitution, it might be doubted that levying the tax upon the natural resources severed from the soil is the same as levying the tax upon the right to sever the natural resources from the soil. But the statement in the statute that the tax levied is that which is authorized by section 21 of article 10 of the Constitution is the same as to say that the tax levied is a severance tax. A severance tax, even though it is measured by the value of the property severed, is not a property tax; it is an excise tax upon the privilege of severing; just as an inheritance tax, even though measured by the value of the property inherited, is not a property tax, but an excise tax on the right of inheriting.
But the question in this case is not whether the tax might, as an abstract proposition, be deemed a property tax. The question is whether the tax, being in excess of 5 1/4 mills on the dollar, is violative of section 3 of article 10 of the Constitution. It is said in appellant's brief, that if the provisions of section 21 of article 10 were not in the Constitution, the court could not escape the obligation of declaring this tax of 3 per cent., or 30 mills, unconstitutional. It is said that section 21 is not important, because its provisions do not conflict with the limitation imposed in section 3, or permit the Legislature to override section 3. The answer to all of that is that section 21, in terms, authorizes the Legislature to levy a severance tax, which cannot be subject to the limitation of 5 1/4 mills imposed by section 3, because the latter section, in terms, refers to a yearly tax. It says that the rate of taxation "on property" shall not exceed "in any one year" 5 1/4 mills on the dollar of its assessed valuation. That means the ad valorem tax that is collected annually on all taxable property, according to its assessed value. To say that the severance tax authorized by section 21 of article 10 of the Constitution is a property tax and is subject to the limitation of 5 1/4 mills, imposed in section 3, is the same as to say that the authority conferred upon the Legislature by section 21 was not necessary and served no purpose. The manifest purpose was to permit the Legislature to levy a severance tax without regard for the limitation imposed by section 3 of article 10 of the Constitution. The severance tax already levied was not subject to the corresponding limitation of the rate of taxation on property in the Constitution of 1898 and 1913. Under Act 31 of 1920, the severance tax on oil and gas was 2 per cent. Hence it was provided in section 21 of article 10 of the Constitution of 1921 that, until the Legislature should enact laws carrying the provisions of the section into effect, "all existing laws relating to severance taxes or licenses" should remain in full force and effect. We have no doubt that the tax imposed by Act 140 of 1922 was intended to be, and is, not a property tax, or tax upon the ownership of oil and gas, but an excise tax, imposed upon the right to sever or produce the oil and gas. Whether, as an abstract proposition, and without regard for section 21 of article 10 of the Constitution, this tax might be deemed a tax on the property itself, on the ownership of the oil and gas, we are certain that the authority of the Legislature to levy the tax was not subject to the limitation of 5 1/4 mills on the dollar, imposed in section 3 of article 10 of the Constitution.
Plaintiff's next complaint is that the levy of the tax only on the mineral oil and natural gas that is produced in the state, and not upon oil or gas brought here from other states, is an arbitrary discrimination against the producers of oil and gas in the state, and in favor of the purchasers of oil and gas produced in other states. It is argued, therefore, that the alleged discrimination violates section 1 of article 10 of the Constitution of the state, requiring that taxes shall be uniform on the same class of property throughout the territorial limits of the authority levying the tax; and that the tax is a denial of the equal protection clause, and violates section 1 of the Fourteenth Amendment of the Constitution of the United States. These complaints are disposed of by our conclusion that the tax in question is not a property tax, or tax on the ownership of the oil and gas, but an excise tax, imposed upon the right to produce or sever the products from the land. The equality and uniformity clause in the state Constitution refers only to property taxes. It has no application to license taxes or to any other form of excise taxes. See Standard Oil Co. v. Police Jury, 140 La. 42, 72 So. 802; City of Gretna v. Bailey, 141 La. 625, 638, 75 So. 491, 496. As the statute accords to everybody the same privilege of producing, or not producing, oil or gas from lands in the state, it cannot be said to discriminate in favor of or against any one. The Legislature could not, in truth, impose a severance tax upon the products of another state. If the tax were imposed upon the importation of the mineral products of other states, it would not be a severance tax. Therefore, to argue that the Legislature cannot levy a severance tax or conservation tax upon the natural resources of the state without levying the same tax upon the natural resources of all other states is the same as to say that the Legislature cannot levy a severance tax or conservation tax at all.
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- Gulf Refining Co. of Louisiana v. McFarland
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Arkansas Natural Gas Co. v. McFarland
... ... F. Brunot, Judge ... Suit by ... Arkansas Natural Gas Company against W. N. McFarland, ... Supervisor of Public Accounts. Judgment for ... facts and issues in this case are the same as in the case of ... Gulf Refining Co. v. W. N. McFarland, Supervisor ... (No. 25892) 154 La. 251, ... ...