Hattiesburg Grocery Co. v. Robertson

Decision Date18 April 1921
Docket Number21739
Citation126 Miss. 34,88 So. 4
CourtMississippi Supreme Court
PartiesHATTIESBURG GROCERY CO. v. ROBERTSON, STATE REVENUE AGENT

1 TAXATION. Income of corporations taxable as income of "persons" under statute.

The term "person," when used in any statute, covers artificial as well as natural persons (section 1590, Code of 1906; section 1357, Hemingway's Code); consequently the incomes of corporations are included in the tax imposed by chapter 101, Laws of 1912 (Hemingway's Code, section 4933 et seq.), on the income of each person.

2 TAXATION. "Income" defined as gain from capital.

"Income" is the gain derived from capital, from labor, or from both combined, and income for any given period of time is the amount of gain so derived during the designated period of time.

3 TAXATION. Income tax is an "excise tax" and not a property tax within constitutional requirement of taxation in proportion to value.

An income tax is an excise and not a tax on property within the meaning of the requirement of section 112 of the state Constitution of 1890 that property shall be taxed in proportion to its value and shall be assessed for taxes under general laws and by uniform rules according to its true value.

4 TAXATION. New Vol. 18 Key-No. Series---Method of computing a person's income stated.

The only method provided by chapter 101, Laws of 1912 (Hemingway's Code, section 4933 et seq.), for ascertaining the amount of a person's income is the requirement that he certify the amount thereof to the State Auditor, and the amount of the tax to be collected thereon must be computed on the income disclosed by this certificate.

HON. R S. HALL, Judge.

APPEAL from circuit court of Forrest county, HON. R. S. HALL, Judge.

Action by Stokes V. Robertson, State Revenue Agent, against the Hattiesburg Grocery Company to recover income taxes. Judgment for plaintiff after appeal from a justice of the peace, and defendant appeals. Affirmed.

Judgment affirmed.

Sullivan & Sullivan and Hannah & Cook, for appellants.

The briefs filed in these cases have dealt at length with the question as to whether the tax here involved is an excise tax, a property tax, an ad valorem tax, a personal tax, or a combination of one or more of these. But let us forget for the present all of these theories and look at the result worked out by the application of the act itself.

First: The amount of income after making certain deductions determines the amount of tax.

Second: The tax-payer is not required to make a return. The assessor is required to ask the tax-payer: "Was your income from salaries, fees, trade, profession and property, or any or all of them, for the year ending February 1st, in excess of twenty-five hundred dollars? If the taxpayer answers in the affirmative, then the assessor hands the tax-payer a blank to be filled out, signed and sworn to and the tax-payer is assessed for the amount he puts down. But suppose the assessor fails to make this inquiry of the tax-payer; nothing is required of the tax-payer. But suppose again, that the assessor makes the inquiry and that the tax-payer truthfully answers, no. If the assessor disbelieves this statement, it is his duty to send the name of this tax-payer to the auditor. The auditor, or anyone designated by him, may summons witnesses and adopt such other course as he may see fit to inquire into the income of this tax-payer; if he had an income in excess of twenty-five hundred dollars, he has a right to assess this tax payer with such amount. The law nowhere requires the auditor, nor the person named by him, to give any notice of any kind or character to this tax-payer.

Third: When the auditor makes this assessment, he reports the same to the tax collector, who proceeds to collect the tax. This assessment by the auditor is a final judgment with no provision for appeal or review.

Fourth: After the assessment, if the tax becomes delinquent, it becomes not merely a lien on the property on which it is levied, but a lien on all the property that the tax-payer has "and shall be collected as ad valorem taxes."

Here we have an honest tax-payer having done everything the law requires of him, who wakes up at taxpaying time with a final judgment rendered against him, constituting a lien on all of his property without ever a word of notice or any opportunity to be heard.

What difference does it make whether the tax imposed by such a statute is an excise tax, a property tax, an ad valorem tax, a personal tax, or a combination of one or more of them, for can it be possible that under the guise of any one or more of them that the courts of our country will tolerate such a proceeding as this statute authorizes.

Can it be that all the principles originally promulgated and zealously sustained by the federal and state constitutions, statutes and court decisions for the protection of the citizen against having his property taken for public use without notice and an opportunity for hearing are now to be ruthlessly ignored, simply because this taking of property is under the guise of an income tax.

Most certainly notice and an opportunity for a hearing are as essential to the validity of this statute as to any other. In 26 R. C. L. 345, section 302, it is said: "302. Notice and hearing.--The rule is fundamental that, under the laws for the taxation of property, the person to be affected must have some notice of the proceeding to be had against his property, that in some form he may be heard before any portion of his estate is seized for the support of the government, and that all laws, which permit of the taxation of property without these safeguards are unconstitutional and void. If a statute does not provide for notice in any form, it is not material that as a matter of grace or favor, notice may have in fact been given of the proposed assessment. (And the cases cited in note.)

And on page 347, section 304, it is further said: "304. Kinds of tax to which right to hearing extends. --The right to notice and hearing does not extend to taxes of every description, but only to such as involve the exercise of a quasi-judicial power in the determination of amount. In the case of an excise not dependent upon the valuation of property and in which there is no discretion as to the amount, no notice of the assessment or levy of the tax is necessary, and the same is true in the case of poll taxes, and generally specific taxes on persons and things. But where a tax is levied on property not specifically but according to its value, to be ascertained by assessors appointed for that purpose upon such evidence as they may obtain, a different principle comes in. A tax-payer, even in such a case, is not entitled to notice of the appointment of the assessors in advance of such appointment or an opportunity to protest against or appeal from such appointment. It is, however, well settled that before the amount of the general property tax which any individual taxpayer is bound to pay is conclusively determined, he must be given notice in order that he may have an opportunity to show that he is not liable for the tax or that the amount assessed against him is too great and similar when the amount of an excise is dependent upon the value of the property in connection with the use of which the excise is imposed, the person assessed is entitled to notice and a hearing with respect to the valuation of the property before the amount of the excise is finally determined." (And cases cited in note.)

And even Mr. Black, so strongly relied on by counsel for appellee, in his fourth edition in section 9, recognizes the necessity of notice and a hearing before the assessment of such a tax, for he says: "It is enough if he is informed of the amount for which he is to be charged, and is afforded an opportunity to contest the legality of the tax, the question of his liability to it, or the amount of the assessment, before some board or tribunal empowered to give him all the relief which justice demand, though it be a board of administrative officers in the first instances, with a final appeal to the courts. As this method of procedure has commonly been prescribed by the income tax laws, their validity has been upheld as against the contention that they deprived the citizen of his property without due process of law."

But counsel for appellee, although admitting that the tax is to be imposed on net income, earnestly argue that no assessment is necessary, that there is nothing to value. and that, therefore no notice is required. We think the fallacy of this argument has already been shown. But one or two more illustrations: Suppose that "B" bought a plantation twenty-five year ago, for which he paid ten thousand dollars, and that he cleared the land, put it in cultivation, built houses, barns, etc.; and that last year what was "B's" income? Was it the fifty thousand dollars, minus the cost of this property, and in counting the cost of clearing, putting into cultivation, tenant houses, barns, etc.? And again, are you going to take into account depreciation, taxes, carrying charges, etc.? Does all this involve the application of one's judgment? We respectfully submit that the valuation of lands, houses, horses, cows, etc., the ordinary valuation that assessors are required to make is nothing as compared to this. And again, suppose a lawyer gets a tract of land as a contingent commission? Is any valuation necessary for the determination of the amount of his income?

But counsel for appellee say that the statute under consideration gives the tax-payer ample notice, because the assessor calls on the tax-payer and gives him an opportunity to make his assessment. Perhaps this argument is sound, although we do not concede it, as to the man who...

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