Humble Pipe Line Co. v. State

• Decision Date: 27 November 1940
• Docket Number: 4564.
• Parties: HUMBLE PIPE LINE CO. v. STATE et al.
• Court: New Mexico Supreme Court

109 P.2d 247

45 N.M. 29, 1940 -NMSC- 082

HUMBLE PIPE LINE CO.
v.
STATE et al.

No. 4564.

Supreme Court of New Mexico

November 27, 1940

Rehearing Denied Jan. 29, 1941.

Appeal from District Court, Santa Fe County; David Chavez, Jr., Judge.

Action by the Humble Pipe Line Company against the State of New Mexico and others for a declaratory judgment determining whether plaintiff was liable to an income tax, which defendants asserted was levied against plaintiff by statute. From a judgment for plaintiff, the defendants appeal.

Reversed, with instructions to enter judgment for defendants.

Under statute imposing an income tax upon foreign corporations having a business or agency or engaged in transaction of business in, into, or from state, or deriving any income from any property within state, in proportion to net income of such business or agency, a Texas company operating a pipe line which extended from a point in Texas to Hobbs, N. M., where it intersected a trunk line extending from Hobbs, to Wink, Tex., there connecting with a main line through which oil was transported to Texas Gulf Coast for refining purposes, was required to pay tax on income derived from transportation of oil gathered in Texas through such portion of pipe line as was situated within New Mexico. Laws 1933, c. 85, § 31(a-c), as amended by Laws 1937, c. 189, § 5. [109 P.2d 248]

Filo M. Sedillo, Atty. Gen., and William A. Watson and Louis C. Lujan, both of Santa Fe, for appellants.

Hervey, Dow, Hill & Hinkle, of Roswell, for appellee.

BRICE, Justice.

This is an action to obtain a declaratory judgment, and the question is whether appellee is liable to an income tax, which appellants assert was levied against it by Ch. 85 of L. 1933, as amended by Ch. 29, L. 1934, Sp.Sess., and Ch. 189, L. 1937.

The appellee is a corporation organized and existing under the laws of the State of Texas with authority to transact business in New Mexico.

The appellant has demanded income tax from the appellee in the sum of $3,287.10, with interest and penalties alleged to be due the State of New Mexico. The trial court concluded that as the appellee is a common carrier of property in interstate commerce, and does no intra-state business, it is not liable to the income tax mentioned.

Appellee owns and operates as a common carrier of crude oil, for compensation, a pipe line extending from a point in Gaines County, Texas, to Hobbs, New Mexico, where it intersects a trunk line extending from Hobbs to Wink, Texas, there connecting with a main line through which the oil is transported to the Texas Gulf coast for refining purposes.

Oil from the several fields of Eastern New Mexico is gathered into the trunk line by means of intersecting pipe lines from the several fields. The Gaines County oil passes out of Texas into New Mexico, and through this state back into Texas with the accumulations of oil from the New Mexico oil fields. The parties agree, in which we concur, that appellee's business is wholly interstate commerce.

The parts of the law material to a decision, under which it is asserted the tax was assessed and levied, are as follows:

"There is hereby assessed and levied a tax *** upon the net income *** of every foreign corporation *** having a business or agency or engaged in the transaction of business in, into or from this [109 P.2d 249] State, or deriving any income from any property within this State, in proportion to the net income of such business or agency as hereinafter provided." L. 1933 c. 85, § 1, as amended by L. 1937, c. 189, § 1.

"Corporations Liable to the Income Tax. Every domestic corporation and every foreign corporation doing business in this State shall pay a tax for each taxable year upon its entire net income derived from business done or property located in this state * *." L. 1933, c. 85, § 29, as amended by L. 1934, c. 29,§ 3.

"(a) If the entire business of a corporation be transacted within this State, the tax imposed shall be upon the entire net income of such corporation for the taxable year.

"(b) If the business of such corporation be transacted both within and without this State the tax imposed shall be upon the portion of such entire net income for each taxable year as is derived from sales, wherever made, or products, goods, wares and merchandise, manufactured or which originated in this State, and from other business done or property located within this State, which may be determined by an allocation and separate accounting when the books of the corporation show income derived from business done and property located within this State.

"(c) The term 'gross receipts in this State' shall include all receipts from persons, firms, corporations, partnerships and associations, or the United States or any state, county, municipality or governmental unit or department for goods, wares and merchandise or for the transporting, delivering or distributing of goods, wares or merchandise or the transporting of persons or property in, into or from this State, and all receipts from sales, wherever made, of products, goods, wares and merchandise manufactured or which originated in this State." L.1933, c. 85, § 31, as amended by L.1937, c. 189, § 5.

It is asserted that the income tax act in question does not purport to tax the income of corporations and others engaged wholly in interstate commerce, and cites Southern Pacific R. Co. v. State Corporation Comm., 41 N.M. 556, 72 P.2d 15, 16, as authority. In that case we had for consideration the construction of the phrase "every domestic or foreign corporation *** engaged in any business in this State ***" against whom a franchise tax was levied by the terms of Ch. 116, N.M.L.1935 (entirely different legislation); and we held that it had reference to business transacted wholly within the state. Property used exclusively for interstate commerce was specifically excluded from its terms by Sec. 6 of that act. We held that the words needed no construction; that they had reference to business done in the state, not partially within the state or across state lines.

But the language of the act in question here, "*** engaged in the transaction of business in, into or from this State, or deriving any income from any property within the State ***", needs no construction. It has reference to business wholly within this state, business...