In re Kansas City Star Co.

• Decision Date: 03 September 1940
• Docket Number: 37001
• Citation: 142 S.W.2d 1029,346 Mo. 658
• Parties: In the Matter of Abatement of additional assessments of State Income Tax assessed v. the Kansas City Star Company for the calendar years 1934, 1935 and 1936
• Court: Missouri Supreme Court

142 S.W.2d 1029

346 Mo. 658

In the Matter of Abatement of additional assessments of State Income Tax assessed

v.

the Kansas City Star Company for the calendar years 1934, 1935 and 1936

No. 37001

Supreme Court of Missouri

September 3, 1940

Appeal from Jackson Circuit Court; Hon. Paul A. Buzard Judge.

Affirmed.

Roy McKittrick, Attorney General, and Russell C Stone, Assistant Attorney General, for appellants.

(1) The judgment abating the additional assessments made against respondent's income for the years 1934, 1935 and 1936 is erroneous because the statute does not permit allocation of income on the basis of circulation unless a taxpayer makes a request of the State Auditor in writing and permission therefor is granted. (a) Rules statutory construction. Allen v. Morsman, 46 F.2d 893; State ex rel Ford Motor Co. v. Gehner, 325 Mo. 29, 27 S.W.2d 3; State ex rel. Western Union Telegraph Co. v. Markway, 110 S.W.2d 1118, 341 Mo. 976; In re Clark Estate, 194 S.W. 54, 270 Mo. 351; State ex rel. Union E. L. & P. Co. v. Baker, 293 S.W. 399, 316 Mo. 853; Artophone Corp. v. Coale, 133 S.W.2d 343; Graves v. Purcell, 85 S.W.2d 543, 337 Mo. 574; State ex rel. Dean v. Daues, 14 S.W.2d 1001, 321 Mo. 1126; Sayles v. K. C. Structural Steel Co., 128 S.W.2d 1051; Cummins v. K. C. Pub. Serv. Co., 66 S.W.2d 925, 334 Mo. 672. (b) Section 10115, as amended Laws of Missouri 1931, page 365. Pullman's Palace Car Co. v. Pennsylvania, 35 L.Ed. 613, 141 U.S. 18; State ex rel. Ellis v. Brown, 33 S.W.2d 104, 326 Mo. 627; Kansas City v. Case Threshing Machine Co., 87 S.W.2d 195, 337 Mo. 913; Morris v. Karr, 114 S.W.2d 962, 342 Mo. 179; Sec. 10135, R. S. 1929. (c) The undisputed evidence shows that no request to allocate income on the basis of circulation was ever made in writing, nor was permission ever granted to allocate on such basis. Secs. 13106, 13108, R. S. 1919; Laws 1927, p. 475; Sec. 10117, R. S. 1929; Laws 1931, p. 363. (2) Respondent's income for the years 1934, 1935 and 1936 results from the conduct of its newspaper business at its principal office in Missouri. (a) Construction of statutes involved. Secs. 10115, 10117, R. S. 1929; Laws 1931, p. 363. (b) Sources of income. Funk & Wagnall's New Standard Dictionary; Webster's New International Dictionary; 58 C. J., sec. 1, p. 811; Holmes on Federal Taxes (6 Ed.), p. 396; Ludlow-Saylor Wire Co. v. Wollbrinck, 275 Mo. 339, 205 S.W. 196; State ex rel. Buder v. Hackmann, 305 Mo. 342, 265 S.W. 532; State ex rel. Manitowoc Gas Co. v. Wisconsin Tax Comm., 152 N.W. 849, 161 Wis. 111; U.S. Glue Co. v. Town of Oak Creek, 153 N.W. 241, 161 Wis. 211; Montag Bros. v. State Revenue Comm., 179 S.E. 563, 60 Ga.App. 660; 73 L.Ed. 706, 279 U.S. 306, 49 S.Ct. 304; Commissioner of Internal Revenue v. East Coast Oil Co., 85 F.2d 322. (3) The evidence definitely shows that respondent's income was derived from sources in this State and not from transactions within and without the State. Western Live Stock v. Bureau of Revenue, 300 U.S. 250, 82 L.Ed. 823; Artophone Corp. v. Coale, 133 S.W.2d 348; Moore v. N. Y. Cotton Exchange, 270 U.S. 593, 70 L.Ed. 750; Age-Herald Pub. Co. v. Huddleston, 92 So. 197; Bardwell v. Clinton, 180 So. 148. It was error for the court to exclude from its consideration undisputed evidence and refuse to make findings of fact offered by appellants. Bailey v. Wilson, 29 Mo. 21; Nichols v. Carter, 49 Mo.App. 401; Pearce v. Burns, 22 Mo. 577; Korneman v. Davis, 281 Mo. 234, 219 S.W. 904; St. Louis Hospital Assn. v. Williams, 19 Mo. 609; Leilich v. Chevrolet Motor Co., 40 S.W.2d 601, 328 Mo. 112; Sec. 952, R. S. 1929.

Watson, Ess, Groner, Barnett & Whittaker for respondent; Henry N. Ess and John R. Moberly of counsel.

(1) Respondent's income being derived from transactions partly done within and partly outside of Missouri, which all must be performed before income is produced, it was specifically authorized to allocate its income and deductions for Missouri income tax. Laws 1931, p. 365; R. S. 1929, sec. 10115; Laws 1927, secs. 13106-8, pp. 475-8; Laws 1919, p. 718; Laws 1917, p. 524. Respondent transacts business outside of Missouri and such transactions are productive of income. Doherty v. Kansas City Star Co., 57 P.2d 45; Artophone Corp. v. Coale, 133 S.W.2d 343; Burkhart Mfg. Co. v. Coale, 345 Mo. 1131; 2 Bouvier's Law Dictionary (3 Ed.), p. 3307. The gathering of news, its preparation and transmission, involve transactions of respondent's business outside of Missouri which are productive of income. Natl. Labor Relations Board v. Abell Co., 97 F.2d 954. The Associated Press and North American Newspaper Alliance are instrumentalities through which respondent conducts extensive business transactions outside of Missouri. Associated Press v. Natl. Labor Relations Board, 301 U.S. 128; KVOS, Inc., v. Associated Press, 299 U.S. 272; Star-Chronicle Pub. Co. v. United Press Assn., 204 F. 221; Western Union Telegraph Co. v. Foster, 247 U.S. 112. Respondent would derive no income unless it gathered and printed the news. The circulation of newspapers and advertising outside of Missouri involves transactions of respondent's business outside of Missouri and partly within and partly without Missouri which are productive of income. Post Ptg. & Pub. Co. v. Brewster, 246 F. 325; Konecky v. Jewish Press, 288 F. 181; Little v. Smith, 124 Kan. 242, 257 P. 961; State v. Salt Lake Tribune Pub. Co., 249 P. 475. The news dealers, distributors and carriers outside of Missouri are representatives of respondent engaged in transactions of respondent's business outside of Missouri. Post Ptg. & Pub. Co. v. Brewster, 246 F. 325; Little v. Smith, 124 Kan. 242, 257 P. 961; Konecky v. Jewish Press, 288 F. 181; Caldwell v. North Carolina, 187 U.S. 632; Davis v. Commonwealth of Virginia, 236 U.S. 699; Rearick v. Pennsylvania, 203 U.S. 510; Swift & Co. v. United States, 196 U.S. 399; Taussig v. Mill & Land Co., 124 Mo.App. 216; Street v. Werthan Bag & Burlap Co., 198 Mo.App. 350, 200 S.W. 739; State v. Kramer, 206 Mo.App. 53, 226 S.W. 643. Respondent's advertising business involves transactions performed partly in Missouri and partly outside of Missouri which are productive of income. Indiana Farmers Guide Publ. Co. v. Prairie Publ. Co., 293 U.S. 276; International Text Book Co. v. Pigg, 217 U.S. 91; International Text Book Co. v. Gillespie, 229 Mo. 413. Respondent's radio business involves transactions partly within and partly outside of Missouri from which respondent derives income. Federal Radio Comm. v. Nelson Bros. Bond & Mtg. Co., 289 U.S. 279; Fisher's Blend Station, Inc., v. State Tax Comm., 297 U.S. 654. Appellant's contention that respondent's business is localized in Kansas City, Missouri, and that all of respondent's income has its source or situs there, is untenable. Giragi v. Moore, 58 P.2d 1251, 68 P.2d 818, 110 A. L. R. 314; Western Live Stock v. Bureau of Revenue, 303 U.S. 258, 82 L.Ed. 823; Artophone Corp. v. Coale, 133 S.W.2d 349; Hans Rees' Sons, Inc., v. North Carolina, 283 U.S. 13; Bass, Ratcliff & Gretton, Ltd., v. State Tax Comm., 266 U.S. 282. (2) Respondent's allocation of its income for the years 1934, 1935 and 1936, on the basis of newspaper circulation was authorized by the income tax statute, was approved by the State Auditor for ten years, and afforded this State the most favorable proportion of taxable income, and was the only fair and logical allocation possible. R. S. 1929, sec. 10115, Laws 1931, p. 365; Laws 1927, p. 475. The allocation statute as construed by the State Auditor. State ex rel. Compton v. Buder, 308 Mo. 260; State ex rel. Ford Motor Co. v. Gehner, 27 S.W.2d 3; State ex rel. Natl. Life Ins. Co. v. Hyde, 292 Mo. 342; Artophone Corp. v. Coale, 133 S.W.2d 347; State ex rel. Barrett v. First Natl. Bank, 297 Mo. 410; State ex rel. Gentry v. Long-Bell Lbr. Co., 12 S.W.2d 80; State ex rel. Union E. L. & P. Co. v. Baker, 293 S.W. 403; Ex parte Carey, 306 Mo. 294; Kansas City Pub. Serv. Co. v. Ranson, 328 Mo. 524, 41 S.W.2d 173; Helvering v. Reynolds Tobacco Co., 306 U.S. 115; New England Mut. Life Ins. Co. v. Reece, 83 S.W.2d 238; Montgomery Ward & Co. v. State Tax Comm., 98 P.2d 151. (3) The circuit court correctly found the facts and declared the law.

OPINION

Ellison, J.

Action under Section 10135, Revised Statutes 1929, (Mo. Stat. Ann., p. 8107), by respondent, The Kansas City Star Company, a Missouri corporation with its chief office in Kansas City, Missouri, to abate additional assessments of State income tax for the years 1934, 1935 and 1936. The County Court of Jackson County denied relief, but on respondent's appeal to the circuit court the assessments were abated. From that judgment the County Assessor and State Auditor prosecute this appeal.

The respondent is engaged in the business of printing, publishing and circulating four widely read newspapers with an aggregate circulation of about 1,400,000, and also owns and operates a radio broadcasting station. Under the law from 1917 until 1927 state income tax was levied on the entire net income of the taxpayer. Recognizing this method discriminated against resident taxpayers who received income from business outside of this State, in favor of nonresidents receiving income partially from business within the State, the Legislature changed the statute by Sec. 13106, Laws Mo. 1927, pp. 475, 476, to provide that every taxpayer, resident and non-resident, should pay the tax upon his entire net income from all sources within this State, "including a reasonable proportion apportioned to this state of net income derived from business partially within and partially without the state which cannot be definitely allocated." From that time on respondent paid State income tax at least for ten years, from 1927 to 1937, by allocating to Missouri such...