Indiana Creosoting Co. v. McNutt

• Decision Date: 23 December 1936
• Docket Number: 26690.
• Parties: INDIANA CREOSOTING CO. v. McNUTT, Governor, et al.
• Court: Indiana Supreme Court

5 N.E.2d 310

210 Ind. 656

INDIANA CREOSOTING CO. v. McNUTT, Governor, et al.

No. 26690.

Supreme Court of Indiana.

December 23, 1936

Suit by the Indiana Creosoting Company against Paul V. McNutt Governor, and others. From an adverse judgment, plaintiff appeals.

Affirmed.

Appeal from Monroe Circuit Court; Donald A. Rogers Judge.

Arthur E. Hopkins, of Louisville, Ky., and Boruff & Boruff, of Bedford, for appellant.

Philip Lutz, Jr., Atty. Gen., Joseph W. Hutchinson, Asst. Atty Gen., and Joseph P. McNamara, Deputy Atty. Gen., for appellees.

HUGHES, Judge.

This is an action by the appellant against the appellees, comprising the Department of Treasury of the State of Indiana, for money paid as excise tax imposed upon the alleged receipts of gross income derived from business in the State of Indiana, under the provisions of the Indiana Gross Income Tax Act of 1933, being chapter 50, Acts 1933, Burns' 1933, §§ 64-2601 to 64-2629; Baldwin's 1934, §§ 15981-16010.

The action was instituted under section 12 of said act (Burns' Ann.St.1933, § 64-2612), which provides that any taxpayer improperly charged with any tax collected under the act may recover the amount improperly collected by applying to the Department of Treasury for such refund, and in the event such refund is not allowed, may institute suit for the recovery of any such amount in the court of the county where such taxpayer resides.

The complaint was in one paragraph, in which it was alleged that the appellant, plaintiff below, reported the gross income for the periods ending March 31, 1934, and June 30, 1934, derived from its business and paid taxes thereon at the rate of one-fourth of one per cent., as provided in section 3(a) of said act (Burns' Ann.St.1933, § 64-2603(a). It is further alleged that the Indiana Creosoting Company is an Indiana corporation with its principal office and place of business located at the city of Bloomington, Ind., and was engaged in the business of creosoting products at said plant at Bloomington, and in the business of manufacturing, compounding, or preparing for sale, profit, or use, articles, substances, and commodities. It further appears from the complaint that after the payment by appellant of its gross income tax figured at the rate of one-fourth of one per cent. the Department of Treasury audited the returns of the appellant, and assessed a deficiency tax for each of the aforesaid periods, amounting to $35.64 for the period ending March 31, 1934, and $78.28 for the period ending June 30, 1934, and applied the rate of one per cent. upon the amount of appellant's gross income; that the appellant paid the deficiency tax, and notified the department that it would institute an action under section 12 of said act to recover the amount of the tax which the appellant claimed was unlawful, in that it was fixed at the rate of one per cent.

The error assigned for reversal is that the court erred in overruling appellant's motion for a new trial. The reasons assigned in the motion for a new trial were: (a) That the decision of the court was not sustained by sufficient evidence; and (b) that the decision was contrary to law.

It is contended by appellant under points and authorities numbered 1 and 2 that the appellant was engaged in interstate commerce in running its plant at Bloomington, Ind., with different states of the United States and foreign countries, and for this reason the Legislature of Indiana cannot levy a tax called a license, income, property, or excise tax; and that appellant is exempt from all taxes by reason of the exemption contained in the Gross Income Tax Act of Indiana.

It is provided in section 6(a) of the act (Burns' Ann.St.1933, § 64-2606(a) that: ‘ There shall be excepted from the gross income taxable under this act: (a) So much of such gross income as is derived from business conducted in commerce between this state and other states of the United States, or between this state and foreign countries, to the extent to which the state of Indiana is prohibited from taxing under the Constitution of the United States of America.’

Whether the appellant was engaged in interstate commerce depends upon the evidence, and we are unable to find any evidence in the record to sustain this contention of appellant. A contract between the appellant and the Chicago, Indianapolis, & Louisville Railway Company, dated December 17, 1914, was introduced in evidence by the appellant. The contract shows that the appellant has a creosoting plant at Bloomington, Ind., located near the tracks of the railway company, and it contracted to creosote ties and timber for the railway company; that the railway company was to furnish and maintain adequate railroad tracks to facilitate the loading and unloading of its ties and other material; that the railway company was to deliver to the creosoting company for treatment 3,000,000 ties at the rate of 200,000 per annum unless the necessity of the railway required less in any one year; that the ties were to be delivered f. o. b. cars at the creosoting company's yard or stacked on the ground in the creosoting company's seasoning yard, and after treatment were to be delivered by the creosoting company f. o. b. at its yard. The contract further provided for the method of treatment, the quality of oil to be used, and the price to be paid for the treatment; that the creosoting company should render the railway bills at the expiration of each month for all ties and timber treated during the previous month, and payment was to be made within twenty days after receipt thereof.

There are many more provisions of the contract, but the foregoing are the essential ones for the purpose of this opinion.

It was alleged in the complaint of appellant that its principal office and place of business was in the city of Bloomington, Monroe county, Ind., while the evidence shows that it was in Louisville, Ky., and the plant office in Bloomington. It is shown by the evidence that the book accounts were kept in Louisville; that the money received in payment of accounts was sent to the office in Louisville, and the bills for supplies and material were paid at the same place. All operating records were kept at the plant office in Bloomington.

There is a total lack of any statement or statements in the contract, or of any evidence in the record, to show that any shipment of ties was to be made outside of the State of Indiana. There is nothing contained in the contract or evidence which shows, or tends to show, that there was any interstate commerce involved in the transaction between the parties to the contract. On the contrary, the contract shows that the railway company was to deliver to the creosoting company three million crossties at the creosoting company's plant at Bloomington for treatment, and after treatment the creosoting company was to deliver the ties to the railway company at Bloomington. The treatment of the ties by the creosoting company is the source of the receipt of the gross income for which it was taxed, and there is no evidence submitted in the record which shows, or tends to show, that any of the income was received from any transaction outside the State of Indiana. On the contrary, all of the evidence shows that the business was done between the parties in Indiana, and all income received by the appellant from the railway company was for intrastate business done in Indiana. There is no evidence to show that any of the ties were received from outside of Indiana, nor that after treatment any of them were shipped outside of the state. We judicially know that the railway company extends through the State of Indiana from north to south, and we may infer, nothing to the contrary appearing, that the railway company had use for the treated ties on its road in Indiana.

It is stated in argument of appellant that the contract was negotiated in Illinois, and consummated in Kentucky. There is a total lack of evidence to substantiate this statement, but, even if it were true, this fact of itself would not constitute interstate commerce. As said in the case of Ware & Leland v. Mobile County, 209 U.S. 405, 28 S.Ct. 526, 528, 52 L.Ed. 855, 14 Ann.Cas. 1031:‘ Contracts between citizens of different states are not the subjects of interstate commerce simply because they are negotiated between citizens of different states, or by the agent of a company in another state, where the contract itself is to be completed and carried out wholly within the borders of a state, although such contracts incidentally effect interstate trade.’

The appellant cites many cases of the United States Supreme Court relative to interstate commerce; but, as the evidence in the instant case shows that there was no interstate commerce involved, the cases are not in point, and are not controlling here.

In the case of the Pennsylvania R. R. Co. v. Clark Coal Company, 238 U.S. 456, at pages 465, 466, 35 S.Ct. 896, 899, 59 L.Ed. 1406, it said: ‘ In determining whether commerce is interstate or intrastate, regard must be had to its essential character. Mere billing, or the place at which title passes, is not determinative. If the actual movement is interstate, the power of Congress attaches to it and provisions of the act to regulate commerce * * * apply.’

And again, in the case of ...