Laing v. Fox

• Decision Date: 15 June 1934
• Docket Number: (No. 7919)
• Citation: 115 W.Va. 272
• Parties: John Laing v. Fred L. Fox, State Tax Commissioner
• Court: West Virginia Supreme Court

115 W.Va. 272

John Laing

v.Fred L. Fox, State Tax Commissioner

(No. 7919)

Supreme Court of Appeals of West Virginia.

Submitted May 10, 1934.

Decided June 15, 1934.

1. Constitutional Law

Sub-section (i), section 2, chapter 33, Acts (First Extraordinary Session) 1933, imposing a privilege tax upon every person engaging in or continuing in any business, profession, trade, occupation or calling not included in other subdivisions of the Act (except persons engaged in or continuing in the business of agriculture, horticulture or grazing), is not in conflict with the Federal or State Constitutions.

2. Licenses

Sub-section (i), section 2, chapter 33, Acts (First Extraordinary Session) 1933, imposing a privilege tax upon every person engaging in or continuing in any business, profession, trade, occupation or calling not included in other subdivisions of the Act (except persons engaged in or continuing in the business of agriculture, horticulture or grazing), which became effective from passage, May 26, 1933, is operative from the beginning of the calendar year, 1933.

3. Statutes

Sub-section (i), section 2, chapter 33, Acts (First Extraordinary Session) 1933, imposing a privilege tax upon every person engaging in or continuing in any business, profession, trade, occupation or calling not included ih other subdivisions of the Act (except persons engaged in or continuing in the business of agriculture, horticulture or grazing), includes persons receiving income from loans and investments.

Appeal from Circuit Court, Kanawha County.

Suit by John Laing against Fred L. Fox, State Tax Commissioner. From a decree sustaining a demurrer to and dismissing the bill, the plaintiff appeals.

Affirmed.

Blue, Dayton & Campbell, Arthur S. Dayton and Wm. F. Blue, for appellant.

Homer A. Holt, Attorney General, Ira J. Partlow and W. Holt Wooddell, Assistant Attorneys General, for appellee.

Litz, Judge:

This is an appeal from a decree of the circuit court of Kanawha County, sustaining a demurrer to, and dismissing, the bill, in the suit of a taxpayer to enjoin the State Tax Commissioner from levying and collecting a privilege or gross income tax.

The statute [sub-section (i), section 2, chapter 33, Acts, First Extraordinary Session, 1933] under which the tax is sought to be levied and collected, follows: "Upon every person engaging or continuing within this state in any business, profession, trade, occupation or calling not included in the preceding subdivisions or any other provision of this act (but not including a person engaging or continuing in the business of horticulture, agriculture or grazing) there is likewise hereby levied and shall be collected, a tax equal to one per cent of the gross incomes of persons taxable under other subdivisions hereof not derived from the exercise of privileges taxable thereunder." A tax is imposed upon the privilege of engaging in specific business activities by other parts of the Act.

The bill discloses that plaintiff, during the year 1933, received income from (a) salary, (b) interest on loans, (c) rents and royalties, (d) profit on casual sales of stock, (e) dividends on corporate stock, and (f) income on gas sales; charges that subdivision (i) and related provisions of the Act are unconstitutional under (1) the Fourteenth Amendment to the Federal Constitution, (2) section 1, Article X, as amended, of the West Virginia Constitution, and (3) section 30, Article VI of the State Constitution; and alleges that subdivision (i) is not applicable to income received prior to its effective date, May 26, 1933, and that it does not apply to investment receipts in the nature of interest, dividends, rentals, profits from casual sales of property and the like.

The exemption of income from horticulture, agriculture or grazing is the basis of the first and second constitutional objections.

Constitutional Questions

1. Plaintiff contends that the statute, by reason of the exemption, discriminates in favor of a large class of citizens and denies to him the equal protection of the laws as guaranteed under the Fourteenth Amendment to the Federal Constitution. The state legislatures may, without violation of the Fourteenth Amendment, select and classify the subjects of taxation so long as they do so in observance of a reasonable consideration of difference or policy. In the recent chain store tax case (Board of Tax Commissioners v. Jackson, 283 U. S. 527, 51 S. Ct. 540, 75 L. Ed. 1248) involving the validity of an Indiana statute, imposing a graduated tax, based upon the number thereof, on stores or mercantile establishments, under a single ownership and management, the Supreme Court of the United States, speaking through Mr. Justice Roberts, stated the rule as follows: "The principles which govern the decision of this cause are well settled. The power of taxation is fundamental to the very existence of the government of the states. The restriction that it shall not be so exercised as to deny to any the equal protection of the laws does not compel the adoption of an iron rule of equal taxation, nor prevent variety or differences in taxation, or discretion in the selection of subjects, or the classification for taxation of properties, businesses, trades, callings, or occupations. Bell's Gap R. R. v. Pennsylvania, 134 U. S. 232, 33 L. Ed. 892, 10 S. Ct. 533; Southwestern Oil Co. v. Texas, 217 U. S. 114, 54 L. Ed. 688, 30 S. Ct. 496; Brown-Forman Co. v. Kentucky, 217 U. S. 563, 54 L. Ed. 883, 30 S. Ct. 578. The fact that a statute discriminates in favor of a certain class does not make it arbitrary, if the discrimination is founded upon a reasonable distinction, American Sugar Ref. Co. v. Louisiana, 179 U. S. 89, 45 L. Ed. 102, 21 S. Ct. 43, or if any state of facts reasonably can be conceived to sustain it. Rast v. Van Demon & L. Co., 240 U. S. 342, 60 L. Ed. 679, L. R. A. 1917A, 421, 36 S. Ct. 370, Ann. Cas. 1917B, 455; Quong Wing v. Kirkendall, 223 U. S. 59, 56 L. Ed. 350, 32 S. Ct. 192. As was said in Brown-Forman Co. v. Kentucky, supra, (217 U. S. 563, 54 L. Ed. 883, 30 S. Ct. 578): 'A very wide discretion must be conceded to the legislative power of the state in the classification of trades, callings, businesses or occupations which may be subjected to special forms of regulation or taxation through an excise or license tax. If the selection or classification is neither capricious nor arbitrary, and rests upon some reasonable consideration of difference or policy, there is no denial of the equal protection of the law.' It is not the function of this court in cases like the present to consider the propriety or justness of the tax, to seek for the motives or to criticize the public policy which prompted the adoption of the legislation. Our duty is to sustain the classification adopted by the legislature if there are substantial differences between the occupations separately classified. Such differences need not be great. The past decisions of the court make this abundantly clear." A similar observation was made by this court in Hope Natural Gas Company v. Hall, 102 W. Va. 272, 277, 135 S. E. 582, 583, sustaining a tax on the privilege of engaging "in mining and producing for sale, profit, or use, any coal, oil, natural gas, limestone, sand or other mineral product, or felling and producing timber for sale, profit or use." Judge Hatcher, writing the opinion of the court, said: "In Bell's Gap R. R. Co. v. Penn., 134 U. S. 232, the same contention that plaintiff now advances here was made against the validity of a Pennsylvania taxation Act. But the Supreme Court held: 'The provision in the XIV Amendment, that no state shall deny to any person within its jurisdiction the equal protection of the laws, was not intended to prevent a State from adjusting its system of taxation in all proper and reasonable ways. * * * It may impose different specific taxes upon different trades and professions, and may vary the rates of excise upon various products, it may tax real estate and personal property in a different manner; it may tax visible property only, and not tax securities for payment of money; it may allow deductions for indebtedness, or not allow them. All such regulations, and those of like character, so long as they proceed within reasonable limits and general usage, are within the discretion of the State Legislature, or the people of the state in framing their Constitution. * * * We think that we are safe in saying that the XIV Amendment was not intended to compel the states to adopt an iron rule of equal taxation.' This doctrine has been repeatedly affirmed. Express Co. v. Seibert, 142 U. S. 339; Clark v. Titusville, 184 U. S. 329; Armour Packing Co. v. Lacy, 200 U. S. 226; Citizens Tel. Co. v. Fuller, 229 U. S. 322; Mich, Cent. Ry. Co. v. Powers, 201 U. S. 245; Heisler v. Thomas Col, Co., 260 U. S. 245. 'The selection of all who are engaged within the state in mining ore or producing ores on their own account * * * as the subjects of an occupation tax is permissible.' Oliver Iron Co. v. Lord, 232 U. S. 172." In Singer Sewing Machine Co. v. Brickell, 233 U. S. 304. 34 S. Ct. 493, 58 L. Ed. 974, the Supreme Court upheld an Alabama statute taxing every person, firm or corporation selling or delivering sewing machines in person or through agents and exempting merchants selling sewing machines at their regularly established places of business. In the opinion it is stated, as a basis of the decision: "* * * there is an evident difference, in the mode of doing business, between the local tradesmen and the itinerant dealer, and we are unable to say that the distinction made between them for the purposes of taxation is arbitrarily made. In such matters, the states necessarily enjoy a wide range of discretion, and it would require a clear case to justify the courts in striking down a law that is uniformly applicable to all persons pursuing a given occupation on the ground that persons engaged in other occupations more or less like...